XIII. Aglet Proposal of Guaranteed Savings.

Aglet proposes that, in lieu of a reasonableness review, PG&E should provide guaranteed ratepayer savings of $600 million over the life of the plant. Aglet states that its proposal would offset the uncertainties of whether the project would be cost-effective. Under the proposal, this guarantee of savings would be accomplished by a comparison each year of the actual costs with an estimate of the costs that would have been incurred during the year if the SGRP had not been performed. The ratepayers would receive a payment of the difference if the estimated savings are not at the required level. In any year where the estimated savings exceed the required level, PG&E could recapture a portion of any previous payments. Aglet recommends that implementation details should be determined in a workshop. TURN generally supports this proposal as an alternative to implementing its recommendations regarding the cost-effectiveness analysis. It recommends that the Commission should conduct a separate phase of this proceeding to address how the proposal would be implemented. ORA recommends consideration of Aglet's proposal.

PG&E opposes Aglet's proposal. It states that it is unfair in that PG&E's shareholders could incur losses while ratepayers were receiving benefits. For example, if the benefits were $300 million, PG&E would be required to provide another $300 million to ratepayers even though the SGRP is cost-effective. In addition, there would be uncertainty as to the amount PG&E would have to provide, if any, until 2025. PG&E asserts that this raises accounting issues, and could lead to concern in the investment community. In addition, the benefit would have to be calculated each year based on an estimate of what would have happened if the SGRP had not been performed, since there will be no way to tell what actually would have happened. SCE's concerns regarding the proposal are essentially the same as PG&E's.

As discussed earlier in this decision, we have found that the likely net benefits of the SGRP are substantially less than PG&E's forecast. We are not granting PG&E a blanket exemption from a reasonableness review if the costs do not exceed $706 million, and are imposing a cap. In addition, Aglet's proposal would have to be based on an estimate of the costs that would result if the SGRP was not performed. For these reasons, we will not adopt Aglet's proposal.