5. Discussion
Rule 16.4 of the Commission's Rules of Practice and Procedure governs Petition for Modification. Rule 16.4(b) states that
a petition for modification of a Commission decision must concisely state the justification for the requested relief and must propose specific wording to carry out all requested modifications to the decision. Any factual allegations must be supported with specific citations to the record in the proceeding or to matters that may be officially noticed. Allegations of new or changed facts must be supported by an appropriate declaration or affidavit.
With respect to Rule 16.4(b), PG&E provided the required declaration or affidavit; Joint Parties did not provide this material. As we will discuss more specifically below, while we do make changes to the implementation timetable and the customer education and outreach approach adopted in D.10-02-032, there is no evidence in the record before us to support modifying the basic findings upon which we based our original plans for implementing the dynamic pricing rate schedules that will allow ratepayers to take advantage of advanced meters as they are installed.
We have quoted at some length from the Petitions before us, as well as other Parties' responses, in order to provide sufficient context for the steps we adopt today to further advance the implementation of dynamic pricing for customers of the investor-owned utilities in California. Our goals remain unchanged, but we re-emphasize today the importance of moving forward in a collaborative fashion, where the IOUs seek input from stakeholders and respond to that input, and of allowing additional time for ratepayers to understand and accept the new rate designs. Our earlier orders imposed relatively compressed timetables for implementing certain rate changes, and, as we summarized above, this has resulted in several requests for extensions of time to implement these orders, as well as several petitions to modify the orders themselves, again either seeking more time to comply with an order, or seeking an alternative approach to the implementation itself. Interested parties are now speaking with a more unified voice and identifying issues that transcend any single IOU's service territory, and we account for this in our actions on the Petitions before us. Finally, issues related to the deployment of advanced metering infrastructure (AMI), and customer acceptance of that deployment, though before us in other dockets, also impact the schedules for implementing the rate changes necessary for customers to take advantage of the benefits offered by AMI.
Mindful of these interrelated challenges, we grant PG&E's Petition for Modification, with some modifications to PG&E's requests, while granting in part and denying in part the Petition for Modification filed by the Joint Parties. As discussed in greater detail below, we find it reasonable to adjust the time allowed to implement the rate design changes adopted in D.10-02-032, but we do not find it reasonable to adopt the modified conceptual approach, and the resulting alternative "end-state" outcomes, that are proposed by the Joint Parties. However, the concerns raised by the Joint Parties regarding customer education and outreach are echoed by other parties in their responses to both the PG&E and the Joint Parties' Petitions, so we therefore grant the Joint Parties' requested modifications to D.10-02-032 regarding the need for improved and better-coordinated customer education and outreach, but for all PG&E customers, not just the small commercial customers for whom Joint Parties are advocating.
To place our actions into a broader context, a number of our findings in D.08-07-045 bear repeating here:5
_ In "California Demand Response: A Vision for the Future (2002-2007)," attached to D.03-06-032 as Attachment A, the Commission stated that electric customers should have "the ability to increase the value derived from their electricity expenditures by choosing to adjust usage in response to price signals." (Finding of Fact 1.)
_ The EAP ["Energy Action Plan"] II identifies demand response, along with energy efficiency, as the State's "preferred means of meeting growing energy needs." (Finding of Fact 2.)
_ A key action in the EAP II is "to make dynamic pricing tariffs available for all customers." (Finding of Fact 3.)
_ According to PG&E's current advanced metering plans, by 2012, all of PG&E's customers will have advanced meters, so all customers can take advantage of dynamic pricing. (Finding of Fact 7.)
_ RTP [Real Time Pricing] is the best rate to promote economic efficiency and equity between customers; however, RTP cannot be developed and implemented until MRTU becomes operational. (Finding of Fact 11.)6
_ CPP more closely aligns the retail rate with the wholesale market, and it can give customers an opportunity to manage their usage and lower their bills. (Finding of Fact 12.)
_ The Commission directed the utilities to propose AMI projects primarily because AMI enables greater demand response through dynamic pricing and demand response programs. (Finding of Fact 13.)
These findings remain unchallenged in any fundamental way, even by parties who would prefer that they--or the consumers on whose behalf they advocate--not be subject to default or mandatory dynamic rates.
5.1. The PG&E Petition
As described above, PG&E requests that the Commission revise D.10-02-032 with respect to (i) the timetable for certain default time-varying rates and (ii) the corresponding cost recovery mechanism.
PG&E proposes that these customers first default to mandatory TOU rates beginning on November 1, 2012 (rather than default to PDP on November 1, 2011, as currently required), and then default to PDP (including TOU) no earlier than March 1, 2014.
As noted above, on May 5, 2011 the Commission's Executive Director partially granted PG&E's request to extend, but not to modify, the schedule for mandatory TOU and default PDP for small and medium sized C&I customers. D.10-02-032 directed PG&E to implement mandatory TOU and default PDP at the same time on November 1, 1011; the Executive Director has authority to extend this date, pursuant to Rule 16.6 of the Commission's Rules of Practice and Procedure, but not to separate the implementation dates. Thus, pursuant to the Executive Director's May 5, 2011 letter, PG&E would be required to implement mandatory TOU and default PDP for small and medium sized C&I customers on November 1, 2012. In its Petition, PG&E proposes to begin defaulting small and medium C&I customers first to TOU in November 2012 and then to PDP in March 2014, with eligible groups following twice yearly in March and November.
