11. Comments on Proposed Decision
The proposed decision of the ALJ in this matter was mailed to the parties in accordance with Section 311 of the Public Utilities Code and comments were allowed under Rule 14.3 of the Commission's Rules of Practice and Procedure. Comments were filed on March 1, 2010 and reply comments were filed on March 8, 2010 by SoCalGas, DRA, TURN, and UWUA.
The following revisions were made based on comments:
· A technical error (misapplication of discounted total project life costs as the deployment costs sought for approval) was corrected. Authorized deployment cost recovery was adjusted from
$1.0112 billion to $1.0507 billion.· SoCalGas is directed to convene a Technical Advisory Panel, similar to the one formed by SDG&E, to assist in AMI planning and implementation.
· SoCalGas is required provide access to near-real time gas usage data directly to consumers, provide retail and wholesale prices to customers on a real-time or near real-time basis in a machine readable form, and provide access to authorized third parties, concurrent with meter installation.
· More time is allowed to develop a plan for outreach and conservation support, to ensure that the draft plan and public workshop are informed by vendor selections. The public workshop must be held within 180 days from the effective date of this decision, with a final outreach plan due to the Commission's Energy Division 60 days thereafter.
· SoCalGas is required to file an advice letter to Energy Division for purposes of review and approval of AMI contracts finalized by SoCalGas. The advice letters should describe how their choice of vendors enables compliance with criteria set forth in Section 7, in particular compatibility with widely adopted standards for communications with consumer-owned devices, and assurance that changes in customer preference of access frequency do not result in additional AMI system hardware costs.
In addition, a number of clarifications were made to the Proposed Decision, as well as fixes to typographical errors and minor corrections.
1. In order to approve this application, we must find that the proposed AMI system affirmatively answers the following questions:
a) Should the Commission approve SoCalGas's proposed AMI deployment activities and funding, either as proposed in this application or with modifications?
i) Are the various elements of the proposed SoCalGas AMI business case and deployment plan reasonable?
a. Are the technology choices proposed by SoCalGas appropriate and technically feasible? Specific elements of the technology plan that should be evaluated include (but are not limited to):
i. Is the proposed SoCalGas-only communication system reasonable? What if any additional communication options, such as shared communications infrastructure between SoCalGas and other utilities with overlapping jurisdictions, should be considered?
ii. Is the battery proposed to power the AMI system reasonable? What if any additional options for powering the meters and communications systems should be considered?
b. Is the SoCalGas AMI proposal for a gas-only AMI system consistent with state energy policy objectives or desirable for other policy reasons?
c. Is the SoCalGas AMI proposal cost-effective, and will it provide lasting value for SoCalGas's customers?
2. The technology choices proposed by SoCalGas, including the stand-alone communications equipment, the choice of battery technology, and the information technology solutions are reasonable, appropriate, and technically feasible.
3. The SoCalGas AMI proposal meets those functionality criteria defined by the Commission for previous (electric or dual fuel) AMI proposals that are relevant to a gas AMI system, to the extent that we understand the applicability of those requirements to a gas-only AMI system.
4. Development and implementation of a cost-effective gas-only AMI system is consistent with state energy policy objectives.
5. Commission precedence dictates in concept the inclusion of terminal value in AMI cost effectiveness showings.
6. The proposed $26.3 million benefit for terminal value of AMI equipment included in the SoCalGas business case is appropriately calculated, and therefore shall be included in the business case analysis.
7. The proposed $757.5 million benefit for elimination of the meter reading workforce after the implementation of an AMI system is reasonably forecast in the SoCalGas AMI business case, and therefore shall be included in the business case analysis.
8. The proposed $148 million gas conservation benefit included in the SoCalGas business case is reasonably forecast in the SoCalGas AMI business case, and therefore shall be included in the business case analysis.
9. SoCalGas' proposed 10% contingency fund is not consistent with AMI deemed reasonable in past AMI cases.
10. Moving forward with the AMI rollout will affect, in some way, a workforce of approximately 970 meter readers, both part-time and full-time.
11. The SoCalGas AMI proposal is cost effective.
12. The cost-effectiveness of SoCalGas' AMI proposal relies upon the materialization of forecast conservation benefits.
13. If the forecast conservation benefits of this project do not materialize, ratepayers may face undue burden.
14. The degree of conservation response depends in part on supporting efforts and outreach on the part of SoCalGas to ensure customers are aware of and engaged in conservation opportunities.
