2. Background
Pacific Gas and Electric Company (PG&E) filed its Cornerstone Improvement Project (Cornerstone) application, because the company believes that it is time to improve the resiliency and reliability of its electric distribution system to a level better than the "adequate" service standard adopted for PG&E in past General Rate Cases (GRCs). PG&E states that, while it has met the reliability standards set by the Commission in past years, it is proposing through the seven-year Cornerstone project to improve the reliability of its electric distribution system to a level substantially above current level and bring its performance closer to that of the other investor-owned utilities in California.
PG&E proposes adding substation transformers, doing increased interconnectivity work between distribution circuits, installing distribution automation on more distribution circuits, and improving rural reliability through the installation of reclosers and fuses. According to PG&E, the project is designed not only to improve PG&E's System Average Interruption Duration Index (SAIDI) and System Average Interruption Frequency Index (SAIFI) numbers, but also to bring PG&E's asset utilization in line with industry practice, to extend the service lives of distribution equipment, and to put into place building blocks that may provide for even better reliability and enhanced customer service once "Smart Grid" technology is more fully developed in the coming years.
2.1. Procedural Matters
This application was filed on May 15, 2008. At the time of the filing, PG&E requested that the Commission approve and fund Cornerstone over the six year period 2009 through 2014, with estimated capital expenditures amounting to $2,322 million and operation and maintenance expenses of $43 million. PG&E also proposed that the Commission impose a reliability performance metric which will result in financial penalties if PG&E did not meet the targets and symmetrical financial rewards if PG&E exceeded the targets.
On June 17, 2008, The Utility Reform Network (TURN) and the Division of Ratepayer Advocates (DRA) jointly filed a motion to dismiss the application. TURN/DRA argued that PG&E's request should be addressed not separately from, but as part of, the GRC process, and the request to do so now is a unilateral attempt to modify key terms of the Settlement regarding the distribution infrastructure funding levels adopted by the Commission in Decision (D.) 07-03-044.
Responses to the motion to dismiss were filed on June 30, 2008, by PG&E, and on July 2, 2008, by the Coalition of California Utility Employees (CUE) and jointly by the California Large Energy Consumers Association (CLECA), California Manufacturers & Technology Association (CMTA), and Energy Producers & Users Coalition (EPUC). PG&E and CUE argued that the motion should be denied, while CLECA, CMTA, and EPUC supported the motion. TURN and DRA filed a reply on July 18, 2008.
On December 19, 2009, an assigned Commissioner's and Administrative Law Judge's (ALJ) Joint Ruling was issued. The ruling denied the motion to dismiss in part, indicating that the Commission would consider PG&E's Cornerstone request as part of this proceeding. The motion to dismiss was granted in part, in that any revenue requirement increase related to the project for the years 2009 and 2010 would not be recoverable from ratepayers, and any reliability incentive mechanism that might be adopted as part of this proceeding could not be implemented until 2011, at the earliest. These two conditions were deemed necessary in order to honor certain terms and conditions of the GRC Settlement adopted by the Commission in D.07-03-044.
PG&E filed a prehearing conference (PHC) statement on January 14, 2009, indicating that it would update its testimony in light of the ruling on the motion to dismiss and the lapse of time since the application was filed. In the PHC statement, PG&E presented a revised scope of issues and a proposed procedural schedule that envisioned the issuance of a final decision by August 20, 2009. A joint PHC statement was filed on January 22, 2009 by TURN, DRA, the California Farm Bureau Federation (CFBF), and CLECA. The joint parties identified additional issues to be considered within the scope of the proceeding, identified their understanding of PG&E's burdens of production and proof as the Applicant, and proposed a schedule that would add approximately four months to that proposed by PG&E. These matters were discussed at the January 26, 2009 PHC. The assigned Commissioner's Ruling and Scoping Memo was issued on February 23, 2009.
PG&E served updated testimony on March 17, 2009. Responsive testimony was filed on July 17, 2009.1 PG&E and CUE served rebuttal testimony on August 7, 2009. Evidentiary hearings were held August 24, 2009 through August 26, 2009. Opening Briefs were filed on September 25, 2009.2 Reply briefs were filed on October 9, 2009, at which time this proceeding was submitted for decision.
1 Testimony was served by DRA, TURN, CFBF, CUE, and the City and County of San Francisco (CCSF).
2 Opening and reply briefs were filed by PG&E, DRA, TURN, CFBF, CUE, CCSF, and the Engineers and Scientists of California (ESC).