In support of this request, PG&E describes results of recent focus group research it has conducted with small and medium C&I customers. According to PG&E:
The difficulty of understanding default PDP is further underscored with these customers because most of them are currently on flat rates, and have no prior experience with TOU rates. The research found that the transition from a flat rate to default time-varying pricing such as TOU or PDP is complex, and requires a communications effort that has multiple phases and multiple touches over an extended period of time in order to build the level of understanding necessary for customers to confidently understand the impacts of the new default pricing schedule on their businesses.7
PG&E argues that a more deliberate transition pace for defaulting customers is required for the small and medium C&I customers whereby TOU and PDP are explained and rolled out through the following four sequential steps:
1. TOU education and awareness;
2. TOU rate understanding and bill impacts;
3. PDP education and awareness; and
4. PDP rate understanding and bill impacts.
PG&E believes that to better help smaller customers (those with demand below 200 kW) to accept the transition to PDP rates, they should have at least one year of experience on TOU before beginning the default process to PDP (including TOU). A full year of experience on the TOU rate enables customers to see the impacts that their energy use and the time of day have on their total bills, and to allow time for customers to develop new patterns of use. PG&E believes that this preparation is necessary before the customer is ready to evaluate his/her ability to layer on the additional behavioral and operational changes associated with PDP event days.
As we have taken up this issue over time, we note that our thinking, as well as that of PG&E, has evolved. In the phase of this proceeding which led to D.10-02-032, we rejected, at PG&E's urging, a similar though somewhat compressed proposal by DRA to separate the implementation of TOU and CPP for this customer group: "For the reasons cited by PG&E, we believe that defaulting small and medium C&I customers first to TOU rates and then one year later defaulting them to CPP and TOU rates is not appropriate. The proposed transition process may lead to customer confusion and frustration, resulting in reduced participation in the PDP program. Therefore, it will not be adopted."8 However, we are now convinced that successful implementation is, in general, likely to require more time than we first assumed in our 2008 and 2010 decisions on dynamic pricing for PG&E.
As noted above, the Commission's Executive Director has already granted PG&E additional time to implement mandatory TOU and default PDP for small-and medium-sized C&I customers on November 1, 2012. Here, we respond to the remainder of PG&E's requests, namely, to begin defaulting small and medium C&I customers to TOU in November 2012, followed by PDP in March 2014, with eligible groups following twice yearly in March and November.
As we noted above, none of the responding parties opposed PG&E's request. SCE concurs with PG&E that the first step for these customers should be a transition to TOU rate structures. Indeed, SCE's preference is not to impose a default CPP/TOU rate structure on these small and medium C&I customers, even after they have had some period of experience on TOU rates. SCE also suggests a single transition date to default or mandatory rate structures, occurring after the summer period has ended.
We remain intent on transitioning small and medium C&I customers to a CPP/TOU rate structure, but we are persuaded that these customers should first be exposed to TOU rates alone, in order to simplify customer education about the new rates. In keeping with our intention to provide more time for this to take place, we believe that customers should have two full years (and two summers) of TOU experience before being defaulted to a PDP rate design. Therefore, PG&E's request should be granted with this modification, so that small and medium C&I customers begin to default to PDP in November 2014. We agree with SCE that a single annual date for default is simpler, and that a date after the summer period has ended is most appropriate. After 2014, PG&E shall default eligible groups to PDP on November 1 of each year. Ordering Paragraphs 3 and 9 of D.10-02-032 should be modified accordingly.
In its Petition, PG&E proposes that these customers begin to default to mandatory TOU on March 1, 2013, rather than February 1, 2012, as was required in D.10-02-032. As noted above, Farm Bureau supports PG&E's proposal. The Commission's Executive Director granted this extension in the May 5, 2011 letter to PG&E. Ordering Paragraph 2 of D.10-02-032 should be modified accordingly.
PG&E proposes to eliminate the requirement to implement a new residential PDP rate on November 1, 2011, and, instead, to retain SmartRateTM as an option for residential customers until residential dynamic pricing options are considered again by the Commission.
As noted above, on May 5, 2011 the Commission's Executive Director granted a slightly different PG&E request: to extend PG&E's currently effective residential CPP rate, SmartRateTM, for one year until November 2012 and suspension of the residential PDP rate approved in D.10-02-032 until November 1, 2012. In the instant Petition, PG&E proposes to eliminate the requirement to implement a new residential PDP rate, and, instead, to retain SmartRateTM as an option for residential customers until the Commission completes its pending review of default residential dynamic pricing rates in A.10-08-005.
In D.08-07-045 we required residential PDP to be combined with TOU in non-event hours. PG&E complied with this requirement in A.09-02-022 and we adopted the rate design in D.10-02-032, Ordering Paragraph 2:
For residential customers with advanced meters, optional Peak-Day Pricing rates that include time-of-use rates during non-Peak-Day Pricing periods [shall be effective by February 1, 2011]. Prior to February 1, 2011, the current E-RSMART option available to residential customers shall remain in effect. On February 1, 2011, an E-RSMART customer shall be moved to the new residential Peak-Day Pricing rates unless the customer opts to return to a non-time differentiated residential tiered rate.
On November 8, 2010, the Commission's Executive Director approved an extension of time to implement this provision of Ordering Paragraph 2: replacing residential SmartRateTM with optional residential PDP and defaulting residential SmartRateTM customers to PDP were deferred to November 1, 2011.