1. The SoCalGas AMI proposal should be approved, with modifications.
2. It is reasonable to reduce SoCalGas' contingency fund to a level consistent with past AMI cases approved by this Commission.
3. It is reasonable to require additional funds to assist SoCalGas' displaced meter reading workforce in transitioning and retraining.
4. It is reasonable to modify SoCalGas' proposed sharing mechanism to reduce the potential risk faced by ratepayers if conservation benefits are lower than forecast.
5. SoCalGas should develop a dedicated plan for consumer outreach to ensure customer awareness of smart meters and engagement in conservation opportunities.
6. It is reasonable to require SoCalGas to offer customers direct access to near-real time gas usage data, provide retail and wholesale prices to customers on a real-time or near real-time basis in a machine readable form, and provide access to such AMI data to customer authorized third parties, on a timeline concurrent with meter installation.
7. It is reasonable to require SoCalGas to provide periodic reports to the Commission on the conservation benefits attributable to AMI deployment.
8. The cost recovery mechanism proposed by SoCalGas is reasonable and consistent with law.
IT IS ORDERED that:
1. Application 08-09-023 is approved with the following modifications:
· Southern California Gas Company shall reduce its contingency fund from 10% to 7%, resulting in a $68.7 million total allowance for contingencies.
· Southern California Gas Company shall supplement by $1 million its funding for workforce retention and retraining. This fund is established to better protect the employment interests of Southern California Gas Company's meter reading workforce and should be used to extend severance, vocational training, and other transitional opportunities to employees affected by the decision to pursue advanced metering infrastructure.
2. Southern California Gas Company's sharing mechanism shall allocate cost overruns of less than $100 million 50/50 to shareholders and ratepayers; cost under runs of up to $100 million shall be allocated 90% to ratepayers and 10% to shareholders, as proposed by Southern California Gas Company.
3. SoCalGas shall offer customers direct access to near-real time gas usage data, provide retail and wholesale prices to customers on a real-time or near real-time basis in a machine readable form, and provide access to such AMI data to customer authorized third parties, on a timeline concurrent with meter installation.
4. Southern California Gas Company shall host a public workshop within 180 days of the issuance of this decision to present a draft plan for advanced metering infrastructure outreach and conservation support. The plan shall include marketing and education elements to prepare customers for advanced metering infrastructure roll-out, sample versions of web-based energy management feedback to encourage conservation, as well as planned marketing to channel customers towards energy efficiency offerings. In order to support the development of its plan, SoCalGas shall convene a Technical Advisory Panel to assist in planning and implementation of AMI. A final written plan shall be submitted to the director of the Commission's Energy Division and served on the most recent service list for this proceeding within 60 days after the workshop.
5. Southern California Gas Company shall establish a system to track and attribute program costs and projected savings from conservation. Based on this tracking system, Southern California Gas Company shall submit a report to the Director of the Commission's Energy Division semi-annually, tracking the gas conservation impacts of the advanced metering infrastructure project to date. These reports shall serve as a forum to adjust, as necessary the elements laid out in the final outreach plan described above. We expect that customer outreach, education and communications will continue to evolve and improve as SoCalGas conducts customer research, monitors customer reaction to new AMI technology and various customer usage presentation tools, and incorporates feedback from these activities into its AMI outreach and education activities. If the report shows that the company is falling short of its projections, it shall submit revisions to its conservation plan to increase awareness, participation, and durability of conservation actions among its customers. The semi-annual reports and any revisions to the advanced metering infrastructure outreach and conservation plan shall be submitted to the director of the Commission's Energy Division and served on the most recent service list for this proceeding. Additional costs incurred in order to improve conservation response will be funded out of contingency funds, or otherwise subject to the risk sharing mechanism authorized in Ordering Paragraph 2.
6. SoCalGas shall file one or more Advice Letter with the executed contract with vendors for AMI technology, installation and/or systems integration for its AMI project, as adopted herein. These contracts are contingent upon Commission approval that they meet the functionality criteria set forth in
Section 7 of this decision. The advice letters should describe how their choice of vendors enables compliance with criteria set forth in Section 7, in particular compatibility with widely adopted standards for communications with consumer-owned devices, and assurance that changes in customer preference of access frequency do not result in additional AMI system hardware costs.
