4. The Settlement Agreement
The Revised Settlement Agreement is an all-party settlement and resolves all issues raised in the protests and all elements of PG&E's request. No protests or comments were filed in response to the joint motion to adopt the settlement. Rather than summarize every term of the Revised Settlement Agreement attached to the joint motion, we summarize the key portions of the Revised Settlement Agreement as follows.
4.1. SmartACTM Program Budget
PG&E requested a SmartACTM Program budget for the period 2007 through the end of 2011 of $123.5 million, a reduction of $55.3 million from the budget authorized in D.08-02-009. PG&E also requested a SmartACTM Program budget for the period 2010-2011 of approximately $58 million.
In its protest, DRA raised concerns regarding the level of expenditures given the change in size and focus of the program, and wanted to explore whether PG&E could increase cost effectiveness of certain program elements.
In Exhibit TURN-1, TURN recommended that the Commission consider what PG&E actually spent during the years 2007-2009, and recommended a 2010-2011 budget of approximately $32.7 million.
The Joint Parties settled on a SmartACTM Program budget for the period 2007 through the end of 2011 of $112.2 million, a reduction of $11.2 million from PG&E's request and a reduction of $66.6 million from the authorized budget.
The Joint Parties also agreed that since PG&E had already collected approximately $148.69 million in rates for funding of the SmartACTM Program, which is approximately $36.47 million more than the budget settled on by the Joint Parties, PG&E would return this difference to customers beginning January 1, 2011 through its Annual Electric True-Up (AET) Advice Letter filing. Also, as of December 31, 2011, PG&E will return any remaining unspent SmartACTM Program funds recorded in the Air-Conditioning Expense Balancing Account (ACEBA) through its AET.
4.2. Reasonableness Review
In its protest, DRA questioned whether the Commission should approve PG&E's expenditures for the SmartACTM Program without a reasonableness review. In the Revised Settlement Agreement, the Joint Parties agree that PG&E should be allowed to recover all SmartACTM Program expenditures incurred by PG&E that are consistent with the Revised Settlement Agreement without an after the fact reasonableness review by the Commission.
4.3. Information Technology Costs and Budget Category Flexibility
In its served testimony, PG&E requests that $5 million of funds from other budget categories within the SmartACTM Program budget be shifted to the Information Technology (IT) budget category, in order to integrate the SmartACTM Program devices and related operations from third-party managed systems into the enterprise-wide standard that will be developed to track and maintain the devices connected to PG&E's Advanced Metering Infrastructure (AMI) network.
In its served testimony, DRA recommends that the Commission should deny PG&E's request to double its IT budget to cover AMI-related system integration work during the SmartACTM Program years 2010-2011. DRA recommends that PG&E defer consideration of this IT integration until the 2012-2014 demand response program cycle.
The Joint Parties agree that, with the exception of Measurement and Evaluation (M&E) costs and contingency funds, PG&E may have budget flexibility for all budget categories, including: PG&E Administrative (IT); Administrative (Labor); Marketing and Incentives; and Purchase, Install, and Maintenance of Air Conditioning Load Control Devices. With the exception of M&E and contingency funds, PG&E will be permitted to shift up to 15% of the 2010-2011 authorized budget from any budget category without prior Commission authorization. This way, PG&E may shift funds to cover IT costs without increasing the program budget.
If PG&&E plans to shift more than 15% from one budget category to another, it must first seek Commission approval through an advice letter filing prior to shifting those funds. PG&E may also request budget flexibility for M&E costs and contingency funds through an advice letter filing.
4.4. Reporting
In the Revised Settlement Agreement, the Joint Parties agree that PG&E will provide the Energy Division, DRA, and TURN, an annual report on the SmartACTM Program for program years 2010 and 2011, no more than six weeks after the annual Ex Ante Load Impact Evaluation Reports, which are due April 1 of each year. The annual report will address the SmartACTM Program's performance, potential design modifications, enrollment, and current budget estimates.
4.5. Financial Incentives
Part of PG&E's currently authorized marketing program for the SmartACTM Program includes an incentive of $50 for residential customers and $100 for business customers to enroll in the program. However, PG&E, TURN and DRA had previously agreed that PG&E would initially market the program offering a $25 incentive to both residential and commercial customers and that PG&E may increase the incentive after consultation with TURN and DRA.4 In its application, PG&E requested authorization to market the program offering incentives in the amount of $50 for residential and $100 for business customers.
In its served testimony, DRA recommended that the incentives remain the same, stating in part, that the results of a PG&E survey show that the incentive payment is not the primary driver for participation in the program.
In the Revised Settlement Agreement, the Joint Parties agree that PG&E will begin testing enrollment incentives of up to $50 for residential customers and $100 for small and medium business customers.
4.6. Rate Schedules
In the Revised Settlement Agreement, the Joint Parties request that the Commission approve the changes to Schedule E-RSAC, Schedule E-CSAC, and PG&E's electric rate schedules for the SmartACTM program, and add clarifying language similar to that approved by the Commission for the Base Interruptible Program rate schedule. The proposed revisions to the tariffs are attached to the Revised Settlement Agreement as Exhibits A and B.
PG&E agrees to seek Commission approval by advice letter, for future revisions to these rate schedules regarding implementation of a price trigger. PG&E also reserves the right to request via advice letter, any revision to the above referenced rate schedule, provided that the requested revision are not inconsistent with the Revised Settlement Agreement.
4.7. Price Response Trigger
The Revised Settlement Agreement provides a starting point for integration of this demand response program with the California Independent System Operator's (CAISO) market. The Joint Parties agreed that PG&E will add a price response trigger at bid cap (currently expected to be $1,000/megawatt hour) that will be dispatched beginning in 2012. The addition of a price response trigger to the SmartACTM program would allow PG&E to bid the load into the CAISO market.
The setting of a price response trigger is consistent with the Commission's policy supporting integration of demand response programs with the CAISO's markets, in particular, with the requirements of D.10-06-034 in Phase III of Rulemaking 07-01-041, Decision Adopting Settlement Agreement on Phase 3 Issues Pertaining to Emergency Triggered Demand Response Programs. D.10-06-034, in part, limits the amount of emergency- or reliability-triggered demand response that counts toward resource adequacy and promotes transitioning customers onto price-based demand response products bid into the Market Redesign and Technology Upgrade at the CAISO.
4 Settlement Agreement Between and Among Pacific Gas and Electric Company, The Division of Ratepayer Advocates, and The Utility Reform Network, Sec. III.G., adopted in D.08-02-009, issued February 14, 2008.
