2. Factual and Procedural Background
On September 29, 2009, Pacific Gas and Electric Company (PG&E) filed Application of Pacific Gas and Electric Company for Authority to Increase Electric Rates and Charges to Recover Smart Grid Costs relating to Compressed Air Energy Storage Demonstration Project Under American Recovery and Reinvestment Act of 2009 (Application).2
The Application seeks authorization for PG&E to increase electric rates and charges to collect the reasonable level of revenue requirement PG&E needs to provide the balance of non-federal matching funds ($24.9 million) to support an award of $24.9 million in federal funds for Phase 1 of a Smart Grid Compressed Air Energy Storage Demonstration Project (CAES Project).3 In this demonstration project, PG&E intends to take a phased approach to build and validate the design, performance, and reliability of an underground CAES plant.4 In addition to the funding sought by this application, PG&E has also requested $1.3 million in research funding from the California Energy Commission (CEC). Should the CEC fund the CAES Project, the funding sought in this application would be reduced accordingly. On August 26, 2009, PG&E applied to the DOE for a
$24.9 million Smart Grid Demonstration grant under the American Recovery and Reinvestment Act of 2009 (Recovery Act) for funding of Phase 1 of a $356 million CAES project that would be located near Bakersfield in Kern County.
Phase 1 of the CAES project includes all permitting, transmission interconnection, and plant design leading up to construction of the CAES facility which would use off-peak energy, such as intermittent wind energy, to inject compressed air into an underground saline rock formation, and then use the compressed air to power a generator during peak periods when the renewable energy would not otherwise be available.5 The completed CAES project would have a generation capacity of 300 megawatts for up to 10 hours.6
PG&E, through this project, seeks to:
. . . 1) verify and demonstrate advanced CAES technology to achieve an optimized energy ratio and heat rate; 2) integrate intermittent renewable resources by using the CAES plant to steady the power fluctuations from load and intermittent renewables; and 3) use the CAES plant to provide ancillary services, including regulation, emergency spinning/non-spinning reserve and VAR/voltage support.
The $24.9 million of funding sought by PG&E would constitute 50% of the $49.8 million budgeted for Phase I of the project. Of the $24.9 million requested in this Application, $15.9 million is for expense, and $9 million is for capital.7 PG&E received approval of its grant application from DOE on November 24, 2009.8
On October 14, 2009, an Administrative Law Judge's Ruling Consolidating Dockets, Shortening Protest Period, Preliminarily Determining Category, Assignment, and Setting a Prehearing Conference (ALJ Ruling) was issued. The ruling consolidated two applications made by PG&E, Application (A.) 09-09-18 and the instant application, A.09-09-019, into a single docket.9 In addition to setting the Prehearing Conference (PHC), the ALJ ruling held that this Application would be considered under the expedited process established by D.09-09-029, set deadlines for protests or comments accordingly, and requested PHC statements.10
On October 15, 2009, Resolution ALJ-176-3242 ratified the preliminary determination that this proceeding was ratesetting and that hearings would prove necessary.
On October 15, 2009, the Independent Energy Producers Association (IEP) filed a response in support of the Application. On October 16, 2009, the DRA and The Utility Reform Network (TURN)11 also filed responses to the Application.
The Consumer Federation of California (CFC) filed a protest to the application on October 15, 2009. CFC protested the Application arguing that it would result in a "taking" in violation of the United States and California Constitutions.12 CFC contends the Commission lacks the authority to "take" customers' money; taking money from customers and giving it to a utility requires a finding of public interest and necessity justifies the proposed contribution.13 CFC asserts that the Commission lacks the authority to require ratepayers to contribute capital to a utility enterprise.14 CFC also argues that, contrary to what is stated in D.09-09-029, the Commission has in fact shifted the burden to show that the proposed rates are just and reasonable away from the utility.15 Such a shift, CFC argues, is legal error and a violation of Pub. Util. Code § 454(a).16
CFC also argues that evidentiary hearings were necessary, but CFC has failed to identify a factual dispute that would warrant hearings. For example, CFC raises the following questions:
In what manner will granting PG&E's application further the stated policy goals identified in Pub. Util. Code §§ 8360 (a) through (j)?
What standard should be applied to determine whether to grant PG&E's application, the cost/benefits standard of D.09-09-029 or the reasonableness standard of Pub. Util. Code §§ 451 and 454?
These are not issues of fact, but rather policy considerations or legal questions. We also note that no party joins CFC in this request for hearings.
On October 16, 2009, PG&E filed Pacific Gas and Electric Company's (U-39-E) Proof of Rule 3.2(c) Compliance along with two exhibits documenting PG&E's provision of notice of the Application in newspapers of general circulation.
On October 22, 2009, CFC, DRA, and PG&E filed PHC Statements for consideration at the PHC. On October 23, 2009, PG&E filed Pacific Gas and Electric Company's Reply to Protests. The PHC took place in San Francisco on October 27, 2009.