In the instant Petition, PG&E now describes the difficulties it anticipates in creating and implementing a default rate that is both tiered and features TOU periods. Instead, PG&E proposes to eliminate the current requirement to design and implement a new residential PDP rate, and instead retain and promote SmartRateTM on a voluntary basis as part of the immediate benefits of SmartMeterTM deployment. The Commission could instead address proposals for default time-varying rates in the Peak Time Rebate and Default Residential Rate Program applications (A.10-02-028 and A.10-08-005).
We agree that more time is needed to develop a residential PDP rate that will be understandable and acceptable to residential customers. This additional time can be granted because in the meantime, residential customers may choose SmartRateTM or TOU. PG&E's request to modify D.10-02-032 to eliminate the requirement to implement a new residential PDP rate should be granted. Furthermore, D.10-02-032 should be modified to retain SmartRateTM as an option for residential customers until the Commission completes its pending review of default residential dynamic pricing rates. Ordering Paragraph 10 of D.10-02-032 should be modified accordingly.
While we grant the relief that PG&E requests here, we also believe that additional information from PG&E regarding the experience of residential customers with existing SmartRateTM and TOU rates (i.e., PG&E's Schedule E-6) would be helpful, since those will be the only time-varying rate schedules available to residential customers for some time. This information will be useful to interested parties and the Commission as we consider what dynamic rate structure should eventually be put in place for PG&E's residential customers. Therefore, we direct PG&E to prepare a report that explains and illustrates not only the logic underlying its design of its SmartRateTM and its TOU Schedule E-6, but also explains the merits of these rates from the ratepayer's perspective. PG&E's report should also provide detailed information regarding its efforts to-date to market these rates to customers, and the results of those efforts. The Director of the Commission's Energy Division shall develop a reporting format to be followed by PG&E, and PG&E shall include this report in its upcoming 2012 Rate Design Window application.
PG&E seeks modification of the cost recovery language of D.10-02-032 to provide certainty of recovery of the expense amounts already approved by that Decision, due to the close of the record in Phase 1 of PG&E's 2011 GRC and the pending GRC Phase 1 settlement submitted to the Commission.9
In Ordering Paragraph 24 of D.10-02-032, the Commission established the following cost recovery mechanism:
PG&E's proposal to use the Dynamic Pricing Memorandum Account [DPMA] to record Peak-Day Pricing costs and the Distribution Rate Adjustment Mechanism [DRAM] for recovery of the associated revenue requirement through 2010 is adopted. This cost recovery mechanism may be extended beyond 2010 to recover the revenue requirement associated with (1) any additional costs above the amount approved in this case after the additional costs are determined reasonable by the Commission, and (2) any costs that are authorized by this decision for 2010, but are actually incurred in 2011, provided it is shown that such costs are not included in Pacific Gas and Electric Company's 2011 general rate case authorization.
In its Petition, PG&E proposes that this cost recovery mechanism be modified to address two issues.
First, PG&E proposes modification of the language in D.10-02-032 to accommodate the extension of implementation dates for non-residential PDP previously authorized by the CPUC and the additional extensions proposed by PG&E in this Petition.
Regarding this first issue, PG&E notes that Ordering Paragraph 24 currently addresses expenditures only through 2011 but the Commission has already extended the timeline for transition of certain agricultural customers to TOU rates until 2012, and PG&E now proposes in this Petition to extend the timeline for transition of other types of customers to TOU and CPP rates beyond 2011. Accordingly, PG&E requests that D.10-02-032 be adjusted to remove the constraints on recovery of the amounts authorized that assumes spending such amounts will be completed prior to the end of 2011.
Second, PG&E proposes modification of the language in D.10-02-032 to clarify that PDP costs authorized in D.10-02-032 should now be recoverable due to the close of the record in the GRC Phase 1 and the uncontested GRC Phase 1 settlement.
Regarding this second issue, PG&E states that the language in the latter portion of Ordering Paragraph 24 -- which appears to require a filing by PG&E to recover 2011 costs after such costs are incurred -- creates unfair exposure for PG&E since PG&E is required to implement these Commission-directed activities. When D.10-02-032 was issued, this ordering language was understandable, given the then-early stage of the GRC and the associated uncertainty regarding what level of PDP costs would be authorized in the GRC. Since then, this uncertainty has been substantively resolved, given the close of the record in the GRC and the uncontested GRC settlement.
Therefore, given the removal of the prior uncertainty, PG&E requests that the Commission revise Ordering Paragraph 24 to authorize recovery of PDP implementation costs expended in 2011 and beyond through the DPMA and DRAM up to the amount approved in D.10-02-032 in accordance with the description of those costs in this Petition and without further Commission review. PG&E requests that such actual costs be recoverable through the DPMA and DRAM to the extent incurred through March 2014, which is the date that PG&E plans to implement default PDP for small and medium C&I customers.
PG&E emphasizes that it is not requesting an increase in authorized funding as part of this Petition. Rather, PG&E merely seeks certainty of recovery of the expense amounts already approved by the PDP Decision due to the current status of the GRC Phase 1. (PG&E Petition 4-6.)
In its Response to PG&E's Petition, DRA recommends that the Commission should require PG&E to clarify the portion of the PG&E petition dealing with certainty of recovery of amounts already approved, and retain the Ordering Paragraph 24 language to allow parties to review the reasonableness of the costs of implementing PDP, taking into consideration any deviation from the implementation timetable adopted in D.10-02-032 resulting from granting PG&E's Petition in full or in part.
