10. Uncontested Aspects of the Business Case
In order to adopt the uncontested aspects of the SCE business case, it is necessary to find that "the settlement is reasonable in light of the whole record, consistent with law, and in the public interest."46 To determine the reasonableness of the uncontested aspects of the settlement, we analyze them within the context of the initial litigation positions of the parties. We find the uncontested aspects of the settlement reasonable in light of the whole record, consist with the law, and in the public interest, based on the discussion set forth below on each aspect.
10.1. Settlement Agreement Adjustments to Costs and Benefits of Business Case
In its initial application and opening testimony, SCE included the costs and benefits of prepaid meter services, under which customers would have the option of paying for electricity services in advance of using the electricity. Under SCE's original proposal, SCE expected prepaid metering to be a source of significant benefits of the AMI system. Both DRA and TURN objected to the inclusion of the costs and benefits associated with prepayment metering in the business case, as described, unless specific customer protections were included. The settlement agreement removes these costs and benefits from the business case. This change is consistent with the litigation positions of the TURN and DRA, and is appropriate given the fact that the Commission has not expressed a policy position on the appropriateness of prepaid meter programs or the customer protections needed to support them.
SCE's initial application forecast an annual inspection rate of 0.5% of meters during the deployment period. DRA's opening testimony advocates for increasing annual meter inspections and the associated revenue requirement. TURN contests SCE's forecasts and calls for a reduction of $25.8 million in costs for meter tampering. The settlement agreement modifies the forecast annual inspection rate of 0.5% to apply also to the post-deployment period, and increases saving through use of the AMI system's capabilities to minimize loss from meter tampering and energy theft. This addresses the parties' concerns with the initial proposal by increasing meter inspections in the post-deployment period to capture the AMI system's ability to reduce energy theft.
SCE initially forecast costs of $29.7 million for repairing weathered meter panels. DRA did not context this forecast; TURN recommended that these costs be reduced by $29.1 million. The settlement agreement provides that the initially forecast meter panel repair cost be reduced by $11.1 million. This reduction is within the range defined by the testimony.
SCE forecast $55.2 million for increased billing costs during the deployment period; DRA recommended that this be reduced by $16 million. The proposed settlement agreement reduces the original forecast by $2.2 million. This reduction is within the range defined by the testimony.
SCE's opening testimony did not anticipate benefits from working cash and increasing the accuracy of meter reads; TURN recommended that benefits for these characteristics totaling $37 million be included in the business case. DRA did not contest SCE's initial proposal. The settlement agreement resolves this issue by including $2.2 million in benefits related to a reduction of billing services exception work. This adjustment is within the range defined by the testimony.
10.1.6. Increased Power Purchase Costs During
Deployment Period
SCE's initial business case included power purchase costs in its cost-benefit analysis, as well as in the deployment period. TURN contests SCE's forecast of power purchase costs. The settlement agreement makes an adjustment to power purchase costs to remove $2.17 million for deployment period power purchase costs from its analysis.
SCE's initial business case forecast increased cost for field supervisors and analysts during the deployment and post deployment period. TURN objected that increased resources should not be required in the post-deployment period. In the settlement agreement cost-benefits analysis and stipulations, SCE removed $5.7 million in post-deployment costs.
10.2. Cost Overrun Risk-Sharing Mechanism
SCE did not propose a mechanism for sharing risks related to cost overruns; DRA proposed such a mechanism in its opening testimony. The DRA mechanism, adopted in the settlement, provides that to the extent the deployment period expenditures exceed the adopted amount by up to $100 million, 10% of the overrun would be borne by shareholders and 90% by ratepayers, without the need for future Commission review of the overrun. TURN did not address the issue of risk-sharing in its testimony. The risk sharing mechanism is unopposed by parties to this case and is reasonable in the context of the whole record. This mechanism is also consistent with a similar provision in the settlement the Commission adopted in the SDG&E AMI proceeding, A.05-03-015.47
10.3. Credit Operational Benefits to Ratepayers When Funds are Spent
SCE's opening testimony proposed crediting operational benefits to ratepayers each month, beginning approximately four months after equipment installation. DRA's counter-proposal in testimony was to credit these benefits to ratepayers when the money is spent on the equipment to be installed. TURN did not address this issue in its opening testimony. The proposed settlement agreement provides that SCE will credit $1.4246 per meter of operational benefits per month through the deployment period, beginning eight months after the meter is reflected in rate base.
