ML030270354

Declaration of Lanette Kozlowski in Support of Motion of Pacific Gas & Electric Co for Order Authorizing Debtor to Pay Certain Refund Obligations

ML030270354
Person / Time
Site:	Diablo Canyon
Issue date:	01/16/2003
From:	Kozlowski L Pacific Gas & Electric Co
To:	Office of Nuclear Reactor Regulation, US Federal Judiciary, Bankruptcy Court, Northern District of California
References
01-30923, 94-07420640
Download: ML030270354 (5)

Text

It 1 JAMES L. LOPES (No. 63678)

WILLIAM J. LAFFERTY (No. 120814) 2 HOWARD, RICE, NEMEROVSKI, CANADY, FALK & RABKIN 3 A Professional Corporation Three Embarcadero Center, 7th Floor 4 San Francisco, California 94111-4065 Telephone: 415/434-1600 5 Facsimile: 415/217-5910 6 Attorneys for Debtor and Debtor in Possession PACIFIC GAS AND ELECTRIC COMPANY 7

8 UNITED STATES BANKRUPTCY COURT 9

NORTHERN DISTRICT OF CALIFORNIA 10 SAN FRANCISCO DIVISION 11 12 HCNVA 13 In re Case No. 01 30923 DM cN*ax 14 PACIFIC GAS AND ELECTRIC Chapter 11 Case

, -*15 COMPANY, a California corporation, Date: February 6, 2003 Debtor. Time: 1:30 p.m.

16 Place: 235 Pine Street, 22nd Floor Federal I.D. No. 94-0742640 San Francisco, California 17 18 19 DECLARATION OF LANETTE KOZLOWSKI IN SUPPORT OF MOTION OF PACIFIC GAS AND ELECTRIC COMPANY FOR ORDER AUTHORIZING 20 DEBTOR TO PAY CERTAIN REFUND OBLIGATIONS 21 22 I, Lanette Kozlowski, declare as follows:

23 1. I am a manager in the Electric Transmission Rates department of Pacific Gas and 24 Electric Company ("PG&E"), a position I have held since October, 1998. I make this 25 Declaration based upon my personal knowledge of PG&E's general operations and upon my 26 review of PG&E's records concerning the matters stated herein. If called as a witness, I 27 could and would testify competently to the facts stated herein.

28 !kv DECLARATION OF LANETTE KOZLOWSKI

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1 2. PG&E is seeking an order authorizing PG&E to pay three categories of refund 2 obligations ordered by the Federal Energy Regulatory Commission ("FERC").

3 3. The California Independent System Operator Corporation ("CAL ISO") imposes 4 certain charges on PG&E and other utilities operating in California. PG&E and the other 5 utilities generally pass on these charges to their customers by adjusting rates. FERC 6 imposes very strict guidelines as to how the utilities can pass on these costs and which of 7 their customers must bear the resulting increased rates. FERC typically issues preliminary 8 indications subject to later review and, where necessary, customer refunds. To settle 9 disputes, FERC conducts extensive hearings and issues binding orders. Each of the refunds 10 that PG&E now seeks authority to make results from a FERC order or a settlement 11 agreement approved by FERC that modified a FERC preliminary indication'. Because such 12 orders and agreements are retroactive, it is common for the utility to make adjustments and HCZAM 13 effect refunds for past charges after they have been litigated or settled at FERC.

cA 14 4. PG&E's customers are divided into two general categories: ETC Customers and FALYN 15 TO Tariff Customers. The ETC Customers are those customers who entered into long-term 16 transmission contracts with PG&E before the creation of the CAL ISO. These contracts 17 make it necessary for PG&E to seek authority from FERC to pass on certain CAL ISO 18 charges to the ETC Customers under Federal Power Act ("FPA") Section 205. The ETC 19 Customers are primarily municipal utilities.

20 5. TO Tariff Customers are subject to a current tariff that allows the pass-through of 21 certain CAL ISO costs. As such, TO Tariff Customers are obligated to reimburse PG&E for 22 applicable charges imposed under the CAL ISO Tariff and PG&E's TO Tariff. TO Tariff 23 customers can be divided into two general groups: wholesale customers and retail customers.

24 6. The refunds that PG&E is seeking authority to effect reflect charges imposed by 25 the CAL ISO or changes to various rates or rate structures under PG&E's TO Tariff or 26 27 'These orders and settlement agreements are not attached as they are quite voluminous 28 but will be made available to the Court and interested parties.

DECLARATION OF LANETTE KOZLOWSKI 1 Reliability Services ("RS") Tariff. FERC has modified its preliminary indications and 2 decided that PG&E must change the way it charged, or failed to charge, certain customers.

