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\pard \qc\sl0 
{\plain }{\plain \b BEFORE THE PUBLIC UTILITIES COMMISSION\par
}{\plain \b OF THE STATE OF CALIFORNIA}{\plain \par
}\pard \qj\sl0 
{\plain \par
}\pard \qj\fi-5040\li5040\sl0\tx720\tx1440\tx2160\tx2880\tx3600\tx4320\tx5040 
{\plain Application of Pacific Gas and Electric Company\tab )\par
}\pard \qj\fi-6480\li6480\sl0\tx720\tx1440\tx2160\tx2880\tx3600\tx4320\tx5040\tx5760\tx6480 
{\plain to Identify Cost Savings for Revenue Cycle \tab \tab )\tab \tab A.97-11-004\par
}\pard \qj\fi-5040\li5040\sl0\tx720\tx1440\tx2160\tx2880\tx3600\tx4320\tx5040 
{\plain Services Provided by Other Entities And to  \tab \tab )\par
}\pard \qj\fi-5040\li5040\sl0\tx720\tx1440\tx2160\tx2880\tx3600\tx4320\tx5040 
{\plain Propose Credits For End-Use Customers In Such\tab )\par
}\pard \qj\sl0 
{\plain Circumstances For Implementation No Later\tab )\par
}{\plain Than January 1, 1999 \tab \tab \tab \tab )\par
}{\plain __________________________________________)\par
}\pard \qj\fi-5040\li5040\sl0\tx720\tx1440\tx2160\tx2880\tx3600\tx4320\tx5040 
{\plain Application of Southern California Edison \tab \tab )\par
}\pard \qj\fi-6480\li6480\sl0\tx720\tx1440\tx2160\tx2880\tx3600\tx4320\tx5040\tx5760\tx6480 
{\plain Company to Identify Cost Savings for Revenue \tab )\tab \tab A.97-11-011\par
}\pard \qj\fi-5040\li5040\sl0\tx720\tx1440\tx2160\tx2880\tx3600\tx4320\tx5040 
{\plain Cycle Services Provided by Other Entities And to  \tab )\par
}\pard \qj\fi-5040\li5040\sl0\tx720\tx1440\tx2160\tx2880\tx3600\tx4320\tx5040 
{\plain Propose Credits For End-Use Customers In Such\tab )\par
}\pard \qj\fi-4320\li4320\sl0\tx720\tx1440\tx2160\tx2880\tx3600\tx4320 
{\plain Circumstances For Implementation on \tab \tab )\par
}\pard \qj\fi-4320\li4320\sl0\tx720\tx1440\tx2160\tx2880\tx3600\tx4320 
{\plain January 1, 1999 \tab \tab \tab \tab \tab )\par
}\pard \qj\sl0 
{\plain __________________________________________)\par
}\pard \qj\fi-5040\li5040\sl0\tx720\tx1440\tx2160\tx2880\tx3600\tx4320\tx5040 
{\plain Application of San Diego Gas & Electric \tab \tab )\par
}\pard \qj\fi-6480\li6480\sl0\tx720\tx1440\tx2160\tx2880\tx3600\tx4320\tx5040\tx5760\tx6480 
{\plain Company to Identify Cost Savings for Revenue \tab )\tab \tab A.97-12-012\par
}\pard \qj\fi-5040\li5040\sl0\tx720\tx1440\tx2160\tx2880\tx3600\tx4320\tx5040 
{\plain Cycle Services Provided by Other Entities And to  \tab )\par
}\pard \qj\fi-5040\li5040\sl0\tx720\tx1440\tx2160\tx2880\tx3600\tx4320\tx5040 
{\plain Propose Credits For End-Use Customers In Such\tab )\par
}\pard \qj\fi-4320\li4320\sl0\tx720\tx1440\tx2160\tx2880\tx3600\tx4320 
{\plain Circumstances For Implementation on \tab \tab )\par
}\pard \qj\fi-5040\li5040\sl0\tx720\tx1440\tx2160\tx2880\tx3600\tx4320\tx5040 
{\plain January 1, 1999 \tab \tab \tab \tab \tab )\par
}\pard \qj\sl0 
{\plain __________________________________________)\par
}{\plain \par
}\pard \qc\sl0 
{\plain }{\plain \b PHASE 2 OPENING BRIEF OF \par
}{\plain \b  THE UNIVERSITY OF CALIFORNIA \par
}{\plain \b THE CALIFORNIA STATE UNIVERSITY AND\par
}{\plain \b THE CALIFORNIA DEPARTMENT OF GENERAL SERVICES\par
}{\plain \par
}\pard \qj\sl480 
{\plain \tab Pursuant to the January 26, 1998 Assigned Commissioners\'92 Ruling (\'93ACR\'94) and the June 8, 1998, 
Administrative Law Judge\'92s Ruling (\'93ALJ Ruling\'94), the University of California, the California State 
University and the California Department of General Services (\'93UC/CSU/DGS \'94) respectfully submit this 
Opening Brief on Phase 2 issues.{\super\fs19 \chftn {\footnote \pard \qj\sa240 
{\plain \super\fs19 \chftn }{}{\plain Dian Grueneich, counsel for the University of California and California State University, has 
authorized Andrew B. Brown to sign this brief on behalf of her clients.}}}
}{\plain \sect \sectd \sbknone\titlepg 
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  We have been active in both phases of this proceeding representing a 
range of customer interests.  Some of the facilities represented will remain bundled utility customers, others 
are current participants in the direct access market, and many are actively investigating the options available 
to them in the restructured electric market.  Therefore, our interests are to ensure that the credits developed 
here forward the pro-competition goals of the Commission without exposing bundled utility customers to 
increased burdens.\par
}\pard \qj\fi-720\li720\sl480\tx720 
{\plain \b I.\tab }{\plain \b\ul Background}{\plain \par
}\pard \qj\sl480 
{\plain \tab Phase 2 of the proceeding addresses a number of issues regarding the appropriate methodology and 
ultimate credits applicable to end-use customers\'92 billings in the case where that customer takes direct access 
electric commodity service from an electric service provider (\'93ESP\'94) and also has an ESP provide certain 
revenue cycle services (\'93RCS\'94).   These credits are necessary for three fundamental reasons: \par
