2. Background
The Commission opened Rulemaking 02-06-001 as a policymaking forum to develop demand response as a resource to enhance electric system reliability, reduce power purchase and individual consumer costs, and protect the environment.1 PG&E's Application (A.) 05-06-0281 emerged from the Rulemaking and was PG&E's proposal for full deployment of an advanced metering infrastructure (AMI).
By Decision (D.) 06-07-027, the Commission authorized PG&E to deploy its AMI project, which included automation of its gas and electric metering and communications network (5.1 million electric meters and 4.2 million gas meters) and consisted of metering and communications infrastructure as well as the related computerized systems and software. Most of the meter inventory was to be retrofitted with communications modules and redeployed.2 The Commission adopted as reasonable a project budget of $1.7394 billion, inclusive of a risk based allowance, or contingency, of $128.8 million and $49 million for pre-deployment costs approved in D.05-09-044. The Commission also adopted PG&E's rate proposal for critical peak pricing (CPP) tariffs.
The authorized AMI project was cost effective in that the present value revenue requirement (PVRR) of the project costs, $2,258.3 million, was more than offset by the sum of the PVRR of operational benefits, which amounted to $2,024.2 million, and the PVRR of the demand response benefits associated with the CPP tariffs, which amounted to $338 million.
Since the approval of PG&E's SmartMeter Program the market in this area has evolved rapidly. PG&E believes that the pace of this development was enhanced by the approval of PG&E's SmartMeter Program which signaled greater opportunities for vendors of advanced metering equipment, communication technology and in-home devices needed to support utility advanced metering initiatives. Further incentive has been provided by the applications of the other major investor-owned utilities (IOUs) in California for AMI programs. PG&E states that the result, since the approval of its original SmartMeter Program, has been substantial innovation and significant reductions in cost.
On December 12, 2007, PG&E filed A.07-12-009, the focus of this decision, requesting authority to further increase rates related to its AMI project (now referred to as its SmartMeter Program) in order to upgrade three elements of its SmartMeter Program technology. The three elements of the SmartMeter Program Upgrade (or Upgrade), are:
· Incorporating an integrated load-limiting connect/disconnect switch into all advanced electric meters;
· Incorporating a Home Area Network (HAN) gateway device into advanced electric meters to support in-home HAN applications; and
· Upgrading PG&E's electric meters to solid state meters to support the above functionality and to facilitate upgrades.
PG&E states that through this SmartMeter Program Upgrade, it will create a foundation for building an infrastructure that will enable and empower new ways of looking at energy use. New possibilities exist in the areas of energy efficiency, customer satisfaction and system reliability.
PG&E estimates $572,453,000 in Upgrade costs that are incremental to those costs authorized by D.06-07-027. The PVRR of the incremental costs is $841,157,000, which is offset by incremental operational, conservation and demand response benefits estimated by PG&E to be $1,063,124,000 (PVRR).
A prehearing conference was held on February 8, 2008, and the Assigned Commissioner's Ruling and Scoping Memo was issued on March 13, 2008. The Division of Ratepayer Advocates (DRA), The Utility Reform Network (TURN), and the California City-County Street Light Association (CAL-SLA) each issued testimony on June 30, 2008. PG&E and the City and County of San Francisco (CCSF) each issued rebuttal testimony on July 23, 2008. Evidentiary hearings were held from August 4 through August 8, 2008. Opening briefs were filed by August 29, 2008. Reply briefs were filed by September 12, 2008, at which time this proceeding was submitted for decision.
1 Order Instituting Rulemaking on policies and practices for advanced metering, demand response, and dynamic pricing, filed June 6, 2002 and closed by D.05-11-009.
2 D.06-07-027 indicates that PG&E's plan was to retrofit 54% of the existing electric meters and 96.1% of its existing gas meters.
