BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE …



BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

|Application of Southern California Edison Company (U 338-E) for Approval of New Rates To| |

|Be Implemented At The End Of The Rate Freeze Period And Other Requested Relief. | |

| |Application 00-01-009 |

ASSIGNED COMMISSIONER’S RULING

SETTING PREHEARING CONFERENCE AND

ADDRESSING PRELIMINARY SCOPING MATTERS

NOTICE IS HEREBY GIVEN that a prehearing conference (PHC) in the captioned matter is set for May 3, 2000, at 9:30 a.m., in the Commission Courtroom, State Office Building, 505 Van Ness Avenue, San Francisco, California.

In general, the application, the protests and responses, and the reply of Southern California Edison Company (SCE) to the protests and responses provide a basis for issuance of a scoping memo.[1] In accordance with Rule 6.3 of the Rules of Practice and Procedure, the scoping memo for this proceeding will be issued after the PHC is held. For the guidance of the parties, and to help define the agenda for the PHC, the following preliminary determinations regarding the schedule and scope of this proceeding are made. These and other matters may be taken up at the PHC. This ruling does not attempt to address all issues raised in the protests and responses.

Schedule

In its application, SCE proposes an aggressive procedural schedule that provides for issuance of a final decision less than 12 months after the application was filed. In its reply to the protests, SCE proposes an alternative schedule that provides for resolution of the matter in less than 15 months. In making these proposals, SCE points to the desirability of issuing a final rate design decision well in advance of the date that rate changes take effect, and alludes to the possibility that the rate freeze will end by the summer of 2001 (SCE Reply, p. 5).

No party has contested SCE’s premise of obtaining a Commission decision prior to the end of the rate freeze. Moreover, where possible, it seems wise to allow extra time for contingencies. However, I have determined that observance of either of the schedules proposed by SCE would have a significant impact on Commission resources. SCE has not demonstrated that issuance of a final Commission decision in December 2000 (or its alternate proposal for a March 2001 decision) justifies the disruptions that would occur by pursuing such a schedule.

As SCE points out, this proceeding is similar to Phase 2 of a general rate case (GRC). In developing the schedule for this proceeding, it is helpful to consider the rate case plan (RCP) schedule for such proceedings. For SCE, the schedule adopted in Decision (D.) 89-01-040, as modified by D.93-07-030, provides that Phase 2 commences on Day 90 (i.e., 90 days after the GRC application is filed) with the utility’s service of exhibits addressing unit marginal costs, marginal cost revenue responsibility, revenue allocation, and rate design. (D.93-07-030, Appendix B, pp. 4A-4 C.) For purposes of this proceeding, the January 7, 2000 application filing date corresponds to Day 90 of the RCP. Other Phase 2 events are scheduled under D.93-07-030 as shown in the following table:

| |Days after initial showing | |

|RCP Day | |Event |

|220 |130 |Utility update testimony |

|280 |190 |ORA testimony |

|320 |230 |Intervenors testimony |

|353 |263 |Hearings begin |

|371 |281 |Hearings end |

|399 |309 |Rebuttal testimony |

|409 |319 |Rebuttal hearings begin |

|420 |330 |Rebuttal hearings end |

|439 |349 |Opening briefs |

|453 |363 |Reply briefs |

|539 |449 |Proposed decision |

|592 |502 |Final decision |

Thus, if the RCP plan schedule were to be observed here, the final decision in this proceeding would be expected 502 days after January 7, 2000, on May 23, 2001. I note that the schedule discussed by ORA, TURN, and CFBF in their protests provides for a final decision on May 1, 2001.

Details of the schedule for this proceeding will be considered at the PHC. For example, parties may wish to consider the advisability of combining direct and rebuttal hearings. However, I anticipate that the adopted schedule will provide for commencement of evidentiary hearings in October 2000, and a final Commission decision in May 2001.

Public Participation Hearings

The RCP provides for public participation hearings in the early stage of GRCs. Even though this case was not filed under the RCP, it appears advisable to schedule a limited number of public participation hearings in SCE’s service territory, particularly in view of the comments received by the Commission’s Public Advisor in response to the bill insert notice.

Proposals for the format, locations, and timing of public participation hearings will be taken up at the PHC.