}\pard \qj\fi-720\li720\sl480\tx720 
{\plain (1) \tab End-use customers should not be required to pay the utility distribution companies (\'93UDCs\'94)--Pacific Gas & Electric (\'93PG&E\'94), San Diego Gas & Electric (\'93SDG&E\'94) and Southern California 
Edison (\'93Edison\'94)--for services the }{\plain \i UDCs no longer provide}{\plain  to the end-use customer; \par
}\pard \qj\fi-720\li720\sl480\tx720 
{\plain (2)\tab The individual credits proposed in this case are necessary because--at this time--the UDCs do not 
have unbundled revenue cycle services }{\plain \i rates}{\plain  which reflect the unbundled services.  Therefore, 
because the UDC distribution rate element contains that portion which pays for the UDC RCS, the 
end-use customer who procures RCS from someone else }{\plain \ul must}{\plain  recover those monies via the credits.  
If and when the UDCs provide }{\plain \i unbundled rates}{\plain  for the unbundled RCS services the need for 
individual credits should end; and,\par
}\pard \qj\fi-720\li720\sl480\tx720 
{\plain (3)\tab Until there are unbundled rates for the unbundled RCS services, the credits adopted here are the 
means whereby the customers (and ESPs) receive a price signal regarding the cost for those 
services.  Reasonably accurate price signals will allow the customer to weigh its service options and 
thereby make the choice most suitable to their needs.  While the ESP (or a UDC discretionary 
service tariff) may offer additional service innovations, the RCS credits will provide at least a 
baseline against which the customer can draw their own conclusions regarding the value of service.  
The credits are not the optimal form of price signal; rates specific to the services provided would 
be a preferable form of signal because they would remove the potential customer confusion 
regarding the scope of costs addressed by the credits (i.e., the utilities\'92 credit proposals will be 
considered by customers--incorrectly--to be the full UDC rate for those services).{\super\fs19 \chftn {\footnote \pard \qj\sa240 
{\plain \super\fs19 \chftn }{}{\plain The superiority of price signals from the market, as would be the case if RCS rates were 
unbundled from distribution, was addressed by SDG&E\'92s witness Croyle: \'93If you were to decide that 
certain activities were now competitive and pull them out of those bundled rates and charge 
separately for them, the only right price signal would be the market price ....\'94 TR 440.}}}
}{\plain \par
}\pard \qj\sl480 
{\plain \tab With these fundamental concepts in mind, UC/CSU/DGS address the various issues raised in the 
proceeding as well as those matters brought forward in the ALJ Ruling.\par
}\pard \qj\fi-720\li720\sl480\tx720 
{\plain }{\plain \b II.\tab }{\plain \b\ul Methodology}{\plain \par
}\pard \qj\sl480 
{\plain \tab The application of a single, consistent methodology for all three UDCs--including the manner in 
which it is implemented--is critical if the RCS credits are to treat end-use customers throughout the state  
equally and if no RCS market anomalies are to be created at the utilities\'92 service area boundaries.  Failure 
to require the same methodology, or allowing the individual utilities to implement that methodology in 
different ways, can yield credit results which reflect more than differences in utility-specific costs.{\super\fs19 \chftn {\footnote \pard \qj\sa240 
{\plain \super\fs19 \chftn }{}{\plain While the utilities purport to follow a \'93common methodology,\'94 it is clear that there are 
significant differences in how they }{\plain \i implemented}{\plain  the methodology which extend far beyond any 
differences in their internal costs.  The inconsistency in }{\plain \i implementation}{\plain  must be removed in order to 
avoid unintended barriers or incentives.}}}
}{\plain   This 
could harm the market by distorting price signals to customers and ESPs.  We agree with ORA that this is 
a fundamental issue.{\super\fs19 \chftn {\footnote \pard \qj\sa240 
{\plain \super\fs19 \chftn }{}{\plain Price: \'93consistency in approach is one of our major recommendations.\'94 TR, 1021.  }}}
}{\plain   UC/CSU/DGS therefore urge the Commission to require a single methodology as 
well as a uniform scheme of utility implementation.\par
\pard \qj\fi-1440\li1440\tx720\tx1440 
\tab }{\plain \b A.\tab }{\plain \b\ul UC/CSU/DGS Support the Fully Allocated Cost Methodology As A Proxy for 
Unbundled RCS Rates}{\plain \par
}\pard \qj 
{\plain \par
}\pard \qj\sl480 
{\plain \tab UC/CSU/DGS urge the Commission to adopt the fully allocated cost (\'93FAC\'94) methodology 
presented by Enron as corrected during hearings.{\super\fs19 \chftn {\footnote \pard \qj\sa240 
{\plain \super\fs19 \chftn }{}{\plain Enron presented revised credits in Exh. 55.  Additionally, certain other potential corrections 
where identified during hearings.  }{\plain \ul See}{\plain , e.g., TR 900-901.}}}
}{\plain   Our support is rooted in our firm belief that customers 
