14. Assignment of Proceeding
Michel Peter Florio is the assigned Commissioner and Robert Barnett is the assigned ALJ in this proceeding.
1. PG&E shall include in future ERRA proceedings an explanation of its internal controls for ensuring compliance with its Commission-approved Hedging Plan, but because its internal financial hedging controls and procedures are complex as well as commercially sensitive, PG&E's application shall include a public high level discussion of its internal procedures and controls for ensuring compliance with Commission-approved hedging plans, after which PG&E shall make its experts available to provide additional details to DRA staff at in-person meetings in the context of which PG&E would provide written information to DRA under Pub. Util. § 583 confidentiality protection as appropriate.
2. DRA and PG&E reached an agreement resolving their dispute over DRA's request that the Commission establish an ongoing process of ratepayer input into the development of PG&E's annual internal audit plan. We adopt the following in this 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 shall provide DRA its draft audit plan in or about November and meet at a mutually agreeable time to review the draft Internal Audit 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 as stated in its testimony, DRA may not exert any management control of PG&E's internal auditing program.
3. At the close of the Record Period, PG&E's ERRA balancing account reflected an undercollection of $71.8 million.
4. DRA's audit of the entries PG&E recorded in its ERRA for the Record Period disclosed no items of a material nature requiring adjustments.
5. DRA's review of PG&E's RPSCMA account for the Record Period disclosed no items of a material nature requiring adjustments. DRA does not object to PG&E's request for the transfer of the entire $385,772 balance in ERRA for recovery.
6. Information presented in PG&E's ERRA showing that would place PG&E at a competitive disadvantage if disclosed was placed under seal.
7. Implementation of the CAISO's MRTU fundamentally changed the manner in which energy is procured and sold by energy market participants in California.
8. The processes required to support MRTU are substantially more complex that the previous processes the CAISO used to balance the electric demand and generation on the transmission grid under the CAISO's control.
9. Changes included with MRTU include the establishment of approximately 3,000 pricing nodes for the CAISO-controlled grid, the re-introduction of a centralized day ahead energy market, and use of a full network transmission model to take transmission congestion into account.
10. Implementation of MRTU required significant changes to the CAISO's systems and processes.
11. Implementation of MRTU required significant changes to PG&E's systems and processes.
12. As MRTU implementation challenges arose, the CAISO adjusted its MRTU implementation schedule at least six times.
13. During the course of MRTU implementation, there was a 17-month increase in the duration of the implementation project.
14. The CAISO's business policies and procedures for MRTU evolved constantly during the MRTU implementation project.
15. PG&E established specific orders to track incremental capital costs and total incurred expense costs associated with PG&E's MRTU implementation activities.
16. PG&E's Project Management Office, Energy Policy Planning and Analysis, Front Office, Middle Office, Back Office, Information Systems Technology Services, and Demand Response Departments incurred significant incremental activity as PG&E implemented MRTU.
17. PG&E's Front Office is responsible, among other things, for the maintenance of PG&E's risk management control objectives, and carrying out this responsibility was substantially affected by MRTU implementation.
18. PG&E's Back Office is responsible, among other things, for the maintenance of PG&E's electric contracts for generation, and for invoicing and settlements with the CAISO, and carrying out these responsibilities was substantially affected by MRTU implementation.
19. PG&E's Demand Response Department is responsible for managing most aspects of PG&E's demand response programs, and carrying out this responsibility was affected by MRTU implementation.
20. PG&E employed methodology, which PG&E calls the PG&E Delivery Method, to manage the ISTS capital projects associated with MRTU implementation.
21. PG&E's capital expenditures for the ISTS project for the initial implementation of MRTU (Release 1) were $50.56 million.
22. The capital project for the initial implementation of MRTU involved substantial modifications to a significant number of the processes and systems used by PG&E's Front Office, Middle Office, and Back Office to manage PG&E's day-to-day procurement activities.
23. To manage the MRTU initial release capital project, PG&E had to manage the changes in business specifications and timelines coming from the CAISO as it carried out its MRTU implementation project.
24. Approximately 276,000 hours of work were necessary to carry out the capital project for the initial implementation of MRTU (Release 1), from its initial phase to its concluding phases.