PG&E replied on February 24, 2011, offering rebuttals to DRA's arguments:
First, PG&E states that DRA's argument emphasizes PG&E's proposed delay in implementing residential PDP as a factor that should drive down PG&E's remaining costs. PG&E replies that such a delay should have an insignificant effect on PG&E's costs authorized in the PDP Decision, because "the vast majority" of PG&E's forecasted spending for the next three years is in customer outreach and PG&E has received no funding for residential customer outreach in the PDP Decision.
Second, PG&E states that DRA's argument that overall spending may decrease ignores the fact that, under PG&E's staged implementation proposal (i.e., first TOU, followed by PDP), customer outreach costs could increase, not decrease. Despite the possibility of increased costs, as previously stated, PG&E is not seeking additional costs in this proceeding.
Third, PG&E states that DRA fails to substantively address the risk to PG&E of undertaking Commission-directed activities without assurance of cost recovery. The scenario proposed by DRA, which would require reasonableness review of all PDP costs authorized in the PDP Decision that are incurred in 2011 or thereafter, offers even greater risk to PG&E than the current language in Ordering Paragraph 24. PG&E concludes by stating "In addition to the unfairness this presents to PG&E, these pressures create disincentives for appropriate levels of spending."10
We modify Ordering Paragraph 24 of D.10-02-032, but not in the precise manner requested by PG&E. PG&E makes a reasonable request for certainty of cost recovery regarding costs approved and found reasonable in D.10-02-032, because spending that appeared likely to end in early 2011 is now likely to extend through sometime in 2014. However, PG&E's suggested language goes beyond what is required to provide this certainty.
Ordering Paragraph 24 of D.10-02-032 should be modified to read as follows:
PG&E's proposal to use the Dynamic Pricing Memorandum Account to record Peak-Day Pricing costs and the Distribution Rate Adjustment Mechanism for recovery of the associated revenue requirement through 2010 is adopted. This cost recovery mechanism may continue through 2014 to recover the revenue requirement associated with (1) any additional costs above the amount approved in this case, after the additional costs are determined reasonable by the Commission, and (2) any costs that are authorized by this decision for 2010 and 2011, but are actually incurred through 2014, with the exception of those costs already included in Pacific Gas and Electric Company's 2011 general rate case authorization.
In drafting this alternative language, several aspects of PG&E's reply to DRA caused us to treat PG&E's proposed language with some caution.
First, PG&E states "the vast majority" of PG&E's forecasted spending for the next three years is in customer outreach and PG&E has received no funding for residential customer outreach in the PDP Decision. In D.10-02-032, Table 1 ("Adopted Incremental Expenditures") provides an itemized summary of the $123.585 million that PG&E was authorized to spend in 2008, 2009 and 2010; it is not clear from that table, in light of the delays PG&E has either already received or now seeks in its Petition, which "vast majority" of spending PG&E now may be referencing. DRA's request for clarity is understandable.
Second, PG&E states that "DRA's argument that overall spending may decrease ignores the fact that, under PG&E's staged implementation proposal (i.e., first TOU, followed by PDP), customer outreach costs could increase, not decrease. Despite the possibility of increased costs, as previously stated, PG&E is not seeking additional costs in this proceeding." This statement leads us to question whether the extended time we grant in this decision is viewed by PG&E as a blank check for further spending, so long as they make a subsequent showing that such costs were reasonable, which they can do by citing to this very decision granting PG&E's request for additional time to implement rate changes. In its Petition, PG&E makes reasonable policy-based arguments for staging its implementation of TOU and PDP rates, but said nothing about the possibility of higher costs until its cost recovery proposal was challenged by DRA. This leads us to conclude that adding the phrase "without further review", as PG&E requests, to Ordering Paragraph 24 is unwise. We expect PG&E to remain within its budget for implementing D.10-02-032, even if more time is needed to accomplish those tasks.
Third, PG&E seems to equate a "reasonableness review" with "unfairness" and "risk", when in fact it is this Commission's core function to review PG&E's costs and expenditures for reasonableness. Indeed, most disconcerting of all is this statement by PG&E: "In addition to the unfairness this presents to PG&E, these pressures create disincentives for appropriate levels of spending" (emphasis added). It is unclear why, given the extensive record that led to D.10-02-032, PG&E believes it should be provided "incentives" for appropriate levels of spending, nor, for that matter, why PG&E believes it has any discretion with respect to complying with D.10-02-032 in the first place.
Fortunately, we note that in its reply to DRA, PG&E expresses openness to deferral of this issue:
In terms of timing, this issue is also of importance to PG&E. However, if the Commission immediately suspends the November 1, 2011 and February 1, 2012 deadlines, such a suspension would take significant pressure off of PG&E's spending for 2011. Accordingly, with such a suspension, PG&E would support deferral of the cost recovery issue until consideration of the other PDP implementation issues raised elsewhere by PG&E's Petition and the Joint Petition.
If PG&E continues to believe that Ordering Paragraph 24 of D.10-02-032, as modified herein, is problematic, it may raise this issue in one of its future ratemaking proceedings.