should not pay for services they do not receive.  This is a philosophy shared with CellNet and often 
mentioned as a guiding principle in the others\'92 testimony.{\super\fs19 \chftn {\footnote \pard \qj\sa240 
{\plain \super\fs19 \chftn }{}{\plain }{\plain \ul See}{\plain , TR at 1246, line 28 through 1247, line 3 (CellNet: King); Exh 9, pages 1 and 2 
(SDG&E); Exh. 71, pages 4-5 (CellNet); Exh. 58, page 4, lines 4-6 (ORA); Exh. 76, page 1-1 
(TURN); Exh. 64, page 2, lines 9-11 (CEC).}}}
}{\plain   The FAC methodology best approximates the 
monies collected from end-use customers via the UDC distribution rates that support the RCS services.{\super\fs19 \chftn {\footnote \pard \qj\sa240 
{\plain \super\fs19 \chftn }{}{\plain Enron, Exh 51, page 2.}}}
}{\plain   
In the absence of unbundled RCS rates, FAC is the next-best proxy to be used as a credit.  Enron has 
derived those credits from utility numbers filed with the Commission and with the Federal Energy 
Regulatory Commission (\'93FERC\'94).  We perceive those figures to be more reliable than the specially 
developed time and motion studies used to generate the \'93actual\'94 future net avoided cost numbers presented 
by PG&E and Edison.  Those studies where not subjected to independent verification, employees other than 
those who did the actual field work were interviewed, and those utility employees knew in advance that 
their answers would be incorporated into credits given to customers who left the utility.{\super\fs19 \chftn {\footnote \pard \qj\sa240 
{\plain \super\fs19 \chftn }{}{\plain }{\plain \ul See, e.g.,}{\plain  Exh. 76, pages 1-2 - 1-3 where TURN notes its \'93significant doubts as to the utility 
figures.\'94  }}}
}{\plain    Therefore we 
believe that the likelihood of bias in the results are high.  This type of bias should not be found in the 
materials the utilities have filed with the CPUC and FERC.\par
\pard \qj\fi-1440\li1440\keep\keepn\tx720\tx1440 
}{\plain \b  \tab B.\tab }{\plain \b\ul If the Fully Allocated Cost Methodology is Not Adopted, then UC/CSU/DGS Believe 
that SDG&E\'92s Net Avoidable Cost Approach, Modified as Suggested by Intervenors, 
is the Superior Methodology Among the Applicants}{\plain \par
}\pard \qj\keep\keepn 
{\plain \par
}\pard \qj\sl480\keep 
{\plain \tab If the Commission does not embrace the fully allocated cost methodology, then UC/CSU/DGS 
would support the approach used by SDG&E, subject to the certain refinements suggested by other parties 
such as ORA, TURN and the CEC.  We believe that SDG&E\'92s identification of the range of \'93avoidable\'94{\super\fs19 \chftn {\footnote \pard \qj\sa240 
{\plain \super\fs19 \chftn }{}{\plain SDG&E\'92s witness, Mr. Croyle, highlights the distinction between \'93avoidable\'94 and \'93avoided\'94  
costs.  Costs applicable for crediting include \'93avoidable\'94 and \'93opportunity\'94 costs.  }{\plain \ul See}{\plain , TR 1055 
(SDG&E: Croyle);  Exh. 9, page 6.  \'93Avoidable\'94 costs are more inclusive than the \'93avoided\'94 costs 
identified by PG&E and Edison.  TR 412, line 27 through 413, line 6 (SDG&E: Croyle).}}}
}{\plain  
costs, founded in part on an examination of UDC RCS activities eliminated assuming 100% ESP 
penetration, to be superior to the more limited examination undertaken by PG&E and Edison.{\super\fs19 \chftn {\footnote \pard \qj\sa240 
{\plain \super\fs19 \chftn }{}{\plain }{\plain \ul See, e.g.,}{\plain  TR 631, line 15 (PG&E: Burns).}}}
}{\plain   
Additionally, the 100% penetration exercise allows some basis for comparison against cost figures provided 
to the CPUC and FERC such as those used to develop fully allocated costs.  In our view it is essential that 
all utilities undertake this 100% analysis in order to provide some form of \'93reality check\'94 against RCS costs 
found in the distribution rates as well as ensuring full identification of avoidable costs.  ORA and SDG&E 
take a similar view.{\super\fs19 \chftn {\footnote \pard \qj\sa240 
{\plain \super\fs19 \chftn }{}{\plain }{\plain \ul See, e.g.}{\plain , Exh. 58 (ORA), page 12, lines 12-14 and page 18, lines 3-11.  For SDG&E\'92s 
recommendation see, Exh 38 (SDG&E), page 30 and TR 446-447.}}}
}{\plain \par
}\pard \qj\sl480 
{\plain \tab The distinction between \'93avoidable\'94 and \'93avoided\'94 costs should not be lost.  SDG&E\'92s 
methodology places the burden on the UDC to realize the savable costs.  Exh. 9, page 6.  It appears that 
PG&E and Edison have attempted to forecast \'93avoided\'94 savings; thus, we fear that they could return in a 
subsequent update and assert that they were not able to realize savings and urge a downward revision in 
the customer\'92s credit.  If that were to occur the customer would effectively pay twice for RCS.  Moreover, 
SDG&E\'92s approach has the practical effect of }{\plain \i reducing}{\plain  the likelihood of subsequent protracted litigation 
