PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

ENERGY DIVISION					RESOLUTION E-3655
                                					                  FEBRUARY 17, 2000	 

RESOLUTION

RESOLUTION E--3655.  Southern California Edison Company seeks revisions to its Transition Cost Balancing Account (TCBA) to provide greater detail regarding the recording of transaction costs associated with the market valuation of Edison’s generating assets.   Approved as modified.

By Advice Letter 1421-E Filed on December 3, 1999. 
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Summary

This Resolution approves, with one modification, a request by the Southern California Edison Company (Edison) to revise its Transition Cost Balancing Account (TCBA) tariffs as required by Resolution E-3633.  The purpose of these revisions is to conform Edison’s tariffs to both the more detailed tariff language of Pacific Gas and Electric Company (PG&E) as well as the guidance contained in Resolution E-3633.

Background

In a previous Advice Letter filing, Edison had proposed the creation of a new memorandum account to be entitled the Divestiture /Market Valuation of Fossil and Hydro Generation Memorandum Account (DMVFHG).  The purpose of this account would have been to record certain transaction costs associated with the market valuation of Edison’s generating assets as required by Assembly Bill (AB)1890.    Examples of these transaction costs could include such items as the cost for appraisers, investment bankers, etc. associated with the market valuation process.

In Resolution E-3633 the Commission denied Edison’s request to create its proposed DMVFHG account.  As the Commission concluded:

To a large extent, Edison’s proposed tariff revisions would allow Edison to record costs it is already authorized to record as offsets to the “CTC Revenue Account” of the Transition Cost Balancing Account (TCBA).  These costs, once they are found reasonable by the Commission at the time that Edison market values its generation assets, would be offset against any net gain from market valuation.  While Edison is already authorized to record many of these costs as potential offsets to its CTC Revenue and CTC Cost Accounts, the description of these accounts in Edison’s tariffs should be clarified for the future. 

The Commission also stated that although Edison could recover its transaction costs under its existing tariff authority:

Edison’s broad and general tariff language could create future uncertainties over the proper recording and ratemaking treatment of costs and revenues.  Therefore, Edison should be required to file an Advice Letter to revise its tariffs in its Transition Cost Balancing Account to conform them to both the more detailed tariff language of PG&E as well as the guidance provided in this Resolution regarding the recovery of transaction costs. 

Resolution E-3633 thereby directed Edison to file an Advice Letter to modify its tariffs and that “the Advice Letter shall be addressed by further order of the Commission.” 

On December 3, 1999, Edison filed Advice Letter 1421-E proposing modifications to its tariffs as required by Resolution E-3633.

Notice 

Notice of AL 1421-E was made by publication in the Commission’s Daily Calendar.  Edison states that a copy of the Advice Letter was distributed in accordance with Section III-G of General Order 96-A. 
Protests

Advice Letter 1421-E was not protested.

Discussion

Energy Division has reviewed the tariff modifications proposed by Edison and finds that, with one minor modification discussed further below, they meet the requirements of Resolution E-3633.

The one modification to Edison’s proposed tariffs occurs in a portion of part (g)(4)(a) of Edison’s Transition Cost Balancing Account (Section JJ).  This portion of Edison’s tariffs should read (changes highlighted):

.(a)…
For purposes of this section, market valuation shall mean the net market value after deducting all transaction and valuation expenses authorized for recovery by the Commission from the gross valuation amount in accordance with Resolution E-3633.
…

This modification conforms this portion of Edison’s tariffs with the other revisions proposed by Edison in its Advice Letter filing as well as reaffirming that transaction costs must be found reasonable by the Commission before they can be recovered in rates.

Comments

Public Utilities (PU) Code section 311(g)(1) provides that this Resolution must be served on all parties and subject to at least 30 days public review and comment prior to a vote of the Commission.  Section 311(g)(2) provides that this 30-day period may be reduced or waived upon the stipulation of all parties in the proceeding.  

The only party, Edison, has stipulated to waive the 30-day waiting period required by PU Code section 311(g)(1) and the opportunity to file comments on the draft Resolution.  Accordingly, this matter will be placed on the Commission’s agenda directly for prompt action. 

Findings

1.	Resolution E-3633 directed Edison to file an Advice Letter to modify its tariffs.   This Advice Letter would be addressed by further order of the Commission.

2.	Energy Division has reviewed the tariff modifications proposed by Edison and finds that, with one minor modification, they meet the requirements of Resolution E-3633.

3.	Edison should modify part (g)(4)(a) of its Transition Cost Balancing Account (Section JJ) tariffs to state that transaction costs must be found reasonable by the Commission before they can be recovered in rates.

4.	Edison has stipulated to waive the 30-day waiting period required by PU Code section 311(g)(1) and the opportunity to file comments on the draft Resolution.  

Therefore it is ordered that:

1.	The request of the Southern California Edison Company (Edison) to modify its Transition Cost Balancing Account as requested in Advice Letter 1421-E is approved as modified.  

2.	Edison shall file a supplemental Advice Letter within 20 days to make the changes to its tariffs outlined in this Resolution.  

3.	Edison’s Advice Letter shall be effective upon the Commission’s receipt of the  supplemental Advice Letter filing. 

This Resolution is effective today.

I 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