ALJ/JMH/hl2 DRAFT Agenda ID #3431

Ratesetting

7/8/2004 Item 50

Decision PROPOSED DECISION OF ALJ HALLIGAN (Mailed 4/6/2004)

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Application of Pacific Gas and Electric Company for Authority, Among Other Things, to Increase Revenue Requirements for Electric and Gas Service and to Increase Rates and Charges for Gas Service Effective on January 1, 2003.

(U 39 M)

Application 02-11-017

(Filed November 8, 2002)

Investigation on the Commission's Own Motion into the Rates, Operations, Practices, Service and Facilities of Pacific Gas and Electric Company.

Investigation 03-01-012

(Filed January 16, 2003)

Application of Pacific Gas and Electric Company Pursuant to Resolution E-3770 for Reimbursement of Costs Associated with Delay in Implementation of Pacific Gas and Electric Company's New Customer Information System Caused by the 2002 20/20 Customer Rebate Program.

(U 39 E)

Application 02-09-005

(Filed September 6, 2002)

INTERIM OPINION ON STORM AND RELIABILITY ISSUES

Table of Contents

Title Page

INTERIM OPINION ON STORM AND RELIABILITY ISSUES 1 1

1. Summary 2 2

2. Procedural Background 3 3

3. Commission Standards for Evaluating Utility Performance 5 5

3.1 D.96-09-045 - Reliability Standard and Reporting 8 8

3.2 D.98-07-097 - GO 166 11 11

3.3 D.00-05-022 - GO 166: Standards 12 and 13 12 12

3.4 PG&E Specific Standards 12 12

4. PG&E's Existing System 14 14

5. PG&E's December 2002 Storm Response 22 22

6. Parties' Recommendations 32 32

7.1 Value of Service Study 50 50

7.2 Funding OIS Improvements 55 55

7.3 Other ORA/PG&E Agreements 63 63

a. Agreement 1 - Division Level Benchmarks 63 63

b. Agreement 2 - Five-Year Average Benchmarks 64 64

c. Agreement 3 - Definition of Major Outage 64 64

d. Agreement 4 - Tap Fuse Installation Program 66 66

e. Agreement 5 - Balancing Length of Outages 66 66

f. Agreements 8 and 9 68 68

7.4 Opening a New Rulemaking for Reliability Metrics and Standards 69 69

7.5 Performance Incentive Mechanisms and Metrics 70 70

a. Reliability Mechanisms 70 70

b. Employee Safety Mechanisms 91 91

c. Call Center Metrics 92 92

8. Conclusion 94 94

9. Comments on Proposed Decision 101 101

10. Assignment of Proceeding 102 102

Findings of Fact 102 102

Conclusions of Law 105 105

INTERIM ORDER 107 107

1. Summary

This interim decision addresses Storm and Reliability issues raised in PG&E's General Rate Case (GRC) for test year (TY) 2003. Today's decision evaluates PG&E's response to the December 2002 storms and PG&E's reliability performance in general. We approve several "improvement initiatives" identified by PG&E in response to problems with the Outage Information System (OIS) and Customer Information Systems that arose during the December 2002 storms. We find that PG&E's recommended initiatives are likely to improve outage communication and reduce outage duration and should be approved. We approve a change in the call center measurement standard requested by PG&E.

Today's decision also considers joint testimony submitted by PG&E and the Office of Ratepayer Advocates (ORA) addressing the issues raised by ORA's testimony. With regard to the PG&E/ORA joint proposal, we concur with six of the Agreements, modify two of the Agreements, and reject one of the Agreements. We do not adopt Agreement 6 of the PG&E/ORA joint proposal. As discussed in this decision, we believe that the existing value of service data is too dated to rely on, and that little would be gained by further "assessment" of this data. In lieu of the value of service assessment proposed in Agreement 6, we direct PG&E to conduct a new value of service study prior to its next GRC. This decision approves Agreements 2 and 7 with modifications.

The decision also addresses the reliability performance incentive mechanism presented in joint testimony filed by PG&E and the Coalition of California Utility Employees (CUE). We do not adopt the PG&E/CUE performance incentive mechanism. We find that the PG&E/CUE performance incentive mechanism is not in the public interest because the performance targets fail to appropriately account for existing funding commitments and commensurate reliability improvements, and the mechanism would result in an unjustified increase in PG&E's revenue requirement.

Today's decision finds that PG&E's overall reliability performance from 1999-2002, as measured by the System Average Interruption Frequency Index (SAIFI) and the System Average Interruption Duration Index (SAIDI) appears reasonable. However, today's decision does not find that PG&E's response to December 2002 storms was reasonable. Our review of PG&E's response to the December 2002 storms finds that while the multiple outages and severe damage caused by the storm were not the result of PG&E's performance, the inadequacy of PG&E's OIS resulted in several unacceptable consequences, including customers being unable to receive accurate outage information in a timely manner, certain single customer outages being extended for an unnecessary amount of time, and emergency personnel being required to stand by hazardous conditions for excessive periods of time during the storms.