15. Assignment of Proceeding
Michael R. Peevey is the assigned Commissioner and David K. Fukutome is the assigned Administrative Law Judge in this proceeding.
1. Prior to filing the Cornerstone application, Commissioners expressed concern about PG&E's level of reliability.
2. The scope and costs of PG&E's Cornerstone proposal are substantial. While the revenue requirements for the years 2010 through 2016, as calculated by PG&E, amount to $1.1 billion, cost recovery for the project will extend far beyond that timeframe and result in a revenue requirement totaling closer to $6 billion.
3. While historical SAIDI and SAIFI comparisons indicate that PG&E's reliability is lower than specified comparison groups, there are reasons for the discrepancies as detailed in D.04-10-034.
4. PG&E has not provided any compelling evidence for changing the previous Commission determination in D.04-10-034 with respect to reliability comparisons with other utilities.
5. PG&E's reliability performance over the past four years has been better than the adequate service standard established in its 1999 GRC (D.00-02-046).
6. PG&E's reliability performance has been generally consistent with the targets established by the Commission as part of PG&E's 2005-2007 Reliability Incentive Mechanism (D.04-10-034).
7. Projects necessary to maintain the current level of electric distribution reliability are addressed in PG&E's GRCs.
8. In the 2005 VOS study, it is indicated that current PG&E customers in all classes report in high numbers that the service they are receiving meets or exceeds their expectations for service quality and that most customers participating in the research are receiving acceptable service, as a function of outage frequency, for service interruptions of all types.
9. There is no new VOS evidence that supersedes, the 2005 VOS study.
10. There is no good evidence to indicate what level of overall improved reliability is necessary or appropriate.
11. Based on a reduced program, up to 68% of PG&E's quantifiable reliability improvement benefits associated with Cornerstone can be achieved for 18% of PG&E's forecasted capital expenditures.
12. With respect to distribution automation, at this point, there is insufficient justification for authorizing capital expenditures amounting to over $600 million to maximize reliability improvements or create a more robust distribution system.
13. Automating the 400 worst circuits would cost $7.2 million per minute of SAIDI saved, while the additional 817 circuits not in the group of 400 worst would cost $28.6 million per minute of SAIDI reduction.
14. Due to cost uncertainty, TURN's estimate of $75,000 for underground devices is as reasonable as is PG&E's estimate of $100,000.
15. For years not covered by union contracts, labor escalation in GRCs is generally based on forecasted factors.
16. Pole replacement and vehicle costs are legitimate distribution automation costs. Commensurate with the reduced level of distribution automation funding that is adopted, pole replacement and vehicle costs over the 2010 through 2013 period amount to $5.678 million and $0.970 million, respectively.
17. While the existing distribution system has a significant amount of existing connectivity additional interconnectivity is necessary to accommodate distribution automation.
18. When dividing interconnectivity projects into quintiles, the first two quintiles provide 43% of the total reliability benefits for all of the 194 projects for only $7.4 million or 6.5% of the $114.6 million total cost.
19. PG&E has not demonstrated the need for its proposed higher level of substation transformer emergency capacity.
20. With respect to substation transformer emergency capacity, the extended customer outage risk is low, and the bulk of FLISR benefits associated with distribution automation do not depend on the more robust system that PG&E's proposal would provide.
21. The purpose of mobile transformers is to maintain flexibility to use them in emergencies.
22. The Energy Policy Act of 2005 encouraged the use of mobile transformers.
23. The Electric Power Research Institute is conducting research into cheaper emergency mobile transformers with 20% lower cost, 25% less weight and 50% faster installation.
24. PG&E's individual bank loss deficiency studies indicate there are 191 substation emergency deficiencies, and the proposal for 95 specific projects addresses deficiencies that range from slightly more than 0.13 MW to 38.6 MW. For the 2010 through 2013 timeframe, there are 23 substations with deficiencies greater than 15 MW.
25. The reliability comparison information provided by PG&E reveals that among PG&E customers, those in low density areas, principally rural, receive less reliable service than those in high density areas.
