7. Assignment of Proceeding
Timothy Alan Simon is the assigned Commissioner and Michael J. Galvin is the assigned ALJ in this proceeding.
1. The utilities recover the costs of their PP programs through various cost allocation methods.
2. Adoption of the EPBR cost allocation method would shift approximately $90 million of the current costs of the PP programs to residential customers from business customers.
3. California lost approximately 287,000 manufacturing jobs between 2001 and 2006. This amount represented a 16.3% loss of manufacturing jobs over a five-year period. The United States, as a whole, lost 13.9% of its manufacturing jobs over the same time period.
4. The costs of PP programs are a non-bypassable surcharge applicable to all gas customers in California except those exempt under Pub. Util. Code §§ 896 and 898 such as municipalities offering their own programs.
5. In the Guardian case, gas service rates were found to be higher in California than an adjoining state due to taxes, fees, and PP program surcharges.
6. To keep that business in California, the Commission approved a discounted transportation rate for Guardian without reducing the PP program surcharges.
7. SoCalGas was authorized to charge its Vernon core customers reduced core transportation rates to enable it to corporate with Vernon.
8. Customers of alternative service providers who are not exempt are required to pay PP program surcharges.
9. Natural gas costs have a direct impact on the economic viability of food processors and their ability to compete in international markets.
10. The California Competitiveness Project found costs of doing business in California are 30% higher than in other Western states. The components of the 30% are 16% for employee costs, 6% State regulatory costs, 5% energy, 3% property, and 1% taxes.
11. Advantages of doing business in California include California being a leader in innovation, technology, RD&D, connected to the Pacific and world markets, and a favorable climate and high standard of living.
12. The cost of gas is an unpredictable component of doing business and can be a major component of doing business.
13. The EE, RD&D, and SGIP programs were established to reduce energy consumption by making energy usage more efficient, developing energy science and technology, and promoting clean and efficient self-generation and cogeneration resources.
14. There are many examples of social programs financed from fees or special funds that do not reflect a general tax distribution.
15. The largest social program on the federal level, Social Security, is funded equally between employees and employers.
16. Some types of businesses such as sole proprietorships and partnerships are not considered corporations and, thus, the taxes that they pay are recorded as the personal income of their owners and appear in the personal income tax category.
17. The currently adopted cost allocation methods for the PP programs were adopted for different reasons at various times, as summarized in Appendix A of this decision.
18. Applicants seek to replace the PP program cost allocation methods with a single cost allocation method irrespective of a program's intended purpose and which customer class or classes is to benefit from the program.
19. Five PPHs were held throughout California to receive comments from the utilities' customers on the utilities proposal to use the EPBR method for allocation costs of the PP programs. Of the 52 customers who spoke at the PPHs, 37 were in opposition, 14 in favor, and one neutral.
20. A computer on-line petition of approximately 8,300 customers opposing the EPBR method was presented at the Oakland PPH.
1. There is no conclusive evidence that the costs of PP programs adversely impact the California economy or competitiveness of California businesses.
2. Applicants have not substantiated that the California General Fund should be viewed as a standard by which the fairness of a cost allocation of the PP programs can and should be measured.
3. Adoption of the EPBR method defies a basic costing principal of assigning cost to those who will benefit, whether direct or indirect.
4. Applicants have not substantiated that its EPBR method is more reasonable than the cost allocation methods currently being used to recover the costs of PP programs and should not be adopted.
IT IS ORDERED that:
1. The joint request of San Diego Gas & Electric Company, Southern California Gas Company, and Pacific Gas and Electric Company to change the cost allocation methods by which their natural gas customers are charged for the costs of their public purpose programs to a single Equal Percent of Base Revenue cost allocation method is denied.
2. Application 07-12-006 is closed.
This order is effective ay.
Dated March 12, 2009, at San Francisco, California.
