32. Revenue Requirements

Instead of the $160.2 million in incremental expenditures ($110.5 million for capital and $49.7 million for expense) estimated by PG&E, the adopted incremental expenditures indicated in the table below should be used in determining the revenue requirements for this decision.

Table 1

Adopted Incremental Expenditures

2009 2010 2008 2009 2010 Total

Capital Capital Expense Expense Expense

(Dollars in thousands)

Customer Outreach

Foundational $ 54 $ 1,800 $ 4,050 $ 5,904

Large Customer - 1,400 4,520 5,920

Small & Medium Customer - - 18,220 18,220

Customer Inquiry - - 2,074 2,074

Customer Notification - - 1,580 1,580

Notification Equipment Development - - - -

Billing, Revenue and Credit - - 1 774 1,774

Information Technology

CC&B Billing Changes $17,442 $ 8,497 347 1,169 - 27,455

CSOL Updates 21,023 2,246 15 3 - 23,287

CC&B Version 2 Upgrade 10,246 21,018 - - - 31,264

Project Management 1,491 898 - - - 2,389

Load Impact Studies - - - 571 750 1 321

Project Management - - 410 1,421 575 2,397

Contingencies - - - - - -

Total Expenditures $50,202 $32,659 $ 826 $ 6,355 $33,543 $123,585

PG&E uses its results of operations model and associated analysis to calculate the anticipated revenue requirements for 2008, 2009, and 2010 needed to fund PG&E's implementation of dynamic pricing rates as ordered in D.08-07-045. The revenue requirements are based on the incremental costs presented in this application that are not included in any other PG&E cost recovery filing, including all capital-related costs and operating expenses. PG&E states that, in determining the revenue requirements, it has used the methods and factors consistent with those used in its SmartMeter and GRC filings. Project cost recovery occurring beyond 2010 will roll into the 2011 GRC or other applicable filings.

No party has challenged PG&E's general methodology, results of operations model, or model assumptions for calculation of the revenue requirement. PG&E indicates that by its proposal, it expects to record a total of $33.3 million in PDP-related revenue requirements in the DPMA through 2010, reflecting an implementation cost of $160.2 million, which includes the impact of D.09-08-027 on PG&E's incremental costs in this proceeding. However, the revenue requirements will need to be recalculated to conform to the costs adopted by this decision. The use of PG&E's results of operations model is reasonable for this purpose, and it should be used to calculate the revenue requirements related to the costs adopted by our decision today. PG&E should include details of the calculations when requesting PDP-related rate recovery through its AET advice filing process.