General Rate Cases Near Finish Line

By Published On: May 22, 2004

The California Public Utilities Commission is set to vote next week on long-simmering general rate case decisions for Southern California Edison and Pacific Gas & Electric. The triennial rate cases have been on hold while the commission sorted through more pressing fallout issues from the energy crisis. The rate cases set allowable revenues for utilities, and this time, because they were filed in 2002 to begin in 2003, the commission will be allowing utilities to adjust rates retroactively. For PG&E?s general rate case, there are two proposed decisions that would adopt rates from two settlements agreed to by the utility and other groups. They both address PG&E?s electric and gas revenue requirements for 2003-05, inflation-related increases (attrition) for 2006, and a settlement on forecast generation requirements for 2003. Both plans incorporate the same revenues for PG&E for 2003?$2.493 billion for electric distribution, $927 million for gas distribution, and $912 million for generation. Excluding revenues related to procurement, the total increase in PG&E?s revenues breaks out to $236 million for electric distribution, $52 million for gas distribution, and $38 million for generation. The retroactive application of the general rate case wouldn?t change current rates. The difference between revenues PG&E initially sought and what would be granted through the settlements is reflected in a $799 million rate reduction approved in February as part of a postbankruptcy rate design. The difference between the proposals concerns inflation. Commissioner Geoffrey Brown would allow the utility to pick up minimum increases, regardless of its earnings or the level of inflation. The original proposed decision notes the possibility of deflation and grants attrition increases but rejects minimum levels requested by PG&E. Approving a minimum attrition adjustment ?regardless of whether or not PG&E has been able to earn its authorized rate of return is inconsistent with the commission?s policy that attrition adjustment should reflect an ?opportunity? to earn the authorized rate of return and not a ?guarantee,?? wrote administrative law judge Julie Halligan in her draft decision. PG&E?s rate case decision was an outgrowth of multiparty settlements while the utility was in bankruptcy. It reflects what negotiators understood was a willingness on the utility?s part to make compromises. Edison, however, has not shown much tendency toward compromise. In February, top executives made their case to commissioners to reject the administrative law judge?s proposed decision in which a $15 million revenue increase is recommended. Edison requested a $250 million increase. Commissioner Susan Kennedy has an alternate to the $15 million decision. Hers would give the nod for a $129 million increase. The lion?s share of additional revenues in Kennedy?s version comes from adoption of Edison?s recommended depreciation rates. In a statement, the utility called this plan an improvement but said it will still ?work with? the commission for a higher amount. ?At a time when rates are at historically high levels, the commission should be seeking opportunities to avoid further increases. The Kennedy alternate ?seems to be the product of granting Edison substantial portions of the relief requested in ex parte wish lists,? asserted The Utility Reform Network. Edison engaged in a series of ex parte (lobbying) communications with Kennedy via her staff in recent months. For instance, in March, Bruce Foster, Edison vice president, and John Hughes, Edison manager of regulatory operations, met with Kennedy adviser Brian Prusnek to discuss depreciation, operation and maintenance, and capital disallowances in the utility?s general rate case, according to documents. A March e-mail from Hughes furnished Prusnek with information to ?illustrate? funding levels for information technology capital and operating expenses. In a subsequent phone call to Prusnek, Hughes indicated that Edison had not been cross-examined on information technology testimony during the proceeding. Last month, the Office of Ratepayer Advocates filed a petition to reopen the Edison general rate case and set rates subject to refund, after the utility disclosed that a dozen or more employees had falsified customer service performance ratings data going back to 1997. Soon after, CPUC president Mike Peevey called for an investigation and said certain awards could be canceled. There has been no ruling on ORA?s motion. The commission is, according to CPUC spokesperson Terrie Prosper, continuing to look into Edison employee fraud disclosures. Edison would be allowed to impose a late payment charge for residential customers, with some exceptions, under all versions of the decision.

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