11. Adopted Incremental Costs and Benefits

Table 3
Adopted Estimates of Incremental Costs
	Incremental Costs
	Nominal	PVRR
	(Dollars in thousands)
Deployment Costs
Meter Devices (Less HAN and Electromechanical	$ 310,757	$ 486,358
Meter Upgrades)
HAN Retrofit	26,532	24,581
Electromechanical Meter Retrofit	18,800	20,372
Information Technology	33,600	49,793
Title 24 Program Costs	-	26,174
Peak Time Rebate Program Costs	-	27,592
Project Management	-	-
Training	1,697	1,592
Risk Based Allowance	44,139	46,724
Subtotal	$ 435,525	$ 683,186
Operations and Maintenance Costs
Operations and Maintenance	$ 4,993	$ 42,886
Risk Based Allowance	562	503
Subtotal	$ 5,555	$ 43,389
Other Costs
Technology Assessment	$ 21,400	$ 18,995
Risk Based Allowance	4,280	3,445
Subtotal	$ 25,680	$ 22,440
Total Incremental Costs	$ 466,760	$ 749,015

	Table 4
	Adopted Estimates of Incremental Benefits
			Incremental Benefits
			Annualized		PVRR
			(Dollars in thousands)
	Operational Benefits
	Integrated Connect/Disconnect Switches
	Avoided Field Visits		$ (6,682)		$ (114,702)
	Improved Cash Flow		(969)		(11,174)
	Reduced Bad Debt		(2,429)		(26,756)
	Tax Benefit from Meter Replacement		n/a		(11,799)
	Subtotal		$ (10,080)		$ (164,431)
	Energy Conservation/Demand Response Benefits
Electric Conservation		n/a		$ (268,847)
Gas Conservation		n/a		0
Peak Time Rebate		n/a		(262,916)
A/C Cycling		n/a		(83,427)
Subtotal		n/a		$ (615,190)
Total Benefits		n/a		$ (779,621)

11.1. Conclusion

The adopted costs and benefits result in a PVRR net benefit of $(30,606,000). By this adopted analysis, the Upgrade is cost effective. However, we note that, when compared to the total Upgrade incremental PVRR cost of $749,015,000, that net benefit is small (only 4.1%). It is insignificant when considering the uncertainties in estimating the PVRR of the Upgrade costs and benefits, especially the conservation and demand response benefits. Changes in only a few assumptions could make the Upgrade cost ineffective or substantially more cost effective. Despite the narrow margin of cost effectiveness reflected in this decision, we feel it is reasonable to authorize PG&E to proceed with the proposed SmartMeter Upgrade, subject to the conditions and costs specified in this decision and will do so. Our judgment is influenced by the results of the cost effectiveness analysis and following additional factors:

· In PG&E's original AMI proceeding, benefits exceeded costs by $104.4 million (4.6%). When looked at on a total basis, it is even more likely that the ratepayers will not be harmed by implementing the Upgrade.

· As described previously by PG&E, on a total basis, the SmartMeter Program compares favorably with what was authorized for SCE and SDG&E. While our adjustments to PG&E's estimates may make that comparison less favorable, it is worthwhile to note that PG&E's costs and cost effectiveness are still in the range of the other two IOUs.

· Authorizing the Upgrade results in a common statewide technology platform for the three IOUs. In general, reasonable consistencies in system components and functionality will facilitate the implementation of consistent demand response and conservation programs, which is desirable.

· The upgraded technology will provide for a technology platform that offers common functionality for PG&E customers, for utility program offerings, and for vendor development of tools, applications, and the expanding market for home energy management devices. Consistency in the marketplace will provide vendors a common set of functionality against which to develop interoperable products that adhere to common standards.

· It is likely that there are other benefits that have not been quantified by PG&E or other benefits that can be realized through the upgrade technology that may arise in the future.