Transmission and Reliability Must Run (RMR) Rates

In its policy testimony (Exhibit SCE-1, pp. 18-19), SCE proposes that this proceeding be used to litigate retail transmission rates and RMR rates that are subject to the jurisdiction of the Federal Energy Regulatory Commission (FERC). Under SCE’s proposal, this Commission would adopt rate design methodologies for transmission and RMR costs. SCE would then file the PUC-recommended rates with the FERC, and the Commission would ask the FERC to defer to the Commission and give final approval for the rates. SCE alternatively proposes that, at a minimum, the Commission should develop a complete record on the issue of retail transmission and RMR rate design in order to formulate a position supported by stakeholders than it can later represent to FERC.

SCE’s proposal is similar to one advanced last year in Pacific Gas and Electric Company’s (PG&E) post transition marginal cost, revenue allocation, and rate design proceeding (A.99-03-014), and disposed of in my June 9, 1999 Scoping Memo and Ruling in that proceeding. PG&E had proposed that the Commission assert its “rightful authority” over marginal costs, revenue allocation, and rate design for transmission and RMR costs. The following quotation from my ruling in the PG&E case is pertinent here:

“Discussion. This Commission has no ‘rightful authority’ to set transmission or RMR rates. In effect, PG&E asks us to develop a record which we would use to make a recommendation to the FERC. D.97-08-056 stated our intent to seek the FERC’s deference to our findings with regard to transmission rate design, revenue allocation, and marginal costs. We subsequently sought a ruling from the FERC on this matter. In an order dated December 17, 1997, the FERC responded by stating it would ‘defer action on the requests until the parties have been afforded a full opportunity to consider and address the impact of those decisions’ in a FERC hearing. (Pacific Gas and Electric Company, et al., 81 FERC Paragraph 61,323 at p. 62,494 (1997)) The FERC has not since explicitly ruled on the issue.

“Because FERC has not expressly decided to defer to our findings, proceeding with PG&E’s proposal would require us to attempt to resolve issues here only to have FERC decline to defer to our decisions generally or upon a party’s motion in specific instances. In fact, the Commission has never requested that the FERC defer to our findings with regard to RMR costs. Without explicit guidance from the FERC on whether it will defer to this Commission’s findings, litigation of these matters could be a futile and presumptuous exercise at considerable cost to the parties and the Commission. I am not convinced that notifying the FERC a second time, and awaiting its response, as TURN suggests, would be a useful exercise at this point and may require further delay.

“For these reasons, the Commission will not address any matters relating to transmission or RMR in this proceeding. In the event the FERC issues an order stating an intent to defer to our resolution of these matters, PG&E may move for their consideration in this or future proceedings in which the Commission is reviewing cost allocation, rate design, and marginal costs.” (Scoping Memo and Ruling of Assigned Commissioner, June 9, 1999, pp. 3-4.)

SCE has not shown why a different approach should be undertaken here. The Commission will not address transmission and RMR rates in this proceeding.

Marginal Cost and Embedded Cost Methodologies

TURN requests an early indication from the Commission whether it will consider SCE’s rate proposals that assertedly rely on embedded cost ratemaking principles. SCE responds that its has proposed an approach to determining marginal costs that has no relationship to embedded costs. Without addressing the substantive merits of either argument, I concur with SCE that it has a right to be heard on its proposals.

I am interested in exploring alternatives to the Equal Percentage of Marginal Cost (EPMC) methodology in this proceeding. I will, therefore, entertain proposals that rely on such alternatives.

Base Case Analysis

ORA and TURN believe that SCE should present a “base case analysis,” i.e., a comparison of its proposed rates to those that would result from updating the methodologies adopted in SCE’s last GRC using more current cost and load data. They suggest that SCE make this filing on June 1, 2000. SCE asserts that it should not be ordered to make such a filing, but nevertheless plans to complete the requested assessment and provide it to ORA and TURN by April 15, 2000.

SCE further asserts that the base case analysis should not provide a basis for procedural delay. Since SCE plans to have the analysis available by April 15, this does not appear to be a problem. SCE, ORA, and TURN should report on the status of this matter at the PHC.

