2. Background
PG&E's current agricultural applicability statement was adopted in Decision (D.) 88-12-031 and is as follows:
A customer will be served under this schedule if 70 percent or more of the energy use is for agricultural end-uses. Agricultural end-uses include growing crops, raising livestock, pumping water for agricultural irrigation, or other uses which involve production for sale, and which do not change the form of the agricultural product.
As part of its rate design testimony in Application (A.) 04-06-024,1 PG&E proposed to revise the applicability statement in each of its agricultural tariffs. In that proceeding, the following positions were taken:2
...PG&E initially proposed a new class definition that more closely paralleled the "on the farm" definition in place prior to 1989, and in Southern California Edison Company's tariffs. The proposal required that 70% or more of the usage be "on the farm," and excluded customers with demands over 500 kilowatts (kW). PG&E also proposed that customers on an agricultural schedule on or before June 17, 2004 (the filing date of this application) be "grandfathered," remaining on agricultural rates even if their operations would not meet the new definition. As proposed, the grandfathering provision would apply until such time as there was a change in farm ownership. PG&E asserted that its proposal, with the grandfathering provision, would result in fewer new customers qualifying for agricultural rates, but there would be little migration of existing customers out of the class.
AECA initially proposed a definition that included "preparatory" activities necessary to bring a product to market (e.g., pasteurizing milk, ginning cotton, hulling almonds). AECA opposed PG&E's 500 kW limit and the "on the farm" location requirement. AECA subsequently urged no change be adopted in this GRC, but that the Commission order a workshop for the three investor owned utilities and agricultural community to create a consistent and fair statewide definition. If the workshop was unsuccessful, AECA recommended the Commission issue an OII. AECA also noted that changes may result from the Critical Peak Pricing (CPP) proceeding (Application (A.) 05-01-016, A.05-01-017 and A.05-01-018). AECA expressed concern that likely upcoming CPP changes, along with other possible changes, make "too many moving parts" for the Commission to render an informed decision here.
CFBF opposed PG&E's proposal. CFBF contended the definition must be flexible enough to incorporate efficient farming practices (e.g., a group of farmers collectively purchasing one large piece of equipment that saves energy and money). CFBF also opposed AECA's initially proposed definition, but supported an OII. CFBF is also concerned that PG&E's grandfathering proposal fails to adequately account for intra-family farm transfers, which CFBF asserts is nearly 80% of changes in farm ownership.
PG&E, AECA and CFBF subsequently reached an agreement and on September 2, 2005 filed a motion for adoption of an agricultural definition settlement. That settlement was contested by the Almond Hullers and Processors Association and Mercado Latino, Inc. Evidentiary hearing was held October 6, 2005. The settlement was amended by addendum dated October 6, 2005.
The settlement maintained the current agricultural applicability statement. It also added provisions related to the treatment of billing adjustments, including the limitation of refunds to a period beginning from the date of the customer's written request to be placed on agricultural rates. This was consistent with a Commission finding in D.05-05-048. However, on rehearing of D.05-05-048, the Commission lifted that limitation and now applies the full three years prior to the date of a complainant's original request, consistent with PG&E's Tariff Rule 17.1 and Public Utilities Code § 736.3 The settlement was therefore inconsistent with the Commission's most recent finding on the subject.
In addition, PG&E agreed not to propose a change in the agricultural class definition in its opening testimony in Phase 2 of its 2007 test year GRC. PG&E also agreed that it would not seek any change in the agricultural class definition before September 1, 2006 and, before advocating any change, would confer with AECA and CFBF. In turn, if PG&E sought a change, AECA and CFBF agreed to cooperate with PG&E in pursuing an expedited schedule for resolution of the issue.
The October 6, 2005 addendum clarified that if certain billing adjustments resulted in a net charge rather than a net refund, PG&E would not bill the customer. There was also agreement that it was the intent of the drafters that the settlement applied to all complaint cases where a decision had not been rendered.
D.05-12-025, dated December 15, 2005, addressed the proposed settlement and found, among other things, that:
1. The Settlement largely does two things: (a) addresses billing adjustments (in a manner that limits refunds using a method the Commission has now reversed) and (b) defers further consideration of the class definition issue. (Finding of Fact 2.)
