6. Cost Recovery for the Opt-Out Plan and Rate Structure

PG&E proposes to recover the incremental costs to the SmartMeter Program to provide the opt-out option from customers exercising the option. Based on its estimated revenue requirement, PG&E proposes two fee schedules for customers electing to not have a wireless SmartMeter.43 One schedule would have a lower initial opt-out fee, with higher monthly charges, while the other would have a higher initial opt-out fee, with lower monthly charges.44 Under both schedules, there would be a 20 percent discount for customers enrolled in the California Alternate Rates for Energy (CARE) program. The proposed fees, assuming 148,500 customers decide to opt out, are:

Schedule A (lower initial fee and higher monthly charges)

Non-CARE $135 upfront $20 / month

CARE $105 upfront $16 / month

Schedule B (higher initial fee and lower monthly charges)

Non-CARE $270 upfront $14 / month

CARE $215 upfront $11 / month

In addition to the initial fee and monthly charges, customers would be charged a separate "exit" fee of $135 (or $105 for CARE customers) if the customer decides to have the radio communications turned on at a later date or terminates service at that location.45 This fee is to cover costs associated with enabling the SmartMeter's radio communications.

In response to the ALJ's October 12, 2011 Ruling, PG&E also submitted proposed rates for each of the other opt-out options. These rates are as follows:46

TABLE 3

CUSTOMER CHARGES BY OPT-OUT OPTION

 

Analog

Radio Out

Wired Meter

Radio Off

Initial Fee

$270

$270

$470

$270

Monthly Charge

$16

$15

$41

$14

Exit Fee

$130

$130

$130

$130

6.1. Parties' Comments

Most intervenors oppose imposing any fee on ratepayers for opting out. Both Lake and Mendocino maintain that PG&E should have already accounted for providing a radio off option, as it had been considered in A.07-12-009. As such, they argue that PG&E should not now be imposing costs on customers to provide this option.47 Network contends that customers have been harmed by the SmartMeters, and, thus, argues that it would be unfair to charge customers to opt-out.48 EON further argues that ratepayers should not be required to pay for a solution that does not solve the problems.49 These parties generally maintain that costs for the opt-out option should be the responsibility of PG&E shareholders.

Aglet states that the majority of incremental costs for the opt-out option should be allocated to all customers. It contends that the need for an opt-out option is driven by the SmartMeter Program as a whole. Therefore, it believes that, just as the SmartMeter Program costs are allocated to all customers, so should the costs associated with the opt-out option.50 DRA also states that the Commission should consider whether the program costs should be recovered from customers exercising the opt-out option, utility shareholders or all ratepayers.51

Alameda, Lake, and Mendocino also maintain that imposing opt-out fees on low-income customers is discriminatory. Lake argues that PG&E arbitrarily applies a 20 percent discount to customers enrolled in the CARE program but provides no discount for families enrolled in the Family Electric Rate Assistance (FERA) program. It further contends that imposing opt-out charges on low-income would be contrary to the objectives of these low income programs, "as these additional charges would place these low-income customers at the same rate as Non-CARE customers who do not opt to have the radios in their Smart Meters turned off."52

We agree with PG&E that a customer selecting the opt-out option should be assessed an initial charge to install the non-communicating meter and a monthly charge. The Commission authorized the utilities to deploy SmartMeters throughout their territories and complete deployment by December 31, 2012. Consequently, the standard for metering has been transitioned from the older technology, analog meters, to today's technology, SmartMeters. In this decision we are not reversing that transition, however, we do approve an option for specific customers who, for whatever reason, would prefer a non-communicating meter. This option to move away from the standard will require PG&E to incur costs such as purchasing a new meter, going back to the customer location to install and service the meter, monthly cost of reading the meter, and labor involved in rendering the existing SmartMeter non-communicative.53 These are some of the examples of the additional cost required to opt-out of the standard wireless SmartMeters.

The proposed decision had concluded that the costs for the opt-out option should not be solely the responsibility of those electing to opt-out, since some of the costs were related to the SmartMeter infrastructure as a whole. As a result, the proposed decision recommended that a portion of the opt-out costs be allocated to all residential ratepayers. In comments on the proposed decision, some parties have raised various legal and policy arguments on why some portion, or all, of these costs should be paid by all ratepayers or PG&E shareholders.54 Based on these comments, we believe it is appropriate to consider allocation of costs as part of the second phase of this proceeding.

