Public Utilities Reports

PUR Guide 2012 Fully Updated Version

Available NOW!
PUR Guide

This comprehensive self-study certification course is designed to teach the novice or pro everything they need to understand and succeed in every phase of the public utilities business.

Order Now

Exceptions to the Rule: Bypassing the California Transition Charge

Fortnightly Magazine - November 15 1996

costs of distribution and transmission, the costs of ancillary services, and today's energy tariffs. Utilities must collect as much of their sunk costs as possible by 2002 under this system.

Best-guess estimates derived by industry consultants MRW & Associates for the New Energy Ventures power aggregator group range between $0.023 per kilowatt-hour (Kwh) and $0.033/Kwh.

During the transition period (em that is, until the CTC is paid off (em the larger customers will have at their disposal only a few methods to achieve savings on power services compared to their present rates.

One method is to find reliable power supplies that will consistently run below the Power Exchange price. Although the pool itself was originally envisioned as a source of competitive pressure to reduce rates for utility customers, in the near term any difference between the prospective pooled energy price and current power tariffs clearly will be reallocated into the unbundled service offerings (distribution, transmission, and system support, etc.) and the CTCs for stranded assets and public benefits (demand-side management (DSM), renewables, low-income assistance, etc.).

Not knowing the ultimate pool price (em and our best guess is that it will vary greatly by season, by day, and even by hour (em makes it difficult to identify what price from a direct-access commodity seller will result in guaranteed energy discounts.

A second mode of savings would be to somehow avoid the CTC. The CPUC had always intended the CTC to be "nonbypassable" and allocated among all utility customers as of the date of its major restructuring policy decision in December 1995. That meant even direct-access customers would bear the CTC obligation beginning in 1998, and the CPUC would not tolerate exemptions or early defections from the utility system as a "sham transaction" meant to avoid paying the CTC.

When the CPUC formalized an interim CTC policy on April 10

in Decision 96-04-054, its then-president Dan Fessler stated, "We want to impart a clear and unequivocal indication that the CTC be nonbypassable." Fessler's rationale was mainly based on the need to prevent "cost-shifting" of the stranded investment from one customer or customer class to any other.

The CPUC has yet to adopt a final decision on setting the level of an interim CTC, and some observers feel that AB 1890 has made interim protections unnecessary. Nevertheless, the threat of an interim CTC has kept a lid on several attempts to speed up the competitive market in advance of the CPUC's restructuring timetable.

Until passage of the new law, even those that had been pursuing pre-restructuring alternatives, such as self-generation, faced the potential CTC assessment. Attempts to work out exemptions for projects under development, as part of the negotiations over Pacific Gas & Electric Co.'s (PG&E's) docketed rate freeze and accelerated depreciation schedule, were quickly slapped down by Fessler last May in a written rebuke to PG&E president Bob Glynn.

The "nonbypassable" nature of the CTC also appeared to be a hallmark of the second memorandum of understanding (MOU) worked out by utilities, industrials, and cogenerators at the start of the August legislative hearings. This