3 FERC has ordered PG&E to effect the appropriate adjustments.

4 7. In connection with the state of California's electric industry restructuring, the 5 CAL ISO was established to provide operational control over most of the state's electric 6 transmission facilities and to provide comparable open access for electric transmission 7 service. PG&E serves as the scheduling coordinator ("SC") to facilitate continuing service 8 under certain of the ETC contracts. The CAL ISO then bills PG&E, as the SC, for providing 9 certain services associated with these ETC contracts. These CAL ISO charges are referred 10 to as the SC costs ("SC Costs").

11 8. Since April 1, 1998, PG&E has included the SC Costs in its calculation of rates 12 for TO Tariff Customers via an accounting mechanism known as the Transmission Revenue HoRD 13 Balancing Account Adjustment ("TRBAA"). In Opinion No. 458, issued on August 5, S14 2002, FERC held that PG&E should not have used the TRBAA mechanism for all SC Costs 15 because the effect of that approach was to charge TO Tariff Customers for all SC Costs.

16 FERC concluded that, instead, PG&E should have sought recovery of some portion of these 17 costs from its ETC Customers. Up until the date of FERC's ruling, PG&E's TO Tariff 18 Customers had been paying all of the SC Costs. FERC ordered that PG&E refund its TO 19 Tariff Customers $110 million, of which approximately $75 million reflects pre-petition 20 payments. This refund will be accomplished through a reduction in transmission rates to TO 21 Tariff Customers in 2003.

22 9. On November 12, 1999, PG&E filed a Scheduling Coordinator Services ("SCS")

23 Tariff to collect SC Costs from the ETC Customers in the event that FERC denied the 24 TRBAA cost recovery mechanism. Litigation of the SCS Tariff will begin shortly and 25 PG&E believes it will be successful in recovering the dollars reflected in these refunds from 26 27 28 DECLARATION OF LANETTE KOZLOWSKI I its ETC Customers 2.

2 10. The CAL ISO also imposes charges on PG&E and the other utilities for certain 3 expenses that the CAL ISO incurs in connection with its efforts to ensure reliable electricity 4 services. These charges are referred to as Reliability Service Charges ("RS Charges").

5 There is not a dispute that PG&E may pass the RS Charges on to customers, but there have 6 been disputes over which customers should bear which portion of the expenses.

7 11. Since June 29, 2000, PG&E has allocated the RS Charges to all customers, ETC 8 and TO Tariff. In its Opinion No. 459, issued on August 2, 2002, FERC held that PG&E did 9 not have authority to collect the RS Charges from ETC Customers. PG&E seeks authority to 10 refund to the ETC Customers approximately $37 million, of which approximately $11 11 million reflects pre-petition payments. The refund cannot be effected through account 12 adjustments or credits. Rather, this refund requires a cash payment by PG&E.

HcmD 13 12. On June 26, 2001, FERC approved a settlement of PG&E's fifth Transmission RKE cVA, 14 Owner Tariff Rate Case ("TO5") that reduced PG&E's transmission rates. On February 27, 15 2002, FERC approved a settlement (the "TAC Settlement") that had been entered into by 16 PG&E and all parties to PG&E's Transmission Access Charge Implementation filing. That 17 settlement made changes to PG&E's TO Tariff to implement a new rate methodology 18 adopted by the CAL ISO. The TAC Settlement incorporates certain changes to the rate 19 design itself, as opposed to PG&E's revenue requirement. Such alterations to the rate design 20 have a direct impact on customer rates. Accordingly, pursuant to the TAC Settlement, 21 PG&E is obligated to refund approximately $10.5 million to its wholesale TO Tariff 22 Customers as a result of these rate design changes and for the reductions in the transmission 23 rates that stem from the T05 settlement. This amount will be recovered through the 24 25 2PG&E seeks recovery of all of the SC Costs from the ETC customers except for certain congestion charges that PG&E incurred, in the approximate amount of $13.5 million.

26 PG&E has held a total of $63 million in reserves, to which the congestion costs and other unrecoverable refunds would be applied. PG&E does not expect the outcome of this 27 proceeding to have a material adverse effect on its results of operations or financial 28 condition.

DECLARATION OF LANETTE KOZLOWSKI I.

1 TRBAA rate mechanism in 2003 rates. Approximately $9 million of the $10.5 million 2 relates to pre-petition payments. The refund cannot be effected via account credits or 3 adjustments but requires a cash payment by PG&E.

4 5 I declare under penalty of perjury under the laws of the United States of America that 6 the foregoing is true and correct. Executed this 16th day of January, 2003 at San Francisco, 7 California.

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10 LANETTE KOZLOWSKI 11 12 HOA%7' R!I 13

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WD 01 1503/l-1419907/pzl/1044654/v 18 19 20 21 22 23 24 25 26 27 28 DECLARATION OF LANETTE KOZLOWSKI