MINUTES
Kenneth Weatherwax
Sierra Consulting Corporation
916/782-5421
Attenders
SCE: John Balessi
PG&E: Robert Levin
SDG&E: Rich Swanson, Jim Parsons
CPUC/DRA: Jim Price (facilitator)
CLECA: Cathy Yap
CEC: Sy Goldstone, Marshall E.
IEP: ?
SCC: Kenneth Weatherwax
There were ten attenders including myself. Jim Price facilitated and proposed the list of issues for discussion.
No one had comments on the "Rules and Responsibilities" handout produced by the May 20 Scoping Workshop. The Subgroup's function was called ambiguous.
DRA queried how cost-of-capital issues affected functional unbundling. Others responded that it was out of scope or had never come up. SDG&E hadn't yet studied how they would have to go about issuing bonds (e.g., for new transmission) in a post-1998 world. SDG&E noted that COC had been mentioned only obliquely to date by the CPUC, in references to studying "cost allocation" and "cost recovery proceedings"; and that the latter didn't even apply to SDG&E since the CPUC had just approved a self-adjusting COC mechanism for them under PBR.
Will rates change in structure under restructuring? Responses were very inchoate. Price noted that aggregators would eventually offer their own rate packages, of indeterminate format.
PG&E repeated its earlier-filed proposal to throw out earlier rate structures, freeze rates, list costs of various services below the cap, and call the residual the CTC. CEC thought such a drastic change in rate structure would unavoidably induce cost-shifting, which would violate CPUC directives. CLECA said that for this reason most rates should be kept with the same structure as today, with the addition of negative credits applicable for unbundled services provided by direct-access brokers/aggregators. Essentially, the justification behind rates has to be rethought and restudied, but the structure of rates must remain. But such credits, unless they varied by customer or at least customer class, would provide an opportunity for cherry-picking of cheaply-served customers.
The four most critical areas of distribution unbundling, as proposed in the previous day's full-group meeting, were discussed:
Metering and Billing were discussed jointly. Main questions raised: who offers billing, and who has custody of billing information?
CEC inquired whether billing costs, with their fixed and variable components, could truly be converted to a "postage stamp" rate for all customers. Edison countered that "billing" wasn't yet defined as such. CEC replied that the creation of a "metering" line-item was independent of an exact definition.
The complaints of aggregators that gas billing unbundling had never effectively occurred were noted. CLECA saw one difference between gas and electricity: gas regulators drastically restricted utility commodity procurement for noncore customers.
CEC inquired whether utilities would be afforded the opportunity to "beat" prices offered by aggregators below the utilities' original offered service price. Whether such a leeway existed might affect (raise) the original price offered; if no such leeway existed, utilities might minimize such a credit to squeeze out possible market entrants.
CLECA pointed out that SEI had spun off a separate billing subsidiary, according to its comments the day before, which indicated that a profit could be made therein and potentially provided data for study. It was thought that more such data might be available from the experience of the breakup of AT&T, although "billing" per se had not come up in the previous day's discussion of that subject, and CLECA pointed out that the "service" only, commodity-less nature of telecom precluded an exact comparison.
It was noted that billing costs might differ drastically depending on whether a little, some, or all customer billing was lost to other providers -- the "1%-25%-100% problem," echoing SDG&E's presentation of the day before. If most customers kept utility billing, fixed costs would remain and not require recovery; otherwise they must be recovered in the billing "credit."
Given direct-access provision of electricity to a customer, it was asked whether utilities' billing systems were sufficiently flexible to offer billing services on behalf of such providers, à la Pacific Bell billing for Sprint. It was decided that it would depend on the price.
The question of how to handle uncollectible accounts, a issue of great importance to aggregators the day before, was discussed. The aggregators had advocated the creation of a commonly-funded Federal Deposit Insurance Corporation-like fund to pay off uncollectible accounts, to forestall the imposition of drastically higher credit requirements for customers (of aggregators, at any rate). Some wondered whether charges paid into such a fund should vary by customer, or customer class. It was noted that this issue was not so important under telecom, since telephone service was "not a matter of life and death," while electric service often was. But CLECA predicted that unless care was taken and the utilities' role as provider of last resort was protected from abuse, such a "public-interest" insurance fund might look more like the ill-fated (and bankrupted) Federal Savings and Loan Insurance Corporation.
Customer Service and Support were briefly discussed. The exact definition of this term needs to be clarified. CEC was afraid that direct access would lead to discrimination, in utilities' repairs to the distribution system, between utility and direct-access/aggregated customers: that is, in a blackout, utility customers might subtly find their power restored earlier. However, consensus held that if penalties were instituted, aggregators would provide more effective (and self-interested) watchdogs against such discrimination than individual customers could have ever hoped to be.
Two agenda items were agreed upon for the next Subgroup meeting:
1. Either CEC or DRA or both would have a telecom analyst talk about billing under telecom deregulation. For study, PG&E recommended a list of nine pricing principles found in Appendix B of their latest final gas BCAP decision.
2. Discussion of the utilities' upcoming July 15th restructuring filings.