regarding the extent of \'93actual\'94 single-year utility cost savings.  Therefore, UC/CSU/DGS believe it is 
appropriate to provide the cost saving incentive built into SDG&E\'92s methodology.  \par
}{\plain \tab Another area of critical importance--and where SDG&E\'92s approach is superior to PG&E\'92s and 
Edison\'92s--concerns the scope of offsets applied to the end-user credit.  SDG&E properly excludes from 
offsets those costs that are more appropriately attributed to actions by ESPs or other UDC costs not 
directly connected to the specific end-use customer\'92s RCS service election.  Exh. 9, page 6.  This is another 
of the primary distinctions between SDG&E\'92s approach and that of PG&E and Edison.{\super\fs19 \chftn {\footnote \pard \qj\sa240 
{\plain \super\fs19 \chftn }{}{\plain For example, SDG&E witness Croyle notes this difference at TR 414, 424-425, 443-444. }}}
}{\plain   ORA (Exh. 58, 
page 18 ), TURN (Exh.76, page 1-21), and Enron (e.g., TR 846), are all in apparent agreement that the 
offsets proposed by PG&E and Edison are overinclusive or unreasonable.  For example, these overinclusive 
offsets would reduce the systemwide }{\plain \i end-user\'92s }{\plain credit for costs which are more appropriately recovered 
either through discretionary or non-discretionary service fees on ESPs or individual customers, through 
Section 376 implementation cost proceedings or other mechanisms.  Overinclusion of costs through offsets 
undermines the credit\'92s ability to reflect those RCS costs found in distribution rates and further dilutes the 
price signal provided to end-use customers and ESPs through the credits.{\super\fs19 \chftn {\footnote \pard \qj\sa240 
{\plain \super\fs19 \chftn }{}{\plain }{\plain \ul See}{\plain , testimony of SDG&E witness Croyle, TR 443, line 15 through 444 line 5.}}}
}{\plain  Insofar as the SDG&E 
methodology omits these costs, UC/CSU/DGS urge the Commission to remove the offsets proposed by 
PG&E and SCE because it is inappropriate to discount the end-use customer\'92s credit for costs not 
attributable directly to the customer. \par
\tab UC/CSU/DGS concur with a number of adjustments to SDG&E\'92s calculation raised in testimony 
and hearings.  However, we believe that in the interest of brevity and clarity it is best to leave the details 
of those adjustments to the parties proposing them.\par
}\pard \qj\sl480\keep\keepn 
{\plain \b\ul III.\tab Associated Issues}{\plain \par
}\pard \qj\fi-1440\li1440\sl480\keep\tx720\tx1440 
{\plain \tab A.\tab }{\plain \ul The Commission Should Carefully Consider the Need for Annual Update Proceedings}{\plain \par
}\pard \qj\sl480 
{\plain \tab The evolution of electric restructuring has triggered a vast array of regulatory proceedings, both at 
the Federal and State levels.  UC/CSU/DGS urge the Commission to avoid the call to evolve this RCS 
credit proceeding into another annual regulatory event.  This potential is particularly troubling if RCS 
crediting is truly an interim step--a view we believe is shared with the CEC and possibly other parties.{\super\fs19 \chftn {\footnote \pard \qj\sa240 
{\plain \super\fs19 \chftn }{}{\plain }{\plain \ul See}{\plain , TR 267, 269 (CEC: Jubien [Opening Statements]); Exh. 64, page 4, lines 1-9 (CEC); 
Exh. 58, pages 3-4 (ORA) (Competitive services should be allocated to UDCs\'92 merchant function).}}}
}{\plain   
The Commission\'92s and other parties\'92 time will be better spent developing the unbundled rates than engaging 
their limited resources annually in the re-litigation of costs and savings.  In any event, it is imperative that 
the unbundled RCS rates be in place no later than the end of the rate freeze.  If annual updating is embraced, 
then the update proceeding should not entertain changes in the methodology adopted in this phase without 
some significant justification.  Moreover, we believe that changes to the credits on an annual basis will 
compound the dilution of the price signal and increase customer confusion, especially during the rate freeze.\par
}\pard \qj\fi-1440\li1440\sl480\tx720\tx1440 
{\plain \tab }{\plain \b B.\tab }{\plain \b\ul Offsets to Customer Credits Must be Carefully and Narrowly Construed}{\plain \par
}\pard \qj\sl480 
{\plain \tab It is very important that any offsets made to the end-use customers\'92 credit be limited to those costs 
imposed by the actions of that customer.  It is inappropriate to include offsets for costs which are more 
appropriately recovered via other mechanisms such as discretionary service charges, implementation cost 
recovery proceedings or rate case proceedings. This topic was the subject of extensive testimony.  Generally 
speaking, UC/CSU/DGS note that ORA, TURN, SDG&E, Enron, and CellNet all appear to share the belief 
that offsets to credits should be narrowly drawn.{\super\fs19 \chftn {\footnote \pard \qj\sa240 
{\plain \super\fs19 \chftn }{}{\plain }{\plain \ul See, e.g.,}{\plain  Exh. 38 (SDG&E) page 9 and Exh. 9 (SDG&E) page 6; Exh. 58, pages 16 & 18 
