PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA  
  
ENERGY DIVISION 					                  RESOLUTION  E‑3648
								                   FEBRUARY 17, 2000  

  
R E S O L U T I O N  
 
Resolution E‑3648.  Pacific Gas and Electric Company requests authorization to record certain electric restructuring costs related to new, unanticipated programs in its Electric Restructuring Costs Account (ERCA).  Approved with modifications.

By Advice Letter 1919-E, filed on September 28, 1999. 

 SUMMARY  
  
By Advice Letter 1919-E, Pacific Gas and Electric Company (PG&E) requests authorization to record certain electric restructuring costs related to new, unanticipated programs in its Electric Restructuring Costs Account (ERCA). This Resolution approves the advice letter with modifications.

BACKGROUND  

In Decision (D.) 99-05-031, the Commission approved a multi-party Settlement Agreement regarding Phase 1 and Phase 2 of the Section 376 Proceeding (A.98-05-004). This Settlement Agreement, among other things, provided for the establishment of the ERCA.
 
In accordance with D.99-05-031, PG&E filed Advice Letter 1886-E to establish the ERCA.  This
Advice Letter was effective August 11, 1999.

The purpose of the ERCA, in part, is to record any unanticipated Internally Managed Costs incurred as the result of implementing a new program or activity prescribed by Commission or Federal Regulatory Commission (FERC) order, mandate, or requirement.  For each of those programs in which the total expenditures exceed $1 million in the program’s first 12 months, PG&E must submit an application or advice letter to seek prior approval from the Commission to record costs associated with the program in the ERCA.  For programs costing less than $1 million in the program’s first 12 months, PG&E need not seek prior Commission approval before recording the costs in ERCA but must submit an application or advice letter to notify the Commission that it is recording costs associated with the program in the ERCA.  PG&E is required to reverse any ERCA entries if the Commission later does not authorize such ERCA entries for the program. 

On September 28, 1999, PG&E filed Advice Letter 1919-E requesting authorization to record certain electric restructuring costs related to new unanticipated programs in its ERCA.

NOTICE  
 
Advice Letter 1919-E was served on other utilities and government agencies, and to all interested parties who requested such notification, in accordance with the requirements of General Order 96-A. 

PROTESTS

The Energy Division received no protests to Advice Letter 1919-E.

DISCUSSION  

By Advice Letter 1919-E, as augmented in subsequent comments, PG&E informs the Commission that it is recording in the ERCA costs associated with the Usage Data Reconciliation System (UDR) program and costs associated with four separate programs to upgrade to the Electronic Data Interchange (EDI) format. Each program has total estimated expenditures less than $1 million in the program’s first 12 months.  Under the terms of the Settlement Agreement, program costs under the $1 million threshold may be recorded in the ERCA effective January 1, 1999 without prior Commission approval.

All of these programs resulted from a combination of Commission orders or resolutions, and directives from the Commission-mandated Rule 22 Tariff Review Group, established by D.97-10-087.  PG&E explains that because these new requirements post-date, or at least were concurrent with PG&E’s 1999 General Rate Case (GRC) application filed in December 1997, these new programs were unanticipated in PG&E’s GRC application.

The UDR program arises from the Retail Settlement and Information Flow Decision (D.97-12-090) which directed the utility distribution companies (UDCs) to create an interim procedure to reconcile customer usage data collected by UDCs from each ESP’s server with ESP settlement data sent by the ESP to their Scheduling Coordinator and the Independent System Operator.  The total estimated expenditures for the UDR program are $153,750, $395,000, and $395,000 for 1999, 2000, and 2001, respectively.  PG&E has adequately explained why such a program was unanticipated and not included in another proceeding.  By this Resolution, these ERCA entries should be explicitly authorized. 

