2. Background
Applicant Pacific Gas and Electric Company (PG&E) seeks Commission approval of a plan to invest $9.9 million of ratepayer funds in Silicon Valley Technology Corporation (SVTC), a start-up company that proposes to build a new solar panel fabrication facility, the Photovoltaic Manufacturing and Development Facility (PV MDF), in Santa Clara County. SVTC has already secured a commitment from the United States Department of Energy (DOE) for a $30 million investment. However, the DOE commitment is contingent upon SVTC raising an additional $9.9 million in matching funds.1 On September 28, 2011, CAlifornians for Renewable Energy, Inc. (CARE) filed a motion to dismiss this action. On October 5, 2011, The Utility Reform Network (TURN), the Division of Ratepayer Advocates (DRA), Greenlining Institute (Greenlining), the Marin Energy Authority (MEA), and the Western Power Trading Forum (WPTF), all of whom together with CARE had protested the application, filed a joint motion to dismiss this action. CARE, TURN, DRA, Greenlining, MEA and WPTF are collectively referred to herein as "Protestors." On October 31, 2011, the assigned Administrative Law Judge (ALJ) denied the motions to dismiss. Pursuant to a schedule adopted at a prehearing conference on September 22, 2011, the parties filed joint opening briefs on November 21, 2011 and joint reply briefs on December 6, 2011. The parties waived evidentiary hearings.
PG&E argues that the PV MDF will engage in research and development (R&D) activities; that R&D investments of ratepayer funds are specifically authorized by Pub. Util. Code §§ 740 and 740.1;2 and that we have approved such investments in the past. PG&E also argues that this investment is consistent with renewable energy programs sponsored by the Commission and points out that it is supported by Governor Brown. Finally, PG&E asserts that ratepayers will be adequately compensated for the investment through their ownership stake in SVTC.
Protestors deny that the PV MDF will engage in R&D activities and argue that the investment is not authorized either by Pub. Util. Code §§ 740 and 740.1 or by § 2775.5,3 which sets out specific requirements that must be met by electrical or gas corporations seeking to invest ratepayer funds in solar energy systems. They assert that investing ratepayer funds in a for-profit start-up company is risky, unprecedented, and sets a disturbing precedent, regardless of its legality. They argue that this type of investment is better suited to a non-regulated entity and point out that shareholders of PG&E have made such investments in the past. Finally, they argue that if the Commission approves the investment, it should be subject to additional conditions designed to increase the probability that ratepayers will ultimately recover the investment.
1 PG&E's original application sought authority to invest $19.8 million in ratepayer funds which was a requirement for receiving an expected grant of $98 million from DOE. When DOE reduced the amount of the grant from $98 million to $30 million, the required matching investment was reduced to $9.9 million. While the dollar amount of ratepayer money at risk has been halved by this change, the percentage of total project cost to be covered by the ratepayers has increased from 20% to just under 25%. It should also be noted that ratepayers must be charged $17.8 million in order to provide PG&E with $9.9 million to invest in SVTC.
2 Section 740:
For purposes of setting the rates to be charged by every electrical corporation, gas corporation, heat corporation or telephone corporation for the services or commodities furnished by it, the commission may allow the inclusion of expenses for research and development.
Section 740.1:
The commission shall consider the following guidelines in evaluating the research, development, and demonstration projects proposed by electrical and gas corporations:
(a) Projects should offer a reasonable prospect of providing benefits to ratepayers.
(b) Expenditures on projects which have a low probability for success should be minimized.
(c) Projects should be consistent with the corporation's resource plan.
(d) Projects should not unnecessarily duplicate research projects previously or immanently undertaken by other electrical or gas corporations or research organizations.
(e) Each project should also support one or more of the following objectives:
1. Environmental improvement.
2. Public and employee safety.
3. Conservation by efficient resource use or by reducing or shifting system load.
4. Development of new resources and processes, particularly renewable resources and processes which further supply technologies.
5. Improve operating efficiency and reliability or otherwise reduce operating costs.
3 Section 2775.5(a):
If an electrical or gas corporation desires to manufacture, lease, sell, or otherwise own or control any solar energy system, it shall submit to the commission, in such form as the commission may specify, a description of the proposed program of solar energy development which it desires to pursue. The corporation may pursue the program of solar energy development unless the commission, within 45 days after the commission has accepted the filing of the corporation's description pursuant to this subdivision, orders the corporation to obtain from the commission the authorization to do so provided in this section. In cases where the corporation seeks to pursue a program of solar energy development with costs and expenses to be passed through to the ratepayers, the corporation may not implement the program until it receives an authorization from the commission which includes findings and a determination, pursuant to subdivision (f), that the program is in the ratepayer's interest. No such authorization shall be required for any solar energy system which is owned or controlled for experimental or demonstration purposes. As used in this subdivision, "experimental or demonstration purposes" means a limited program of installation, use, or development the sole purpose of which is to investigate the technical viability or economic cost effectiveness of a solar application.
(b) The commission shall deny the authorization sought if it finds that the proposed program will restrict competition or restrict growth in the solar energy industry or unfairly employ in a manner which would restrict competition in the market for solar energy systems any financial, marketing, distributing, or generating advantage which the corporation may exercise as a result of its authority to operate as a public utility. Before granting any such authorization, the commission shall find that the program of solar energy development proposed by the corporation will accelerate the development and use of solar energy systems in this state for the duration of the program.
(f) The costs and expenses of implementing a program of solar energy development shall not be passed through to the ratepayers of an electrical or gas corporation unless the commission finds and determines that it is in the ratepayers' interest to do so.
