COM/GFB/vfw Mailed 6/2/04
Decision 04-05-055 May 27, 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) |
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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) |
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Application of Pacific Gas and Electric Company Pursuant to Resolution E-3770 for Reimbursement of Costs Associated with Delay in Implementation of PG&E'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) |
(See Attachment E for List of Appearances.)
Title Page
OPINION: PHASE 1 ISSUES 1
1. Summary 2
2. Procedural History 6
3. PG&E's Request 12
4. The Distribution Settlement 15
5. The Generation Settlement 18
6. Commission Review of the Settlements 20
7. Terms of the Distribution Settlement 22
7.1 Total Revenue Requirement 22
7.2 Attrition 23
7.3 Discussion 27
7.4 Administrative and General (A&G) Expense 30
7.5 Unbundling of A&G Expenses 41
7.6 Nuclear Decommissioning Trust Administrative Fees 42
7.7 Distribution Operations and Maintenance Expense 43
7.8 Customer Accounts and Services Expense 45
7.9 Line Extension Administration 47
7.10 Uncollectibles 48
7.11 Depreciation 48
7.12 Rate Base 52
7.13 Capital Additions 53
7.14 Working Cash 56
7.15 Taxes 57
7.16 O & M Labor Factors 60
7.17 Other Operating Revenues 60
7.18 New Customer Connections and E-Net Costs 62
7.19 Insufficient Funds Fee 62
7.20 Public Utilities Code Section 739.10 63
7.21 Recovery of Expenses Associated With the 20/20 Program 64
7.21.1 Discussion 66
7.22 Customer Information System (CIS) Capital 68
7.22.1 Discussion 69
7.23 Idle Facilities 71
7.24 Integrated Resource Planning 71
7.25 Service Guarantees Under the Quality Assurance Program and Customer
Service Issues 72
8. Terms of the Generation Settlement 74
8.1 Return on Regulatory Assets 75
8.2 Amortization of the Statement of Financial Accounting Standard No. 109
(FAS 109) Regulatory Asset 75
8.3 Diablo Canyon Depreciation 76
8.4 Diablo Canyon O&M Expense 76
8.5 Additional Security Costs at Diablo Canyon 76
8.6 Post Test Year Capital Applications 77
8.7 Fuel Oil Inventories 77
9. Conclusion 77
9.1 Reasonable in Light of the Whole Record 77
9.2 Consistent with the Law 79
9.3 In the Public Interest 79
10. Other Issues 82
10.1 Pension Contributions 82
10.1.1 Discussion 83
10.2 Diablo Canyon Independent Safety Committee (DCISC) 86
10.2.1 DCISC Background 87
10.2.2 Request for Relief 89
10.2.3 Positions of the Other Parties 91
10.2.4 Discussion 99
10.2.4.1 Stipulation 99
10.2.5 The Revised Petition to Modify D.88-12-083 100
10.3 Compensation Issues 107
10.3.1 Executive Compensation 107
10.3.1.1 Discussion 109
10.3.2 Retention Bonuses 113
10.3.3 SrERP Is Funded By Shareholders, Not Ratepayers 116
10.4 GO 77-K Report and Dividend- Related Advice Letter 122
10.5 Service Drop Maintenance 131
10.5.1 Discussion 132
10.6 Adopted Rate Changes 133
10.7 Rulings of the Administrative Law Judge 135
Comments on Alternate Proposed Decision 135
Assignment of Proceeding 135
Findings of Fact 135
Conclusions of Law 141
ORDER 143
ATTACHMENT A Settlement Agreement (PG&E, ORA, TURN, AGLET,
Modesto Irrigation District, Natural Resources Defense
Council and Agricultural Energy Consumers Assoc.
ATTACHMENT B Settlement Agreement (PG&E, ORA, TURN, City and County of
San Francisco, and Aglet).
ATTACHMENT C Stipulation Agreement (PG&E, San Luis Obispo Mothers for Peace,
Diablo Canyon, Independent Safety Committee, ORA, CEC, and TURN.
ATTACHMENT D Results of Operations TY 2003
ATTACHMENT E Service List
1. Summary
This decision resolves issues litigated in the revenue requirement phase (Phase 1) of Pacific Gas and Electric Company's (PG&E) test year (TY) 2003 General Rate Case (GRC). In this decision, we consider two comprehensive settlements filed by the majority of parties in this proceeding. Pursuant to Rule 51 et seq. of the Commission's Rules of Practice and Procedure, we consider a Settlement Agreement proposed by PG&E, the Office of Ratepayer Advocates (ORA), the Utility Reform Network (TURN), Aglet Consumer Alliance (Aglet), Modesto Irrigation District (MID), the Natural Resources Defense Council (NRDC), and the Agricultural Energy Consumers Association (AECA), (collectively, "the Settling Parties"), that resolves all but one of the issues raised by the Settling Parties regarding PG&E's forecast TY 2003 electric and gas revenue requirements and 2004, 2005, and 2006 attrition requests (the Distribution Settlement). We also consider a separate Settlement Agreement proposed by PG&E, ORA, TURN, Aglet, and the City and County of San Francisco (CCSF) regarding PG&E's forecast TY 2003 generation revenue requirements and related attrition, (the Generation Settlement).