We agree with Lake that any discount provided to customers enrolled in the CARE program should also be provided to customers enrolled in the FERA programs. However, we do not agree with Lake's assertion that imposing opt-out charges on low-income would be contrary to the objectives of these low-income programs. Lake incorrectly compares the rates to be paid by CARE customers electing a non-communicating SmartMeter with Non-CARE customers who do not opt out of wireless SmartMeters. These two groups of customers are not receiving the same type of service, since their meters will have different levels of functionality (wireless communications vs. no communications). Further, the wireless SmartMeter is the standard adopted for PG&E's Advanced Meter Infrastructure program. Therefore, any customer opting to have a non-communicating meter is electing to not have the standard. More importantly, the opt-out option is voluntary, as a customer may participate for any reason, or no reason at all. As such, the fact that a CARE customer's electric bill will increase because the customer has decided to participate in the opt-out option should not be considered "defeating" the purpose of the low-income programs.

The proposed decision had recommended the following fees and charges for customers electing a non-communicating digital meter opt-out option:

For Non-CARE and Non-FERA Customers:

For CARE and FERA Customers:

We decline to adopt an exit fee at this time. PG&E's proposed exit fee would be the same regardless of which opt-out option is adopted, and the current record does not contain sufficient evidence to justify why such a fee is necessary. Therefore, we will consider the appropriateness of an exit fee in the second phase of this proceeding.

Parties' comments on this proposal have ranged from no additional fees for opting out55 to setting a reasonable level of fees.56 Additionally, DRA has recommended that there should be a different initial fee depending on whether the customer is selecting the opt-out option for one or two meters.57 Based on these comments, and our determination to adopt an analog meter opt-out option, further consideration of the fees and charges to be assessed on customers electing the opt-out option should be included in the second phase of this proceeding.

We recognize that this second phase of the proceeding will take time to complete based on the number of issues identified in this decision. At the same time, we do not wish to delay the implementation of the opt-out option. Accordingly, we adopt interim fees and charges, subject to adjustment once a decision on costs and cost allocation for the opt-out option is issued, for customers electing the opt-out option. The interim fees and charges are as follows:

For Non-CARE and Non-FERA Customers:

For CARE and FERA Customers:

PG&E is authorized to establish new two-way electric and gas Modified SmartMeter Memorandum Accounts to track revenues and costs associated with providing the opt-out option. We allow PG&E to track these costs and revenues in a two-way memorandum account so that it will preserve the opportunity to seek recovery of these costs and revenues once a final decision on costs and cost allocation is issued.58

43 PG&E Testimony at 1-2 - 1-3.

44 Customer could pay for monthly charges on either a flat-fee basis or based on their energy consumption.

45 PG&E Testimony at 2A-5.

46 PG&E Response to ALJ October 12, 2011 Ruling, filed October 28, 2011, Attachment A, Summary. On November 9, 2011, PG&E filed a revised version of Attachment A to correct some calculation errors. The charges in Table 3 include the corrections contained in the November 9 filing.

47 Lake Protest at 4; Mendocino Protest at 3-4.

48 Network Protest at 5.

49 EON Protest at 14.

50 Aglet Protest at 3.

51 DRA Response at 6.

52 Lake Protest at 4.

53 PG&E's Response to the October 12, 2011 ALJ Ruling.

54 See, e.g., Lake Comments, filed December 12, 2011, at 8 (allocation of costs to all ratepayers is inconsistent with § 728, as non opt-out customers would pay for a benefit received only by opt-out customers); TURN Comments, filed December 12, 2011, at 14-15 (costs associated with offering an opt-out option are a reasonable risk of the AMI program and should be borne by PG&E shareholders).

55 See, e.g., California County of San Francisco (CCSF) Comments, filed December 12, 2011, at 4-5; Network Comments, filed December 12, 2011, at 4.

56 See, e.g, Aglet Comments, filed December 12, 2011, at 4 (opt-out charges be set at a level that would discourage "frivolous opting out."); TURN Comments, filed December 12, 2011, at 8-10 (need to consider affordability and equity when setting fees).

57 DRA Comments, filed December 12, 2011, at 6-9.

58 Authorization of a memorandum account does not necessarily mean that the Commission has decided that the types of costs to be recorded in the account should be recoverable in addition to rates that have been otherwise authorized, e.g., in a general rate case. Instead, the utility shall bear the burden when it requests recovery of the recorded costs, to show that separate recovery of the types of costs recorded in the account is appropriate, that the utility acted prudently when it incurred these costs and that the level of costs is reasonable. Thus, PG&E is reminded that just because the Commission has authorized these memorandum accounts does not mean that recovery of costs in the memorandum accounts from ratepayers is appropriate.

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