860-038-0200 Unbundling (1) This rule is designed to ensure compliance with ORS 757.642 by directing electric companies to separately identify their embedded costs on a function-by-function basis. The electric company must unbundle its costs in a manner that facilitates the development of rates described in OARs 860-038-0220 to 860-038-0280. The electric company must unbundle costs associated with functions that a retail electricity consumer may self-supply or purchase from an entity other than the electric company. The calculation of unbundled rates is beyond the scope of this rule. (2) Each electric company must separately identify its costs of each of the following functions: (a) Generation; (b) Transmission services; (c) Distribution services; (d) Ancillary services; (e) Consumer services: (A) Billing services; (B) Metering services; and (C) Other consumer services; (f) Retail services, examples of which are listed in section (3) of this rule; (g) Investment in public purposes; and (h) Any other function the Commission deems appropriate. (3) Examples of Retail Services include but are not limited to the marketing, sale, design, construction, installation or retrofitting, financing, operation and maintenance, warranty and repair of or consulting with respect to: (a) Energy consuming equipment located on the consumer’s premises; (b) Provision of technical assistance relating to any customer-premises process or device that consumes electricity, including energy audits; (c) Transformation equipment, power-generation equipment, and related services located on the consumer’s premises that are not owned by the electric company; (d) Building or facility design and related engineering services, including building shell construction, renovation or improvement, or analysis and design of energy-related industrial processes; (e) Facilities operations and management; and (f) Other activities identified by the Commission. (4) Each electric company must separately identify costs as direct or indirect for each function. Costs must be directly assigned where information is available. To the extent possible, all costs must be assigned to the functions based on cost causation. Common costs and taxes allocated to each of these functions must be separately identified. A return on investment must be calculated and stated separately for each function. (5) Each electric company must file its functionally unbundled costs with its general rate filings and results of operations reports filed with the Commission. The electric company filing must clearly identify the allocation factor(s) used to functionalize each rate base, expense, and revenue item. All allocation and functionalization procedures adopted by the Commission for an electric company must be used in subsequent filings until expressly modified by the Commission. (6) Each electric company must make an initial filing complying with the rules in this Division by October 1, 2000. This filing shall use the financial results for a test year that encompasses all or part of the 12-month period beginning October 1, 2001. (7) Each electric company must use the allocators and cost functionalization procedures set forth in section (9) of this rule to functionally unbundle its respective costs. If an electric company proposes to assign, allocate, or reclassify costs using cost functionalization procedures that differ from those contained herein, the electric company must include in its filing, testimony that: (a) Supports the allocation factors and procedures the electric company proposes to use to unbundle its costs; (b) Justifies the deviation from the cost functionalization procedures; and (c) Presents the results of the allocation factors and procedures set forth in this rule and the results of the alternative factors and procedures that are proposed. (8) The cost allocation factors in section (7) of this rule are subject to Commission review and approval. (9) Costs must be directly assigned to the functions identified in section (2) of this rule where information is available. The allocation procedures presented below are to be used to functionalize those costs that cannot otherwise be charged directly to the appropriate function. (a) Rate Base: (A) Intangible Plant (FERC Accounts 301-303) must be directly assigned where possible. The remainder of the costs must be allocated to the appropriate functions using the O&M Labor allocator; (B) Generation Plant (FERC Accounts 310-346) must be directly assigned to the Generation function, except that some costs may need to be reclassified; (C) Transmission Plant (FERC Accounts 350-359) must be directly assigned to the Transmission function, except that some costs may need to be reclassified. Transmission Plant is defined as both transmission lines and transmission substation equipment operating at voltages of at least 46 kilovolts, as well as transmission facilities and transmission substation equipment operating at voltages of at least 34.5 kilovolts if such facilities terminate within enclosed substations; (D) Distribution Plant (FERC Accounts 360-373) must be directly assigned to the Distribution function, except that some costs may need to be reclassified; (E) General Plant (FERC Accounts 389-399) must be directly assigned where possible. The remainder of the costs must be allocated to the appropriate functions using the O&M Labor allocator; (F) Accumulated Depreciation must be functionalized in the same manner as the respective Plant accounts; and (G) Each electric company must review its other rate base items and where possible directly assign the costs to the appropriate function. The remaining costs must be allocated to the appropriate functions using general allocators to be determined in each company’s filing; (b) Operation and Maintenance (O&M) Expense: (A) Production O&M Expense (FERC Accounts 500-557) must be directly assigned to the Generation function, except that some costs may need to be reclassified; (B) Transmission O&M Expense (FERC Accounts 560-574) must be directly assigned to the Transmission function, except that some costs may need to be reclassified; (C) Distribution O&M Expense (FERC Accounts 580-598) must be directly assigned to the Distribution function, except that some costs may need to be reclassified; (D) Customer Accounts O&M Expense (FERC Accounts 901-905) must be directly assigned where possible. The remainder of the costs must be allocated to the appropriate functions using general allocators to be determined in each company’s filing, except for FERC Account 904, Uncollectible Accounts, which must be allocated using a Total Revenue Requirement allocator; (E) Customer Service and Information O&M Expense (FERC Accounts 906-910) must be directly assigned where possible. The remainder of the costs must be allocated to the appropriate functions using general allocators to be determined in each company’s filing; (F) Sales O&M Expense (FERC Accounts 911-917) must be allocated exclusively to functions determined to be competitive by the Commission; and (G) Administrative and General O&M Expense (FERC Accounts 920-935) must be allocated to the appropriate functions using the O&M Labor allocator; and (c) Other Expenses: (A) Amortization and Depreciation Expenses must be functionalized in the same manner as the respective Plant accounts; and (B) All taxes must be identified as Federal, State, or Local Taxes; (i) Taxes other than income taxes must be allocated in the following manner: (I) Ad Valorem Taxes: Net Plant in Service; (II) Payroll Taxes: Labor; (III) Revenue Related Taxes: Total Revenue Requirement; and (IV) Franchise Fees & Privilege Taxes: Distribution function; and (ii) Income Tax Expenses must be calculated for each of the functions identified in section (2) of this rule; and (d) Revenues: In a rate filing, required revenues must be calculated for each unbundling category using the traditional revenue requirement calculation methodology (recovery of costs plus a return on investment). For reporting purposes, revenues must be assigned to the appropriate category per the underlying tariff for which they were collected. Common revenues that cannot be directly assigned must be functionalized using the Net Plant allocation factor. Statutory/Other Authority: ORS 183, 756 & 757 Statutes/Other Implemented: ORS 756.040 & 757.600 - 757.667 History: PUC 17-2000, f. & cert. ef. 9-29-00