Taken together, the Distribution Settlement and the Generation Settlement (also referred to jointly as the Settlements) provide for a TY 2003 revenue requirement of approximately $2.493 billion for electric distribution, $927 million for gas distribution, and $912 million for generation. Excluding revenues related to procurement, this represents an increase of approximately $236 million, or 10.44% in electric distribution revenues, $52 million, or 5.90% in gas distribution revenues, and $38 million, or 4.35% in generation revenues. A portion of the increase in GRC-related revenues is collected as other operating revenues, rather than from sales of electricity and gas. Therefore, the increase in revenues from sales to customers resulting from the Settlements is 8.46% electric distribution, 4.60% gas distribution and 3.90% generation.
We find that the Settlements are reasonable in light of the whole record, consistent with the law, and in the public interest. While the Settlements are to a certain extent "black box" settlements that do not represent the increased level of precision we sought when we approved PG&E's TY 1999 revenue requirement request, we are satisfied that they are in the public interest.
The 2003 base revenues authorized today are effective as of January 1, 2003, consistent with our decision in Decision (D.) 02-12-073. However, as a result of our recent approval in D.02-04-062 of a Rate Design Settlement lowering PG&E's rates by $799 million, the increase in PG&E's revenue requirements for electric distribution and generation authorized today has already been reflected and to a large degree, offset, as part of the revenue requirement reductions approved in D.02-04-062.
PG&E's bundled gas distribution base revenues are changed by this decision as shown in the following table.1
Class |
Changes in Annual Revenues ($000's) |
Revenue Change |
Core Customers |
||
Residential |
$30,147 |
1.8 |
Small Commercial |
9,355 |
1.9 |
Large Commercial |
126 |
0.9 |
0 |
0 | |
Wholesale |
||
Non-Core Customers |
||
Industrial Distribution |
1,349 |
3.4 |
Industrial Transmission |
0 |
0 |
Electric Generation |
54 |
0.2 |
Cogeneration |
30 |
0.2 |
Shareholder Absorption2 |
115 |
4.7 |
Total Change |
$41,1763 |
1.8% |
As a result of this decision, a residential gas customer using an average of 50-therms per month on a year-round basis would see average monthly bill increases of 67 cents.
As part of the Distribution Settlement considered and adopted in this decision, the next test year for PG&E will be 2007. We therefore direct PG&E to tender its Notice of Intent for the TY 2007 GRC consistent with the Rate Case Plan.4
In addition to the issues addressed in the Settlements, we consider Applicant's request for approval of a $128.6 million (total Company) contribution to the Company's Retirement Plan trust. Today's decision denies PG&E's request, finding that PG&E did not provide clear and convincing evidence that a contribution is needed at this time.
We also resolve disputed issues related to the Diablo Canyon Independent Safety Committee (DCISC). Today's decision approves a Stipulation filed by PG&E, ORA, the DCISC, TURN, and the San Luis Obispo Mothers for Peace (Mothers for Peace), which provides that the DCISC shall continue with its current responsibilities and funding through the year 2006. Today's decision also grants, in part, the Mothers for Peace Petition to modify D.88-12-083.
Finally, in this decision, we examine issues related to PG&E's executive compensation. We review and comment on certain executive bonuses designed to promote the retention of certain corporate officers during the difficult period of the energy crisis and the financial insolvency and bankruptcy of PG&E and PG&E Corp.'s non-utility affiliates. We find that the Senior Executive Retention Bonus Program (SeERP) has been, or will be, funded by shareholders, not ratepayers, and we adopt additional accounting and reporting measures to ensure that this remains the case.
This decision resolves all issues in Phase 1 of PG&E's TY 2003 GRC. Phase 2 of this proceeding will address marginal cost, revenue allocation and rate design. This proceeding remains open.
1 Revenue changes are allocated to customer classes using the marginal cost revenues adopted in PG&E's 2000 Biannual Cost Allocation Proceeding (BCAP) (D.01-11-001). 2 Amount represents 50% of the scaled distribution marginal cost revenue allocated to industrial transmission customers. D.98-06-073 (p. 20) ordered PG&E to reduce the distribution revenue requirement by 50% of the amount allocable to this customer class through the end of the Gas Accord period. 3 This is the total increase in Commission revenue from sales; an additional amount of $10,442 from Other Operating Revenue (OOR) must be added to this amount to get the total rate case Commission revenue increase of $51,618. 4 The Rate Case Plan was adopted in D.89-01-040.
