5. Accounting for PG&E'S CAES Project
In general, when a utility invests capital it is allowed to include reasonable capital costs in ratebase and allowed the authorized rate of return, which is set in its general rate case and cost of capital proceedings. PG&E will be funding
Phase 1 of the CAES Project with a combination of federal Recovery Act grant funds and funding generated through an increase in rates. PG&E states that non-federal funds invested in capital for the CAES Project will be treated like any other capital invested by a utility; it will be included in ratebase (if determined to be reasonable) and subject to an allowance for an authorized return. Phase 1 is in large part a feasibility study and includes costs that are expense rather than capital costs, which will be expensed as they normally would be.45 Federal Recovery Act funds will not be included in ratebase.
PG&E's request to establish a memorandum account to track the costs incurred on this project and a process to recover the revenue requirements booked to that account are reasonable.46 The portion of costs paid for by Recovery Act Funds must not be tracked through this memorandum account. Finally, if PG&E receives research funds from the CEC, the amount authorized for recovery by this decision shall be reduced accordingly.
45 Prehearing Conference Transcript at 8-9.
46 R.08-12-009 at 31.