The four EDI programs are the result of the Commission’s directives to use and standardize methods of electronic information exchange in the direct access marketplace.  They are 1) EDI of Electric Direct Access Service Requests (DASR) Data (EDI 814), 2) EDI of Electric Billing Data (EDI 810), 3) Internet Billing, and 4) EDI of Electric Meter Usage Data (EDI 867). The total estimated expenditures for the programs are as follows:

	EDI Program			1999			2000			2001
EDI 814 - DASR Information		$634,950		$132,000		0
EDI 810 - Billing			$304,950		$132,000		0
EDI over the Internet			  $30,150		$404,000		0
EDI 867 - Meter Data Information	$529,950		$132,000		0

EDI 814 is being implemented pursuant to a recommendation/directive from the Commission’s Electric Rule 22 Tariff Review Group’s Operations Coordinating Committee and the Sub-committee on DASR Consistency.  PG&E agreed to start testing electric DASR information with market participants in the first quarter of 2000.  EDI 814 will be used for DASR data exchange. 

As required by Rule 22, Section K.3, adopted by the Commission in D.97-10-087, PG&E is providing data via EDI 810 for consolidated billing.  Recently, PG&E needed to upgrade EDI 810 from version 3030 to 4010 to be Year 2000 (Y2K) compliant and develop a consistent EDI billing format among the California Utility Distribution Companies.  Of the costs identified above for EDI 810, $8,000 is associated with Y2K compliance.  In Resolution W-4165, we denied two water utilities’ request to establish memorandum accounts for recording costs for Y2K coverage. To ensure consistency, PG&E should not be allowed to recover the costs related to upgrading the EDI 810 transaction set to be Y2K complaint. 

The Internet Billing program arises from Commission Resolution E-3582, dated January 20, 1999 and D.99-06-095, dated June 24, 1999 wherein the Commission ordered the implementation of migration to the Internet for EDI transactions due to its long-term cost-effectiveness.

The EDI 867 program was ordered in Commission Decisions 98-12-080 and 99-07-007.  PG&E is currently engaged in converting the exchange of meter usage data from California Meter Exchange Protocol (CMEP) to EDI.  In D.98-12-080, the Commission adopted the recommendation of the Permanent Standards Working Group (PSWG) that EDI protocols be used for transferring electric meter usage data information. The Commission established September 1, 1999, as the date to implement EDI protocols on a trial basis, with the goal of having EDI as the only standard no later then February 1, 2000.  D.99-07-007 approved for implementation the EDI protocols and implementation guidelines that were developed by the Meter Usage Data Task Group.  Implementation was ordered to begin on a trial basis beginning September 1, 1999 and for all usage data transfers no later than February 1, 2000. 

PG&E has adequately explained why the EDI programs were unanticipated and not included in another proceeding, and by this Resolution these ERCA entries, with the exception of the $8,000 for the Y2K upgrade related portion of EDI 810, should be explicitly authorized. 

COMMENTS

The draft resolution of the Energy Division in this matter was mailed to the parties in accordance with Public Utilities Code Section 311(g).  Given that PG&E originally classified the costs for EDI as a single program with total expenditures exceeding $1 million in the first twelve months, the draft Resolution denied PG&E’s request to record the costs related to the program in the ERCA prior to the effective date of the Resolution.  Such outcome is consistent with the provisions of the ERCA and the Commission’s policies concerning prospective ratemaking. 

PG&E filed comments on the draft resolution on January 3, 2000.   PG&E’s comments take issue with the draft resolution’s proposal to deny PG&E the ability to record in ERCA the costs it has been incurring and continues to incur to implement the Commission’s mandates to upgrade its data exchange systems to the EDI format.  PG&E believes that the draft resolution’s proposed denial of PG&E’s ability to recover its legitimate EDI expenditures is inconsistent with the intent of the ERCA and is unreasonable and unfair.  PG&E argues that 1) the Commission has the discretion to waive the ERCA pre-approval requirement to avoid an unfair and unreasonable result, 2) the Commission should allow recordation in the ERCA of the costs of programs that have been directed by the Commission and 3) allowing recordation in ERCA of the EDI implementation costs is not barred by the prohibition against retroactive ratemaking.  Alternatively, PG&E suggests that the Commission should regard PG&E’s EDI upgrade as four discrete programs, each of which qualifies for recordation in ERCA without Commission pre-approval.