25. PG&E's total incremental MRTU capital expenditures are $50.56 million.
26. PG&E's total MRTU implementation expenses are $11.96 million.
27. PG&E estimates that it was authorized $1.0 million per year for MRTU costs in its 2007 GRC decision, D.07-03-044.
28. To derive its requested revenue requirement in this proceeding, and with the intention of ensuring that does not double recover the MRTU-related amounts authorized in its 2007 GRC, PG&E has subtracted $1.0 million per year from its MRTU expenses.
29. The incremental MRTU implementation expenses for which PG&E is seeking recovery, after subtraction of $1.0 million per year, are $8.95 million.
30. PG&E has requested to recover in the generation and distribution components in PG&E's 2011 electric rates $18.1 million and $0.2 million, respectively.
31. The $18.3 million in MRTU revenue requirements that PG&E has requested to recover in 2012 electric rates is reasonable, subject to an audit.
1. PG&E's administration of its ERRA power purchase agreements, its URG administration relative to fuel costs, its procurement least-cost dispatch activities, and its procurement-related revenue and expenses recorded in its ERRA for the 2009 Record Period were prudent and complied with its conformed 2006 Long Term Procurement Plan.
2. PG&E's administration of its allocated CDWR contracts, Non-Qualifying (QF) must take contracts, conventional generation contracts, renewable energy contracts, AMP demand response contracts, and non-QF contracts complied with Standard of Conduct 4 of the Commission's Procurement Standards of Conduct.
3. PG&E's least cost dispatch procurement activities during the Record Period complied with PG&E's 2006 Conformed LTPP, including Standard of Conduct 4 of the Commission's Procurement Standards of Conduct.
4. PG&E's fuel expenses for the utility retained generation and procurement activities during the Record Period were prudent and complied with PG&E's 2006 Conformed LTPP.
5. PG&E's showing on utility retained generation fuel expense and administration and management of URG facilities was consistent with D.05-07-015 and D.05-04-036, by which PG&E and DRA agreed that PG&E would provide certain information in future ERRA filings as part of its response to DRA's master data request.
6. In support of DRA's efforts to learn about and understand PG&E's IA plan, and to allow DRA an opportunity to provide suggestions on the IA plan, PG&E's Internal Auditing Department shall 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 can be amended during the audit year. However, DRA may not exert any management control of PG&E's internal auditing program.
7. PG&E should include in future ERRA applications a public high level discussion of its internal procedures and controls for ensuring compliance with Commission-approved hedging plans. Thereafter, PG&E shall make its experts available to provide additional details to DRA staff at in-person meetings, in the context of which PG&E would provide written information to DRA under Pub. Util. Code § 583 confidentiality protection.
8. PG&E complied with the recovery requirements of RPSCMA and it is appropriate for PG&E to recover the RPSCMA balance in this ERRA compliance proceeding.
9. PG&E's ERRA balancing account entries, reflecting an undercollection of $71.8 million as of December 31, 2009, as well as PG&E's $385,772 in RPSCMA entries as of December 31, 2009, are accurate and should be adopted.
10. PG&E's accounting books were closed on PG&E's ISTS capital project for the initial implementation of MRTU (Release 1) during 2009.
11. PG&E's accounting books were closed on PG&E's ISTS capital project for the 2009 pre-summer release of MRTU during 2009.
12. Because the books were closed on PG&E's capital project for the initial implementation of MRTU (Release 1) and on PG&E's capital project for 2009 pre-summer release of MRTU in 2009, it is appropriate to review the reasonableness of these projects in this 2009 ERRA compliance proceeding.
13. PG&E's activities to carry out its ISTS capital project for the initial implementation of MRTU (Release 1), and the resulting $50.56 million of capital expenditures, were reasonable.
14. It is appropriate to review the reasonableness of PG&E's MRTU expenses incurred prior to the end of 2009 in this 2009 ERRA compliance proceeding.
15. PG&E should be authorized to collect in 2012 rates the $18.3 million PG&E has requested to recover, subject to an audit.
16. There is no basis for allocating any of the incremental MRTU implementation expenditures PG&E has reflected in the MRTUMA to FERC jurisdiction.
17. PG&E's cost allocation recommendations appropriately consider which customers receive the benefit of MRTU implementation expenditures.
18. The $0.2 million of revenue requirement associated with demand response-related MRTU implementation expenditures is appropriately allocated to PG&E customers as are other demand response-related revenue requirements, by including these amounts in the Demand Response Revenue Balancing Account.
