Before the Public Utilities Commission of the State of California

Order Instituting Rulemaking on the	)
Commission’s Proposed Policies	)	        R.94-04-031
Governing Restructuring California’s	)	(Filed April 20, 1994)
Electric Services Industry and	)
Reforming Regulation.	)
	)
	)
Order Instituting Investigation the	)
Commission’s Proposed Policies	) 	        I.94-04-032
Governing Restructuring California’s	) 	(Filed April 20, 1994)
Electric Services Industry and	)
Reforming Regulation.	)
	)

Rebuttal Comments Of the Office Of Ratepayer Advocates
On Unbundling of Revenue Cycle Costs and Services
In Response To ALJ Ruling of January 31, 1997

JAMES E. SCARFF
Staff Counsel

Attorney for the Office of Ratepayer Advocates

California Public Utilities Commission
505 Van Ness Ave.
San Francisco, CA 94102
Phone: (415) 703-1440
February 7, 1997				Fax: (415) 703-2262

Before the Public Utilities Commission of the State of California

Order Instituting Rulemaking on the	)
Commission’s Proposed Policies	)	        R.94-04-031
Governing Restructuring California’s	)	(Filed April 20, 1994)
Electric Services Industry and	)
Reforming Regulation.	)
	)
	)
Order Instituting Investigation the	)
Commission’s Proposed Policies	) 	        I.94-04-032
Governing Restructuring California’s	) 	(Filed April 20, 1994)
Electric Services Industry and	)
Reforming Regulation.	)
	)

Rebuttal Comments Of the Office Of Ratepayer Advocates
On Unbundling of Revenue Cycle Costs and Services
In Response to ALJ Ruling of January 31, 1997