7. Southern California Gas Company shall file an advice letter no later than 30 days from the effective date of this decision, establishing a balancing account and detailing the cost recovery mechanism in conformance with this decision. Southern California Gas Company is authorized to recover deployment costs of up to $1.0507 billion in this account, plus additional amounts, if any, consistent with the terms and conditions of the Risk Sharing Mechanism approved in Ordering Paragraph 2.
8. Application 08-09-023 is closed.
This order is effective today.
Dated April 8, 2010, at San Francisco, California.
MICHAEL R. PEEVEY
President
DIAN M. GRUENEICH
TIMOTHY ALAN SIMON
Commissioners
I reserve the right to file a concurrence.
/s/ TIMOTHY ALAN SIMON
Commissioner
I will file a dissent.
/s/ JOHN A. BOHN
Commissioner
I will file a dissent.
/s/ NANCY E. RYAN
Commissioner
Concurrence of Commissioner Timothy Alan Simon
Decision Approving Southern California Gas Application
for Advanced Metering Infrastructure
A.08-09-023/D.10-04-027
I support this decision approving the Southern California Gas Company's (SoCalGas) Application for Advanced Metering Infrastructure (AMI). However, the true cost-effectiveness of this AMI project, as in any demand side management technology, is almost entirely dependent on the success of our efforts in customer outreach, adoption, and education. At my request, this decision sets forth a detailed roadmap for ensuring that residential and small business customers are fully aware of the functionality and potential benefits of their AMI technology, and that focuses on adoption methods through workshops with faith-based and Community Based Organizations (CBOs).38 If we are to swiftly and effectively transform behavior and maximize conservation, acceleration in adoption rates for the use of customer interfaces and online energy management tools must occur.
Near Real-Time Information Delivery and Web-based Platforms
Much of the debate surrounding the proposed gas AMI projects involves concerns about the delivery of the usage and pricing data to the consumer and its impact on demand side management. I acknowledge that currently there are fewer potential discretionary applications for gas AMI than electric AMI. However, near real-time price signals and effective web-based customer applications will successfully increase the awareness of consumption patterns as they occur.
I am impressed with the web-based tools that are available to customers to manage their consumption.39 Technology companies have developed effective platforms for viewing near real-time pricing data, and mobile applications will be available for the smartphones and other similar devices. Along with electric AMI pricing and billing information, user-friendly customer web portals and analytical tools for gas AMI will lend themselves to a better understanding of consumption patterns and home energy management options. It should also be noted that these web-based portals are offered free of charge to customers and will interface with other utilities that share service territories with SoCalGas. Hence, eventually ratepayers can embrace the comparative analytics on gas, electric, and water consumption. However, it will be absolutely essential that the benefits of these platforms are conveyed to all customers - particularly in underserved communities that have been historically "hard to reach".
Raising the Bar on Customer Education and Outreach
As with electric AMI and dynamic pricing implementation, it is crucial that we protect our public investment in gas AMI through a carefully coordinated customer outreach and education plan. This is a critically important part of this Decision. This Commission raised the bar in customer education and outreach planning in our recent PG&E Peak Day Pricing decision. This Decision advances this trend.
It is imperative that we recognize that despite the few residential uses of natural gas, conservation practices are not necessarily widely adopted or maximized. Residential consumers and small businesses must be properly educated on the benefits of near real-time pricing information and web tools in order to make incremental progress in conservation. Based on the results of a "Customer Insight Panel," SoCalGas assumed "an initial 13% participation rate for its customers, and growing at 1% per year."40 Growth in participation will occur at a faster rate with a robust customer education campaign that enlists the marketing strengths of the selected AMI vendor, and the help of Community Based Organizations.
The Decision's workshop and Technical Advisory Panel requirements will help to establish a plan and a budget for customer education to empower residential and small business customers.41 I am confident that semiannual reporting on SoCalGas' progress in meeting education and outreach performance metrics is the appropriate vehicle for transforming behavior and increasing conservation. By monitoring the performance metrics, my office supports the Decision as an important addition to California's energy efficiency goals.
Dated April 13, 2010, at San Francisco, California.