19. The $18.1 million of revenue requirement associated with non-demand response-related MRTU implementation expenditures is appropriately allocated to PG&E customers as are other generation-related revenue requirements, by including these amounts in the Utility Generation Balancing Account.
20. There is no mechanism for recovering PG&E's costs to implement MRTU in the CAISO's Grid Management Charge that the CAISO charges to its market participants.
21. PG&E should be authorized to recover in 2012 rates the revenue requirement PG&E has requested; the 2009 and 2010 revenue requirements associated with the ISTS capital project for the initial implementation of MRTU (Release 1); the 2009, 2010, and 2011 revenue requirements associated with the ISTS capital project for the 2009 pre-summer release of MRTU; and the 2008 and 2009 revenue requirements associated with PG&E's incremental MRTU implementation expenses, after reduction for the annual MRTU amounts previously authorized in PG&E's 2007 GRC, subject to an audit.
22. PG&E properly assumed that its internal costs of developing software will be afforded favorable tax treatment in accordance with IRS procedures.
23. PG&E properly reflected the favorable tax treatment anticipated for the costs of developing software in the revenue requirements it calculated in this proceeding.
24. Information placed under seal should remain sealed for three years, as provided in this order.
IT IS ORDERED that:
1. Pacific Gas and Electric Company's administration of its power purchase agreements, utility retained generation administration related to fuel costs, and procurement of least-cost dispatch power activities for the period beginning January 1, 2009 and ending December 31, 2009 (Record Period) were prudent and complied with its conformed 2006 Long Term Procurement Plan.
2. Pacific Gas and Electric Company's (PG&E) Internal Auditing Department shall provide the Division of Ratepayer Advocates (DRA) its draft audit plan in or about November, and meet at a mutually agreeable time to review the draft Internal Audit plan as it relates to the Energy Resource Recovery Account subject matter. After reviewing the Internal Auditing plan, DRA may provide suggestions regarding that plan. At any time during year, DRA may provide such comments and suggestions on the Internal Auditing plan. At any time during the year, the DRA may provide such comments and suggestions on the plan because the plan can be amended during the audit year. However, DRA may not exert any management control of PG&E's internal auditing program.
3. In future Energy Resource Recovery Account applications, Pacific Gas and Electric Company shall include a public high level discussion of its internal procedures and controls for ensuring compliance with Commission-approved hedging plans. Thereafter, it shall make its experts available to provide additional details to the Division of Ratepayer Advocates staff at in-person meetings, in the context of which it will provide written information under Public Utilities Code Section 583 confidentiality protection.
4. Pacific Gas and Electric Company's $71.8 million Energy Resource Recovery Account (ERRA) undercollected balance as of December 31, 2009, and its procurement-related revenue and expenses recorded in its ERRA in that Record Period were reasonable and prudent.
5. Pacific Gas and Electric Company shall recover the Renewables Portfolio Standard Cost Memorandum Account balance of $385,772 by recording it in the Energy Resource Recovery Account and consolidating it with its Annual Electric True-Up for recovery as of January 1, 2012.
6. Pacific Gas and Electric Company is authorized to collect in 2012 rates the $18.3 million Market Redesign and Technology Upgrade revenue requirement that it has requested to recover in this proceeding, subject to refund based on the Commission's consideration of an audit.
7. The $0.2 million of revenue requirement associated with demand response-related Market Redesign and Technology Upgrade implementation expenditures shall be allocated to Pacific Gas and Electric Company customers as are other demand response-related revenue requirements, by including these amounts in the Demand Response Revenue Balancing Account.
8. The $18.1 million of revenue requirement that is non-demand response-related Market Redesign and Technology Upgrade implementation revenue requirement shall be allocated to Pacific Gas and Electric Company customers as are other generation-related revenue requirements, by including these amounts in the Utility Generation Balancing Account.
9. All information placed under seal in this proceeding shall remain sealed for a period of three years from the effective date of this order.
10. Application 10-02-012 is closed.
This order is effective today.
Dated July 28, 2011, at San Francisco, California.
MICHAEL R. PEEVEY
President
TIMOTHY ALAN SIMON
MICHEL PETER FLORIO
CATHERINE J.K. SANDOVAL
MARK J. FERRON
Commissioners
