10. Assignment of Proceeding

Michael R. Peevey is the assigned Commissioner and Katherine Kwan MacDonald is the assigned ALJ in this proceeding.

Findings of Fact

1. The ClimateSmart Demonstration Program adopted in D.06-12-032 is a voluntary program which allows both residential and commercial customers to pay a monthly premium to offset the GHG emissions associated with their electricity usage.

2. D.06-12-032 requires PG&E to contract for at least 75 percent of the 2 million short tons in GHG reductions PG&E predicted it would achieve during the three-year demonstration project, using shareholder funds if necessary.

3. D.06-12-032 allows A&M costs for the demonstration program to be recovered from all PG&E ratepayers.

4. Approximately 30 percent of the A&M budget adopted in D.06-12-032 was for administrative expenses.

5. D.06-12-032 authorized PG&E to spend any unspent A&M funds to procure GHG emission reduction contracts in order to meet its minimum procurement obligation of 1.5 million tons of carbon dioxide equivalent reductions.

6. As of December 31, 2009, there were approximately $4.078 million of unspent A&M funds remaining.

7. PG&E's request to extend the program is evidence that PG&E finds merit in the ClimateSmart Demonstration Program.

8. PG&E was granted a day-to-day extension of the Program until the Commission reaches a decision on the merits of its Application.

9. Customer enrollment in ClimateSmart did not meet the level anticipated by PG&E. As a result, PG&E has fallen short of achieving its GHG offset procurement goals.

10. PG&E's participation in the Climate Action Reserve's process to develop offset protocols in forestry and dairy methane gas was a benefit to both ratepayers and society generally.

11. The ClimateSmart Demonstration Program produced a body of knowledge about GHG emission reduction projects and offset project protocols that would not otherwise have been available. Extension of the ClimateSmart Demonstration Program will further develop this body of knowledge.

12. The ClimateSmart Demonstration Program supported development of the Climate Action Reserve protocol.

13. Extension of the ClimateSmart Demonstration Program is consistent with current state, regional and national climate change policy.

14. The advertising and marketing efforts in support of the ClimateSmart Demonstration Program contribute to customer education of the ClimateSmart Demonstration Program, the dangers of global warming, and options customers can take to mitigate their carbon footprint. Using the remaining A&M funds to directly procure GHG offsets does not achieve these program benefits, specifically identified by the Commission, which only inure to ratepayers through continuing the program.

15. PG&E has not proposed significant changes to its marketing and education strategies.

16. PG&E shareholders may be obligated to procure an estimated 650,000 short tons upon project completion even if ClimateSmart is extended, depending on ultimate program performance.

17. Terminating the ClimateSmart Demonstration Program does not definitively reduce PG&E shareholder's obligation to meet the performance guarantee.

18. PG&E shareholders will face a significant responsibility regardless of extension of the program and may even be worse off as a result of such an extension.

19. PG&E requests authority to use the remaining A&M funds without restriction between program administration and marketing.

20. Since the ClimateSmart Demonstration Program is the first of its kind, there is no clear way to assess its performance in relation to other similar programs.

21. A comprehensive evaluation of the program would allow PG&E and the Commission to draw conclusions about the program and glean any valuable lessons that would be useful in developing similar programs in California in the future.

Conclusions of Law

11. The ClimateSmart Demonstration Program should be extended to allow further development of the body of knowledge related to GHG emission reduction projects and protocols; continued contribution to customer education; continued opportunity for customers to balance out the carbon impact generated by their energy usage; and to give PG&E more time to contract for the remainder of the 1.5 million short tons required by D.06-12-032.

12. PG&E's shareholders remain obligated to make up the difference between the GHG reductions supported through customer contributions and the minimum performance guarantee of 1. 5 million tons set by D.06-12-032 regardless of program extension.

13. PG&E should engage the EAG, in-house staff, and Commission staff experts on customer decision-making including resources from Energy Efficiency, Demand Response, and Distributed Generation in the marketing plan development process.

14. Ratepayers should be indifferent to allowing PG&E to carry-forward the A&M funds for use during the extension of ClimateSmart because D.06-12-032 did not contemplate returning unspent A&M funds to ratepayers and ratepayers are not being asked to contribute any additional money.