/s/ TIMOTHY ALAN SIMON
TIMOTHY ALAN SIMON
Commissioner
DISSENT OF COMMISSIONER BOHN
In prior cases, I have voted in support of the advanced meter programs proposed by PG&E, SCE and SDG&E. I support the general policy of improving the technical capability of the utility infrastructure and moving ahead on the path to a smart grid. However, in this instance I find that I agree with the Administrative Law Judge's (ALJ) conclusion that the proposal presented by Southern California Gas Company (SoCal Gas) should not be approved.
Simply put, the benefits of advanced meters are less for a gas-only utility such as SoCal Gas, than it is for electric-only or combined electric-gas utilities. The cost of electricity varies dramatically over the course of a day and the improved ability to track electric usage provided by advanced meters can go a long way towards reducing demand during the most expensive hours. Individual choice on a real time basis can have a significant effect, both on consumers and the system.
The same is not true of natural gas. Gas is bought by utilities primarily on a monthly basis, not hourly. Daily fluctuations in gas prices and costs are relatively small compared to electricity. There is simply little benefit today to the increased information provided by advanced meters for natural gas.
The decision adopted by the Commission concludes that this program is cost-effective, relying on estimates of conservation savings presented by SoCal Gas. The ALJ found it unlikely that these savings would actually occur. I note that SoCal Gas' expectation of conservation savings is inconsistent with the analyses we relied upon in approving PG&E's and SDG&E's advanced meter cases. In finding this proposal worthwhile, the adopted decision also assumes that without advanced meters, SoCal Gas' meter reading costs would increase significantly compared to their historic levels. This is another assumption that has little merit and was rejected by the ALJ.
My concern here is that the proposal approved today is not cost-effective. That does not mean advanced meters should never be considered by SoCal Gas. As technology costs change and as we gain more experience with the advanced meters installed by PG&E and SDG&E, it may well be appropriate for SoCal Gas to submit a new proposal for advanced meters in the future. However, there is no urgency to implementing this program for SoCal Gas now, and the proposal adopted in this decision, despite heroic efforts to justify its costs, simply does not pencil out. Capital is not infinitely available, nor is the ratepayer's burden expected to decline. This expenditure is not the place to use scarce resources.
/s/ JOHN A. BOHN
John A. Bohn
Commissioner
San Francisco, CA
April 8, 2010
Dissenting Statement of Commissioner Nancy E. Ryan
Decision Approving Application of Southern California Gas Company for Advanced Metering Infrastructure
A.08-09-023
April 8, 2010
I do not support the Commission's decision today to approve Southern California Gas Company's (SoCalGas) Advanced Metering Infrastructure project, and write this dissenting statement to set forth my reasons.
This decision is a close call. SoCalGas' proposed advanced metering project has the potential to give consumers new information about when and how they consume gas. I strongly believe that information will lead to smarter energy use-lowering costs to consumers and reducing greenhouse gas emissions. That is why I remain a strong supporter of advanced metering.
The Commission's decision includes some important enhancements to SoCalGas' proposal. For example, the decision includes a cost sharing mechanism to reduce the risk that consumers see cost overruns. It also reflects lessons-learned from the electric advanced metering context and requires SoCalGas to put energy usage information into the hands of consumers as soon as possible.
However, I believe that each advanced metering project also needs to pass a cost-benefit test. In my judgment, the project that SoCalGas presented here does not pass the test. In particular, I am not sufficiently comfortable with the energy conservation projections.
Rather than approve this project today, I would prefer to spend the next few years observing the Pacific Gas & Electric Company (PG&E) and San Diego Gas & Electric Company (SDG&E) gas advanced meter deployments. I expect the PG&E and SDG&E experiences will provide valuable data that SoCalGas can use to develop firmer energy conservation forecasts. The other utilities' projects will also help SoCalGas identify additional strategies to engage consumers. SoCalGas can then bring forward a new application to the Commission as part of a holistic campaign on gas conservation.
For all of these reasons I am voting against Commissioner Grueneich's alternate proposed decision, which approves SoCalGas's advanced metering initiative.
Dated April 8, 2010, at San Francisco, California.
/s/ NANCY E. RYAN
NANCY E. RYAN
Commissioner
38 Decision on Application of Southern California Gas Company for Approval of Advanced Metering Infrastructure (D.10-04-027), February 9, 2010, at 44.
39 For instance, Microsoft and iGoogle have web-based tools for consumers to manager their bills and consumption.
40 Id. at 34.
41 Id. at 44.
