8. Incremental Costs to Implement Dynamic Pricing

In comments filed on February 28, 2008 and in comments on the proposed decision, PG&E indicates that the utility would need to incur incremental costs to implement dynamic pricing according to the January 23, 2008 Ruling and proposed decision. PG&E indicates there would be incremental costs associated with information technology systems, billing changes, and customer outreach and education. PG&E requests authority to accumulate costs, without limitation, in a balancing account for recovery as part of the Annual Energy True-Up rate changes.¹³¹

We expect there will be reasonable incremental costs required to implement dynamic pricing rates adopted by the Commission including costs associated with systems and billing changes and customer outreach and education. However, we cannot give PG&E authority to recover incremental expenditures in this decision since we do not have a record to approve any particular expenditure level. Furthermore, since this decision does not adopt any specific rates, it is premature to determine the necessary level of incremental expenditures for system changes and customer outreach and education.

Even if this decision could approve expenditures, the Annual Energy True-Up process would not be appropriate since PG&E seeks approval for its Annual True-Up rate change through an advice letter process that does not provide an opportunity for reasonableness review. Instead PG&E should seek cost recovery through formal applications.

For expenditures that occur in 2011 and later, PG&E should seek recovery in general rate cases. In the meantime, to the extent PG&E believes it needs authority to incur incremental expenditures to implement specific dynamic pricing rates, PG&E should seek recovery in the application in which PG&E proposes the rates. If PG&E plans to start spending before the Commission has issued a decision on a dynamic pricing rate proposal, PG&E is authorized to record the incremental expenditures in a memorandum account and seek recovery in the related rate design proceeding.

For expenditures related to customer education and outreach, PG&E should explain how it is coordinating customer outreach related to dynamic pricing with the outreach the utility is conducting for energy efficiency and other demand response programs.

¹³¹ PG&E Comments, February 28, 2008, pp. 18-19, 32-34; PG&E Opening Comments on Proposed Decision, pp. 11-12.