Minutes
Ratesetting Working Group
October 8-9, 1996

Note: all handouts made available electronically will be posted on the Working Group's Web site.

Full Working Group, 10/8:

1. Review of Agenda, Minutes, and Other Announcements: Any corrections to the minutes of the 9/17-18/96 meetings should be sent to Jim Price.

2. Recent Developments: Several parties expressed concern that a letter sent to the Commission on 9/26/96 from 5 legislators, concerning the extent of distribution services unbundling, did not reflect the range of viewpoints that have been expressed in the Working Group's discussions; Edison stated that the letter was originated by the unions, which asked Edison to assist it in developing a draft.

Parties discussed the issues on the agenda for the Commissioners' Forum for the Direct Access Working Group on 10/10/96, which includes issues of overlap with RWG. Jim Price should seek to present a summary of the RWG's 8/26/96 report.

3. Status of PBR Proceeding: An ALJ Ruling was issued on Oct. 2, setting dates for comments and setting a workshop on Oct. 22, along with other procedural issues.

4. Updates on 11/15 Filings: SDG&E is considering collecting CTC in kWh charges. An issue of concern to parties is the resulting relationship of rates without CTC to an appropriate rate structure after CTC ends. If it uses this approach, SDG&E would revise its rate design after CTC ends. SDG&E is also considering revising its CTC rate monthly; discussion of this issue debated the role of forecasts in setting CTC charges.

5. Elaboration of Issues concerning 11/15 Filings

1. Shared Costs and Common Costs: PG&E presented its proposed approach; its analysis uses an embedded cost approach to separate revenue requirements, and has occupied a time span for completion from about July 15 to November 15. SCE presented its proposed approach (see Powerpoint presentation), which is detailed in its PBR filing; for a copy of its PBR workpapers, call Meraj Rizvi at (818) 302-1063. SCE considers its approach to be similar to PG&E's, in determining how costs would vary if divestiture of functions were to occur.
2. Unbundling of Cost of Capital: PG&E's proposal will be similar to its current cost of capital filing. It will unbundle cost of capital for transmission, generation, and distribution. It is looking at the treatment of cost of capital in the U.K., but has no numbers yet. Transmission may have the lowest risk, while generation may have the highest risk. PG&E is also looking at trends in cost of capital in telecommunications. Parties discussed various effects on cost of capital due to competition.

Interpretation of Existing Tariffs subteam, 10/9:

Jeff Nahigian, representing Calif. Mobile Home Residents Action Assoc., and Richard Hairston, representing Western Mobilehome Park Owners Assoc., presented concepts for service with direct access to mobile home parks. One concept would be to allow tenants to choose one "residents' supplier", but limit further choice of supplier so that the park owner can keep its administration manageable.

Analysis subteam, 10/9:

Status of Analysis of Unbundling the Distribution Function into Component Services:

SDG&E presented illustrative results of an unbundling cost study on meter reading activities. Subsequent processing was not included at this time. Results are based on the current method of reading meters, and do not account for reoptimizing routes. An issue affecting the outcome of results is whether UDCs will need to pay marketers for meter reads that the marketer performed.

Telecommunications Billing and Incremental Cost Issues:

Dale Piiru and Zenaida Conway of DRA's telecommunications staff joined in a discussion of billing and incremental costing issues in telecommunications restructuring. Telecommunications incremental costing developed in phases over a period of years. Proxies were used at first, including embedded cost. After a certain point in progress, the FCC ordered certain treatment, including geographic deaveraging, which required revision of some studies.

CPUC Decision 95-12-016 is pertinent for defining the current ratemaking structure. Services are classified as Category 1, 2, and 3, which determines pricing methods such as regulated, band of cap & floor, or complete flexibility. A factor is whether a service is discretionary. Caps reflect direct embedded cost (i.e., standalone), while floors reflect Total Service Long Run Incremental Cost (TSLRIC).

Billing has not been controversial, sometimes being done by PacBell and sometimes by competitors. Other suppliers who use PacBell's billing services pay PacBell for the service.

The need was identified for a common vocabulary, which was developed in workshops.

Analogies to electric restructuring were explored.