Today's hearing at the CPUC

Here is an update of events at the CPUC rate design hearing today.

The first panel was the Agriculture folks: California Farm Bureau, Cal.
League of Food Processors and Leprino (biggest producer of mozarella
cheese). They generally support the Governor's proposal and the ability of
ag processors to switch to agricultural rate schedules, but admitted that
this would lead to revenue shortfalls, which PG&E and others were quick to
jump on. They want the ability to switch to ag rate schedules to avoid rate
shock. The ALJ was very interested in the different segments of ag, and
their needs, loads and usage patterns. Info on this will be filed by next
week (fruit and nut usage, annual crop usage, processing, wine, dairy, beef
and poultry).

The County of Los Angeles witness testified that, as a big customer of SCE,
they wanted to protect essential services from huge rate hikes, and that
special rate treatment should be afforded to those loads identified in the
exemption from rolling blackouts Any unrecovered costs should be collected
from all customers except CARE and residential up to 130%. He supported
allocating the increase in the same proportion costs are allocated to rate
classes as in total current revenues (not just generation revenues). He also
cautioned against imposing excessive charges on peak load, as this will
encourage load shifting and not conservation. (This became a theme for the
afternoon -- is load shifting conservation, and therefore a good thing, or is
it NOT conservation, and a bad thing, that will drive up non-peak prices).

The Federal Executive Agencies' witness Brubaker would use cost of service to
the extent possible to allocate the increase. The impact of any special
arrangements made to avoid increases must be picked up by someone else.
There is not enough detailed generation information or time to make a fair
allocation, so use of a proxy is necessary. This should be the use of
existing recover of generation costs by class, resulting in an equal
percentage increase in rates. The classes reflect different cost incurrence
factors and an equal cents per kwh is not justified. Residential shortfall
should stay in that class. TOU-8 and E-19 and 20 rates should reflect a peak
price two times that of the non-peak. Tiering of TOU customers already gives
adequate price signals. Cost-based rates are most fair and give best price
signals. Tiering is a short-term solution, and metering is not in place to
handle cost based rates yet. There were some questions on how that cost
basis would be determined, since generation prices are apparently more than
cost-based, and also questions on what the appropriate differential should be
between peak and offpeak rates, as they may be converging.

Schoenbeck with Energy Producers and Consumers (that should cover everyone)
supported a spread between off and on peak and allocated all of the increase
to the onpeak rate, with a market cap of 50 cents. His proposal is a 10:1
allocation of costs between onpeak and off. He was questioned as well on
whether load shifting was conservation, and he stated that it is a
cost-saving measure and his proposal allows each customer to find his or her
own solution to the increase in costs. He was also questioned whether load
shifting might not cause mid and off peak prices to rise. This depends on
resource availability, he answered, but it could. He also testified that the
3 cents charge should not be applied to DA customers.

CIU's Chalfant testified briefly, and will be called back. He stated that
his proposal does 3 things, it passes the equity test (cost based, no rate
shock) with even increases among classes, anad reduces peak usage using top
100 hours, and uses an approved CPUC methodology. For TOU-8 and E-20, 75% of
rate increase would be collected in the summer, and 75% of that would be
collected during peak hours.

Forgive my typing errors. Tomorrow up are Kinder Morgan, Street Lighting,
Aglet Consumers, and CLECA.