6. Use of A&M funds

TURN and DRA argue that if the Commission allows PG&E to continue the ClimateSmart Demonstration Program through December 31, 2011, such an extension should be conditioned upon return of all unspent A&M funds to ratepayers. DRA and TURN assert that the limitations on the use of A&M funds specified in D.06-12-032 only apply to the initial three-year pilot period. They contend returning this money to ratepayers is a reasonable solution because ratepayers should not be asked to fund an experiment of minimal value to them. In addition, DRA and TURN note that this outcome would allow PG&E to evaluate marketing strategies free of Commission oversight.

PG&E asks for authority to carry forward unspent A&M funds recorded in the administration and marketing subaccount of the electric and gas ClimateSmart Balancing Accounts, as well as any additional unspent A&M funds, including interest at the end of 2009. PG&E requests authority to use the A&M funds carried forward for A&M expenses during the extension period without restriction to transfers among budget categories or years, or, consistent with the Decision, authority to purchase offsets directly under PG&E's performance standard. PG&E states that at the end of the extension period, any residual balance in the A&M subaccounts will be transferred to the electric DRAM and the gas Noncore Distribution Fixed Cost Account, ultimately returning any unused funds to customers in rates through the existing Annual Electric True-up and Annual Gas True-up.

6.1. Discussion

PG&E stopped collecting the ClimateSmart Demonstration Program administration and marketing costs from ratepayers after December 31, 2009 and does not seek through this Application any additional amounts from ratepayers for advertising and marketing of the demonstration program. D.06-12-032 established the ClimateSmart Balancing Accounts for gas and electric service. The ClimateSmart Balancing Accounts each have two subaccounts; the Premium Subaccount, which tracks collections from the participant rate or premium billed to ClimateSmart subscribers to fund GHG emission reduction projects and the Administration and Marketing Subaccount, which tracks the authorized administration and marketing budget and actual expenses. PG&E proposes no change to the Premium Subaccounts.

D.06-12-032 did not contemplate returning unspent A&M funds to ratepayers. Ratepayer monies were to be used for program administration and marketing during the program and if any funds remained, they were to be used to procure GHG offsets rather than being returned to ratepayers. In this Application, PG&E does not ask the ratepayers for additional money to continue the ClimateSmart Demonstration Program. Instead, PG&E seeks to use remaining ratepayer money set aside for ClimateSmart administration and marketing for ClimateSmart administration and marketing during extension of the program, if granted. Therefore, ratepayers should be indifferent to allowing PG&E to carry-forward the A&M funds for use during the extension of ClimateSmart.

Approximately $4.1 million in A&M funds remained as of December 31, 2009. The total amount remaining is less than the average administration and marketing allocations for any prior year of the ClimateSmart Demonstration Program. Therefore, while PG&E offers to return any unspent funds, we fail to understand how any remaining funds will be available for return to ratepayers upon completion of the extension.

In seeking this extension, PG&E finds merit in the ClimateSmart Demonstration Program. In order to fully support ClimateSmart, PG&E has made a commitment to utilize innovative marketing, education and outreach strategies. A lack of ratepayer funds should not be a reason to fail to deploy new marketing strategies. PG&E may need to spend shareholder funds to achieve its marketing objectives.²⁷ Given the limited funds remaining, the Commission anticipates that PG&E will spend all remaining A&M funds during the extension period, as well as any shareholder funds that may be necessary, to maximize success of the demonstration program.

In regards to the allocation of the remaining A&M funds, we find that PG&E's request for authority to use the funds without restriction between program administration and marketing has merit. Given the small amount of funds available, however, we would encourage PG&E to budget as much as possible towards effective marketing while seeking to minimize program administration costs. While we will not set a specific program administration budget for any individual year, we require that PG&E spend at least half of the funds remaining on marketing to maximize the amount of dollars used towards marketing to enroll new customers and retain existing customers in the program.

²⁷ The average annual program administration budget in program years 2007-2009 was around $1.1 million. If PG&E expends a similar amount in 2010 and 2011, a mere $2 million will be available for program marketing over the two-year extension period.