MICHAEL R. PEEVEY
President
DIAN M. GRUENEICH
JOHN A. BOHN
RACHELLE B. CHONG
TIMOTHY ALAN SIMON
Commissioners
APPENDIX A
Public Purpose Programs
1. California Alternate Rates for Energy (CARE)
The CARE program, established in 1989 as the Low Income Rate Assistance program and renamed CARE in 1995, provides rate discounts to qualifying low-income residential customers to reduce their energy costs and to help improve their standard of living.40 Customers whose household income is less than 200% of the federal poverty level are eligible to participate in this program. Eligible customers participating in this program currently receive a 20% discount on their bill. CARE costs are recovered through an ECPT cost allocation method. 41 Customers exempted from paying the cost of this program are CARE participants, electric generation, wholesale, and enhanced oil recovery customers.
The ECPT cost allocation method was adopted over a per-customer cost allocation method at the time the program was implemented in 1989.42 This cost allocation method was determined to be more consistent with California legislation which required that program costs not be borne by a single ratepayer class.
2. Energy Efficiency (EE)
The EE program, established prior to 1990, was designed to reduce energy consumption by making energy usage more efficient. This program assists customers to conserve energy and reduce or eliminate energy waste through the use of monetary incentives and rebates to reduce the cost of installing energy efficient equipment, providing technical advice and support on energy saving strategies, and offering education and outreach. This programs help customers save money on energy costs and reduce the usage of limited, carbon-creating fuel supplies, and help to demonstrate and commercialize energy savings technologies.
Southern California Gas Company (SoCalGas) has used the DB cost allocation method to recover EE program costs since approved in 1993 by D.93-12-043. Prior to 2005, San Diego Gas & Electric Company (SDG&E) used the EPMC cost allocation method to recover its program costs. However, with the adoption of new energy efficiency goals, SDG&E requested and received authorization to switch to the DB cost allocation method from the EPMC cost allocation method.43 PG&E has used the DB cost allocation method to recover its program costs since being adopted in its 1995 Biennial Cost Allocation Proceeding (BCAP). The DB cost allocation method was adopted so that EE program cost would be directly assigned to the customer classes for whom the EE programs are designed and to make the allocation more consistent with the distribution of program dollars.44
3. Direct Assistance Program and Low Income Energy Efficiency (LIEE)
The LIEE program (DAP at SoCalGas and LIEE at SDG&E and PG&E), was established in the 1980's and updated in 2007 to set the stage for the next generation of energy efficiency in California, provides energy efficiency measures at low or no cost to low income residential customers. This program was designed to provide an energy resource for California while concurrently providing low-income customers with ways to reduce their bills and improve their quality of life through an emphasis on conservation and energy efficiency measures.45
Both SoCalGas and PG&E use the DB cost allocation method to recover LIEE costs from the customer classes for whom the LIEE programs are designed. The DB cost allocation method has been used by SoCalGas since 1993 and PG&E since 1995.46 SDG&E uses the EPMC cost allocation method, pursuant to a 1993 joint settlement agreement between SDG&E and DRA.47
4. Research, Development and Demonstration (RD&D)
The RD&D program, established in 2004, is directed towards developing science and technology, the benefits of which will accrue to California citizens and are not adequately being addressed by competitive or regulated entities.48 Included in this program are projects that focus on energy efficiency, renewable energy, public benefits, and joint opportunities with other entities.
The decision establishing this program provided for the utilities to maintain their existing authorized RD&D cost allocation method. Hence, SoCalGas and SDG&E use the EPMC cost allocation method to recover their costs from this program. PG&E, not having non-PP program RD&D programs at the time this program was established, was required to allocate its RD&D PP program costs on an ECPT cost allocation method. However, it was authorized to request use of the EPMC cost allocation method in a future BCAP or other ratemaking proceeding.49
5. Self Generation Incentive Program (SGIP)
The SGIP, established in 2001, is an incentive program to promote the development, installation, and interconnection of clean and efficient self-generation and cogeneration resources to improve system reliability for customers.50 Self-generation include distributed generation technologies (micro-turbines, small gas turbines, wind turbines, photovoltaics, fuel cells and internal combustion engines) installed on the customer's side of the utility meter that provide electricity for a portion or all of that customer's electric load.