26. PG&E's rural reliability program is cost-effective.
27. There is no opposition to PG&E's proposal to recover the cost of Cornerstone in electric distribution rates in the same manner as other distribution revenue requirements, by using the then current revenue allocation and rate design methods to change rates.
1. The preponderance of evidence does not support the need for a program with the scope and cost of Cornerstone as proposed by PG&E.
2. Requested cost recovery associated with Cornerstone as proposed by PG&E should be denied.
3. It is reasonable to consider specific elements of PG&E's Cornerstone proposal for cost recovery, especially those that address specific problems in a reasonable manner and those that are cost-effective.
4. PG&E should address all future electric distribution reliability matters in an integrated fashion through the GRC process.
5. As part of its next GRC (after the current ongoing 2011 GRC), PG&E should conduct a new VOS study for use, at least in part, in determining and justifying its electric distribution reliability needs.
6. It is important that the needs of customers who continually receive significantly poorer service than others be addressed.
7. Basing the adopted distribution automation budget on the automation of the 400 worst-performing circuits is reasonable. However, PG&E should prioritize its program so that it obtains the most reliability benefit for the least cost.
8. For purposes of determining a distribution automation budget, use of a 3 zone assumption and a value of $75,000 for underground devices is reasonable.
9. TURN's use of forecasted labor escalation for those years not yet covered by union contracts is reasonable.
10. For distribution automation capital expenditures, $5,678 million for pole replacement costs and $0.970 million for vehicles are reasonable.
11. The need for a broadly based feeder interconnectivity program has not been justified.
12. $36.7 million for connectivity projects to accommodate the adopted level of distribution automation project expenditures is reasonable.
13. It is reasonable for PG&E to invest approximately $7.4 million in the cheapest of the capacity connectivity projects that have reliability benefits.
14. At least in the short term, PG&E should continue to rely on mobile transformers to address substation transformer emergency capacity problems.
15. In order to help ensure the continued viability of mobile transformer use for emergency capacity purposes, it is prudent to keep the potential number of deficient transformer banks in check. For substation capacity projects proposed over the 2010 through 2013 period, it is reasonable to implement 23 projects, totaling $114.511 million in capital expenditures, for those substations that have emergency MW deficiencies in excess of 15 MW.
16. PG&E's rural reliability program is reasonable, and the proposed projects, totaling $59.924 million in capital expenditures, should be implemented over the 2010 through 2013 timeframe.
17. In identifying and prioritizing projects, PG&E should optimize the funds authorized by this decision to mitigate the identified problems of worst-performing circuits, emergency substation capacity and rural reliability, by considering the severity of the problems, options available, cost-effectiveness analysis, and non-quantifiable benefits. With exception of shifting funds to the emergency substation capacity program, PG&E should be allowed to shift funds between programs.
18. Rates should be set initially to recover forecasted costs. PG&E should establish a new balancing account to track recorded costs.
19. PG&E should provide annual reports that discuss work completed during the prior calendar year and the cost of that work, and a forecast of work to be performed in the current calendar year. Reports should be submitted annually by March 1 in each of the years 2010 through 2014, for work done in the prior year.
20. PG&E's revenue allocation and rate design proposal is reasonable.
IT IS ORDERED that:
1. Pacific Gas and Electric Company shall implement the authorized version of the Cornerstone Improvement Project, for the time period 2010 through 2013, as specified in Attachment A.
2. Pacific Gas and Electric Company shall file an advice letter by October 1, 2010 to implement rates related to the authorized Cornerstone Improvement Project expenditures for 2011.
3. Pacific Gas and Electric Company shall use its results of operations model used in this proceeding and incorporate the costs adopted in this decision to determine the appropriate revenue requirements for the years 2011 through 2013. Detailed results shall be included in the advice letter that implements rates for 2011.
4. Pacific Gas and Electric Company shall recover the authorized costs of the Cornerstone Improvement Project in electric distribution rates in the same manner as other distribution revenue requirements, by using the then current revenue allocation and rate design methods to change rates.