(ORA); Exh. 76, pages 1-21 through 1-28 (TURN); Exh. 51, page 36 (Enron); Exh. 53, page 16 
(Enron); Exh. 71, page 11 (CellNet).}}}
}{\plain \par
}\pard \qj\fi-2160\li2160\tx720\tx1440\tx2160 
{\plain \tab \tab }{\plain \b 1.\tab }{\plain \b\ul Because Utility Demand For Reusable Meters Can Draw Down Credits, The 
Commission Should Allow Customers To Purchase Their Existing Meter.}{\plain \par
}\pard \qj 
{\plain \par
}\pard \qj\sl480 
{\plain \tab Part and parcel of the utility meter ownership credit is the value of a returned meter.  In most 
instances that value is driven, in part, by whether the utility will consider the meter \'93reusable.\'94  When the 
utilities existing stock of meters is sufficient to serve its own demand, the utilities\'92 credit is generally driven 
down.  Additionally, because they assert that no secondary market exists for these meters, unreusable 
meters will be scrapped.  In the case of SCE there is a significant offsetting cost to their scrapping processes 
which can make the meter value negative.{\super\fs19 \chftn {\footnote \pard \qj\sa240 
{\plain \super\fs19 \chftn }{}{\plain TR 570 (SCE: Pope): \'93What drives the [net] salvage value ... negative is that there\'92s a fairly 
large expense of removing the meter from Edison\'92s accounting records.\'94}}}
}{\plain \par
}{\plain \tab UC/CSU/DGS believe that the proposal that customers have the option to purchase existing meters 
in place is a viable means of mitigating this offsetting effect.  As noted in testimony, retrofit technologies 
exists for some meters.{\super\fs19 \chftn {\footnote \pard \qj\sa240 
{\plain \super\fs19 \chftn }{}{\plain TR 1261 (CellNet: King).  CellNet, for example, produces retrofit devices that would allow 
convention meters to be used for direct access.}}}
}{\plain    Failure to provide this option to customers means that the utilities and customers 
will lose an opportunity to save costs.  Because the utilities may be able to use the meter, it may be prudent 
to give them some discretion on the sale, but in no event should the utility be able to refuse a sale where 
they have no internal use for the meter or where the salvage value (and hence customer credit) would be  
significantly reduced because of UDC handling costs.{\super\fs19 \chftn {\footnote \pard \qj\sa240 
{\plain \super\fs19 \chftn }{}{\plain }{\plain \ul See}{\plain  the extensive testimony regarding this issue beginning at TR 416 (SDG&E: Croyle).  }}}
}{\plain   The record is sufficient to implement this 
proposal{\super\fs19 \chftn {\footnote \pard \qj\sa240 
{\plain \super\fs19 \chftn }{}{\plain ORA developed this proposal.  See, Exh 58, page 16.  Additionally, extensive testimony was 
given during hearings regarding the circumstances where the sale would make sense as well as 
potential means of pricing the meters.  SDG&E does not generally oppose this concept.  See, TR 
417-419 and 442-443 (SDG&E: Croyle).}}}
}{\plain ; the Commission need only set guidelines regarding the scope and limitations on UDC discretion 
and the reasonable means of pricing meters.  Parties to the transaction can then negotiate the transaction, 
or a pro forma mechanism could be put in place.\par
}\pard \qj\fi-1440\li1440\tx720\tx1440 
{\plain \tab }{\plain \b C.\tab }{\plain \b\ul The Geographic Segmentation Proposals Raise Serious Concerns That Require 
Additional Review}{\plain \par
}\pard \qj 
{\plain \par
}\pard \qj\sl480 
{\plain \tab Traditionally, utilities\'92 rates have been developed using broad customer classes with only limited 
attention to customer-specific differences in the costs to serve.  Generally the rates reflect class average 
costs.  UC/CSU/DGS is concerned that the use of deaveraging based on geographic segmentation 
significantly clashes with the methods used to develop the now-frozen rates.  While deaveraging may make 
sense in future ratemaking, creating RCS credits from such an alien basis is troubling.  We believe that 
deaveraging should not be applied in this case; it is not appropriate to deaverage by location when other 
deaveraging slices may also be appropriate. To select one dimension of deaveraging without embracing 
other areas may well not be perceived by customers as equitable.\par
}{\plain \tab UC/CSU/DGS share the concern expressed by others that the piecemeal deaveraging cannot be 
traced back to the traditional development of class-specific rates and therefore a determination of whether 
cost-shifting occurs is problematic at best.{\super\fs19 \chftn {\footnote \pard \qj\sa240 
{\plain \super\fs19 \chftn }{}{\plain }{\plain \ul See, e.g.,}{\plain  Exh 76 (TURN) pages 1-6 through 1-12; Exh 56 (ORA) pages 15-16; Exh. 51 
(Enron) pages 27-28; Exh. 52 (Enron) page 3; Exh. 53 (Enron) pages 2-5.}}}
}{\plain   We do not believe that deaveraging }{\plain \i per se}{\plain  would necessarily 
cause cost-shifting, but we do believe that selective deaveraging could have the result of shifting costs.  