2. PG&E's current agricultural eligibility statement (based on whether or not the electricity is used to "change the form of the agricultural product") has led to debates that have sometimes taken on a metaphysical tone, can be subject to conflicting interpretations, can present questions of where to draw the line between agricultural and commercial use, and has led to nearly 10 years of litigation, thereby demonstrating the desirability of clarification or redefinition of the class. (Finding of Fact 3.)
3. The Settlement unreasonably silences PG&E, defers rather than resolves the agricultural class definition issue, and limits refunds. (Finding of Fact 5.)
4. The Settlement is neither reasonable in light of the whole record, consistent with law, nor in the public interest, and the Settlement as a whole fails to achieve a sufficiently just and reasonable outcome to merit its adoption. (Finding of Fact 8.)
The Commission concluded that the motion to adopt the proposed settlement should be denied, the current agricultural class eligibility statement should not be modified at that time, and the order should be effective immediately so that certainty would be provided to customers and parties regarding retention or modification of the agricultural class eligibility statement, clarity would be provided regarding the period for refunds, and parties could continue to examine the agricultural class definition without delay.4
As part of its Test Year 2007 Phase 2 GRC application, PG&E again provided testimony on the agricultural definition issue and requested that its proposed agricultural applicability statement be implemented on an expedited schedule. The proposed statement in PG&E's prepared testimony contains the following:
Beginning March 2, 2006, agricultural rate schedules apply where PG&E determines that 70 percent or more of the electric usage on the meter is used for growing or harvesting of agricultural, aquaculture and horticultural products for sale, or for raising livestock, fish or poultry for sale. In order to qualify for an agricultural rate, all of the activity must be served through a single meter on a single premises. Up to 30 percent of the electric usage on the meter can be for any other purpose, including storage, warehousing, processing, or preparation for market of agricultural and horticultural products (e.g., canning, packaging, dehydrating, butchering, etc.). None of the usage may be for residential purposes. Agricultural applicability does not apply to processing or preparation for market of agricultural and horticultural products that were grown, raised, or harvested on, and delivered from, another premises. Agricultural applicability also does not apply to water pumping by an irrigation district for downstream use by agricultural or other customers.5
PG&E stated that the proposed statement is an attempt to bring clarity to its agricultural definition and greater consistency to the agricultural definition within the state, principally with Southern California Edison's (SCE's) "on the farm" agricultural definition. PG&E's proposed statement also includes grandfathering provisions whereby meters that are on agricultural rates prior to March 2, 2006 would remain on agricultural rates subject to certain usage and ownership provisions.
AECA, CRM and CFBF have indicated they do not support PG&E's proposed agricultural class definition and, in opposition, would propose a substantially different definition. Settlement talks on this issue began early on in the proceeding. For instance, in its April 25, 2006 prehearing conference statement, CRM stated that it had been in settlement discussions with PG&E, AECA and CFBF concerning the agricultural definition and was hopeful that a settlement would be reached.
PG&E proposed, and no party objected, to consider the agricultural definition issue on a separate expedited schedule. The May 25, 2006 assigned Commissioner's Ruling and Scoping Memo set testimony, hearing and briefing dates such that a decision on the agricultural definition issue would be issued by the end of 2006. At the request of the Settling Parties,6 in order to provide sufficient time to settle the issue before intervenor testimony would be due, an ALJ ruling, dated July 10, 2006, extended that schedule by approximately one month.
On July 26, 2006, the Settling Parties provided notice of a conference regarding a proposed stipulation and settlement on PG&E's agricultural applicability criteria modifications. The conference was held on August 2, 2006. On August 8, 2006, the Settling Parties filed their motion to adopt the Agricultural Definition Settlement. No comments contesting the settlement were filed. Evidentiary hearing was held on September 20, 2006.
1 Phase 2 of PG&E's test year 2003 general rate case (GRC).
2 D.05-12-025, mimeo., pp. 17-18.
3 Subsequent statutory references are to the Public Utilities Code unless otherwise indicated.
4 See D.05-12-025, Conclusions of Law 6-8.
5 Exhibit 1, p. 6-6.
6 Request was by a July 7, 2006 conference telephone call with the assigned administrative law judge (ALJ).