5.2. The Joint Parties' Petition
The Joint Parties emphasize that their Petition is filed only on behalf of Small C&I Customers, with demand below 20 kW.11 However, in resolving certain issues raised in the Joint Parties' Petition, we extend some of our modifications more broadly to apply to other customer groups served by PG&E which have not yet transitioned to dynamic pricing.
Joint Parties identify several fundamental issues at the core of our dynamic pricing initiative, and while we do not find it necessary to grant all of the specific relief sought in their Petition in order to address these issues, we do find it necessary to initiate several actions in order to determine whether we should order PG&E to redirect its customer education and outreach efforts and funding. We will make this determination in a future order, following our review of the additional information we request below.
The issues raised, and relief sought, by the Joint Parties fall into two broad categories. First, Joint Parties request that, instead of what they describe as the "arbitrary" implementation dates required by the Commission, a schedule be adopted for defaulting customers to Time of Use rates "based on objective measures of customer understanding (as measured by customer awareness), customer acceptance of time-varying rates (as measured by penetration) and PG&E's ability to serve its customers on time-varying rates with no significant problem (as measured by customer complaints)." Second, instead of a customer education plan that, according to Joint Parties, currently provides little by way of real solutions for small businesses to reduce their energy use during peak periods, the Commission should require that PG&E attract and retain customers on time-varying rates "by aggressively offering integrated energy efficiency and demand response solutions to help small business customers reduce their usage during peak and non-peak periods." (Joint Parties at 3-4).
Joint Parties offer a number of reasons for requesting relief:
_ Distressed economic conditions
o 12.4% unemployment and 1.4 million jobs lost--high unemployment
o Small businesses are struggling to stay afloat
o The need to support job retention and job growth in this fragile economy.
_ Problems encountered by PG&E in its outreach to large C&I customers
_ Changes in the wholesale market for electricity in California
_ Impact on small business customers
o Number and nature of small business customers
o High level of unpredictability for small business owners
o Lack of products, services and programs to assist small business customers to respond to peak-day pricing
o Lack of effective customer outreach necessary to make peak-day pricing work
o Lack of integrated solutions for small businesses
o Sending workers home from work and laying off workers
o Disruption to operations, higher costs and loss of business
o Unpredictable electric bills
o Frustration with utility and commission programs
As explained in detail below, we deny the Joint Parties' "implementation-related" requests, but grant the Joint Parties' "customer education-related" requests. Joint Parties enumerate economic issues that are of fundamental concern to us, but have not provided any factual information that specifically connects these issues, in terms of causality, to implementation of dynamic pricing rates for small commercial customers.12 We continue to believe that clear and specific implementation deadlines will benefit both PG&E and its customers, so we decline to adopt the alternative approach proposed by the Joint Parties. However, we are concerned that PG&E's present approach to customer education and outreach, which we endorsed in D.10-02-032, has not been shown to be the most effective means of meeting those deadlines. The extensions of these deadlines that we grant elsewhere in this decision will also provide the time and opportunity to revisit PG&E's approach. To support this effort, we modify D.10-02-032 accordingly, as detailed below.
The Joint Parties' requested changes to the dynamic pricing implementation schedule for PG&E, which are denied, include the following proposals:
_ Proposal that PG&E offer A-1 TOU to Small C&I Customers on a default basis only when certain subjective conditions regarding customer awareness, understanding and complaint conditions have been met;
_ Proposal that PG&E provide small C&I customers defaulting from flat rates to TOU rates one-year of bill protection relative to the preexisting flat (A-1) rate;
_ Proposal that PG&E offer A-1 TOU to Small C&I Customers on a mandatory basis only when certain subjective conditions regarding customer awareness, understanding and complaint conditions have been met;
_ Proposal that PG&E allow customers meeting certain narrow criteria to opt out to flat rates; and
_ Proposal that PG&E continue to offer PDP to its Small C&I Customers on a voluntary ("opt-in") basis only.
SCE's Response to the Joint Parties' Petition offers a succinct analysis of the problems with these proposed modifications to D.10-02-032. First, SCE observes that the Joint Parties' proposed criteria, if adopted by the Commission, would likely prevent small C&I customers from ever transitioning from flat rates to a default or mandatory TOU rate structure. According to SCE, the proposed criteria are "arbitrary and unworkable" and ignore the benefits provided by a TOU rate structure. Second, SCE states that the assertions made by the Joint Parties regarding implementation of default CPP/TOU rate structures are unsupported, ignore bill protection and ignore customers' ability to opt out of the CPP/TOU rate structure. Finally, SCE states that the Joint Parties' Petition provides no clear basis for the disparate treatment of small versus medium C&I customers or other customers.13
PG&E identifies similar practical problems with the Joint Parties' proposals, stating "in practice, the Joint Parties' proposal, as currently developed, is not feasible."14 PG&E observes that the Joint Parties have not provided any data that would suggest that it is feasible to generate and measure awareness levels of 80 to 90 percent, nor does the proposal provide a feasible method for how such "awareness" should be defined or measured. Nevertheless, PG&E concludes that "if the Commission is interested in pursuing the Joint Parties' ideas further, PG&E recommends that informal discussions or workshops, and, as appropriate, testimony and evidentiary hearings, should follow the granting of the schedule suspension discussed above."
Joint Parties reply to the criticisms levied by SCE and PG&E by noting that the IOUs nevertheless share broadly similar concerns about the challenges involved in transitioning small and medium commercial customers to time-variant rates. Joint Parties recommend a "structured workshop process" that would consider the adoption of a plan to transition small business customers to TOU rates based on the "awareness-driven" approach that they recommend.
