PG&E's Response to the PHC

In response to the Presiding Administrative Law Judge's request at the PHC, PG&E, on September 21, 2009, filed a motion for leave to file a late-filed exhibit which sets forth a description of two methods for calculating bill credits (the Percent of Generation Revenue (PGR) method and the Generation Credit Rate (GCR) method) and a tier-by-tier comparison of anticipated average bill credits for PG&E's residential customers under the two methods.

PG&E expert witness' exhibit states that with respect to the residential class specifically, D.07-09-004 in Phase 2 of PG&E's General Rate Case determined that rates for PG&E customers taking service under CARE, as well as for non-CARE customers who consume primarily in usage Tiers 1 and 2, be insulated from both increases and decreases in the generation revenue requirement. Thus under the normal ERRA trigger mechanism, neither PG&E's residential CARE customers nor its non-CARE customers consuming in Tiers 1 and 2 would see a rate decrease resulting from PG&E's current ERRA overcollection (just as they would see no rate increase when the ERRA balancing account is undercollected and generation rates are increased).

This outcome is identical to the one approved for San Diego & Electric Company (SDG&E) in D.09-09-042, Application 09-08-002. For both utilities the effect of ERRA overcollection on residential tiered rates is the same; ratemaking methodologies (D.07-09-004 for PG&E and D.08-02-034 for SDG&E) preclude the rate reduction benefits from going to customers consuming in Tiers 1 and 2. Residential customers of either utility with usage in Tiers 1 and 2 would not benefit from an ERRA overcollection.

The exhibit describes two bill credit calculation methods:

1. The PGR Method

A one-time bill credit will be issued to any current PG&E electric customer who contributed generation revenue (i.e., who paid generation rate components). Each customer would receive a bill credit equal to a constant percentage of the amount of generation revenue that the customer contributed. This bill credit calculation approach is the PGR method.

PG&E proposes that the overcollection be credited to customers proportionally to the amount of generation revenue that each customer contributed during the historical period (HP).⁶ This would be accomplished by first calculating a single Bill Credit Percentage that would apply to every customer. Each individual customer's bill credit would be the product of this uniform Bill Credit Percentage and the customer-specific amount of generation revenue paid during the HP. A customer who, for whatever reason, paid more in generation revenue during the HP than another customer, would thus receive a larger bill credit.

In contrast to the results obtaining from the normal ERRA trigger mechanism, the PGR method would provide some benefits to residential customers taking service under CARE, as well as to residential customers taking service under non-CARE rates who consume primarily in Tiers 1 and 2.

2. The GCR Method

A second method for calculating the bill credits, as proposed by SDG&E in Application 09-08-002, would reflect how the normal ERRA trigger mechanism works for residential customers - by providing bill credits only to customers on non-tiered rates and to non-CARE customers on tiered rates with usage in Tiers 3 and higher. This bill credit calculation approach is the GCR method.

The GCR method would first allocate the total amount of the ERRA overcollection to the various customer classes using the Commission-approved commodity revenue allocation factors. For all classes other than residential, class-specific "credit rates" would be calculated by dividing the class `allocated bill credit amount by the class' bundled sales during the HP. Each customer in the class would then receive a bill credit equal to the class-specific credit rate multiplied by the customer's HP sales under bundled service.

For the residential sector, though, the GCR method is slightly different and distinguishes between customers on tiered and non-tiered rates. For customers on non-tiered rates, a credit rate is calculated in a similar fashion as described in the previous paragraph (i.e., by dividing the bill credit amount allocated to the residential class by their bundled class sales), and that credit rate is used to calculate bill credits for all such customers. For the customers on tiered rates, though, the credit rate is adjusted by dividing the residential class average credit rate by the percentage of sales in Tier 3 and higher. The effect of excluding the Tiers 1 and 2 sales is to increase the resulting credit rate for tiered customers. Each tiered customer's bill credit is then calculated by multiplying this credit rate by the customer's Tier 3 and higher usage during the HP. In this way, customers without usage in Tier 3 and higher during the HP would not see any bill credit with the GCR method. Similarly, customers with just small amounts of usage in Tier 3 and higher would see only small bill credits, while customers with large amount of usage in Tier 3 and higher would see large bill credits.

PG&E calculated bill credits under each of the two methodologies:

	Tier 1	Tier 2	Tier 3	Tier 4	Tier 5
PGR - CARE and non-CARE	$13.02	$17.65	$42.49	$96.44	$162.82
GCR - non-CARE	$0.00	$0.00	$66.10	$160.55	$259.08
GCR CARE	$0.00	$0.00	$0.00	$0.00	$0.00

According to PG&E, "each methodology has its merits and [] either would be acceptable and fair to customers." (PG&E Supplemental Testimony, p. 1.)

⁶ PG&E's proposed HP was the first eight months of 2009, from January 1, 2009 through August 31, 2009. D,09-09-042 in SDG&E's proceeding, Application 09-08-002, adopts a slightly longer, 12-month HP and we will do the same for PG&E using the 12-month period from September 1, 2008 through August 31, 2009.