9. The Review of PG&E's MRTU Implementation
Costs Should Not Be Deferred

DRA proposes that we should defer review of PG&E's MRTU implementation costs. PG&E argues to the contrary. PG&E says nothing is served by deferral of the review; the projects for which PG&E seeks review are complete and no new information about these projects will become available in the future. Nor is deferral justified, according to PG&E, by any need for the Commission to adopt standards for review. In PG&E's opinion, the Commission has already adopted the standards to be applied to the review of these costs. Because the project is mandated by CAISO and FERC, PG&E believes the review should focus primarily on whether the costs can be verified and are incremental, and there is no basis for deferring review to a yet-to-be-instituted joint utility proceeding.

9.1. The Projects for Which PG&E
is Seeking Review are Complete

DRA recommends that review of MRTU reasonableness costs should be deferred until after full implementation because CAISO has continued to add additional functionality to its markets after the initial implementation of MRTU. PG&E counters that while future projects to implement additional MRTU functionality should be reviewed later, the projects for which PG&E is seeking review have been completed, and so should be reviewed now. We agree with PG&E. PG&E's capital expenditures for the initial implementation of MRTU (Release 1), capital expenditures for the 2009 Pre-Summer Release of MRTU, and Operation and Maintenance (O&M) expenses recorded in the MRTUMA through December 31, 2009, all reflect costs associated with phases of MRTU that are complete and in operation. No new information about the reasonableness of PG&E's actions in implementing these projects will become available later. From an accounting perspective, the books are closed on both of these projects, and their costs are known. From an operational perspective, these projects have gone into service. From a regulatory perspective, these projects are being utilized. Further delay in review and recovery of costs further separates the recovery of costs from the customers benefiting from MRTU. Therefore, from a regulatory perspective, review is appropriate now.

9.2. No Further Proceeding to Develop
Review Standards is Necessary

We discussed recovery of MRTU expenditures in PG&E's 2010 ERRA forecast proceeding, stating "[t]he MRTU project is a project mandated by regulatory and reliability requirements of the California Independent System Operator and Federal Energy Regulatory Commission. Therefore, the Commission expects the review of these costs to primarily focus on whether the costs can be verified and are incremental."¹² PG&E's records show that the costs recorded to PG&E's MRTU capital projects (or as MRTU-related expenses) were spent for MRTU activities and are properly accounted for, and that these costs are incremental to costs recovered through other proceedings. PG&E has provided an analysis of related cost recovery proceedings to show that there is no cost recovery overlap.

DRA argues that the Commission should order the development of standards for the qualification of MRTU implementation costs. DRA also states that accounting standards alone are not sufficient to determine the reasonableness of MRTU for California ratepayers. PG&E disputes DRA's assertions.

We agree with PG&E for two basic reasons. First, this proceeding is not to review the reasonableness of MRTU. MRTU was ordered by FERC; CAISO had no choice but to comply. In Resolution E-4093, the Commission stated that it "expects the investor-owned utilities (IOUs) to be fully prepared for MRTU and to have the resources necessary to be able to participate in the new market design, [Locational Marginal Pricing], and a day-ahead energy market."¹³ In order to be in compliance with Commission directives, PG&E must meet its utility obligations within the MRTU framework. Second, to the extent DRA is suggesting that accounting standards alone are not sufficient to determine the reasonableness of PG&E's MRTU implementation expenditures, PG&E has not relied on accounting standards alone to make its reasonableness case. PG&E has presented evidence in addition to accounting standards, to support the reasonableness of its MRTU implementation activities.

9.3. Review of PG&E's MRTU Implementation
Costs Should not be Deferred to a
Three-Utility Consolidated Proceeding

DRA recommends deferring cost review until the Commission establishes a consolidated proceeding to address MRTU cost recovery for the three IOUs. PG&E says this recommendation for delay should be rejected. We note PG&E sought review of its MRTU implementation costs in its 2010 ERRA forecast proceeding, and the Commission declined to review the MRTU expenditures in that proceeding, stating "this decision . . . defers the issue to PG&E's ERRA Compliance filing (or separate application)."¹⁴ PG&E has complied with the Commission's directive in this proceeding.

Furthermore, there are also real costs associated with DRA's proposal. Adoption of DRA's proposal would defer review of PG&E's implementation activities for an undetermined amount of time, which could be a year or more. MRTU went into effect over two years ago, on April 1, 2009; DRA's proposal would require another Commission proceeding, with associated administrative overhead. Use of the existing ERRA compliance proceedings reduces that administrative overhead.

¹² D.09-12-021, at 3, fn. 1.

¹³ Resolution E-4093, at 5.

¹⁴ D.09-12-021, at 3, fn. 1.