DWR underestimates revenue needs, SoCal Edison says

By the OGJ Online Staff

HOUSTON, Aug. 15, 2001 — The California Department of Water Resources has underestimated how much money it will need to buy electricity on behalf of Southern California Edison Co.’s customers, the company said.

Southern California Edison (SCE), a unit of Edison International, Rosemead, said that DWR did not include some key expenses in its projections of revenue requirements, including:

— Franchise fees that are due the cities and counties must be included.

— Underscheduling penalties should be included since the Federal Energy Regulatory Commission has imposed penalties on coordinators that fail to schedule at least 95% of their loads with the grid operator.

— Grid management charges associated with serving load should be included.

— DWR should include all of SCE’s ancillary service charges because SCE is not creditworthy and cannot procure these services on its own.

In addition to these omissions, SCE said DWR reduced without sufficient explanation the amount of power it will have to buy for SCE.

“Without explanation, DWR decreased the projected net-short of SCE by 7,046 Gw compared to DWR’s July 23 revenue requirement submittal,” according to the filing. At the same time, DWR increased the amount of power it expects to buy on behalf of Pacific Gas & Electric Co., San Francisco, but also lowered what it projected buying for San Diego Gas & Electric Co.

DWR said its model forecasts the electricity needs of each utility. But the utilities don’t have access to the models so they can’t say if the revenue requirements projected by DWR are reasonable or not.

The California Public Utilities Commission and the state assigned DWR the role of supplying power to the customers of the financially ailing California utilities. DWR assumed the role in January 2001 and is expected to continue buying power for another 2 years until SCE is returned to investment grade credit status.

The utility is on the verge of bankruptcy after paying more for wholesale electricity than it could collect in retail rates. No longer considered creditworthy, SCE could not buy power for its customers.

Up to now, the state has funded the power purchases out of the treasury, but going forward utility collections must offset purchases and service bonds that will reimburse the state.

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The Clarion Energy Content Team is made up of editors from various publications, including POWERGRID International, Power Engineering, Renewable Energy World, Hydro Review, Smart Energy International, and Power Engineering International. Contact the content lead for this publication at Jennifer.Runyon@ClarionEvents.com.

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