5. Commission Review

By addressing electric distribution reliability now rather than as part of PG&E's test year 2011 GRC, as would normally be the case, this issue has been singled out as being important to the Commission. As stated in the February 23, 2009 assigned Commissioner and ALJ's Joint Ruling:

...A reliably functioning electric distribution system is crucial for maintaining the welfare of the utility's customers and supporting the economy. It is preferable to begin the scrutiny and detailed analyses to determine whether major capital expenditures are necessary to maintain or improve distribution reliability and, if necessary, to determine the extent and timing of such expenditures, sooner rather than later ... (at 5).

While we have stressed the importance of reliability, it is only a part of our overall responsibility to ensure that utilities provide safe, reliable, and efficient service at reasonable rates.

PG&E's Cornerstone proposal is designed to increase electric distribution reliability, primarily through capital expenditures to bolster or replace certain aspects of its electric distribution infrastructure. As with any review of capital additions, our primary concerns are (1) whether there is a need for Cornerstone; (2) if there is a need, whether Cornerstone represents the optimal solution when considering alternatives and cost-effectiveness analysis that takes into consideration both quantifiable and non-quantifiable benefits.

While we will look at the Cornerstone proposal in total, we will also consider whether it is appropriate and reasonable to adopt portions of the proposal rather than the total amount. There are a number of parts to PG&E's proposal, and some may stand up better than others to our review.

PG&E, as the applicant, has the burden of affirmatively establishing the reasonableness of all aspects of its request and proving that it is entitled to the relief in rates that is seeking. As with any GRC related matter, the standard of proof that the applicant must meet is that of a preponderance of evidence.

It is with these basic principles in mind that we will review PG&E's Cornerstone request.