CPUC Exempts New Muni Load from DWR Surcharge

By Published On: November 30, 2004

State regulators this week approved a measure allowing customers of publicly owned utilities in new developments to avoid paying exit fees to offset the cost of Department of Water Resources (DWR) power purchases made for investor-owned utilities. By a 3-2 vote on November 19, California Public Utilities Commission members approved CPUC president Mike Peevey?s alternate decision granting an exception to the DWR cost responsibility surcharges for new municipal utility load in new developments (greenfields) as well as load that was projected to move from investor-owned utilities to munis. ?This doesn?t represent a gold rush of new munis being formed to take advantage of providing cheaper service,? Peevey said. ?These customers represent new growth.? Peevey stressed that the muni greenfield demand has not resulted and will not result in any shifting of costs to captive utility customers because DWR did not buy power to serve them. The exceptions will be granted on a first-come, first-served basis but are not unlimited. A 150 MW cap was placed on new load in much of Pacific Gas & Electric?s and Southern California Edison?s combined service territories through 2012. This cap was set to avoid creating financial incentives for siting new load and to prevent cost shifting of DWR charges. Along with the exception for brand-new load, the surcharge exemption also applies to departing customers in PG&E?s service territory that the utility forecast would transfer to municipal utilities and irrigation districts in its August 2000 bypass report to DWR. State regulators concluded that the exemption for transferred load was warranted because DWR relied on PG&E?s forecast in procuring power and did not buy supplies for the former private utility customers during California?s electricity crisis in 2001. Commissioners Loretta Lynch and Carl Wood voted against the decision. Lynch said she agreed with Peevey?s conclusions but argued that the CPUC should postpone a decision and hold another hearing to determine the legislative intent of the law setting parameters for recovering DWR?s expenses in procuring power. Commissioner Geoffrey Brown supported Peevey?s alternate as a reasonable compromise but favored imposing a 50 MW cap for new load. The approved bypass exemption applies to 210 MW of load transferred from PG&E. The decision places no exemption cap on load from new customers in the cities of Davis, Brentwood, Lodi, Redding, and Roseville and in four irrigation districts: Laguna, Merced, Modesto, and South San Joaquin. The rationale is that there will be no financial hit on the utility ratepayers since the IOUs never planned to buy load for nonexistent customers. Other municipal utilities and irrigation districts must submit proof of their eligibility to qualify for any unused exemptions from the surcharge. The CPUC determined that 28 municipal utilities and three irrigation districts meet the criteria and are eligible to apply for any available exception to the municipal departing-load surcharge. The California Municipal Utilities Association is analyzing the commission?s decision to determine its impact on muni growth. ?We had asked for a categorical exemption of any customer that had never been served by a public utility. We didn?t quite get that,? said Jerry Jordan, CMUA executive director. ?I think that commissioner Peevey recognized some of the unique characteristics of the existing irrigation districts that are competing with PG&E,? said Garith Krause, Merced Irrigation District general manager. ?It provides some openings for the district to provide service to new customers.? To qualify for the greenfield exemption, munis must have been formed and serving at least 100 retail customers as of November 16, 2004, the date of the CPUC decision. ?New load? is defined as customers who had never been served by a California IOU but were located in an investor-owned utility?s former service territory annexed by a publicly owned utility.

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