ALJ/DKF/avs Date of Issuance 6/25/2010

Decision 10-06-048 June 24, 2010

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Application of Pacific Gas and Electric Company for Authority to Increase Revenue Requirements to Recover the Costs to Implement a Program to Improve the Reliability of Its Electric Distribution System (U 39 E).

Application 08-05-023
(Filed May 15, 2008)

(See Attachment B for List of Appearances.)

DECISION ON PACIFIC GAS AND ELECTRIC COMPANY

REQUEST TO IMPLEMENT A PROGRAM TO IMPROVE

ELECTRIC DISTRIBUTION SYSTEM RELIABILITY

TABLE OF CONTENTS

Title Page

DECISION ON PACIFIC GAS AND ELECTRIC COMPANY 2 2

REQUEST TO IMPLEMENT A PROGRAM TO IMPROVE 2 2

ELECTRIC DISTRIBUTION SYSTEM RELIABILITY 2 2

1. Summary 2 2

2. Background 3 3

2.1. Procedural Matters 3 3

3. PG&E's Updated Request 6 6

4. Positions of the Other Parties 7 7

5. Commission Review 13 13

6. Need for Cornerstone 14 14

6.1. Discussion 15 15

7. How to Proceed 18 18

7.1. Cornerstone 18 18

7.2. Future Proceedings 19 19

8. Adopted Elements of Cornerstone 21 21

8.1. Distribution Automation 21 21

8.1.1. PG&E's Proposal 21 21

8.1.2. Discussion 22 22

8.2. Feeder Interconnectivity 25 25

8.2.1. PG&E's Proposal 25 25

8.2.2. Discussion 27 27

8.3. Substation Transformer Emergency Capacity 28 28

8.3.1. PG&E's Proposal 28 28

8.3.2. Discussion 30 30

8.4. Rural Reliability 35 35

8.4.1. PG&E's Proposal 35 35

8.4.2. Discussion 36 36

8.5. SAIDI and SAIFI Benefits 38 38

9. Adopted Costs 39 39

10. Implementation Flexibility 40 40

Title Page

11. Cost Recovery 40 40

11.1. Discussion 42 42

12. Reporting Requirements 44 44

12.1. Discussion 45 45

13. Rate Design 46 46

14. Comments on Proposed Decision 46 46

15. Assignment of Proceeding 46 46

Findings of Fact 47 47

Conclusions of Law 50 50

ORDER 52 52

ATTACHMENT A - Authorized Expenditures for the Years 2010 through 2013

ATTACHMENT B - Lists of Appearances

DECISION ON PACIFIC GAS AND ELECTRIC COMPANY

REQUEST TO IMPLEMENT A PROGRAM TO IMPROVE

ELECTRIC DISTRIBUTION SYSTEM RELIABILITY

1. Summary

This decision determines that Pacific Gas and Electric Company (PG&E) has not demonstrated the need for its broad based Cornerstone Improvement Project that is designed to elevate PG&E's electric distribution reliability to a substantially higher level at a cost of $1,992.0 million in capital and $58.9 million in expense over the period 2010 through 2016. Instead, expenditures amounting to $357.4 million in capital and $9.2 million in expense, for the period 2010 through 2013, are authorized to fund a reduced program that (1) addresses specifically identified problems related to worst-performing circuits and substation transformer emergency capacity and (2) implements feeder interconnectivity and rural reliability projects that are cost-effective. Still, through this reduced program, it is estimated that up to 68% of the quantifiable reliability improvement benefits identified in PG&E's Cornerstone Improvement Project proposal can be achieved for the approximate 18% of the requested costs.

Particular projects that are rejected at this time are done so without prejudice. PG&E should address all future electric distribution reliability matters in an integrated fashion through the general rate case process. For its 2014 general rate case, PG&E is required to perform and present a value of service study to help it and the Commission decide to what extent, if any, electric distribution reliability should be improved to satisfy its customers' needs. In developing future reliability improvement programs or projects PG&E must be able to demonstrate the need for such programs or projects, and if there is a need, whether the program or project represents the optimal solution when considering alternatives and cost-effectiveness in the identification and prioritization processes.