On November 5, the assigned Commissioner issued a Scoping Memo and Ruling of Assigned Commissioner (Scoping Ruling), setting the scope of issues in the proceeding and a timetable for case management. In addition, the Scoping Ruling determined that evidentiary hearings would not be necessary.17 PG&E and DRA subsequently filed comments.18 CFC did not file any comments.
On November 19, 2009, PG&E filed Pacific Gas and Electric Company's
(U-39-E) Proof of Rule 3.2(d) Compliance along with an attachment documenting the notice enclosed with customer bills during the period beginning October 12, 2009 and ending on November 9, 2009.
On December 1, 2009, PG&E and DRA filed a Stipulation of Pacific Gas and Electric Company and The Division of Ratepayer Advocates Regarding the Record and Issues.19
On December 3, 2009, the Commission issued Resolution ALJ-243 Ratification of changes to preliminary determinations pursuant to Rule 7.5, which approved the assigned Commissioner's ruling changing the determination of need for hearing from hearing needed to no hearing needed, consistent with the definitions of Rule 1.3 and Article 7 of the Commission's Rules of Practice and Procedure.
On December 7, 2009, CFC filed a Motion of the Consumer Federation of California for Reconsideration of the Scoping Memo and Ruling of the Assigned Commissioner, arguing that CFC's protest concerning the Application was within the scope of the proceeding.20
On December 14, 2009, the assigned ALJ issued a Ruling Taking Judicial Notice of Department of Energy Document, in which the assigned ALJ took judicial notice of the DOE's, Financial Assistance Funding Opportunity Announcement: Smart Grid Demonstration Program (DE-FOA-0000036).
2 Attached to the Application was PG&E's Smart Grid Demonstration Project application that was submitted to the United States Department of Energy (DOE).
3 The total expected project cost for all three phases of the CAES project is $356 million. Phase 2 will cover plant construction and Phase 3 will cover plant monitoring. PG&E plans to request Commission approval for rate recovery for Phases 2 and 3 in a subsequent application or through its procurement process.
4 PG&E Application, Attachment 1 at Project Abstract.
5 Specifically, Phase 1 includes geologic reservoir verification (field studies, core sample drilling, geological and engineering analysis), National Environmental Policy Act/California Environmental Quality Act permitting/siting, the California Independent System Operator (CAISO) System Impact Study, baseline for evaluating project performance, and preliminary plant design. (See PG&E Application, Attachment 1 at 12-14. and Division of Ratepayer Advocates (DRA) Data Response
at 2.)
6 PG&E Application at 2.
7 PG&E Application at 3.
8 Stipulation of PG&E and the DRA (Stipulation) at 2.
9 The assigned ALJ subsequently issued a ruling on October 30, 2009 deconsolidating the dockets. PG&E filed a Motion to Withdraw Application without Prejudice in
A.09-09-18. A.09-09-018 was dismissed on November 9, 2009 by Decision (D.) 09-11-003.
10 Under D.09-09-029, where concurrent applications are made to the DOE and the Commission, the normal protest period is shortened to 15 days and replies are due within 7 days following the protest.
11 TURN filed a single Response and Protest of The Utility Reform Network to PG&E's applications. In its filing, TURN protested A.09-09-018, which has since been withdrawn by PG&E. TURN did not protest application A.09-09-019.
12 CFC Protest at 3-4.
13 CFC Protest at 4.
14 CFC Protest at 2, CFC cites City and County of San Francisco v. Public Utilities Commission, et al (1971) 6 Cal. 3d 119, 128-129 in support of this contention. We note, however, that this case addressed whether a utility's use of the straight line method of depreciation rather than accelerated depreciation for federal income tax purposes was a reasonable cost that the utility could flow through to ratepayers. The court found these cost were unreasonable costs (resulting from imprudent management of the utility) that could not be passed on to ratepayers. The opinion does not state that ratepayers may not be required to contribute capital to a utility project such as that which is before us in this application. CFC's citation is taken out of context from the facts before the court and was merely dicta from the concurring opinion.
15 CFC Protest at 5-6.
16 CFC Protest at 5-6.
17 See Scoping Memo and Ruling of Assigned Commissioner in A.09-09-019 at 4.
18 DRA's Comments were filed on November 19, 2009. PG&E's comments were filed on November 20, 2009.
19 On December 4, 2009, PG&E filed a Motion requesting that the data responses sent to DRA be included in the record. As discussed later, that motion is granted.
20 On December 7, 2009, CFC tendered for filing an Application for Rehearing of the Scoping Memo and Ruling of the Assigned Commissioner (Application for Rehearing). The Application for Rehearing was rejected by the Commission's Docket Office. CFC refiled the document as a motion for reconsideration.