We find merit in the IOU's concerns about the practicalities of the Joint Parties' proposals. We will not adopt those proposals in this decision, and we see little value in scheduling workshops to discuss them further. We find no support for the implicit assumptions in the Joint Parties' Petition: not only that small commercial customers should not be exposed to more accurate price signals than those afforded by a flat, unchanging rate, but that they would neither respond to such information, nor benefit if they do respond to price signals. "Flat" rates for small commercial customers are currently designed such that all customers pay the same price at all hours, regardless of differences in their individual hourly usage profiles or the cost of energy throughout the day. Some customers benefit from this highly averaged approach, but some surely do not. Joint Parties' proposals would effectively deny the entire customer class the opportunity to participate in, and benefit from, time-variant pricing programs, by imposing threshold criteria that are so vague and difficult to measure that they are unlikely to ever be met, no matter which utility or third party might be responsible for customer education and outreach. Furthermore, just as their Petition does not establish a connection between California's economic problems and the implementation of dynamic pricing, here Joint Parties again fail to offer new information that challenges the validity of the underlying findings that support our dynamic pricing and advanced metering initiatives.15 The portions of the Joint Parties Petition to Modify D.10-02-032 with respect to the implementation dates for dynamic pricing should be denied.
Joint Parties separately request that the Commission modify D.10-02-032 to direct PG&E to "offer its new Small C&I Time-of-Use rate (A-1 TOU) as a stand-alone rate on a voluntary basis as soon as possible and in no event later than December 31, 2011." This request is unclear, because it appears from PG&E's current A-1 tariff that customers may already choose this option: "Customers with a SmartMeterTM system installed that can be remotely read by PG&E may also voluntarily elect to enroll on A-1 TOU rates prior to their TOU default dates."16 PG&E did not respond to this aspect of the Joint Parties' Petition, but we clarify here that, if it is not doing so already, PG&E shall immediately offer its A-1 TOU rate as a stand-alone rate on a voluntary basis.
Regarding customer outreach and education, Joint Parties propose that PG&E be ordered to undertake the following actions on behalf of its small C&I customers:
_ Conduct an enhanced education, outreach and marketing program to inform eligible Small C&I Customers about the availability of its A-1 TOU rate;
_ In conjunction with its outreach and education campaign, conduct an aggressive outreach program providing Small C&I Customers with an integrated set of energy efficiency and demand reduction solutions through a single point of contact;
_ Perform periodic assessments of customer awareness and understanding of the A-1 TOU rate and other time-varying rates offered by PG&E, track Small C&I Customer enrollment into and disenrollment from the A-1 TOU rate and other time-varying rates, and track customer complaints regarding time-varying rates.
Joint Parties support these proposals by citing PG&E statements in the reports that the utility was required to submit by D.10-02-032. Joint Parties also cite statements in the Commission's "Energy Efficiency Strategic Plan" regarding the importance of providing customers with integrated demand side management solutions, and suggest that little evidence exists to verify any such activities on behalf of the customer group they represent here.17
PG&E's March 7, 2011 Response does not address this aspect of the Joint Parties' Petition in detail, beyond suggesting that these topics be further explored in workshops.18
We grant the Joint Parties' request to modify D.10-02-032 to include the customer outreach and education proposals listed above. In D.10-02-032, we stated "(a)s indicated in other parts of this decision, if customer outreach and education problems arise, it may be necessary to delay certain aspects of PDP implementation."19 Today, we are delaying certain aspects of PDP implementation, and our reasons have much to do with apparent problems with customer outreach and education. Having now denied the Joint Parties' requested modifications to PG&E's dynamic pricing implementation schedule, while also granting PG&E the additional time it seeks to meet our originally adopted schedule, we are still left with uncertainty regarding how PG&E will successfully and effectively meet even the extended deadlines it has requested and now been granted.
In reviewing the reasons PG&E offered for seeking the delayed implementation schedule that we are granting here in this decision, one theme that underlies PG&E's Petition is PG&E's unwillingness to take responsibility for the lack of success of its own efforts in the area of customer education and outreach. For example, in describing the "lessons learned" from its dynamic pricing and SmartMeterTM implementation efforts to date, PG&E suggests that recent high bill complaints were incorrectly attributed (by its own customers) to installation of the SmartMetersTM, rather than being attributed to rate increases, residential rate design, and weather-related usage. PG&E says nothing of its own failure to inform its customers, in an effective and timely manner, that changes were coming that could expose them to higher bills, or to explain those bills to its customers once they arrived.20 In short, PG&E faces documented challenges when it comes to its relationship with its own customers, and we must account for that in this decision; this is consistent with our message to PG&E in D.10-02-032. Therefore we will adopt, with some additional refinements, the customer outreach and education modifications to D.10-02-032 proposed by Joint Parties.
The issues raised here by the Joint Parties are not new to this proceeding. DRA first raised its concerns in the portion of this proceeding that led to D.10-02-032. We addressed DRA's position in several Findings of Fact (FOF) and Conclusions of Law (COL), expressing qualified support for the approach PG&E proposed to take:
FOF 62 It is not clear what aspects of customer outreach and education, if anything, would be improved by segregating small commercial customer's costs as recommended by DRA.
