Guys and Gals --

Commercial wants our opinion (in fact they want us to contact the CPUC and 
legislative members) to gauge the "true" meaning of the DA bypass of the 
3c/kwh Surcharge.  This question basically has arisen because there is a 
customer that we may not re-DASR if the Surcharge bypass extends in 
perpetuity (or if at least is there a Window of Opportunity that keeps 
customers from paying).  Put in other words, would anyone give us a "free 
pass" if we move load to DA right now and promise to keep them there with no 
ability to return to electric utility service?

My current analysis looks something like this --

The term "Surcharge" is only applicable until the end of the AB1890 rate 
freeze (which will end no later than March.1.02 and may end earlier if (a) 
federal court finds in PG&E/SCE favor or (b) California legislature mandates 
an earlier end-date.  Surcharge is a "term of art" to get around the problems 
of the AB1890 rate freeze.
At the end of the AB1890 rate freeze, it is my understanding that the CPUC 
will modify fully the rate structure and level to ensure full cost recovery 
on a going forward basis (therefore Utility Retained Generation, QF expense, 
CDWR current expenses (both energy purchase and financing costs will be 
included).
Other outstanding costs will include (1) Utility Undercollection from May.00 
until when no additional CA-ISO costs are applied) and (2) CDWR costs 
beginning Jan.17.01 until the end of AB1890 rate freeze new rates.
Understanding how these costs will be recovered and by whom will most likely 
(70%) be decided by the Legislature with some decision-making by the CPUC.
Utility Undercollection Bypass - 25%
CDWR Jan.17.01 thru AB1890 end Bypass - 80% for people who never were on 
Utility Service, 10% for people who used Utility Service post Jan.17.01
CDWR Net Unavoidable Bypass - 10% for people who used Utility Service post 
Jan.17.01, 80% for others.

LEGISLATION IMPACTING THIS DECISION

There are three key direct access bills being considered (the Bowen bill - 
SB2x27, the Kelley bill - AB2x42, and the Battin bill - SB2x??).

The Bowen bill would remove the DA suspension authority granted in AB1x1 and 
replace it with the following (1) if a customer has not bought from an 
electric utility on or after Jan.17.01 there are no charges [except there may 
be an entrance fee to use the electric utility going forward] and (2) if a 
customer wants to switch from an electric utility to an ESP they must pay "to 
the department any uncollected amounts equivalent to the department's net 
unavoidable cost of power procurement, including any financing costs, 
attributable to that customer" to ensure the satisfaction of any power 
purchase obligation or bond obligation to serve "that customer".  The 
recovery period shall be coincident with the terms of bonds issued to finance 
the purchases.  The CPUC has 90 days from the effective date to notify 
customers of their obligations.  

The Kelley bill would remove the DA suspension authority granted in AB1x1 and 
replace it with the following (1) if a customer has not bought from an 
electric utility on or after Jan.17.01 there are no charges, (2) every 
customer is allowed to buy from an ESP a % of their load equal to the amount 
served by Utility Retained Generation (not CDWR purchases) with no charges, 
(3) after the effective date, any customer that buys from the electric 
utility and wants to switch must pay "to ensure satisfaction of any power 
purchase obligation or bond obligation incurred by the department" with the 
following constraints - (a) for res and small commercial customers, if DA 
load is less than load growth or (b) to self gen customers, if the customer 
has given 180 days prior notification or (c) if the customer has given DWR 12 
months' advance written notice (then only a fee equal to 12 months 
unavoidable costs).  The CPUC has 30 days from the effective date to notify 
customers of their obligations.

The Battin bill would ... still reviewing

CPUC DECISIONS IMPACTING THIS

May 5 Order - DA doesn't pay current DWR expenses.  Good for bypass of these 
costs.