10.4. PTR Program Two-Tiered Rebate
SCE originally proposed calculating the costs of its peak-time rebate program using a rebate of $0.66 per kWh. DRA recommended that the business case calculations instead use a higher rebate for customers with installed enabling technology, such as automated response equipment or information feedback systems. TURN did not take a position on this issue in its opening testimony. The proposed settlement calculates the costs and benefits for the business case using a two-tired rebate to participating customers, with higher rebates to those with installed enabling technology. SCE has proposed such a two-tiered rebate structure for the PTR program included in its 2009 General Rate Case. The Commission may or may not adopt a similar rate structure in the SCE GRC, and we do not prejudge that issue here, but this settlement term is reasonable in light of the record for the purposes of SCE's business case.
10.5. Avoid Double-Recovery of AMI Costs in GRCs
SCE proposed to avoid double-recovery of AMI costs through the use of a balancing account mechanism, and used a "business as usual" approach in its GRC. DRA's initial position was that the Commission should deny SCE the opportunity to recover any AMI-related costs in its 2009 and 2012 GRCs. TURN requested that the Commission remain vigilant in reviewing costs in this case and SCE's upcoming GRCs to avoid possible double-recovery. The settlement agreement provides that SCE will not recover any AMI-related costs in its 2009 GRC, will ensure that it avoids double-recovery of AMI costs in its 2012 GRC and will ensure any recovery of AMI costs in its 2012 GRC are consistent with the limits on recovery that the Commission adopts in this proceeding. This position is within the range defined by the testimony, and is reasonable in the context of the whole record. This issue also resolves additional disputes over the need for separate accounting for AMI costs and benefits in its GRC. In order to ensure the aspect of the settlement is more easily monitored, we require SCE to make an affirmative showing in its (2012) GRC that it has avoided double recovery of any requested AMI costs, and that any requested costs in its 2012 GRC are consistent with the limits on recovery adopted in this decision.
10.6. Allocation of Revenue Requirement for Deployment Period Costs
SCE proposed allocating the revenue requirement associated with deployment period costs using a distribution allocator defined in its application and opening testimony. TURN and DRA each proposed alternative methodologies for allocating the revenue requirement among customer classes. The settlement agreement defers this issue to be litigated in Phase 2 of SCE's GRC, with costs in the meantime allocated consistent with SCE's proposed distribution allocator. It is reasonable to defer litigation of this issue to Phase 2 of SCE's GRC, which is an appropriate venue for determining revenue allocation among customer classes. Using SCE's allocator on an interim basis is reasonable in light of the whole record.
10.7. Remote Connect/Disconnect Policies
SCE proposed no changes to its existing policies related to connection and disconnection of customer electric service. TURN initially raised questions about whether cost savings to SCE of remote connection and disconnection should be reflected in changes in SCE's tariffs. The settlement agreement provides that SCE's connection and disconnection tariffs do not require revision at this time, and that subsequent changes to these tariffs will be brought to the Commission for approval. This outcome is reasonable in light of the whole record, and recognizes that if changes are needed in SCE's tariffs, there are existing avenues for the Commission to consider those changes.
10.8. Ratemaking for Results Sharing
SCE originally proposed that results sharing be consistent with GRC methods. TURN objected to this mechanism. In the settlement and stipulations, SCE agreed to record actual costs up to a cap, and reduce the GRC memorandum account authorized amount consistent with the benefits forecast. The settlement agreement also provides that if the ratemaking memorandum account is eliminated, SCE will file an advice letter addressing this issue.
46 Commission Rules of Practice and Procedure, Rule 12.1(d).
47 SDG&E: D.07-04-043 Appendix A, p. 6.