FOF 65 Certain aspects of PG&E's planned efforts, such as customer workshops and partnering with industry and community groups, would duplicate what an outreach advisory panel might accomplish.
FOF 69 It is important that PG&E is able, in a transparent way, to demonstrate that it will evaluate its outreach and education efforts and, if necessary, that it will modify its efforts appropriately. PG&E has not provided sufficient details on how this would be done.
COL 39 The further segregation of costs for small commercial customers will not likely be that revealing with respect to our outreach and education goals, and DRA's proposal to require such segregation will not be adopted.
COL 40 Rather than establishing an outreach advisory panel, PG&E should (1) work with Energy Division and the Business & Community Outreach group and develop a written customer education and outreach plan, (2) work with the Business & Community Outreach group to determine how the group can assist PG&E in outreach efforts to small and medium customers, and (3) hold quarterly meetings.
COL 41 PG&E should be subject to a number of reporting requirements in order for the Commission to gather information and to provide a means for parties to express concerns and a means to address any such concerns.
As shown in the material quoted above, in D.10-02-032 we determined that PG&E should be subject to a number of reporting requirements in order for the Commission to gather information and to provide a means for parties to express concerns and a means to address any such concerns.21 To assist in this effort, we imposed extensive reporting requirements on PG&E and ordered PG&E to take the following actions:
· File an advice letter clearly identifying and describing the specific performance measurements, for each of its customer classes, which it will use to determine that its outreach and education campaign is successful. After reviewing any protests and comments, Energy Division prepared a resolution adopting specific performance measurements;
· Prepare and provide a monthly report to the Energy Division to provide a breakdown of cost categories and money spent on education and outreach as well as a narrative description that describes the costs;
· Provide a semi-annual written progress report to all parties on the service list, which includes foundational research conducted and findings, and all outreach activities that have occurred;
· Hold quarterly progress report presentations. Two of the meetings shall be with Energy Division, DRA and the Business & Community Outreach group. Two of the meetings shall be in conjunction with the semi-annual written reports and open to all parties on the service list;
· Provide, to the Commission's Business & Community Outreach group, PG&E's schedule of outreach events, at which PG&E staff will be educating customers about PDP and TOU rates. To the extent possible, we stated that PG&E should coordinate such events with the Business & Community Outreach group; and
· After each of the presentations to parties on the service list, provide an addendum to the semi-annual written report to parties on the service list. The addendum shall include a workshop report describing recommendations and issues raised during the presentation, and how PG&E will proceed as a result of the discussions and recommendations.
After ordering the preparation and submittal of the information listed above, we concluded:
If the Commission finds, based on the information 1) in the monthly, quarterly or semi-annual reports, 2) through the advice letter process, 3) through feedback from the Business & Community Outreach group, or 4) through the formal third party evaluation reviewed by the DREMC that PG&E's methods of education and outreach are failing to satisfactorily educate customers or reach specific market segments that are most at risk, it may be necessary for the Commission to order PG&E to redirect its customer outreach and education efforts and funding. PG&E remains subject to the education and outreach performance criteria established for PDP, and the effectiveness of the utility's education and outreach efforts approved here will be a factor in approving requests for additional funding for customer education and outreach for PDP in future proceedings.22
As part of its compliance with our reporting requirements, PG&E describes focus group results that indicate that its customer education and outreach efforts may face greater-than-anticipated challenges in meeting the expectations we included in D.10-02-032.23 Indeed, Joint Parties, including members of the small business community, report that PG&E's efforts suffer from a lack of products, services and programs to help small business customers to respond to PDP; a lack of effective customer outreach necessary to make PDP work; and a lack of integrated solutions for small businesses. Issues like these should have been raised, and addressed by PG&E, in the stakeholder reporting processes we established in D.10-02-032, rather than requiring parties to resort to a petition to modify that decision.
Based the concerns expressed in the two Petitions before us, we must question whether PG&E's present approach to customer education and outreach, which we endorsed in D.10-02-032, is the most effective means of meeting our deadlines for implementing dynamic rates. Furthermore, we are specifically concerned that PG&E's methods of education and outreach may not reach specific market segments that are most at risk of being significantly impacted by the transition to dynamic rates; we first raised this concern in D.10-02-032. Therefore, we conclude that we should reevaluate the approach to customer education and outreach that we required of PG&E in D.10-02-032. As described below, we order two specific actions to be undertaken by PG&E, interested parties, and the Commission's Energy Division and Business & Community Outreach staff. We believe that the extensions granted in this decision that provide PG&E more time to implement dynamic rates will also create the additional time needed for interested parties to review PG&E's present approach to customer education and outreach.
First, we grant those portions of the Joint Parties' Petition seeking modifications to D.10-02-032 regarding PG&E's customer education efforts. PG&E shall revise the "customer education and outreach plan" that it filed pursuant to Ordering Paragraph 12 of D.10-02-032 and include specific plans for accomplishing the tasks below:
1. Conduct an enhanced education, outreach and marketing program to inform eligible Small C&I Customers about the availability of its A-1 TOU rate;
2. In conjunction with its outreach and education campaign, conduct an aggressive outreach program providing Small C&I Customers with an integrated set of energy efficiency and demand reduction solutions through a single point of contact; and
3. Perform periodic assessments of customer awareness and understanding of the A-1 TOU rate and other time-varying rates offered by PG&E, track Small C&I Customer enrollment into and disenrollment from the A-1 TOU rate and other time-varying rates, and track customer complaints regarding time-varying rates.
