BEFORE THE PUBLIC UTILITIES COMMISSION
	OF THE STATE OF CALIFORNIA

Application Of Pacific Gas and Electric		) 
Company To Identify Cost Savings For 		)	A.97-11-004
Revenue Cycle Services Provided By			) 
Other Entities And To Propose Credits		)
For End-Use Customers In Such 			)
Circumstances For Implementation No		)
Later Than January 1, 1999				)
Application Of Southern California 			)
Edison Company To Identify Cost Savings		)	A.97-11-011
For Revenue Cycle Services Provided By		)
Other Entities And To Propose Net 			)
Avoided Cost Credits For End-Use 			)
Customers In Such Circumstances For		)
Implementation On January 1, 1999			)
Application Of San Diego Gas & Electric		)
Company To Identify Cost Savings For		)	A.97-12-012
Revenue Cycle Services Provided By 		)
Other Entities And To Propose Credits		)
For End-Use Customers In Such 			)
Circumstances For Implementation No		)
Later Than January 1, 1999				)

	REPLY BRIEF
	ON BEHALF OF CALIFORNIA COMPETITION NETWORK
	REGARDING PHASE II 
	IN THE UNBUNDLING OF REVENUE CYCLE SERVICES

							California Competition Network
							Christian Energy
							Commonwealth Energy
							Eastern Pacific Energy
							Energy Compliance Systems
							Keystone Energy
							PowerCom Energy Services
							Utilisis Corporation.

July 10, 1998

REPLY BRIEF
PHASE II IN THE UNBUNDLING OF REVENUE CYCLE SERVICES
CALIFORNIA COMPETITION NETWORK

	In response to Commissioner Knight’s invitation in the July 2, 1998 Commission Meeting,  a number of the Energy Service Providers (ESPs) who have not been directly involved in this proceeding hereby submit this reply brief,  represented by the California Competition Network (CCN). The following companies specifically support this brief: Christian Energy, Commonwealth Energy, Eastern Pacific Energy, Energy Compliance Systems, Keystone Energy, PowerCom Energy Services, and Utilisis Corporation
	CCN respectfully suggests that the Commission adopt credits equal to current rates paid by bundled customers for revenue cycle services (RCS).  This policy is needed not only to allow for fair competition in RCS, but, more fundamentally, to enable meaningful customer choice in the Direct Access market. 

1.	The Commission should adopt credits equal to what customers now pay the UDC for RCS.

CCN strongly urges the Commission to adopt credits based on fully-allocated costs and adopt Enron’s proposed credits. The California Energy Commission (“CEC”) summed up the arguments for establishing credits equal to current rates, all of which CCN agrees with, as follows:
•	“Fairness to customers means that customers who choose to purchase a service from a non-UDC provider, should no longer have to continue paying the UDC for that service.” (CEC Opening Brief at 2)
•	“Total cost RCS credits ensures that customers who purchase RCS from an ESP do not pay twice for RCS-specific costs.” (Id. at 4)
•	“Customers who do not receive total cost based credits will be forced to pay the UDC for a service they do not receive.” (Id. at 4)
•	“Total cost RCS credits is fully consistent with the goal of efficient competition.” (Id. at 4)

1.	RCS credits should be established for the long term.

The Commission should adopt credits and a methodology that last as long as possible and avoid UDC suggestions to relitigate credits each year.  A long-term resolution allows businesses to plan for and implement market entry.  It allows them to invest in the necessary infrastructure. It reduces the cost of ongoing proceedings to update and modify credits. Importantly, it significantly reduces the regulatory risk inherent in entering this market and reduces the cost for ESPs and their customers.

2.	RCS credits should not be deaveraged geographically.
CCN suggests that geographic deaveraging causes many more problems than it is intended to solve. First, it will add to ESPs’ implementation costs in billing and educating their customers. Second, it will confuse customers. Third, it is unclear why meter reading should be deaveraged geographically while other services are not; for example, meter services costs are likely to differ geographically as well, since drive times for rural areas are longer than those for urban areas. CCN agrees with TURN’s conclusion that such deaveraging should not be done without a comprehensive proceeding to ensure that all rate elements, if any, are deaveraged appropriately  (TURN brief at 17).

3.	Credits based on fully-allocated costs are needed to prevent the UDCs from having even more of a competitive advantage in RCS.
The UDCs are already strongly positioned to compete for the RCS business and, of course, completely dominate the provision of RCS in California. The UDC advantages include incumbency, existing facilities and personnel, scale economies, and more. Establishing credits, as proposed by the UDCs, that are substantially lower than their total costs of providing RCS, results in an unconscionable competitive advantage.
Without fullly allocated costs for RCS credits, the Commission will endorse a policy which is patently inconsistent with basic economics and cost allocation.  The Commission should not (1) sanction UDCs to collect fully allocated costs for RCS services on the one hand, and leave competing entities to recover the full costs of replacement services from customers on the other hand.  This allows the UDC to keep the difference (under Performance-Based Ratemaking) and customers must pay fully for RCS twice, minus the incremental costs.

1.	CCN suggests that the Commission reject the UDCs’ argument that credits should be based on “avoided costs.”
CCN respectfully suggests that the Commission reject the UDC’s statements that their savings will be limited to small, incremental savings. In calculating their projected savings, the UDCs relied on their own employees for estimates and, more importantly, made no attempt to identify ways to achieve savings equal to fully-allocated costs. They did not do so, even though the Commission ordered them to proposed a way to prevent customers from being double-charged for RCS by the UDC when customers receive RCS from an ESP. (D.97-05-039, Ordering Paragraph 5: “PG&E, SDG&E and Edison shall file… cost studies and supporting testimony that separately identifies the net cost savings resulting when billing, metering and related services are provided by another entity and proposes a means for ensuring that customers are not charged by the distribution utilities for those services in such circumstances.”) 
Instead, the UDCs relied on current systems and current practices, with no consideration for changes to meet the challenges of the competitive world. No business in a competitive industry could survive with such a strategy. The UDCS, in short, have not demonstrated that there is no reasonable means by which they could continue recover the RCS costs associated with serving remaining UDC customers should the Commission adopt credits based on fully-allocated costs. 

Respectfully submitted, 				10 July 1998, 

by

California Competition Network 			Christian Energy

_____________________				_______________
Eric Charles Woychik					Reverend Charles L. Floyd
 
Commonwealth Energy				Eastern Pacific Energy

______________________				___________________
Frederick M. Bloom					Tracy Rush

Energy Compliance Systems				Keystone Energy

______________________				___________________
Kenneth Miller						Douglas Mitchell

PowerCom Energy Services				Utilisis Corporation

______________________				___________________
Charles Haley						William Dale