CPUC Handing Utilities Financial Latitude

In a trio of decisions this week, the California Public Utilities Commission affirmed one by one that utilities are getting the benefit of financial doubt, post-energy crisis. Pacific Gas & Electric was given authority to sign early contracts for short-term needs, and Southern California Edison received $24 million in funds that had been denied by the Federal Energy Regulatory Commission. Southern California Gas received a shareholder incentive award that one commissioner claimed to be one-fourth higher than the amount other utilities got. These decisions, hot on the heels of the California Supreme Court ruling that approved Edison's deal with the CPUC, show little doubt that utilities are back in regulators? favor. (On August 21, the state?s highest court allowed the $3.2 billion settlement between the CPUC and Edison to proceed. The order dismissed consumer concerns that negotiations were carried out behind closed doors?and with knowledge of the risks of the rate freeze?while buoying the commission?s and utility?s plans to pass though the costs of the energy crisis to ratepayers.) On August 21, PG&E was allowed on a unanimous vote to contract for half of the difference between its total load and what its hydroelectric facilities and nuclear plant can provide in electricity for 2004 (net short) without the usual CPUC oversight. The underlying reasoning is that having more lead time to contract for the utility?s net short leaves PG&E, and ratepayers, less vulnerable to high prices. Many have pointed to the inability of utilities to contract for supplies on the fly without commission preapproval as one of the major contributors to the energy crisis. The commission isn?t letting PG&E proceed completely without oversight. Although the deal allows PG&E?s contracts for supply to be deemed ?reasonable and prudent for the purposes of cost recovery? instantly, the commission still holds the keys to the reasonableness review process. PG&E is limited to 50 percent of non-baseload need, and contracts are not to extend beyond 2004. Any contracts made have to be finalized through the CPUC?s advice letter process. That process is often a formality?it does not require hearings and involves a relatively cursory overview by commission staff. There was some discussion that the comment period on advice letters should be shortened for these cases, but the commission granted the routine comment period instead. The contract proposals do, however, go to the ?procurement review group.? For Edison, the commission decided that funds that could have been claimed as transmission spending, and thus out of CPUC jurisdiction, were actually distribution costs and refundable. ?Edison has met its burden of proof? in order to receive the funds, said commissioner Susan Kennedy. Edison?s $24 million in transmission expenditures fell into the cracks between what FERC would approve and what the CPUC considers reasonable expenditures. The CPUC?s decision found the costs to be considered under distribution and not transmission, and thus eligible for CPUC approval. The decision ends what Kennedy called ?regulatory Ping-Pong? between the two commissions?with Edison as the ball. SoCal Gas got $17.4 million in shareholder incentive bonuses for ?reasonably? managing its gas acquisition for core customers between April 2000 and March 2002. Edison had questioned whether SoCal, during that time, had caused gas prices to spike and had engaged in anticompetitive behavior. However, those issues will be taken up in another proceeding? I02-11-040 ?and the shareholder award is subject to refund. At the CPUC, the continuing holdout for tighter control of utilities? pass-through to ratepayer bills is exemplified by commissioner Loretta Lynch. Commissioner Carl Wood, a strong advocate of re-regulation and a return to integrated utility resource planning, is walking the tough-on-utilities line on one side and getting utilities to a position of financial strength on the other. For instance, he sees PG&E?s latitude for contracting its net short as a ?transition? while the commission contemplates the larger issue of integrated planning. Commissioner Geoffrey Brown is also counted on for the tough-on-utilities vote, but it was not evidenced in the August 21 meeting. In the Edison transmission issue, Lynch proposed that Edison submit the details of the $24 million deal for adjudication. ?Edison chose to ignore? reasonable direction on the matter, said Lynch. In the SoCal incentive decision, Lynch argued that the utility?s profits from the incentive program are one-fourth higher than those of San Diego Gas & Electric and PG&E. CPUC decision numbers and outcomes: D03-08-066 ?PG&E, unanimous D03-08-062 ?SCE, 4-1, Lynch opposing D03-08-064 ?SoCal, 4-1, Lynch opposing

Over 11K Stories!

| Independently Powered Energy News

CPUC Handing Utilities Financial Latitude

vdharadmin

Related Posts

Op-Ed: Before and After Net Energy Metering 3, A Thought Experiment

Auld Lang Zine

CPUC Chops Solar Rooftop Payments & Adds Battery Incentives, Few are Happy

PG&E Competes with Irrigation Districts on Noncommodity Costs