PG&E shall prepare its revisions by collaborating with DRA and the CSBRT/CSBA, as well as any other interested parties who wish to participate, to ensure that the revised plan satisfactorily addresses the items listed above. PG&E shall serve its revised plan on the service list within 60 days of today's date. In the meantime, the Commission's Energy Division and Business & Community Outreach staff shall work with PG&E to ensure that PG&E's existing customer education and outreach plan remains on track. To this end, we modify Ordering Paragraph 15 of D.10-02-032 to ensure more collaboration between PG&E and Commission staff.
Second, in order to determine whether PG&E should redirect its customer outreach and education efforts and funding, we will direct the Commission's Energy Division and Business & Community Outreach staff to review all of the material submitted pursuant to Ordering Paragraph 15 of D.10-02-032, and submit a report with recommended changes. As noted above, in D.10-02-032 we stated "in adopting and supplementing various aspects of PG&E's outreach and education proposals, as well as deferring the default date for small and medium C&I customers, we believe there is a much greater chance that the transition to PDP will be successful." Now, we believe that participants other than PG&E should report to us on the success of PG&E's efforts to date. As detailed below, we direct Commission staff to report to us on their assessment of PG&E's progress, and to suggest specific, actionable steps that PG&E can take to improve its efforts.
Specifically, the Commission's Energy Division and Business & Community Outreach staff shall prepare a report documenting the progress, successes and remaining challenges with respect to the customer education and outreach actions and spending ordered in D.10-02-032. The report shall include recommendations of specific, actionable steps that PG&E can take to improve its efforts, and recommendations regarding how the Commission could link PG&E's cost recovery to the outcomes expected when PG&E's funding was approved. The report shall be served on the service list 60 days from today. Parties may comment on the report 10 days later.
The assigned Commissioner or assigned Administrative Law Judge (ALJ) may issue additional rulings after reviewing the documents and actions listed above. We remind PG&E that in Ordering Paragraph 16 of D.10-02-032, we stated "the effectiveness of the utility's education and outreach efforts shall be a factor in approving requests for additional funding for customer education and outreach for Peak-Day Pricing in future proceedings." At this point, we remain unconvinced that PG&E's efforts to-date have been effective; PG&E must find a way, in collaboration with stakeholders as well as Commission staff, to help us to weigh the effectiveness of current efforts when we evaluate any possible additional funding requests PG&E may make in the future. We will not approve new funding for PG&E to accomplish tasks that have already been found reasonable and funded in D.10-02-032, but we will hold PG&E accountable for the results to which it committed in that proceeding. If those funds have been spent but have not produced the results we expected, we will need to determine what, instead, those funds may have purchased and whether PG&E's spending was prudent.
5 See, D.08-07-045, "Decision Adopting Dynamic Pricing Timetable And Rate Design Guidance For Pacific Gas And Electric Company."
6 "MRTU" refers to the California Independent System Operator's "Market Redesign and Technology Upgrade."
7 PG&E Petition at 15.
8 D.10-02-032 at 30.
9 As noted above, since PG&E filed its Petition, the Commission approved D.11-05-018 on May 5, 2011, adopting the GRC settlement in Ordering Paragraph 1, with modifications and clarifications that are unrelated to the matters before us in PG&E's Petition.
10 PG&E February 24, 2011 reply comments at 10.
11 See Joint Parties Petition, footnote 2: "Small business customers referred to in this Petition as Small Commercial and Industrial Customers (Small C&I Customers) have a maximum demand not exceeding 20 kilowatts (kW)...The sole focus of this Petition for Modification is Small C&I Customers and Petitioners make no recommendation here as to rate design for other customer classes."
12 Rule 16.4(b) states, in part, "Any factual allegations must be supported with specific citations to the record in the proceeding or to matters that may be officially noticed. Allegations of new or changed facts must be supported by an appropriate declaration or affidavit." Joint Parties provide limited citations and no affidavit supporting allegations of new or changed facts.
13 SCE Response to the Joint Parties' Petition at 5-10.
14 PG&E Response to the Joint Parties' Petition, Attachment A at 12.
15 We note again that, pursuant to Rule 16.4(b), "any factual allegations must be supported with specific citations to the record in the proceeding or to matters that may be officially noticed. Allegations of new or changed facts must be supported by an appropriate declaration or affidavit."
16 See http://www.pge.com/tariffs/tm2/pdf/ELEC_SCHEDS_A-1.pdf, Revised Cal. P.U.C. Sheet No. 30506-E.
17 Joint Parties' Petition at 17-20.
18 PG&E's March 7, 2011 Response, Attachment A at 13-14.
19 D.10-02-032 at 38.
20 PG&E Petition, at 10-11. We further note that the September, 2010 independent evaluation of PG&E's Smart Meter deployment identified, as one of multiple factors that appeared to contribute to the escalation of Smart Meter-related high bill complaints, PG&E's customer service practices. See http://docs.cpuc.ca.gov/EFILE/RULINGS/122935.PDF at 13-14
21 D.10-02-032, Conclusion of Law 41. We expressed this somewhat differently in our discussion on page 3 of that Decision: "PG&E should be subject to a number of reporting requirements in order for the Commission and other parties to monitor PG&E's customer outreach and education efforts."
22 Decision 10-02-032 at 93-94.
23 PG&E Petition at 12-13.
