Discussion
The Commission is being asked to determine now, which customers should be responsible for any above-market costs that the CC8 facility might have over the 30-year useful life of the plant. Should it be PG&E's bundled customers or should PG&E customers who are ineligible for direct access at the time the plant goes into operation, but who subsequently leave PG&E's service, share in the cost of the plant by way of an NBC?
Many of the factors that inform our decision on this cost-sharing issue are hard to predict. For example, expectations are that CC8 will be economic for its 30-year plant life, but PG&E can not guarantee that in light of possible shifts in its customer base, including customers leaving for direct access (DA), municipalization or Community Choice Aggregation (CCA). In addition to customer migration, there could also be changes in customer usage through conservation, energy efficiency, advanced metering, DG, and renewables.
We are mindful of these factors as we consider Settling Parties' proposal to have any above-market costs for CC8 borne by all customers who benefit from the facility's commercial operation for its 30-year life and cost amortization--including departing load customers. Before it makes the commitment for CC8, PG&E wants to ensure that its bundled customers will be indifferent to future departing loads. DRA and TURN support this 30-year NBC because it will protect bundled ratepayers of PG&E from being responsible for any above-market costs if there is a significant migration of customers to competing energy providers in PG&E's service territory.
However, we are also aware of the potential logistical difficulties such a 30-year NBC could have in terms of the calculation, application, and allocation of the charge. Although Settling Parties propose deferring those issues, and any other related NBC issues, to another proceeding, we must be cognizant about the full panoply of concerns authorizing such a lengthy NBC could have, not just on PG&E's departing load customers, but for the other utilities as well.
We faced these same possible customer migration and cost-sharing issues when we considered SCE's Mountainview facility and SDG&E's Palomar and Ramco plants, and when we established policies for the investor owned utilities' (IOUs) long-term procurement plans. In all three instances, we approved a cost-recovery mechanism for a 10-year period.
In Mountainview, we found ". . . in order to not over-burden ratepayers in the early years of the contract, we adopt TURN's proposal that all customers of Edison that are currently ineligible for direct access be obligated to pay for stranded costs for the first 10 years of Mountainview's life."5 In the Decision approving Palomar and Ramco as new electric resources for SDG&E, we adopted "the same mechanism that we did in the Edison/Mountainview decision, D.03-12-059 whereby all customers of SDG&E that are currently ineligible for direct access are obligated to pay for the stranded costs of any new generation for the next ten years. This will insure that neither the utility, nor its bundled customers, will be forced to pay stranded costs for these generation assets in the event that new direct access is permitted."6
D.04-12-048 was directed at approving the long-term procurement plans for all three IOUs. In the discussion on recovery of stranded costs, we reviewed our policy as set forth in D.03-12-059 and D.04-06-011 and specified that "this decision adopts the same standards for fossil-fueled resources acquired by the utilities either directly or through contract. The utilities should be allowed to recover stranded costs for these resources from departing load over either the life of the contract or 10 years, whichever is less. The 10-year recovery period will also apply to any utility-owned generation acquired as a result of the procurement process, commencing once the resource begins commercial operation."7
Commission decisional precedent supports the ten-year stranded cost recovery. While we did permit a utility to justify requesting a cost recovery period of longer than ten years, neither PG&E, nor the Settling Parties, presents such justification. All of the uncertainties surrounding migrating customer bases and potential changes in customer electricity use are the same for PG&E's CC8, as they were for SCE's Mountainview and SDG&E's, Ramco, and Palomar facilities. We previously found that the 10-year cost recovery was a balanced compromise so as to not shift the cost burden of an uneconomic asset to a utility's bundled customers. We find nothing in the record of the CC8 proceeding that justifies changing the length of time for the cost recovery provision.
In addition, Paragraph 11 of the Settlement Agreement did not provide the Commission with sufficient information to understand the impact of implementing the 30-year NBC.
Therefore, we have determined that the record supports adopting the Settlement Agreement, with a 10-year NBC. This is consistent with Commission decisional precedent and will protect PG&E's bundled ratepayers from bearing the entirety of any above-market costs during this period.
5 D.03-12-059, Findings of Fact 22., mimeo., p. 60.
6 D.04-06-011, mimeo., p. 42.
7 D.04-12-048, mimeo., p. 60.