The cost allocation method for recovering program costs was not specifically addressed in the decision that established this program. The decision, instead, provided for the utilities to track all program costs in memorandum accounts and to include program costs in their next BCAP. SoCalGas adopted the ECPT cost allocation method as an interim allocation method and SDG&E the EPMC cost allocation method. Neither of these utilities has had a BCAP proceeding since this program was established. For PG&E, SGIP costs were tracked in a memorandum account until its 2005 BCAP. In that proceeding, PG&E was authorized to use the ECPT cost allocation method, which has consistently been adopted for cost recovery of environmental programs.51
6. Board of Equalization Administrative Expenses (BOE)
This program, established in 2004, consists of the Commission's and Board of Equalization's costs of administering the PP programs.52 Program costs are recovered as an overhead cost to the surcharges applicable to the various PP programs. PP program costs are allocated to customer classes on an ECPT method. The ECPT method was adopted without any discussion.53
7. The California Institute for Climate Solutions (CICS)
The CICS program considered and vacated in Rulemaking (R.) 07-09-008 would have established an entity to explore solutions to global warming and to reduce greenhouse gas emissions and be based on the ECPT cost allocation method.
8. Solar Water Heating (SWH)
The SWH program is being considered pursuant to the Solar Water and Heating and Efficiency Act of 2007 (Assembly Bill 1470). This program would, among other matters, establish programs to reduce natural gas demand, pollution including greenhouse gases, and create a mainstream market for solar water heating technology. The SWH surcharge would apply to both core and noncore gas customers and be based upon ECPT.
(END OF APPENDIX A)
APPENDIX B
ACRONYMS
ALJ Administrative Law Judge
BCAP Biennial Cost Allocation Proceeding
BOE Board of Equalization
CARE California Alternate Rates for Energy
CFC Consumer Federation of California
CICS California Institute for Climate Solutions
CLFP California League of Food Processors
Commission California Public Utilities Commission
DAP Direct Assistance Program
DB Defined Benefit
DRA Division of Ratepayer Advocates
ECPT Equal Cent Per Therm
EE Energy Efficiency
EPBR Equal Percent of Base Revenue
EPMC Equal Percent Margin Contribution
Guardian Guardian Industries Corporation
LIEE Low Income Energy Efficiency
PG&E Pacific Gas and Electric Company
PHC Prehearing Conference
PPH Public Participation Hearing
PP Programs Public Policy Programs
RD&D Research Development and Demonstration
SDG&E San Diego Gas & Electric Company
SGIP Self Generation Incentive Program
SoCalGas Southern California Gas Company
SWH Solar Water Heating
TURN The Utility Reform Network
Vernon City of Vernon
(END OF APPENDIX B)
40 58 CPUC2d, 278 at 279.
41 Equal cent per therm allocates program costs to each customer based on transported gas volumes, except customers that are specifically exempt from paying the costs of any given program.
42 32 CPUC2d, 406 at 416.
43 D.05-09-043, mimeo., p. 184.
44 See D.95-12-053, 63 CPUC2d (1995), 414 at 456, and D.05-09-043.
45 D.07-12-051 (2007), mimeo., p. 3.
46 Exhibit 2, p. S-8.
47 See D.94-12-052, 58 CPUC2d 306 at 348, 349, and 357.
48 See D.04-08-010 mimeo., p. 25.
49 See D.04-08-010 mimeo, p. 41.
50 See D.01-03-073 and Pub. Util. Code § 399.15(b).
51 See D.05-06-029, mimeo., p. 17, and Conclusion of Law 5, p.26.
52 See D.04-08-010 and Pub. Util. Code § 895 (b) and (c).
53 See D.04-08-010, mimeo., p. 21.
