6. Discussion
6.1. ERRA Compliance Issues
PG&E's showing demonstrates that during the 2009 record period, PG&E made appropriate entries to its ERRA and complied with regulatory standards in the areas of fuel procurement for utility retained generation, administration of power purchase contracts, and least cost dispatch of electric generation resources. DRA proposed no disallowances. We approve PG&E's ERRA compliance proposals.
PG&E has shown its utility retained generation (URG) fuel expenses to have been in compliance with its approved procurement plan during the record period and that its administration and management of its URG was prudent and did not cause extraordinary fuel expense.
PG&E made an extensive showing on its URG fuel costs and also presented URG operational statistics and reports, including information about its outages, through Master Data Request (MDR) responses, which are part of PG&E's initial showing.7 PG&E provided testimony related to generation fuel costs, supporting data, and tables, which describes in detail the actions taken by PG&E regarding generation fuel procurement for PG&E-owned gas-fired generation, California Department of Water Resources (CDWR) contracts, tolling agreements, and PG&E's Diablo Canyon power plant. The information is persuasive.
PG&E provided a detailed showing that it administered its QF and other must-take power purchase agreements, and its non-QF contracts in accordance with contract provisions. DRA has no objection to our finding that PG&E has complied with Standard of Conduct 4.8 PG&E has administered its QF and non-QF contracts in accordance with the contract provisions and in compliance with Commission guidelines relating to those contracts.
DRA found PG&E's showing on hedging to be unclear, and recommends that PG&E include an explanation of its internal controls for ensuring compliance with its Commission-approved Gas Hedging Plan in an ERRA application that includes gas procurement for CDWR contracts. PG&E does not object to DRA's recommendation, although PG&E noted that internal controls and procedures are commercially sensitive and thus, qualify for protection under Pub. Util. Code § 583.
PG&E agrees that future ERRA compliance applications should include discussions with DRA of its internal procedures and controls for ensuring compliance with Commission-approved hedging plans. In those discussions, PG&E will provide DRA with written information including detailed descriptions of its internal controls and procedures, under Pub. Util. Code § 583 confidentiality protection.
The non-QF contract administration chapter of DRA's report recommends that the Commission establish an ongoing process of ratepayer input into the development of PG&E's annual internal audit plan, begun with sufficient timeliness in each ERRA cycle to assure public confidence. PG&E and DRA reached a stipulation to resolve these issues (Exhibit PG&E-7). PG&E and DRA request that we adopt the following language as part of our final decision:
In support of DRA's efforts to learn about and understand PG&E's Internal Audit (IA) plan, and to allow DRA an opportunity to provide suggestions on the IA plan, PG&E's Internal Auditing Department will provide DRA its draft audit plan in or about November, and meet at a mutually agreeable time to review the draft IA plan as it relates to the ERRA subject matter. After reviewing PG&E's IA plan, DRA may provide suggestions regarding that plan as it relates to the ERRA subject matter. At any time during the year, DRA may provide such comments and suggestions on the IA plan as it relates to the ERRA subject matter because the plan is a living document and can be amended during the audit year. However, as DRA has stated in its testimony, DRA may "not exert any management control of PG&E's internal auditing program." (Exhibit PG&E-7.)
PG&E described the least cost dispatch practices employed by PG&E to meet its customers' electric requirements in a cost effective and reliable manner during 2009. PG&E complied with Commission Standard of Conduct 4, which mandates that PG&E dispatch its portfolio of existing resources, allocated CDWR contracts, and purchases to meet its 2009 electric load obligations in a least cost manner. DRA's Master Data Request included numerous questions on least cost dispatch after which DRA propounded additional discovery requests. DRA did not recommend any disallowance.
PG&E presented the accounting entries made to its ERRA balancing account during year 2009, showing a $71.8 million ERRA undercollected balance as of December 31, 2009. DRA's review took the form of an audit, performed by a financial examiner who is a certified internal auditor. DRA's report concluded that no adjustments to PG&E's ERRA balancing account were required.
The RPSCMA was established to track third party consultant costs incurred by the Commission and paid by PG&E in connection with the Commission's implementation and administration of the Renewables Portfolio Standard, as authorized in D.06-10-050. Specifically, PG&E requested approval to transfer the end-of-year 2009 balance of $385,772 from RPSCMA to the ERRA for recovery. DRA does not object.
7 Ex. PG&E-3, Ch. 1, at 1-4, fn. 8. PG&E and DRA reached a mutual agreement in A.03-08-004, PG&E's 2003 ERRA compliance review proceeding, to work together to provide the additional information DRA requests through an MDR. The MDR process has been used ever since with DRA providing PG&E its MDR questions 60 days before PG&E's filing deadline each year.
8 Standard of Conduct 4 provides that "The utilities shall prudently administer all contracts and generation resources and dispatch the energy in a least-cost manner. Our definitions of prudent contract administration and least cost dispatch are the same as our existing standard."
