7. Comments on Proposed Decision

The proposed decision was initially issued for comment on September 6, 2005, in accordance with Pub. Util. Code § 311(d) and Rule 77.1 of the Rules of Practice and Procedure. Comments were filed on September 26 and 30, 2005. Subsequently, the proposed decision was withdrawn from the Commission's agenda. The decision was revised and reissued for comment.

The proposed decision of the commissioner in this matter was mailed to the parties in accordance with Section 311 of the Public Utilities Code and comments were allowed under Rule 14.3 of the Commission's Rules of Practice and Procedure. Comments were filed by CCDC, CCSE, CESA, DRA, FCE, IREC, PG&E, the Solar Alliance, SCE, and SDG&E/SCG. Reply comments were filed by CCDC, CCSE, FCE, IREC, PG&E, the Solar Alliance, and SCE.

Where the comments suggested minor adjustments or clarifications to the decision, these have been incorporated throughout. Where comments reargued earlier positions or attempted to present new arguments or facts, they were not considered.

A few comments merit discussion. Several parties commented that there were errors in the discussion of how to include T&D investment deferrals in the methodology. That section of the decision has been revised to remove the distinction between grid-side and customer-side DG. In addition, the discussion of the physical assurance requirements of D.03-02-068 has been amended to clarify that while those requirements are intact for purposes of contracts for T&D investment deferrals, the requirements are not applicable to the methodology we will use to estimate collective T&D benefits of both grid-side and customer-side DG.

Solar Alliance and FCE commented that we should attempt to include employment and tax revenue benefits in the analysis. The decision has been revised to direct the contractor to suggest a methodology for quantifying these effects, and to allow for further comments and consideration of this issue.

DRA and FCE ask for additional transparency and opportunity for input as the cost-benefit tests are performed by the contractor, particularly if input variables are modified as allowed in certain circumstances. The decision has been modified to clarify that once the contractor completes the cost-benefit analysis, parties will have an opportunity for comment and the ALJ and assigned Commissioner will determine if further hearings or workshops are necessary following those comments.

Solar Alliance alleges the decision errs in neglecting to include the price elasticity benefits of DG in the natural gas market, although it has included the price elasticity effects of DG in electricity markets. Solar Alliance is incorrect. The decision specifically excludes electricity market price elasticity effects from the cost-benefit analysis, finding that if DG resources are anticipated, we should not assume their addition will impact the market price of electricity. The decision agrees with the parties who claimed that the utilities will procure fewer non-DG resources in response to anticipated DG capacity.

Nevertheless, we agree with Solar Alliance that, in general, the DG resources deployed through our various incentive programs in California should reduce demand for natural gas, and this may result in lower prices for natural gas than might otherwise occur if these DG resources were not deployed. The key question is whether this reduced demand is currently large enough to have a measurable impact on natural gas market prices. Despite our agreement with Solar Alliance that our programs should reduce natural gas demand, we will not direct our consultant to estimate natural gas market price impacts at this time. It is our view that this may be worthy of consideration when DG penetration reaches a higher level. For now, we find the potential market price impact from our programs is too small to justify creating a methodology and isolating this impact from other natural gas market price fluctuations. We can revisit this determination at a later date and direct study of this potential benefit if conditions warrant it.