9. Operating Costs and Benefits

PG&E and DRA now agree on the project installation and deployment costs, and all operational benefits and costs. Although PG&E and DRA stipulated to the operating and maintenance costs (O&M) shown in Table 1, Stipulated AMI Project Costs, that table assumes a 15-year depreciable life. This decision adopts a different depreciation life of 20 years for the AMI communications equipment. Therefore, PG&E's actual revenue requirement will be slightly different. The values in Table 1 are adequate for determining whether the AMI project is likely to be cost effective because the revenue requirement impact is not significant when considered against the life of the system and other inherent estimation risks and errors.

TABLE 1

STIPULATED AMI PROJECT COSTS


Line No.	Cost Category	Estimated Costs Deployment (Last Meter Installed in 2011) and O&M (Through 2010) ($ in millions)	PVRR ($ in millions)
1	Project management costs	$87.9	$87.5
2	Risk-based allowance	128.8	135.0
3	Meters and modules	637.4	799.2
4	Network materials	83.6	98.5
5	AMI operations	40.9	119.1
6	Interface and systems integration	94.0	155.6
7	Interval billing system	85.0	109.1
8	Meters/modules installation	326.1	355.9
9	Electric network and WAN installation	87.2	99.1
10	Gas network and other installation	5.8	6.9
11	Meters/modules QA sample testing	2.8	2.3
12	Meter operations costs	22.6	129.3
13	Customer contact-related costs	32.3	45.5
14	Customer exceptions processing	6.6	5.3
15	Marketing and communications	23.1	22.6
16	Customer acquisition	54.8	44.0
17	Other employee related costs	20.7	43.4
18	Total Estimated Project Costs (totals subject to rounding error)	$1,739.4	$2,258.3
(Source: Ex. 32, revised Table 10-1 (Revised 3/14/06.)

Table 2, Stipulated Project Benefits, excludes the demand response benefits discussed separately in this decision. We adopt the stipulated project benefits as reasonable.

TABLE 2

STIPULATED AMI PROJECT BENEFITS

Line No.

Benefit category

Annualized
Benefit After Implementation
(2005 $ million)

PVRR
($ in millions)(a)

1

Operational meter reading

$86.2

($1,074.4)(b)

2

Electric Transmission and Distribution

12.8

(195.7)

3

Meter Operations

7.0

(103.4)

4

Customer Contact

2.7

(39.9)

5

Billing Benefits

18.6

(215.3)(b)

6

Gas Transmission and Distribution

1.2

(9.9)

7

Reduced Software License Expense

5.0

(48.1)

8

Remote Turn-On/Shut-Off

11.5

(102.0)(b)

9

Other Employee-Related Costs

16.8

(218.5)

10

Total Annual Benefit

$161.8

($2,007.2)

11

Reduced Equipment Replacement (2011 $)

8.5

(10.2)

12

Deferred Meter Testing

1.6

(6.8)

13

Total One-Time Benefits

$10.1

($17.0)

14

Total Benefits
(totals subject to rounding error)

($2,024.2)

_______________
(a) PVRR values in parentheses are a reduction in revenue requirement.
(b) PVRR totals for these benefits are net of severance costs.

(Source: Ex. 32, revised Table 10-2 (Revised 3/14/06).)


Line No.	Benefit category	Annualized Benefit After Implementation (2005 $ million)	PVRR ($ in millions)(a)
1	Operational meter reading	$86.2	($1,074.4)(b)
2	Electric Transmission and Distribution	12.8	(195.7)
3	Meter Operations	7.0	(103.4)
4	Customer Contact	2.7	(39.9)
5	Billing Benefits	18.6	(215.3)(b)
6	Gas Transmission and Distribution	1.2	(9.9)
7	Reduced Software License Expense	5.0	(48.1)
8	Remote Turn-On/Shut-Off	11.5	(102.0)(b)
9	Other Employee-Related Costs	16.8	(218.5)
10	Total Annual Benefit	$161.8	($2,007.2)
11	Reduced Equipment Replacement (2011 $)	8.5	(10.2)
12	Deferred Meter Testing	1.6	(6.8)
13	Total One-Time Benefits	$10.1	($17.0)
14	Total Benefits (totals subject to rounding error)		($2,024.2)
_______________ (a) PVRR values in parentheses are a reduction in revenue requirement. (b) PVRR totals for these benefits are net of severance costs.
(Source: Ex. 32, revised Table 10-2 (Revised 3/14/06).)