6. Should Ratepayers Fund Any AMI Pre-Deployment Activities?

On brief, TURN discusses that historically the Commission ensures that the requirements of Pub. Util. Code § 451 are met by either reviewing proposed programs, deeming them reasonable and authorizing a set amount of costs or allowing for separate accounting of project costs with after the fact reasonableness review.² TURN states that "PG&E's request for authority to recover up to $49 million in pre-deployment costs for an AMI project that has yet to be approved, without further reasonableness review and without any analysis of cost-effectiveness, contravenes basic Commission regulatory policies ..." by forgoing both pre-authorization review of the costs it seeks authority for, and after the fact reasonableness review. (TURN Brief, pp. 1-2.) TURN believes that forgoing this review would not allow the Commission to find that the charges associated with recovery of PG&E's pre-deployment costs are just and reasonable as required by § 451.

TURN also argues that Commission precedent does not support PG&E's request for pre-approval of expenditures in advance of assessment of the cost-effectiveness or reasonableness. TURN points to Decision (D.) 01-04-006 and D.01-07-029 which upheld the proposition that "the burden to demonstrate reasonableness for cost recovery will be on each respondent utility" for emergency reliability programs even in light of the energy crisis that California was suffering from. (See D.01-07-029, p. 3.) TURN indicates that subsequent rulings in A.04-01-009 and A.04-02-026 followed past precedent by rejecting utility requests for pre-approval of cost recovery of certain project components prior to a comprehensive review of the projects as a whole. (TURN
Brief, pp. 4-5.)

6.1 Discussion and Conclusion

TURN and ORA appear to argue that because no party has reviewed PG&E's proposed pre-deployment expenditures for reasonableness that the Commission is foreclosed from finding that the expenditures are reasonable. However, PG&E's application clearly stated that it was seeking a finding of reasonableness of its proposed pre-deployment expenditures. The fact that TURN and ORA chose not to evaluate the cost-effectiveness of PG&E's proposed expenditures places the Commission in an awkward position with respect to the robustness of the record, but does not preclude the Commission from independently assessing the expenditures that PG&E has proposed for reasonableness. This argument really goes to the issue of what level of funding should be authorized, not whether funding can or should be authorized, and thus we do not find that it is inherently inappropriate for ratepayers to fund AMI pre-deployment activities.

TURN and ORA argue on policy grounds that it is unwise for the Commission to separate review of the proposed pre-deployment expenditures and scope proposed by PG&E from review of the deployment decision. In essence, they argue that there is no way that the pre-deployment activities will be reasonable unless the Commission approves deployment of AMI, a determination that has not yet been made. Under this reasoning, finding PG&E's proposed pre-deployment costs reasonable requires the Commission to assume that AMI deployment will occur, resulting in prejudgment of the deployment application.

The analogy drawn by TURN to the ruling by the ALJ and Assigned Commissioner in A.04-01-009 (and A.04-02-026) is particularly on point. For example, on page 2 of the Assigned Commissioner and Administrative Law Judge Ruling Denying Motion Requesting Authorization to Sign Contracts and Recover Cancellation Costs, the ALJ and Commissioner state:

"In this application, PG&E is proposing to construct the SGRP [Stem Generator Replacement Project], and is requesting approval of the reasonableness of the SGRP in advance of actual construction. It is also requesting that the Commission set a cost for the SGRP that will carry with it a presumption of reasonableness. Entering into the contracts is one of the first steps in the SGRP."

If you were to replace terms in the above quote that relate to "construction of the SGRP" with "deploying AMI" you would describe PG&E's proposal in this application. Pursuit of the activities PG&E has defined as pre-deployment for its AMI Project are, like signing contracts in the above quote, the first steps in deploying AMI. However, the bulk of these arguments again go to the proper scope and definition of pre-deployment activities, not whether or not any pre-deployment activities should be funded by ratepayers. Therefore, we find that there is no legal impediment to authorizing pre-deployment activities and we will consider the scope of the activities on the merits.