California initially implemented decoupling through the Supply Adjustment Mechanism (SAM) for gas utilities beginning in 1978 (Decision 88835). By 1982, similar mechanisms were in place for the three electric IOUs. As the gas industry restructured, gas utilities began to serve large customers under a straight fixed-variable rate design, which continues through today. The CPUC stopped the electric decoupling mechanisms in 1996 due to restructuring of the electric power industry.
In 2001, the Legislature passed Section 739.10, which required that the CPUC resume decoupling. Decoupling resumed for Pacific Gas & Electric, Southern California Edison, and San Diego Gas & Electric beginning with the 2004 revenue requirement. Currently, the revenue decoupling program is combined with performance incentives for meeting or exceeding energy efficiency targets. Revenue requirements are adjusted for customer growth, productivity, weather, and inflation on an annual basis with rate cases every three or four years, varying by utility.
Decoupling mechanisms have been developed and applied in individual cases with the IOU utilities. All of the investor-owned electric and gas utilities have decoupling. It has been in place for many years in California and is an integral policy for California's "big, bold" energy efficiency initiative (CA Code Sec. 9 Section 739(3) and Sec. 10 Section 739.10 as amended by A.B. XI 29; Decisions 98-03-063 & 07-09-043).
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