5. Discussion

In D.06-01-024, and later in D.06-12-033, the Commission established funding for CSI in such a manner that annual revenue requirements are high in early years and decline in later years. This was purposeful, as CSI incentives are relatively high in the early year of the program and decline substantially in later years. Furthermore, unlike the Commission's prior programs that supported solar investments, the pace of solar deployment under the CSI is not subject to annual limits. Under the CSI, the market sets the pace of deployment, with demand for incentives determining the level of the rebates offered. As a result, the total amount of solar investment in any given year, and thus the total amount of rebates required, is not known with any certainty. Because the Commission was not sure how fast demand for solar incentives would materialize, it concluded it should front-load collections and ensure adequate funds for the program, and taper off collections as incentive rates also dropped. (D.06-01-024, p. 6.) In addition, the first years of the CSI program require the Program Administrators to quickly build their administrative capacity, and the Program as a whole to launch low income solar incentive programs and a Research, Development, Demonstration and Deployment (RD&D) Program. The start-up costs of these programs are another compelling reason to front-load CSI revenue requirements.

Joint Petitioners' respective CSI balancing accounts are currently overcollected, as they point out in their petition, in part because solar projects are taking a long time to go on-line and collect incentives. We have good reason to expect the funds will eventually be needed, particularly when low-income and RD&D programs are implemented. DRA points out that any revenue not collected now will only need to be collected later. DRA is concerned that if we suspend collections in 2009, we may need to increase the revenue requirement in later program years to ensure adequate funding.

On the other hand, we recognize that an important factor contributing to the overcollection is the transfer of SGIP funds to CSI in late 2006, as directed by the Commission. According to the Joint Petitioners, SDG&E transferred $37.2 million and SCE transferred $104.6 million to their respective CSI balancing accounts at the end of 2006 from their SGIP balancing accounts.⁷

Because the transfer of funds from SGIP has increased the overcollection in the CSI balancing accounts, we can suspend 2009 CSI collections. This means that SCE and SDG&E will effectively use the money they transferred from SGIP in December 2006 in place of 2009 CSI collections. This allays DRA's concern that revenue requirements in later years will need to be increased. Thus, we find it reasonable to allow SCE and SDG&E to suspend collections of further CSI revenue from ratepayers for the 2009 calendar year. Indeed, the amount transferred from SGIP for SDG&E is larger than collections would be in 2009, therefore we adjust the collection schedule for SDG&E in later program years to account for this. For SCE, the SGIP transfer of $104.6 million is $42.4 million less than the $147 million SCE would collect in 2009. However, the large overcollection in SCE's balancing account makes it reasonable to suspend collections until 2010. The difference of $42.4 million, if needed by SCE at a later date, can be added to SCE's 2016 revenue requirement which is quite low in comparison to other years.

SCE and SDG&E should resume CSI revenue collections from ratepayers in 2010, per the revised revenue requirement schedule adopted in this order. PG&E does not request a suspension, so it should continue to collect its CSI revenue requirement per the schedule adopted in D.06-12-033, which we copy in this order.

In summary, we adopt a new revenue requirement schedule for CSI as follows, replacing the schedule previously adopted in D.06-12-033:

Table 2: Revised Annual CSI Revenue Requirements

(In millions of dollars)

We will not grant the request by SCE and SDG&E to establish an advice letter process for future revenue requirement changes. We stated in D.06-01-024 that we would consider adjusting the revenue requirement based on the pace of program expenditures. This decision makes such an adjustment. We prefer that future CSI revenue requirement adjustments be considered by the full Commission, following the filing of a petition to modify the revised revenue requirement set forth in this order. This will help us ensure that total revenue collected under the CSI program conforms to the $2.16 billion limit established in SB 1.

⁷ PG&E states that it transferred $37.1 million from its Self-Generation Program Memorandum Account (SGPMA) to CSI on December 31, 2006. Later, PG&E clarifies in comments on the proposed decision that it erred in transferring the $37.1 million to CSI because the funds were needed for SGIP projects that received incentive commitments from 2001 through 2006, but were not yet paid. PG&E suggests it should now transfer this amount back to SGIP so it can pay these incentive commitments. In directing the utilities to transfer unspent SGIP funds to CSI in December 2006, the Commission intended for the utilities to transfer money they had actually collected from ratepayers but not yet committed to SGIP projects. SCE and SDG&E transferred unused money they had collected for SGIP, resulting in that much less money they needed to collect from their ratepayers for CSI. Since PG&E had projects in the pipeline for which funds were committed, it should not have transferred $37.1 million to CSI. We will consider PG&E's transfer to CSI to be $0, and it should now reverse the accounting transfer it made on December 31, 2006 to CSI, and return this money to its SGPMA, because these funds are needed for SGIP projects reserved prior to December 31, 2006.

⁸ The adopted revenue requirement for PG&E in D.06-12-033 contained a mathematical error and should have been $947 million. We correct the table adopted in this order accordingly, which brings the total CSI revenue requirement for the three IOUs to $2,166 billion, in compliance with the CSI budget limit in SB 1.