Although we maintain our interpretation of the intent of the ERCA and our position with respect to prospective ratemaking, discussion of these issues is irrelevant if a program falls below $1 million because under the terms of the Settlement Agreement, these costs may be recorded in the ERCA effective January 1, 1999 without prior Commission approval.  Because we now believe that PG&E originally misclassified the costs related to EDI by combining them into one program instead of four, we will not address PG&E’s comments regarding these issues.  Instead, we have modified the Discussion, Findings, and Ordering Paragraphs of the resolution to incorporate PG&E’s suggestion that the Commission should regard PG&E’s EDI program as four discrete programs because each is a separate, independent initiative that could be implemented on a stand-alone basis.  Each addresses a separate function in the Direct Access process and each was ordered separately by the Commission or its Electric Rule 22 Review Group at different times. Although this is the correct outcome for these particular expenditures categorizations, we will not allow PG&E to re-categorize expenditures simply to circumvent the $1 million threshold that triggers the Commission approval process. We put PG&E on notice that in any future ERCA filings, the Energy Division will verify that programs are in fact completely independent from each other.

On January 10, 2000, PG&E submitted an update to its comments on the draft resolution to revise its estimates for the EDI program costs to reflect the most recent budgeted expenditures.  

We have incorporated these revised estimates in the Discussion, Findings and Ordering Paragraphs of the resolution.  

FINDINGS  

1.	By Advice Letter 1919-E, as augmented by subsequent comments, PG&E informed the Commission that it is recording in the ERCA costs associated with the UDR program and costs associated with four separate programs to upgrade to the EDI format.  

2.	The Energy Division received no protests to the advice letter.

3.	Given that PG&E originally classified the costs for EDI as a single program with total expenditures exceeding $1 million in the first twelve months, the draft Resolution denied PG&E’s request to record these costs in the ERCA prior to the effective date of this Resolution. Such outcome is consistent with the provisions of the ERCA and the Commission’s policies concerning prospective ratemaking.

4.	PG&E’s EDI costs should be classified as four separate programs, each under $1 million. Under the terms of the Settlement Agreement, programs costing less than $1 million (over a 12-month period) may be recorded in the ERCA effective January 1, 1999 without prior Commission approval.

5.	To ensure that PG&E will not re-categorize expenditures simply to circumvent the Commission’s approval process, the Energy Division will verify that future program costs requested for recovery in the ERCA are separate, discrete, independent initiatives that can be implemented on a stand-alone basis.

6.	PG&E has adequately explained why the UDR and EDI programs were unanticipated and not included in another proceeding.  

7.	In Resolution W-4165, we denied two water utilities’ request to establish memorandum accounts for Y2K coverage.

8.	Except for the costs associated with the Y2K upgrade portion of EDI 810, the Commission should explicitly authorize the ERCA entries associated with the UDR and EDI programs. 

THEREFORE, IT IS ORDERED that:  

1.	Pacific Gas and Electric Company’s Advice Letter 1919-E, as augmented by its January 3, 2000 comments, shall be approved with the modification that the $8,000 estimated expenditure associated with upgrading the EDI 810 transaction set to be Y2K compliant, may not be recorded in the ERCA.

2.  	This Resolution is effective today.

I hereby certify that the foregoing resolution was duly introduced, passed and adopted at a conference of the Public Utilities Commission of the State of California held on February 17, 2000; the following Commissioners voting favorably thereon:  

  

  								                                                    
        WESLEY M. FRANKLIN  
    Executive Director

RICHARD A. BILAS
         President
HENRY M. DUQUE
JOSIAH L. NEEPER
CARL W. WOOD
LORETTA M. LYNCH
      Commissioners