Detailed segmentation (which is akin to deaveraging) could be a feature of market-based rates for RCS.  
However, in the current context of credits, we do not believe that the applicants have fully explained how--given the cost variations driven by meter types for example--only meter reading deserves deaveraging. {\super\fs19 \chftn {\footnote \pard \qj\sa240 
{\plain \super\fs19 \chftn }{}{\plain }{\plain \ul See, e.g.,}{\plain  TR 733 (PG&E: Ross) regarding customer class cost distinctions and use of meter 
reading zones.}}}
}{\plain  
Therefore, any proposal to deaverage the RCS portion of distribution rates must be carefully reviewed to 
ensure that similar customers within each class are not treated dissimilarly via the type of deaveraging 
applied. \par
}\pard \qj\fi-1440\li1440\tx720\tx1440 
{\plain \tab }{\plain \b D.\tab }{\plain \b\ul Due to the Speculative Nature of the Utilities\'92 Implementation of Fully Consolidated 
ESP Billing, Additional Review May Be Needed}{\plain \par
}\pard \qj 
{\plain \par
}\pard \qj\sl480 
{\plain \tab Full ESP Consolidated billing--where the ESP calculates charges for UDC and ESP services, and 
then delivers and collects the bill--is an important option that UC/CSU/DGS expect to be implemented as 
the competitive market matures.{\super\fs19 \chftn {\footnote \pard \qj\sa240 
{\plain \super\fs19 \chftn }{}{\plain Fully Consolidated ESP Billing, where the ESP calculates }{\plain \ul all}{\plain  charges, presents and collects 
the bill, must not be confused with Partial Consolidated ESP Billing, where the ESP takes information 
from the UDC (either \'93rate-ready\'94 data or the UDC\'92s charges as calculated by the UDC) and 
combines that with the ESP\'92s own charges into a single bill for presentation and collection.  
Conversely, ESPs may present data to the UDCs under UDC consolidated billing.  }{\plain \ul See}{\plain , D.97-10-087, 
Appendix A, pages 35-39.}}}
}{\plain   However, there are a number of outstanding issues regarding how this 
option will be exercised.  To our knowledge this has been the first proceeding to address some of those 
details.  While certain aspects of the record are sufficient to outline the range of costs to be addressed, we 
also believe that there are many more issues outstanding at this time.  Given the utilities\'92 position regarding 
the nature and costs associated with the \'93audit\'94 and testing procedures they would like to impose on ESPs,  
we expect this to be the subject of future detailed discussions.  It may, therefore, be appropriate to revisit 
this topic and remove the currently speculative character of the utility program costs when the nature and 
scope of ESP qualification process is clarified.  If the Phase I decision instructs the UDCs to program their 
billing systems for the Fully Consolidated ESP billing option, then the ultimate credits developed with less 
speculative data could be easily and quickly implemented.  This approach would allow the utility cost and 
savings data to be addressed at the time the program details are addressed.\par
}\pard \qj\fi-1440\li1440\sl480\keep\keepn\tx720\tx1440 
{\plain \tab }{\plain \b E.\tab }{\plain \b\ul New Customer Connections Should Be Able to Avoid UDC Initial Meter Installations}{\plain \par
}\pard \qj\sl480\keep 
{\plain \tab We concur with TURN\'92s proposal that new customer installations should be able to avoid costs 
associated with a \'93default\'94 initial UDC meter installation and thereby own the meter.  New customer 
connections should have the ability to reduce costs through the competitive market.  The Permanent 
Standards Working Group\'92s efforts toward open meter architecture should alleviate UDC concerns about 
\'93unreadable\'94 meters and the \'93lock-in\'94 of customers.  We disagree with Edison\'92s view that AB 1890 
forecloses this option for a majority of new installations. Because direct access could be used throughout 
a project\'92s construction,  and because meters should be readable by both ESPs and UDCs,  we do not 
believe that the UDCs should have preferential status in meter installation business for new connections.{\super\fs19 \chftn {\footnote \pard \qj\sa240 
{\plain \super\fs19 \chftn }{}{\plain }{\plain \ul See}{\plain , TR 544, line 9 through 545 line 2 (SCE: Fellows) regarding direct access and 
developments which seek to maximize energy efficiency.  }{\plain \ul See also}{\plain , TR 518, line 5 through 524, line 
11.}}}
}{\plain \par