Modeling Issues

In PG&E’s post transition marginal cost, revenue allocation, and rate design proceeding (A.99-03-014), Administrative Law Judge (ALJ) Gottstein issued a ruling scheduling a workshop to address computer modeling issues. The ruling stated that “[t]he Commission’s objective is to have models that we, and all interested parties, can readily use, validate, and adjust to accommodate alternative revenue allocation and rate design options.” (August 24, 1999 ruling of ALJ Gottstein, p. 1.) In PG&E’s recent Phase 1 GRC decision, the Commission noted this ruling and went on to state that “[i]t makes sense to investigate complex computer models being used in any ratemaking proceeding, and to seek ways to simplify and make those models more accessible to parties, early in a proceeding.” (D.00-02-046, p. 469.)

Parties should be prepared to discuss at the PHC whether there is a need for such a modeling workshop in this case. In the event the discussion reveals such a need, SCE would be directed to conduct a workshop in consultation with the Energy Division.

Supplemental Service

SoCalGas proposes that SCE be required to serve the application on the parties in the Distributed Generation Rulemaking (R.99-10-025), and that the time for protests and responses be extended accordingly. In its response, SCE demonstrated that it has provided adequate notice. SoCalGas’ request is denied.

8. Catalina Island Ratemaking

No party responded to SCE’s proposal to establish a separate phase of this proceeding to consider cost recovery issues for the Catalina Island system. I am particularly interested in hearing ORA’s position on this proposal. SCE should prepare a recommended schedule that assumes a separate Catalina phase will be established, and that would allow disposition of that phase within 18 months after the application was filed.

9. Coordination Issues

Some degree of overlapping of issues among various proceedings may be inevitable, but it behooves the Commission to minimize the duplication of litigation in multiple forums to the extent possible. At the PHC, I will entertain a discussion of the parties’ views on coordination of this proceeding with the post-transition ratemaking proceeding (A.99-01-016, et al., for which a Commission decision in Phase 2 is pending); SCE’s anticipated test-year 2002 general rate case; the distributed generation proceeding (R.99-10-025); and others. I am particularly interested in the parties’ views on SCE’s proposals to consider standby rates, procurement, levelized payment plans, nuclear decommissioning and public purpose programs, and hourly pricing for large customers. In addition, I am interested in hearing the parties’ views on whether flexible pricing options should be considered generically for all utilities rather than individually, as proposed by SCE.

10. Temporary Service List

Pending the taking of appearances at the PHC, the temporary list attached to this ruling will be used.

IT IS RULED that parties should be prepared to address the foregoing issues at the prehearing conference.

Dated April 5, 2000, at San Francisco, California.

| | | |

| | |Richard A. Bilas |

| | |Assigned Commissioner |

CERTIFICATE OF SERVICE

I certify that I have by mail this day served a true copy of the original attached Assigned Commissioner’s Ruling Setting Prehearing Conference and Addressing Preliminary Scoping Matters on all parties of record in this proceeding or their attorneys of record.

Dated April 5, 2000, at San Francisco, California.

| |

|Fannie Sid |

NOTICE

Parties should notify the Process Office, Public Utilities Commission, 505 Van Ness Avenue, Room 2000, San Francisco, CA 94102, of any change of address to insure that they continue to receive documents. You must indicate the proceeding number on the service list on which your name appears.

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The Commission’s policy is to schedule hearings (meetings, workshops, etc.) in locations that are accessible to people with disabilities. To verify that a particular location is accessible, call: Calendar Clerk (415) 703-1203.

If specialized accommodations for the disabled are needed, e.g., sign language interpreters, those making the arrangements must call the Public Advisor at (415) 703-2074 or TDD# (415) 703-2032 five working days in advance of the event.

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[1] Protests were filed by The Alliance for Retail Markets (ARM), The California City-County Streetlight Association, The California Department of General Services, The California Farm Bureau Federation (CFBF), The Independent Energy Producers Association, The Office of Ratepayer Advocates (ORA), Southern California Gas Company (SoCalGas), The Utility Reform Network (TURN), and the Western Manufactured Housing Communities Association. The California Power Exchange Corporation filed a response, and Capstone Turbine Corporation submitted a letter in response to the application. SCE filed a reply to each of the protests and responses except for the protest of ARM.

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