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Fortnightly Magazine - February 1 2000

it must recover that cost only from its SC customers. See 88 FERC ¶63,007.

It seems the protocols in the ISO tariff for identifying, allocating and recovering costs for ancillary services and transmission losses don't agree with contracts that PG&E and the other electric IOUs signed with certain transmission customers long before there ever was an ISO. That means PG&E must make up the difference. Attorneys Glen Ortman and Michael Yuffee (Verner, Liipfert, Berhard, McPherson and Hand), who represent SMUD against PG&E, say that while SoCal Edison "went out and negotiated with its existing customers to resolve the obvious discrepancies," PG&E took a chance and lost its bet:

"Basically, one can look at California's restructuring as a cake. ¼ PG&E chose not to negotiate the crumbs ¼ because it assumed that those costs - the crumbs - would be small. Now, upon further reflection, PG&E realizes that those crumbs it left to its existing contract customers were bigger than it first thought."

Two months after Judge Grossman barred recovery in TO tariffs, PG&E filed its new tariff for its SC customers, including SMUD. In its application, PG&E claimed that California's restructuring created a new regime with requirements for new services, necessitating a new tariff for a new rate classification:

"The role of an SC is not even a function that PG&E is obligated to perform. ¼ Rather, at the time of commencement of ISO operations, PG&E voluntarily agreed to fulfill that role so that the SC customers could gain access to the ISO-controlled grid. Under the ISO rules, the SC customers could not gain access to the ISO-controlled grid without an SC."

Yet SMUD and the other SC customers (mostly municipal power agencies) view any added charge as an infringement of their contracts. Further, while SMUD relies on PG&E as its scheduling coordinator, it believes that the newly filed SC tariff targets costs for ancillary services - which SMUD says it doesn't want or need from PG&E, as the muni explained in its protest filed on Dec. 2:

"The math is rudimentary. SMUD pays for its own self-supplied ancillary services. PG&E, which does not provide these services or incur any costs for them, now seeks to charge SMUD for such services under the ISO tariff. This unquestionably amounts to a double charging."

THE FERC ACCEPTED PG&E'S NEW TARIFF on Jan. 11 (see 90 FERC ¶61,010) but suspended it immediately, saying it must first review Judge Grossman's order and the other issues pending in the case on TO tariffs. That list includes whether to mandate a pro forma TO tariff in California, or even a pro forma wholesale distribution tariff. (Such a tariff might aid California customers such as the city of Vernon, which must rely on a dedicated, utility-owned 66-kilovolt distribution line to connect with the ISO grid for wholesale power.) Enron, in particular, has urged the FERC to mandate a pro forma tariff for wholesale distribution, with capacity posted on OASIS, but Judge Grossman rejected that idea and the FERC staff appears to oppose it.

The Jan. 11 action led me