4. Positions of the Other Parties

A number of different parties participated in this proceeding. Parties object to at least some, if not all, aspects of the Cornerstone proposal, and have supplemented the record with their testimonies and recommendations. A brief summary of their positions follow.

4.1. TURN

TURN urges the Commission to reject PG&E's application arguing that the request is unreasonable and inadequately supported and PG&E's approach to this matter is fundamentally flawed. According to TURN, PG&E's proposal is not cost-effective, is not prioritized to provide the most benefits at the least cost, contains well over a billion dollars of spending that will have miniscule impacts (if any) on reliability measures, and ignores existing equipment. Also, PG&E has not demonstrated that its proposal will address the types of reliability events that spawned the application, such as the 2006 heat storms, the 2007-2008 storm season, and other high profile outages. TURN states by the Commission saying "no" to PG&E's application, PG&E will be required to work with the tools already available to the utility to address reliability performance, just as it did in developing and implementing the 2007 SAIFI Reduction Program (designed to achieve 40% of the SAIDI improvement at 2% of the cost of the Distribution Reliability Improvement Program). TURN adds that the record evidence suggests that Cornerstone would not only serve the more general goal of increasing rate base investment as a means of achieving the company's ambitious earning growth goals, but is specifically identified as a way out of the hole created by the shortfall in its "Business Transformation" efforts.

TURN's primary alternative recommendation would have the Commission provide clear guidance as to the type of showing the utility needs to make in support of any proposal for additional reliability-targeted spending, and create a separate phase of the upcoming GRC to consider such proposals. TURN also recognizes that where the subject matter is PG&E's service reliability, the Commission may be reluctant to reject the application in its entirety and instead desire to give the utility some amount of additional funding to spend toward improving reliability. If the Commission decides to authorize some funding in this application, TURN recommends that it should approve funding in amounts no greater than those set forth in TURN's second alternative recommendation. It should also condition any such funding as TURN proposed in that alternative, to achieve some degree of the prioritization and cost consciousness that TURN asserts is lacking in the application. TURN estimates that this alternative provides approximately 65% of PG&E's reliability (SAIDI/SAIFI) improvement for 11% of PG&E's budget recommendation. The capital expenditures associated with TURN's alternative recommendation are $129.7 million for distribution automation; $44.7 million for distribution capacity principally to support distribution automation; and $53.3 million for accelerated rural reliability. TURN would also include $7.7 million in expenses for distribution automation.

4.2. DRA

DRA urges the rejection of PG&E's Cornerstone proposal. The general issues upon which DRA bases its opposition to the project are as follows: PG&E fails to satisfy its evidentiary burden; it violates statutory law and Commission precedent; and PG&E's regulatory showing has no meaningful or reliable evidence to support the project's cost-effectiveness, the value of the service it offers customers, or inter-utility comparisons on reliability, and provides insufficient details on the specific projects within Cornerstone. Also, DRA states that ratepayers' perceptions and opinions were not factors that were considered regarding whether PG&E needed to improve its electric distribution reliability. Moreover, according to DRA, there is good evidence that the Cornerstone application is primarily motivated by its corporate interest in increasing its rate base, rather than some genuine concern with serving its customers interests.

From purely policy perspective, DRA states that there could be a reasonable argument that PG&E should be entitled to consider whether to institute a program such as Cornerstone. However, DRA asserts that PG&E should have limited its request as one for guidance from the Commission, rather than the $2 billion application being considered here, adding that for a policy-supported project to go into effect, it would have to be based on tangible, verifiable, and reasonable proof that its costs and benefits would ultimately serve the public's interest. According to DRA, Cornerstone offers none of that.

CUE agrees with PG&E's position that its reliability performance is inferior to that of other utilities and that its reliability can be improved. CUE states that given proper resources, PG&E could (and should) provide better reliability to its customers.

CUE indicates that Cornerstone reliability improvements are a far cheaper solution than generation-side reliability improvements. However, CUE asserts that by excluding whole categories of potential reliability improvements, Cornerstone misses opportunities to either achieve greater reliability improvements than proposed in the filing, or achieve similar reliability improvements but at lower cost. Therefore, CUE agrees with TURN's proposal that a second phase of the 2011 GRC be created to evaluate cost - effective reliability measures. CUE asserts that such measures should include those rejected by PG&E for consideration in this proceeding such as increased staffing, shortening equipment restoration times, tree trimming beyond General Order 95 requirements, and any other measures PG&E may identify.

In general, CUE states PG&E's electric distribution capacity proposal and distribution automation proposal are reasonable. Also, given the significant benefits of the rural reliability program, CUE recommends that the program be expanded, by spending more money on fuses and reclosers for rural reliability than proposed and expanding the program to urban and suburban areas, as long as the additional fuses and reclosers are at least as cost-effective as the overall Cornerstone project. Lastly, CUE recommends that the Commission should require PG&E to keep its apprentice pipeline full as an additional means to improve reliability.

CCSF supports efforts to improve the reliability and safety of PG&E's electric service system, provided that PG&E demonstrates that the costs of such improvements are reasonable. CCSF states that PG&E had a choice of a variety of programs to achieve the goal of improving reliability, and the main issue in this application is whether PG&E has selected the right programs.

According to CCSF, there are well-accepted methods in the electric utility industry to quantitatively compare the cost-effectiveness of potential reliability improvement programs, and PG&E failed to take advantage of any of the available methods. As a result, CCSF asserts that PG&E has failed to meet its burden of demonstrating the reasonableness of its Cornerstone proposal. That is, PG&E cannot demonstrate the reasonableness of its proposed programs without a showing that those programs are cost-effective, i.e., rank favorably among the possible alternatives in terms of their reliability bang for the buck.

Consequently, CCSF recommends that the Commission deny the application without prejudice and invite PG&E to submit in another proceeding (either a new application or a general rate case) properly supported proposals to achieve the important goal of improving system reliability and safety. To support such proposals, PG&E should identify all reasonable alternatives and then evaluate and rank those alternatives using a cost effectiveness analysis of the type illustrated in CCSF's testimony.

In the event that Commission approves some of PG&E proposed expenditures for distribution automation, CCSF recommends that the Commission should direct PG&E to do a cost-benefit analysis to ensure that improvements are made to the most deserving circuits, regardless of voltage.

CFBF recommends that PG&E's application be denied in its entirety. According to CFBF, PG&E is seeking approval of a very expensive capital investment program to address a perceived problem before the Commission has reasonably investigated and rationally determined that an actual problem exists. Further, the perceived problem underpinning Cornerstone - that PG&E's reliability is significantly worse than other utilities - is based solely upon a comparison of reliability metrics that both the Commission and PG&E have found invalid and meaningless. Lastly, CFBF asserts that PG&E's Cornerstone lacks the necessary studies and analyses to allow the Commission to determine whether the proposed projects are cost effective, provide sufficient value to PG&E's customers and are affordable, considering California's economic difficulties.

ESC supports the goal of Cornerstone to improve the reliability of the distribution system for the benefit of PG&E's customers. However, ESC is concerned that PG&E will not implement Cornerstone efficiently or effectively, and that a lack of recruitment, training, or a commitment to use PG&E employees to perform the required design and engineering work will squander an ideal opportunity to make real improvements to distribution reliability and waste $2 billion of ratepayers' money.

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