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DIRECT ACCESS CREDIT The Direct Access Credit results from the intersection of CPUC regulations and extraordinarily high prices for electricity in 2000. The following is excerpted from a CPUC draft document that describes what the Direct Access Credit is and how it is derived.2 °Since 1998, PG&E and SCE have offered service to two distinct classes of customers. Bundled service customers received the full range of electric services from the utilities, which include energy procurement and delivery. PG&E and SCE customers could also choose, under the DA option, to purchase energy from an electric service provider (ESP). PG&E and 5CE continue to deliver electricity to both [Direct Access] and bundled service customers. A. Rate Freeze Total rates were frozen at levels in effect on June 10, 1996 for all customers. Bundled service customers paid these frozen rates for the duration of the transition period (January 1, 1998 through March 31, 2002 or aCommission-authorized earlier end date). These frozen tariff rates included a generation rate component. The generation rate was unbundled into a market price and a competition transition charge (CTC) component. The CTC was calculated residually as the difference between the fixed generation rate component and the market price, where the market price was based on the utility's cost of procuring power from the PX and the California Independent System Operator (ISO). All customers pay the CTC and the CTC revenues were to be used to pay for the utility's stranded generation costs, also known as transition costs. B. The Avoided Cost Credit The utilities calculated a market price for billing purposes utilizing the cost and quantities of power purchased from the PX. This PX price was used to determine the contribution to the recovery of CTC (when compared to the generation rate component of frozen rates) and also represented the utilities' avoided cost of procuring energy. The PX component of the generation rate was either applied to recover the cost of purchasing power for bundled service customers or given as a credit to DA customers. The credit reflected the fact that DA customers had chosen to procure their energy through an ESP rather than the utility. So long as the market price, or DA credit, remained below the generation component of the customer's frozen rate, the DA customer continued to make a contribution to CTC in exactly the same manner as a similarly situated bundled service customer. C. The Zero Minimum Bill Provision Because the DA credit was based on the market price from the PX, it was possible that the credit would exceed either the generation rate component or the entire bill. If the PX credit exceeded the generation rate component, there was a negative CTC, i.e., no contribution to recovery of stranded costs. If the PX credit exceeded the entire amount of the bill, meaning that the PX credit was greater than the sum of the generation, distribution, transmission, public purpose, and the other rate components, there would be a negative bill. In other words, the DA customer would receive a credit for the entire utility bill. This is also known as a "credit" bill. Z See Attachment D description of 1998 RAP -Draft Decision. Wind Up Agreement-Attmt 13- v18 4-28-04 cln