}\pard \qj\fi-720\li720\sl480\keep\keepn\tx720 
{\plain \b IV.\tab }{\plain \b\ul Response to ALJ Malcolm\'92s Issues: AB 1890 Impact Upon The RCS Credit Proposals}{\plain \par
}\pard \qj\sl480\keep 
{\plain \tab In the following sections UC/CSU/DGS respond to the various issues raised in the June 8, 1998 ALJ 
Ruling.\par
}\pard \qj\fi-1440\li1440\sl480\tx720\tx1440 
{\plain \tab }{\plain \b A.\tab }{\plain \b\ul Section 368(a) Does Not Limit the Commission\'92s Ability to Require RCS Credits.}{\plain \par
}\pard \qj\sl480 
{\plain \tab AB 1890, and specifically Section 368(a), impose no limits on the Commission\'92s ability to require 
credits to those customers who secure RCS services from providers other than the UDC.  Section 368\'92s 
rate freeze provision speaks to the UDC rate as a whole; as long as the sum of unbundled elements do not 
change the whole rate faced by }{\plain \ul bundled}{\plain  service customers.  D.96-12-077, page 7-8.  Additionally, 
unbundling beyond that initially contemplated by AB 1890 is not precluded.  Ibid.{\super\fs19 \chftn {\footnote \pard \qj\sa240 
{\plain \super\fs19 \chftn }{}{\plain Indeed, D.96-12-044, at page 33, notes that other ways of dividing the total rate are 
permitted under the statue, and that the point of dividing the rate into components is to ensure that 
direct access customers pay the same charges for the services they take from the utility.  At that time 
only the provision of energy was expected to be competitive.  Obviously the Commissions policy has 
evolved in this area, as evidenced by D.97-05-039.}}}
}{\plain   Indeed, given that the 
focus of AB 1890 was upon the Commission\'92s development of a competitive }{\plain \i generation}{\plain  market (instigated 
by the end of natural monopoly characteristics related to generation), further unbundling of utility service 
functions--like RCS--that can aid market development are logical.{\super\fs19 \chftn {\footnote \pard \qj 
{\plain \super\fs19 \chftn }{}{\plain D.97-05-056, at page 6-7, states that:\par
}\pard \qj\li1008\ri1008\sa240 
{\plain [t]he purpose of promoting competition where it may be viable is to assure the best 
use of the economy\'92s resources, to assure customers pay the lowest price for services, 
and to expand the array of services available to customers.  Unbundling promotes 
competition by providing customers with options for individual services and sending 
customers price signals which would permit them to make reasoned choices about 
their competitive options.  }}}
}{\plain   This is a touchstone to D.97-05-039.  
And since the Commission has determined that RCS is a proper subject for competition, it would be 
inequitable to customers and non-UDC providers to pay an admission fee.  Yet this is what customers will 
face during the time they pay the UDC for services it no longer provides.  Put most simply, competition at 
the price of paying twice is an insurmountable barrier to market entry and is inconsistent with the 
Commission\'92s pro-competition policies.\par
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\pard \qj\fi-1440\li1440\tx720\tx1440 
{\plain \tab }{\plain \b B.\tab }{\plain \b\ul If the CPUC Determines that Section 368(a) Limits Crediting During the Transition 
Period, the Commission Should Not Use the Evidentiary Record Developed Here for 
Post-transition Credits.}{\plain \par
}\pard \qj 
{\plain \par
}\pard \qj\sl480 
{\plain \tab Should the Commission conclude that RCS crediting is not permissible while rates are frozen, it is 
unlikely that there will be any real competition for these services during the transition period.  As noted 
above, absent RCS credits to customers, competition in the RCS market--and the associated benefits of 
technology and service innovations--will be stymied by the barrier of the UDC distribution rate.  RCS 
crediting in the }{\plain \i post-transition}{\plain  period should be avoided: the same effect can be done via the unbundling 
of rates for the services the Commission has unbundled. The UDC would simply not charge for services 
it does note provide.   UC/CSU/DGS firmly hope that the problems associated with generating appropriate 
credits can be avoided simply by relying upon market forces to set the appropriate prices for competitive 
services.  However, if the UDCs are required to identify the full range of RCS costs }{\plain \i now}{\plain , and to track the 
savings they will realize from ESP-provided RCS services, then better cost information would be gained.  