The Office of Ratepayer Advocates (ORA) presents these comments pursuant to Administrative Law Judge (ALJ) Weissman’s Ruling of January 31, 1997. These rebuttal comments address selected portions of the comments of Southern California Edison Co. (Edison), Itron, and CellNet Data Systems.  ALJ Weissman’s Ruling correctly presumes that ORA does not stipulate to positions of Edison or other parties that are not addressed herein.
In its January 21, 1997 comments, ORA identified five conditions that should be imposed when a Utility Distribution Company (UDC) proposes to implement a system-wide installation of an Automated Meter Reading (AMR) system:
•	There must be no rate increase to customers attributable to AMR implementation, even in the future,
•	Customers must be allowed to choose to be metered through a different communications system,
•	Customers must have an unrestricted choice of UDC or third-party metering,
•	The UDC must ensure that all communications protocols for its communications system are available to all meter manufacturers, at least one year in advance of its implementation, and
•	The UDC may not begin offering or installing meters intended for automated meter reading on customers’ premises before January 1, 1998.
Nothing in Edison’s January 21 Comments rebuts the need for these conditions. Although the Edison Comments also misrepresent the methodology that SDG&E, ORA, and others propose for determining rate credits for revenue cycle services, and incorrectly states (at 17) that no participants in other markets have been denied the right to measure and bill for their services, these comments focus on Edison’s AMR proposal..
I.	Edison’s Comments Do Not Demonstrate a Need for a Rate Increase to Implement AMR
Edison has not demonstrated that supplemental ratepayer funding is either necessary or appropriate for it to establish automatic meter reading. Any analyses attempting to demonstrate such a need must take into consideration all the benefits to Edison from having such a system. However, Edison’s analysis is limited principally to claimed savings associated with eliminating manual meter reading and reducing the cost of correcting meter reading errors (Edison Comments, p. 27). (Even with this partial analysis of benefits, Edison has shown savings which offset $450 million of the planned $525 million expenditure.) 
The additional value of an AMR system to Edison’s shareholders is likely to be substantial, and is probably greater than the incremental funding Edison seeks from ratepayers. For example, at the January 15, 1997 evidentiary hearing, Kansas City Power and Light’s witness described operational savings extending well beyond those that Edison has considered..Even Edison acknowledges that AMR will create opportunities to improve its control and operation of its distribution system, as well as to accommodate and facilitate “value added services”, and describes some of these opportunities (Edison Comments, pp. 10, 13, and 28). Because these opportunities have value beyond that quantified by Edison, the Commission should not agree to ratepayer funding of Edison’s entry into the communications market.
II.	ITRON’s Testimony on Economies of Scale Does Not Rebut the Value of Allowing Customer Choice Among Communications Systems for Metering
There is no reason to prohibit customers and their suppliers from using alternatives to Edison’s proposed AMR communication system. Edison’s proposed vendor, Itron, testified at the January 15, 1997, evidentiary hearing that economies of scale become achievable at 10% or more of the market, which Edison uses to claim that continued monopoly provision of communication services is economically efficient. If Itron is correct that the economies of scale are sufficiently great at higher levels of market penetration that competing communications systems will not be cost competitive for AMR, then Edison and Itron have no need for Commission regulatory protection. Nor will they need to worry about maintaining a sufficient market share to make their systems cost effective.  
In instances where specific meter functionality is required to achieve operational savings in distribution operations (e.g., response to specific types of queries from the UDC’s operations centers), this functionality could be specified as a requirement for metering and associated communications systems used in a UDC’s service area.
III.	Customers Must Have An Unrestricted Choice Of UDC Or Third-Party Metering
Edison anticipates that users will gradually install their own meters to reap the extensive benefits that other parties attribute to technological changes, and states that its AMR proposal does not prevent third-party competitive entry (Edison Comments, p. 21). Edison presumes that meters other than its own will be used in conjunction with its AMR system, and has agreed that customers should not be limited in their decisions to choose between UDC or third-party metering. Accordingly, we find Edison’s comments to be consistent with ORA’s recommendation.
IV.	Edison’s Commitment to “Open Architecture” Is Too Vague, and the Commission Must Establish a Practical and Enforcable Guideline for this Commitment 
Edison describes its proposal as being built on an “open architecture” (Edison Comments, p. 13). Edison does not define “open architecture”, but one workable definition appears in the December 20, 1996, comments of CellNet (p. 9):
“an appropriate definition of ‘open’ is that protocols must be made available to third parties by the developer of the protocol to enable third parties to design, develop, and manufacture hardware and software implementing the protocols.”  
The Commission should hold a UDC to at least this level of standard before allowing it to proceed with an AMR system.
V.	The UDC May Not Begin Offering Or Installing Meters Intended For Automated Meter Reading On Customers’ Premises Before January 1, 1998
Edison has not filed an application for authorization to proceed with implementing an AMR system, or for ratepayer funding of such a system. Indeed, Edison has not made such a claim. Accordingly, before the Commissionauthorizes such action, it needs to create a factual record that the benefits of Edison’s proposal exceed its costs, and that Edison’s proposal is in fact the most cost-effective way of achieving those benefits. Due to the time involved in these processes, ORA’s proposed condition does not limit any realistic plans for implementation of Edison’s proposal.
VI.	Edison’s Comments Misconstrue the Concept of Customer Choice
Edison consistently focuses its discussion of unbundling in terms of its effect on unit costs, despite the prominence of “customer choice” as a goal of the Commission’s electric restructuring policy decision (D.95-12-063). Edison characterizes other parties’ efforts to create choice in the future provision of electric service as a “morass of premature, poorly thought-out, and ill-defined ambitions.” (Edison Comments, p. 3) 
In both its December 1996 and January 1997 Comments (pp. 2 ff.), Edison persists in describing its various “revenue cycle” activities as “distribution services”, and claims the Commission has “recognized that distribution services are essentially of a monopoly nature.” (Edison Comments, pp. 11 - 12) This is an erroneous description of what the Commission did. In D.96-09-045, cited by Edison, the Commission explicitly limited its findings to very narrow issues. Noting that Edison had argued that customer service standards were outside the scope of that proceeding, the Commission observed that “service” was a word “comprehensive enough to touch upon every aspect of the utilities’ business that relates to a customer.” The Commission emphasized that its intended context was to refer to “interruptions in the delivery of electricity” and that despite “a consensus building effort that went beyond our order”, “no further expansion” of that proceeding “was warranted.” 
While the Commission did state that “[b]illing services, call center operations, ... are among the types of customer services related to the electric distribution system that we intend to continue to oversee even as generation becomes competitive,” it did not say that they would remain the sole province of the UDCs. What the Commission did say was that, “[t]hey are in part congruent with other activities before the Commission, which would have been impossible for the parties to anticipate in September 1995.”
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In conclusion, ORA’s previously filed comments support an immediate unbundling of revenue cycle services, in order to ensure effective competition in generation markets.  Edison’s comments do not provide any reason to delay implementation of ORA’s recommended unbundling.

Respectfully submitted

					 
James E. Scarff
Staff Counsel

Attorney for the Office of 
Ratepayer Advocates

California Public Utilities Commission
505 Van Ness Ave.
San Francisco, CA 94102
(415) 703-1440 (phone)
February 7, 1997				(415) 703-2262 (fax)