APPENDIX A
SETTLEMENT AGREEMENT REGARDING SAN DIEGO GAS & ELECTRIC COMPANY'S ADVANCED METERING INFRASTRUCTURE APPLICATION, A.05-03-015
Pursuant to California Public Utilities Commission's Rules of Practice and Procedure, Article 12, Rule 12.1, San Diego Gas & Electric Company (SDG&E), the Division of Ratepayer Advocates (DRA), and Utility Consumers' Action Network (UCAN) (the Settling Parties) enter into this Settlement Agreement regarding SDG&E's Advanced Metering Infrastructure (AMI) proposal, submitted for Commission consideration in Application A. 05-03-015 (the Settlement).1 The Settling Parties, who were the only active parties to the proceeding, believe that the Settlement is reasonable in light of the whole record, consistent with law, and in the public interest.
I. Introduction and Background
The Settling Parties believe that the record is sufficient to meet the burden of proof and to allow the Commission to make a reasoned decision. SDG&E filed its revised business case-in-chief on March 28, 2006, provided supplemental testimony upon the request of presiding Administrative Law Judge (ALJ) Gamson on June 16, 2006, and later updated and revised its showing on July 14, 2006 and again on September 7, 2006. DRA and UCAN propounded numerous data requests and DRA conducted an on-site audit of SDG&E's cost and benefit analysis and supporting workpapers. Both DRA and UCAN filed direct and rebuttal testimony.
The Commission held eight days of evidentiary hearings, beginning September 25, 2006. Subsequently, parties filed opening briefs and reply briefs on October 27 and November 13, respectively. On December 15, 2006, ALJ Gamson issued a ruling to reopen the record to consider further information regarding alternative deployment options. SDG&E responded to ALJ Gamson's ruling on January 4, 2007 and January 11, 2007. SDG&E, DRA and UCAN submitted comments on SDG&E's response. In light of the entire record pre-dating the ALJ's December 15, 2006 ruling and the additional information submitted by all parties in response to that ruling, the record is amply developed to consider this Settlement.
Based on the foregoing, the Settling Parties submit for Commission adoption this comprehensive Settlement, which constitutes a settlement of all issues between the Settling Parties.
In summary, the Settling Parties agree that SDG&E's AMI deployment and cost recovery proposal as set forth in SDG&E's Application 05-03-015, including the supporting testimony,2 is reasonable and should be adopted by the Commission with the following modifications: (1) the total AMI project costs will be increased to $572 million to include additional AMI functionalities and extended meter warranty provisions, as described below; (2) SDG&E will purchase an extended warranty for the AMI equipment, so long as the terms described below are met; (3) SDG&E is required to issue an addendum to its Request for Proposal (RFP) as described below; (4) SDG&E will modify its AMI technology selection, as described below; (5) the risk contingencies will be shared between ratepayers and shareholders in the manner described below; (6) the AMI revenue requirement will be allocated among customer classes, as described below; (7) Critical Peak Pricing (CPP), Peak Time Rebate (PTR) and other AMI related dynamic rates will be determined in SDG&E's January 31, 2007, General Rate Case (GRC) Phase 2 proceeding,3 (8) SDG&E will establish an AMI "Technology Advisory Panel" (TAP) as described below and in Attachment A; (9) SDG&E will report quarterly on AMI implementation progress to the CPUC Energy Division, as described below; and (10) SDG&E may recover increased costs that are the result of uncontrollable/force majeure events, as described below.
Each of these modifications is set forth below.
II. Settlement Agreement Provisions
The Settling Parties find reasonable SDG&E's proposal for full AMI deployment and cost recovery, as described in SDG&E's application and supporting testimony, with the following modifications:
1. The total project cost is increased to $572 million to include the additional cost of adding Home Area Network (HAN) and Remote Connect/Disconnect functionalities and to include the cost of the extended warranty provisions, as more fully described below;
2. The Settling Parties agree that it is prudent for SDG&E to obtain bids from meter vendors for an extended warranty for the AMI meters for up to XXXXXXXXXX. The XXXXXXX installment of the extended warranty is not to exceed XXXXX. Costs for the additional installments for the extended warranty beyond the XXX-XXXX period, if any, will be reviewed and if found reasonable will be recoverable in SDG&E's next (post Test Year 2008) and subsequent General Rate Cases or other appropriate Commission proceedings. SDG&E will attempt to obtain as part of the XXXXXXX warranty an option and pricing for subsequent extensions.
3. SDG&E will issue an addendum to its Request for Proposal (RFP) in order to:
a. Ascertain the current status and viability of advancements in AMI technology and may, at its discretion, and with input from the Technical Advisory Panel described in Attachment A, accept bids from technologies excluded from the original RFP;
b. Determine whether project costs are significantly increased by the functional requirements of two-channel metering and 99.5% next day data availability;
c. Seek proposals to install the HAN and remote connect/disconnect capabilities;
d. Seek proposals for an extended warranty of the AMI equipment; and,
e. SDG&E's RFP addendum will require that all vendor bids include the following in addition to their base bid proposal:
i. A Home Area Network (HAN) communications system, based on an open standard capability for residential and C&I customers, which should be compatible with the HAN choice of other major California utilities;
ii. Separate pricing for the cost of providing a single channel of hourly meter data and the incremental cost of providing two independent channels of hourly meter data for residential customers;
iii. Separate pricing for the cost differential of providing a minimum of 99.5% throughput of the meter data from 99.5% of AMI-enabled customers daily, versus providing a minimum of 98.5% throughput of the meter data for 98.5% of such customers daily (with a cumulative minimum of 99.5% throughput of meter data over a three day period);
iv. Separate pricing for the cost of providing electric remote disconnect/connect technology to all of SDG&E's residential customers; and,
v. Separate pricing, terms and conditions with meter vendors for XXX-XXXX extended AMI meter warranty provisions, with pricing for at least the XXXXXXX of the extended warranty and with a schedule for additional extensions at the option of SDG&E beyond XXXXX-XXXXX.
