undercollect

Set up a dedicated rate component for SoCal to deal with part of their undercollect.

Absent the transmission line deal, the bond revenue plan would have to be restructured to repay the past undercollect.

Only massive rate hikes (40% or higher roughly) would address the undercollect issue and Davis is unlikely to authorize those.

Therefore, if the utilities undercollect because frozen rates are below wholesale prices, then the utilities accumulate a debt.

The details of the plan are reportedly as follows: - Set aside the $3.1 bilion undercollect in a separate account funded by a dedicated rate component.

The state would make a secured loan (secured against the transmission assets) to SoCal to pay back the remainder of the undercollect.

This is because "Plan B" enables SoCal to collect a dedicated rate component to pay both its undercollect and its expenses going forward.

This is because Sturmwasser is chiefly concerned with the fact that the plan results in a retroactive rate increase to pay SoCal's undercollect.

- This modified Plan B deal, which will originate in the Assembly, will almost certainly include a dedicated rate component to pay SoCal's undercollect.

In other words, Sempra claims that it will be able to eliminate SDG&E's undercollect just by dealing with the PUC rather than the legislature.

They are interested not only in the terms of the agreement (and particularly the amount paid for the undercollect), but also in the terms of the long-term power contracts that the state must negotiate.

The remainder of the undercollect, stated as $3.5 billion or an amount determined by PUC review, would be paid through securitization of the undercollect by SoCal.

For example, consumer groups believe there is a lot of padding in the "undercollect", and that the holding company should cough up billions in assets paid for with dividends supplied by the SCE subsidiary.

The rest of the undercollect will be paid for by a "dedicated rate component", or charge to ratepayers - mostly commercial, industrial and large users - that cannot be revoked by the Public Utility Commission.

The utilities' undercollect, which will not be addressed in today's CAPUC hearings, could very well provide an invitation for QFs and generators to file involuntary bankruptcy against SoCal and PG&E.

Sources believe it is likely that SoCal would object to at least some of the plan's provisions (for example, a PUC audit of SoCal's debt amount to determine the direct rate component to pay for the undercollect).

Attached is a deal example that I recently presented to Great Lakes Gas Transmission that solves a fuel levelization problem they have on their system....they overcollect in the Winter and undercollect in the Summer.