ALJ/JSW/tcg Date of Issuance 4/18/2011
Decision 11-04-031 April 14, 2011
BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
Application of Pacific Gas and Electric Company Proposing Cost of Service and Rates for Gas Transmission and Storage Services for the Period 2011-2014. (U 39 G) |
Application 09-09-013 (Filed September 18, 2009) |
(See Appendix D for List of Appearances.)
DECISION REGARDING THE GAS ACCORD V SETTLEMENT
TABLE OF CONTENTS
Title Page
DECISION REGARDING THE GAS ACCORD V SETTLEMENT 1
1. Summary 2
2. Procedural Background 5
3. Discussion 8
3.1. Introduction 8
3.2. Public Participation Hearing Comments 10
3.3. Joint Motion for Approval of Gas Accord V Settlement 12
3.3.1. Summary of the Gas Accord V Settlement 12
3.3.2. Analysis of the Gas Accord V Settlement 21
3.3.2.1. Comparison to Original Positions 22
3.3.2.1.1. Settlement Reflects Interests of Different
Customers 22
3.3.2.1.2. Revenue Requirement 22
3.3.2.1.3. Capital Expenditures and O&M Expenses 24
3.3.2.1.4. Demand Forecasts 28
3.3.2.1.5. Cost Allocation and Rate Design 28
3.3.2.1.6. Gas Storage Issues 30
3.3.2.1.7. Revenue Sharing Mechanism 32
3.3.2.1.8. CTA Issues and Settlement 33
3.3.2.1.9. Operational Issues 34
3.3.2.2. Contested Settlement Issues 36
3.3.2.2.1. Revenue Sharing Mechanism 37
3.3.2.2.2. Proposal to Reduce Schedule G-XF Rate 39
3.3.2.2.3. Delivery Point of SoCalGas' Schedule G-XF
Capacity 41
3.3.2.2.4. FERC Gas Storage Posting Requirement 48
3.3.2.3. San Bruno Explosion Considerations 52
3.3.2.4. Summary 60
4. Assignment of Proceeding 62
5. Comments on Proposed Decision 62
Findings of Fact 62
Conclusions of Law 70
ORDER 72
Appendix A: Gas Accord V Settlement Agreement
Appendix B: CTA Agreement
Appendix C: Gas Transmission and Storage Safety Report
Appendix D: List of Appearances
DECISION REGARDING THE GAS ACCORD V SETTLEMENT
1. Summary
Today's decision addresses Pacific Gas and Electric Company's (PG&E) natural gas transmission and storage (GT&S) application for 2011 through 2014. The initial focus of the original application was to address the revenue requirements, cost allocation, and rates associated with PG&E's GT&S facilities that will apply during this four-year rate cycle. However, following the September 9, 2010 San Bruno explosion and fire (San Bruno explosion), a separate safety phase was added to this proceeding. As a result, this decision requires PG&E to provide a semi-annual Gas Transmission and Storage Safety Report (Safety Report). A summary of today's decision follows.
PG&E settled all GT&S issues with the other parties in the Gas Accord V Settlement Agreement (Gas Accord V Settlement), which is attached to this decision as Appendix A. San Diego Gas & Electric Company (SDG&E) and Southern California Gas Company (SoCalGas) objected to two issues addressed by the settlement, and two other issues that pertain to PG&E's GT&S services. Today's decision rejects the issues raised by SDG&E and SoCalGas, and grants the motion of the settlement parties to approve the Gas Accord V Settlement. The terms contained in the Gas Accord V Settlement are adopted.
The Gas Accord V Settlement continues the Gas Accord market structure for PG&E for another four years, with some minor changes. The Gas Accord V Settlement establishes the revenue requirements and the rates for PG&E's GT&S services for this four-year rate cycle. The revenue requirements and rates agreed to in the Gas Accord V Settlement represent a compromise by the various parties of their positions on many different issues. Under the adopted Gas Accord V Settlement, the overall revenue requirement increases in each of the four years (2011: $514.2 million; 2012: $541.4 million; 2013: $565.1 million; and 2014: $581.8 million) over the 2010 revenue requirement of $461.8 million. PG&E had originally requested in its application revenue requirements of $529.1 million for 2011; $561.5 million for 2012; $592.2 million for 2013; and $614.8 million for 2014.
Under the adopted Gas Accord V Settlement, these gas transmission and gas storage rate components will result in an increase to most of PG&E's natural gas customers. As a result of today's decision, a typical residential gas customer in PG&E's service territory, who uses 37 therms per month, will experience a 0.7% increase in their monthly gas bill, from about $51.60 per month to $51.96 per month. Small commercial and large commercial gas customers will experience monthly increases of 0.8% and 0.9%, respectively.
This application was filed and the Gas Accord V Settlement was agreed to prior to the San Bruno explosion. As a result, the Commission initiated efforts in this proceeding to ensure the safe and reliable operation of PG&E's GT&S facilities in the years to come. As part of that effort, this decision requires PG&E to provide the Safety Report to the Commission and to the service list. This Safety Report shall provide details about the pipeline-related and storage safety, reliability, and integrity capital projects and maintenance activities that are being undertaken by PG&E and to track the amounts spent on such projects and activities. In addition, the Safety Report will provide Commission staff with details of whether the gas transmission pipeline projects that PG&E has identified as "high risk" by PG&E are being carried out, whether other replacement projects have been undertaken instead, and to determine PG&E's rationale for the reprioritization of these projects.1 The Safety Report will also allow us to monitor the status of PG&E's compliance with federal pipeline requirements, such as recurring pipeline inspections and pipeline upgrades. Furthermore, this decision directs Commission staff to review these reports to detect whether there are any problems with PG&E's administration of its pipeline-related capital projects and maintenance activities, and whether high risk sections of transmission pipeline are being replaced or upgraded.
A subsequent decision will follow to address other safety-related gas transmission issues raised by the San Bruno explosion such as providing fire personnel throughout PG&E's service territory with training and information about the location of PG&E's transmission pipelines and shutoff valves, and ensuring that PG&E personnel are rapidly dispatched and deployed to the site in an emergency.
It is important to note that this decision, and the decision to follow, is part of a forward-looking process that examines what can be done to ensure the safety and reliability of PG&E's GT&S system during the four-year period covered by this proceeding. This proceeding is not examining the cause of the San Bruno explosion and whether or not things should have been done differently. In addition, the reports of the National Transportation Safety Board and the Independent Review Panel have not yet been completed.
1 PG&E uses a Risk Management Program to assess the risk of every segment of gas transmission line within its system. Part of the formula for developing the risks associated with different pipeline segments are the physical characteristics of the pipe, such as when the pipe was installed, pipeline condition and inspection reports, method of construction, and other traits. In addition, the formula considers location factors such as population density, structures nears the pipeline, and environmental conditions. Using its formula, risk numbers are then developed for each segment of the transmission line. These risk numbers are then issued to identify, quantify, and prioritize the work for high risk pipeline segments. This work could consist of inspection by a smart pig, pipeline replacement, pipeline relocation, or other risk mitigation techniques.