5. Pacific Gas and Electric Company shall establish the Cornerstone Improvement Project Balancing Account to track the revenue requirements associated with actual costs. At the end of 2013, any balance associated with authorized revenue requirement in excess of recorded revenue requirement shall be refunded or credited to ratepayers.
6. For the years 2012 and 2013, Pacific Gas and Electric Company shall recover the forecast revenue requirements and the year-end balance recorded in the Cornerstone Improvement Project Balancing Account in electric rates in the Annual Electric True-up advice letters for those years.
7. As part of its scheduled test year 2014 general rate case filing, Pacific Gas and Electric Company shall include a new value of service study for electric reliability.
8. Pacific Gas and Electric Company shall provide annual reports that discuss work completed during the prior calendar year and the cost of that work, and a forecast of work to be performed in the current calendar year. The reports shall also include an accounting of the specific projects that have been funded or are being funded and a description of how the final projects were selected including alternatives, cost-effectiveness and priorities. Reports shall be submitted annually by March 1 in each of the years 2010 through 2013, for work done in the prior year.
9. Application 08-05-023 is closed.
This order is effective today.
Dated June 24, 2010, at San Francisco, California.
MICHAEL R. PEEVEY
President
DIAN M. GRUENEICH
JOHN A. BOHN
TIMOTHY ALAN SIMON
NANCY E. RYAN
Commissioners
Attachment A
Authorized Expenditures for the Years 2010 through 2013
(Nominal dollars in thousands)
Distribution Automation
Install FLISR systems and perform associated work on the 400 worst performing circuits, with appropriate prioritization of projects based on the severity of the problem and cost effectiveness analyses.
2010 |
2011 |
2012 |
2013 |
Total |
|||||||
Capital Expenditures |
$15,547 |
$32,066 |
$43,804 |
$44,924 |
$136,341 | ||||||
Expenses |
- |
754 |
2,336 |
4,563 |
7,653 | ||||||
Distribution Capacity -
Feeder Interconnectivity
Upgrade feeders in urban/suburban areas to accommodate authorized distribution automation and to realize reliability benefits of the most cost effective projects, including the projects specified by TURN that total $7.4 million.
2010 |
2011 |
2012 |
2013 |
Total |
|||||||
Capital Expenditures |
$ 4,992 |
$10,779 |
$14,706 |
$ 15,061 |
$ 45,538 | ||||||
Distribution Capacity -
Substation Transformer Emergency Capacity
Install transformers on substation banks with emergency capacity deficiencies greater than 15 MW, with appropriate prioritization of projects based on the severity of the problem and cost effectiveness analyses.
2010 |
2011 |
2012 |
2013 |
Total |
|||||||
Capital Expenditures |
$ 310 |
$38,900 |
$39,972 |
$ 35,330 |
$ 114,512 | ||||||
Expenses |
- |
- |
487 |
1,000 |
1,487 | ||||||
Distribution Capacity -
Project Management
2010 |
2011 |
2012 |
2013 |
Total |
|||||||
Capital Expenditures |
$ 174 |
$ 606 |
$ 510 |
$ 473 |
$ 1,763 | ||||||
Rural Reliability
Install reclosers and fuses on rural distribution circuits, with appropriate prioritization of projects based on the severity of the problem and cost effectiveness analyses.
2010 |
2011 |
2012 |
2013 |
Total |
|||||||
Capital Expenditures |
$ 4,229 |
$15,968 |
$19,313 |
19,784 |
$ 59,294 | ||||||
Expenses |
- |
5 |
25 |
49 |
79 | ||||||
(End of Attachment A)
ATTACHMMENT B
Lists of Appearances
************** PARTIES ************** |
Norman J. Furuta |
Robert Finkelstein |
Kevin S. Nakamura |
Reed V. Schmidt |
Mark Mitchell |
Bruce T. Smith |
Luke Dunnington |
Keith R. Mccrea (END OF ATTACHMENT B) |