4. SDG&E will evaluate the results of the revised RFPs and will modify its selections based on the following conditions:
a. Savings to the total meter cost can be lowered by XXXX or more by reducing the two-channel capability and the minimum daily data availability requirement;
b. The incremental cost of remote connect/disconnect technology costs does not exceed XXXXXXXXX. If the cost of the remote disconnect exceed XXXXXXX SDG&E will not include the remote disconnect functionality in the AMI meter technology and will reduce the total costs of $572 million by XXXXXXXX.
c. The HAN field tests can demonstrate that the vendor's HAN technology can meet XXXXXXXXXXXXXXXXXXX.
d. The cost of the extended warranty for the XXXXXX installment does not exceed XXXXXX. If the extended warranty costs exceed XXXXX, SDG&E is not required to purchase the extended warranty and the total cost of $572 million will be reduced by XXXXXXXXXXX.
5. Settling Parties agree to the risk contingency and sharing proposal described below:
a. Expenditures up to the total project cost of $572 million are deemed reasonable ( inclusive of the costs of HAN, remote disconnect capabilities and extended warranty XXXXXXXX as described above) and will be recovered in rates without any after-the-fact reasonableness review.
b. To the extent actual project costs exceed the total cost of $572 million by up to $50 million, then 90% of the costs that exceed $572 million will be recovered in rates without any after-the fact reasonableness review.
c. To the extent actual project costs exceed the total costs of $572 million by up to $50 million, then 10% of the costs that exceed $572 million will be borne by SDG&E shareholders and will not be recovered in rates.
d. To the extent actual project costs are below the total costs of $572 million, then 10% of the difference between the $572 million and the actual project costs will be awarded to SDG&E shareholders. This sharing mechanism will be applied to no more than the first $50 million of expenditures that fall below the total costs of $572 million.
e. Any ratepayer portion of costs that exceed $572 million will be recorded in and recovered through the through the Advanced Metering Infrastructure Balancing Account (AMIBA).4
f. Any shareholder rewards or costs will be recorded and recovered through SDG&E's Reward and Penalties Balancing Account (RPBA).
g. Actual project costs that exceed $622 million may be recoverable in rates to the extent approved by the Commission following a reasonableness review of the additional amounts.
h. Total project costs of $572 million may be adjusted downward as a result of the provisions described in Section 4. If total project costs were reduced, then the risk sharing mechanism would apply to the revised total project cost.
6. The Settling Parties agree that 100% of AMI revenue requirement will be allocated among customer classes utilizing the SDG&E distribution allocation in place when AMI costs are recovered in rates.
7. The Settling Parties agree that the PTR, CPP and other AMI related dynamic rates should be determined in the proceeding addressing SDG&E's GRC Phase 2 Rate Design application submitted on January 31, 2007.
8. SDG&E agrees to establish an AMI "Technology Advisory Panel" (TAP) as more fully described in Attachment A.
9. SDG&E agrees to provide quarterly reports to the Energy Division on AMI implementation progress.
10. The Settling Parties agree to the following force majeure provisions that provide for SDG&E to recover in rates costs that exceed $572 million without shareholder penalty due to events beyond SDG&E's control (uncontrollable events), including without limitation:
a. Force majeure events that materially affect SDG&E's ability to implement the project as planned such as: (i) landslide, lightning, earthquake, storm, hurricane, flood or other acts of nature; (ii) transportation accidents in which SDG&E is neither intentionally nor negligently responsible; (iii) riots, terrorism, war, civil disturbances, or sabotage; or (iv) changes in law;
b. Material changes in the scope or functionality of the AMI Project (as that scope is defined in SDG&E's application) due to governmental or regulatory actions, or due to issuance of any order, judgment, award, or decree which affects the AMI project;
c. Material changes in the costs of the AMI project caused by a delay in Commission approval of the project beyond April 5, 2007; and,
d. Significant delays before or during project deployment caused by regulatory or governmental action or inaction, including delays caused by cities and local governments or permit delays.
III. Additional Terms and Conditions
1 On January 26, 2007, the ALJ issued a ruling granting SDG&E motion to propose a settlement agreement beyond the Rule 12.1 time limit.
2 SDG&E's case-in-chief is comprised of SDG&E's March 28, 2006 submission as revised and superseded by the July 14, 2006, and September 7, 2006 updates.
3 A. 07-01-047.
4 SDG&E's balancing account treatment of AMI project cost and benefits are described in Exhibit 34, Chapter 14 Prepared Direct Testimony of Robert Hansen.
