10. Additional Rate of Return
PG&E requests the rate of return (ROR) on rate base for the PV UOG Program be equal to its currently authorized ROR of 8.79 adopted in D.07-12-049 for 2008, plus one percent. PG&E claims the additional one percent is allowed pursuant to § 454.3 and by D.06-05-039 for renewable assets.76 Alternatively, PG&E requests that if we find that Pub. Util. Code § 454.3 is not applicable, we grant the increase in the rate of return pursuant to § 454(a).
10.1. Parties' Positions
Greenlining opposes the additional rate of return adjustment, arguing that an increase in the rate of return would be justified only if the technology is experimental. Greenlining states that the PV Program relies on solar PV which "has been in relatively widespread use for the last three decades."77
CFC opposes the proposed increased rate of return addition for a different reason. CFC argues that D.06-05-039 allows an increase in the rate of return under Public Utilities Code § 454.3, however not without holding a hearing and determining that "the capital costs [of the facility], when added to its costs of operation and maintenance, result in a cost of electricity generated over the useful life of the facility less than that of electricity generated by existing facilities utilizing nuclear power or fossil fuel; and the facility is used and useful." CFC asserts "PG&E has offered no evidence which would support such a finding."78
10.2. Discussion
Pub. Util. Code § 454.3 in relevant parts provides that:
The Commission may, after a hearing, approve an increase of from one-half of 1 percent to 1 percent in the rate of return otherwise allowed an electrical corporation on its electric plant for investment by the corporation in facilities meeting the following requirements: ...
(c) ...The facility is experimental and is, in the determination of the commission, reasonably designed to improve or perfect technology for the generation of electricity from renewable resources or to more efficiently utilize other resources in a manner which will decrease environmental pollution from and lower the costs of the electricity generated.
This language was explicitly acknowledged by the Commission in
D.06-05-039 at page 28:
"a utility may build a renewable resource and, and under appropriate circumstances, earn between 0.5% and 1.0% increased rate of return on the investment. That is, the Legislature has authorized an increased incentive for utility ownership of renewable generation. We think IOUs should consider taking advantage of this law and, where reasonable and appropriate, we will authorize the increased rate of return."
As we noted in D09-06-049, the sole purpose of the above statement was to signal to the utilities the availability of incentives for the utility-owned renewable generation under circumstances authorized by § 454.3. The decision did not automatically authorize an increased ROR for SCE's renewable projects, nor does it do so for PG&E's here.
Section 454.3 provides three categories under which projects would be eligible for additional return. The first and the second categories are irrelevant here. We therefore, consider whether the SPVP meets the requirement of § 454.3(c), quoted above.
Section 454.3(c) does not define the criteria for assessing whether a facility is experimental, however it does say that the facility is "designed to improve or perfect technology for the generation of electricity from renewable resources." PG&E's program is clearly not designed as a means of testing or refining a new generation technology. While the program may take advantage of new technologies as they become available, it is not intended to be a test-bed for experimental technologies. Furthermore, using it as such would be anathema to one of the fundamental rationales justifying this program, namely the relative certainty of deployment and operation the facilities to be deployed under this program offer relative to renewable resources procured under the general RPS program. Given this we do not believe this program fulfills the requirements or intent of 454.3(c).
PG&E asks that if we find that its request for a higher rate of return does not meet the criteria required pursuant to 454.3(c), that we authorize its request pursuant to 454(a). 454(a) requires that in order for a public utility to change "any rate or so alter any classification, contract, practice or rule, as to result in any new rate, except upon a showing before the Commission and a finding by the Commission that the new rate is justified." In general we are not satisfied that PG&E has made a credible showing that a higher rate of return is justified in this instance. Furthermore, section 454(a) is intended to ensure that utilities do not change their rates without a showing and finding that the new rates are justified. However, rate of return adjustments are traditionally considered in a utility's cost of capital proceeding. We reject PG&E's request here.
76 PG&E's Application at 7.
77 Greenlining Opening Brief at 12.
78 CFC Opening Brief at 27.