15. A comprehensive evaluation of the program should be conducted by an external consultant to allow PG&E, the Commission and ratepayers to draw conclusions and glean valuable information about ClimateSmart that may be useful in developing similar programs in California in the future.

16. Unused A&M funds remaining at the end of December 31, 2011, should be used towards the direct purchase of offsets in accordance with D.06-12-032.

17. Consistent with D.06-12-32, the PG&E shareholder obligation is the difference between the minimum performance guarantee of 1.5 million short tons of GHG reductions minus the total GHG reductions supported through customer collections through December 31, 2011.

ORDER

IT IS ORDERED that:

1. Pacific Gas and Electric Company's ClimateSmart Demonstration Program and Tariff Option is extended until December 31, 2011 as conditioned in Ordering Paragraph 2 through 5 below.

2. The time for Pacific Gas and Electric Company to fulfill the performance guarantee of 1.5 million short tons of greenhouse gas emission reductions adopted in Decision 06-12-032 is extended until December 31, 2011. The amount Pacific Gas and Electric Company shareholders will have to fund is the difference between the minimum performance guarantee of 1.5 million short tons of greenhouse gas reductions minus the total greenhouse gas reductions supported through customer collections through December 31, 2011.

3. Pacific Gas and Electric Company is authorized to carry over unspent Administrative and Marketing without restriction between marketing and administration funds to continue the program until December 31, 2011. At least half of the remaining funds, as of the end of the month in which this decision is issued, must be spent on marketing.

4. Pacific Gas and Electric Company must file an annual report for 2010 as required by Decision 06-12-032 by March 15, 2011.

5. In lieu of an annual report for 2011, Pacific Gas and Electric Company must hire an external consultant to conduct a comprehensive evaluation of the ClimateSmart program. Pacific Gas and Electric Company must work with the Energy Division staff to develop the selection protocol for choosing the consultant. The Energy Division staff will participate in the request for proposal process and will assist Pacific Gas and Electric Company in choosing a consultant. Pacific Gas and Electric Company shall pay the consultant with ClimateSmart program administration funds. Pacific Gas and Electric Company is responsible for hiring the consultant and management of the consultant who will produce a comprehensive program report. The evaluation report must contain the information set forth in Attachment A. Pacific Gas and Electric Company must file the comprehensive evaluation report no later than June 15, 2012.

6. Application 09-05-016 is closed.

This order is effective today.

Dated October 28, 2010, at San Francisco, California.

MICHAEL R. PEEVEY

President

JOHN A. BOHN

TIMOTHY ALAN SIMON

NANCY E. RYAN

Commissioners

Commissioner Dian M. Grueneich, being necessarily absent, did not participate.

ATTACHMENT A

Comprehensive Evaluation Report Requirements

Pacific Gas and Electric Company (PG&E) must file, no later than June 15, 2012, a comprehensive evaluation report of the ClimateSmart demonstration program. In addition to a comprehensive wrap-up of all program metrics usually included in the annual reports (broken down by year), the comprehensive program evaluation must also, at a minimum, address the following issues:

1. Did the economic downturn play a role in new customer enrollment;

2. Did the economic downturn play a role in PG&E's customer enrollment attrition rate and if so, how large a role did it play;

3. Evaluate the advertising and marketing strategies utilized by PG&E to determine which strategies were most effective;

4. Could PG&E have employed different marketing strategies to achieve higher customer enrollment;

5. What, if any, is the relationship between customer enrollments in green tariff programs versus customer enrollments in carbon offset programs;

6. Would PG&E customers have preferred to enroll in a third-party carbon offset program versus a program offered through a utility;

7. How could PG&E have lowered the dollars spent per customer enrolled, including, but not limited to marketing, enrollment and administration costs,

8. How could PG&E have lowered the dollars per ton reduced;

9. Could the greenhouse gas offset procurement process be improved in order to streamline the purchase of offsets; and

10. The overall lessons learned from the program: PG&E's perspective and the consultant perspective. 

(END OF ATTACHMENT A)