View on Exit Fees

Wednesday morning, June 27 (before the CPUC decision to delay the vote on
DA), I gave Marty Sunde this view on exit fees and surcharges for DWR costs
in the California market:

There is a 75% probability that customers who go to direct access and who
used utility service between January and June 2001 will pay an exit fee
calculated as the difference between market price and utility rates during
that period. The exit fee could also include the going forward costs or
alternatively, those costs could be passed along in the form of a uniform
surcharge. In other words, with regard to past costs, regulators or
legislators would require DA customers to pay the amount they belive had been
sucked from the state during the January-June crisis period. I said the
"retroactive ratemaking" argument is a nicety that California could easily
dispense with.

Now that we know the CPUC decision will be delayed, I think the probability
of exit fees for retroactive costs is even higher - either the DA legislation
will pass between now and July 3, or Carl Wood will change the PUC order to
get the "jailbreaking" customers to pay up.