Therefore, the record developed in this proceeding could be improved at that later time if the Commission 
is resolve to use a bill crediting mechanism.\par
}\pard \qj\fi-1440\li1440\tx720\tx1440 
{\plain \tab }{\plain \b C.\tab }{\plain \b\ul Does AB 1890, and Particularly Section 368(b), Limit the Commission\'92s Ability to 
Implement \'93Deaveraging\'94, e.g., by Causing \'93Cost-Shifting\'94}{\plain \par
}\pard \qj 
{\plain \par
}\pard \qj\sl480 
{\plain \tab As stated earlier, UC/CSU/DGS do not believe that deaveraging }{\plain \i per se}{\plain  would be a violation of AB 
1890.  However, that is not to say we support it as proposed in this case.  Properly done, it may be possible 
to \'93unbundle\'94 those costs addressed in distribution rates into strata more refined than that used when the 
rates were built up.  However, we believe that if improperly done the result of deaveraging rates may 
certainly lead to improper cost-shifting within classes and between them.  Additionally, because utility 
accounting generally does not address the detailed cost data required to support deaveraging{\super\fs19 \chftn {\footnote \pard \qj\sa240 
{\plain \super\fs19 \chftn }{}{\plain }{\plain \ul See}{\plain , TR 608, lines 13-14 (PG&E: Burns).}}}
}{\plain , and because 
that detail was generally not present through the evolution of the rates, it is not clear how precisely these 
cost differences can be assigned. \par
\tab As for the passage cited in Section 368(b), we believe that because AB 1890 was focused on the 
development of a competitive }{\plain \i generation}{\plain  market, and because the Commission in an exercise of its 
expertise later determined that RCS should not be solely the domain of monopolies, RCS should be treated 
as analogous to generation.{\super\fs19 \chftn {\footnote \pard \qj\sa240 
{\plain \super\fs19 \chftn }{}{\plain That AB 1890 was focused on competition in generation only is clear from reviewing 
Section 330 and other provisions.}}}
}{\plain   Put more simply, the later unbundling of RCS services does not mean that 
customers who do not take that service from the UDC must continue to pay for that now unbundled 
component.  Section 368(b) focused on an unbundled generation component for customers eligible to 
purchase electricity from other suppliers.  The Commission has determined that certain eligible customers 
may also purchase RCS.  Therefore the logic expressed in 386 should relieve the customer from the burden 
of paying for the unbundled service the UDC no longer provides.\par
}\pard \qj\fi-720\li720\sl480\tx720 
{\plain \b V.\tab }{\plain \b\ul Conclusion}{\plain \par
}\pard \qj\sl480 
{\plain \tab For the reasons set forth above, UC/CSU/DGS urge the Commission to adopt RCS credits which 
reflect the monies customers pay in UDC distribution rates.  These credits should be an interim measure 
which would end when unbundled rates are developed for unbundled services.  We urge the development 
of unbundled RCS rates and stress that these should be in place no later than the end of the rate freeze.  
These rates would provide the clearest price signal to customers and ESPs.  We support the fully allocated 
cost approach as the preferable proxy for RCS rates.  If the fully allocated cost methodology is not 
embraced, we believe that the credit approach used by SDG&E is superior to the PG&E and Edison 
approaches.   All UDCs should identify \'93avoidable\'94 costs through the 100% penetration analysis.  Offsets 
to the customer credits should be narrowly constructed, and the UDCs should use other recovery 
mechanisms for costs not directly attributable to the customer (e.g., service charges, implementation cost 
recovery proceedings or rates cases as appropriate).  RCS \'93update\'94 proceedings should not become an 
annual regulatory proceeding with extensive litigation regarding avoided UDC costs. Customers should 
have the option to purchase their existing meter in place as well as owning the meter at the time of initial 
installation.  Geographic deaveraging should not be embraced at this time as it was not used for the 
development of rates and the UDC studies do not appear rigorous enough to support the proposal.  
Deaveraging must be carefully reviewed to ensure that similarly situated customers are not treated 
differently.\par
}\pard \qj\fi-4320\li4320\tx720\tx1440\tx2160\tx2880\tx3600\tx4320 
{\plain Dated: June 26, 1998\tab \tab \tab \tab Respectfully submitted, \par
}\pard \qj 
{\plain \par
}{\plain \par
}{\plain \par
}{\plain \tab \tab \tab \tab \tab \tab ____________________________________________\par
}{\plain \par
}{\plain \tab \tab \tab \tab \tab \tab Christopher T. Ellison\par
}{\plain \tab \tab \tab \tab \tab \tab Andrew B. Brown\par
}{\plain \tab \tab \tab \tab \tab \tab ELLISON & SCHNEIDER\par
}{\plain \tab \tab \tab \tab \tab \tab 2015 H Street\par
}{\plain \tab \tab \tab \tab \tab \tab Sacramento, California 95814\par
}\pard \qj\fi-5760\li5760\tx720\tx1440\tx2160\tx2880\tx3600\tx4320\tx5040\tx5760 
{\plain \tab \tab \tab \tab \tab \tab Telephone:\tab 916/447-2166\par
}\pard \qj\fi-5760\li5760\tx720\tx1440\tx2160\tx2880\tx3600\tx4320\tx5040\tx5760 
{\plain \tab \tab \tab \tab \tab \tab Facsimile:\tab 916/447-3512\par
}\pard \qj 
{\plain \tab \tab \tab \tab \tab \tab E-mail: abb@eslawfirm.com\par
}{\plain \par
}{\plain \tab \tab \tab \tab \tab \tab Attorneys for the California\par
}\sect \sectd \sbknone\margrsxn1170\footery1920\titlepg 
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