12. Land Deposits
PG&E proposes to include the land deposits for future PV facility in Plant Held for Future Use (PHFU) in order to recover the carrying costs of these deposits prior to the operation of the PV facilities. PG&E plans to transfer the deposits to plant in service after the PV facilities start operation.
12.1. Parties' Positions
DRA opposes PG&E's land deposit proposal. DRA argues that although the Commission may allow a utility to earn a return on the cost of property, land deposits do not qualify for such recovery because they are not "property acquired.83 In DRA's view, property is only acquired when the land is purchased. DRA is also concerned that "allowing PG&E to earn a rate of return on land deposits would create a perverse incentive for PG&E to put down numerous land deposits in order to pad its rate base, with no risk to its shareholders."84 DRA urges the Commission to deny PG&E's request, but should the Commission allow PG&E purchases to be treated as PHFU, DRA proposes to limit the time that a property can be held for future use to 18 months, consistent with PG&E's claim of the timeframe for bringing PV projects on line. PG&E is opposed to this treatment, because in its view, it would restrict its ability to make reasonable purchases for use in later phases of the UOG build-out.85
CFC is also opposed to PG&E's land proposal because PG&E has no firm plans for the use of land on which it will pay a deposit. CFC argues PG&E should not be allowed to hold such deposits in its PHFU account.86
In response, PG&E states that plants held in PHFU will be for building PV facilities. Therefore, it should be allowed to recover the carrying cost.
12.2. Discussion
We reject PG&E's proposal to recover the carrying costs of land deposits prior to operation of the PV facilities. The Commission allows utility property held for use at a later date to be included in PHFU based the Electric Uniform System of Accounts, Account 105. Paragraph B describes the PHFU as follows:
This account shall also include the original cost of land and land rights owned and held for future use in electric service under a plan for such use, to include land and land rights:
(1) Acquired but never used by the utility in electric service, but held for such service in the future under a plan, and
(2) previously held by the utility in service, but retired from such service and held pending its reuse in the future under a plan, in electric service. (See Electric Plant Instruction 7.)
PG&E also describes PHFU as property acquired in advance for future utility use. Both definitions are consistent in that only utility-owned land and land rights are eligible to be entered into PHFU. Land deposits prior to purchase of the land do not qualify as acquired or owned property per the above definition. Therefore, such deposits cannot be entered into PHFU. Only after land is purchased pursuant to a plan for PV facility construction, it will become acquired property eligible for inclusion in PHFU account.
It is worth noting that even if land deposits were allowed as PHFU, in this instance, they would not be allowed as PHFU, because PG&E has not met the requirement to provide a plan on how these lands will be used if the PV Program is terminated and PV facilities are not constructed.
83 DRA's Opening Brief at 9.
84 DRA's Opening Brief at 9.
85 PG&E's Opening Brief at 32.
86 CFC's Opening Brief at 29.
