2. Background
A. Market for LEVs
The market for pure electric vehicles (EV) is developing. While nearly all EVs are in California,2 there are only 2,300 battery EVs on California's roads.3 A report SCE and PG&E submitted to the Commission states that "according to vehicle manufacturers, expected California light-duty4 EV [2002] sales are currently estimated at about 400 vehicles."5 There are currently no plug-in hybrid vehicles - vehicles with both an electric motor and an internal combustion engine that are cable of operating completely with the electric motor and a battery system charged from the electric grid - available on the market in the U.S.6
Fuel-cell technology is just beginning to find its way into vehicles, and may be a driver of natural gas demand in the future. Fuel cell powered vehicles consume hydrogen to create electricity, which is used to power electric motors for locomotion. Currently, the most efficient means of producing hydrogen is based on natural gas (just as gasoline is made from crude oil). Although full-scale commercialization of fuel cell technology is not anticipated until at least 2010 due to "significant engineering and technology challenges [that] lie ahead,"7 we note that the emerging fuel cell technology will be dependant on utility infrastructure.
On the natural gas side, the picture is slightly better. There are approximately 100,000 natural gas vehicles (NGVs) in the United States, 20% of which are in California. There are approximately 200 liquefied natural gas vehicles operating in California.8
Most of the increases in LEV production (except the production of internal combustion engine/electric hybrid vehicles that do not require electric charging) have been driven by regulatory requirements.
B. History of IOU LEV Funding
We approved IOU ratepayer funding for LEVs in 1993 in Decision (D.) 93 07-054, after the Legislature enacted Pub. Util. Code § 740.3 et seq. The statute provides that the Commission should work with other state agencies, air quality management districts, the motor vehicle industry and the IOUs to evaluate and implement policies to promote the development of equipment and infrastructure needed to promote the use of electric power and natural gas to fuel low-emission vehicles. . The statute prohibits the Commission from passing funding for such programs through to ratepayers unless they are in the ratepayers' interest. In 1999, the Legislature amended Pub. Util. Code § 740.8 to provide that "interests of ratepayers, short- or long-term, mean direct benefits that are specific to ratepayers in the form of safer, more reliable, or less costly gas or electrical service."9
We decided D.93-07-054 prior to the enactment of the foregoing definition, and therefore developed our own guidelines to determine whether ratepayers should pay for LEV programs. Those guidelines provided for ratepayer LEV funding "if the utilities can demonstrate that" the programs promote 1) reliable and efficient utility service, 2) safe service, 3) environmentally and socially responsible utility service or 4) reasonable rates.10 Thus, the IOUs bear the burden of proof in these proceedings.
We imposed four additional requirements in D.93-07-054: compliance with statutory guidelines related to research and development and demand side management; consultation with the rest of the industry; consistency with other agencies; and preservation and accommodation of competition.
First, we required that ratepayer-funded LEV programs comply with statutory and Commission guidelines related to Research, Development and Demonstration (R&D or RD&D) and Demand Side Management. Second, the IOUs had to demonstrate that they had reviewed programs of the motor vehicle industry, state, regional and local agencies, other utilities and state and national electric and natural gas LEV research groups to ensure their programs did not unnecessarily duplicate and were complementary with the programs of these entities. Third, we required the utilities to demonstrate that their programs are generally consistent with goals, policies and objectives of state and federal legislation and state and local agency action. Finally, utilities' programs could not unfairly compete with nonutility enterprises. We did not decide on funding for any particular LEV activities in D.93-07-054, but instead directed the IOUs to file 6-year program applications. In 1995, we issued D.95-11-035, our decision acting on those applications. We found that some of the IOUs' proposed programs satisfied the guidelines, but that others were not in the ratepayers' long-term interest. Among other things, we prohibited ratepayer funding for utility development of products for utility commercialization use and to market LEVs.
We reiterated this point in our 1998 decision denying rehearing of
D.95-11-035: "[T]he Legislature and the Commission intended funding for these essentially experimental programs for a specific six-year period, not an open-ended one."11
We also stated in D.95-11-035 that the LEV statute does not obligate us to fund any IOU LEV programs. While the law "encourage[s] this Commission to approve utility programs that support the development of a market for [LEVs] . . . , no ratepayer funds can be expended unless the program will provide direct benefits to ratepayers in the form of safer, more reliable or less costly gas or electric service."12 Thus, for the Commission to approve IOU programs, the IOUs must demonstrate that their ratepayer-funded LEV programs provide such direct ratepayer benefits.
We also prohibited the utilities from undertaking ratepayer-funded RD&D program that would concentrate on developing new engines and vehicles.13 We made clear that while utilities could engage in new product evaluation in order adequately to plan and manage the electric vehicle recharging load, ratepayers should not fund the development of new products. D.95-11-035 authorized funding for utility LEV programs for six years. The funding expired on December 21, 2001. We extended the funding through December 31, 2002 in Resolution G-3322, and through our final decision on these applications in D.02-12-056. We explained in D.02-12-056 that, "We do not prejudge the utilities' applications for any additional funding or new program activities, or whether continued funding of existing LEV program activities pursuant to our final decision is appropriate."14
D.95-11-035 provided that the utilities would record their LEV program expenses in "one-way" balancing accounts. The accounts are so labeled because their usage requires the utilities to refund to ratepayer funds reflected in rates but left unspent, but does not allow them to recover from ratepayers any expenditures in excess of the authorized accounts.15
D.02-12-056 also made clear that we would be considering only "discretionary" LEV program activities, such as customer service, training, research and development and other "non-mandatory" LEV programs, in this proceeding.16 These discretionary programs are not the subject of statutory clean air requirements, but rather are carried out by the IOUs at their own discretion. This decision acts only on the IOUs' discretionary funding requests.
We explained that we would review "mandatory" LEV program activities in each utility's general rate case (GRC) or cost-of-service proceeding.17 We identified as "mandatory" activities the acquisition of alternative fuel use fleet vehicles pursuant to federal law, operation and maintenance costs associated with use of alternative fuel use fleet vehicles and associated infrastructure, infrastructure (fueling facilities and related equipment) needed to support alternative fuel use fleet vehicles, employee training and instruction necessary for the use of alternative fuel use fleet vehicles, and accounting for the costs of these mandatory activities. These activities are therefore outside the scope of this decision. To the extent the IOUs have included requests for mandatory funding in their applications - even interim funding pending the outcome of their GRCs or cost-of-service proceedings - we do not act on them here. They will have to seek interim funding in those other proceedings.
C. The IOUs' Applications
In this decision, we act on each IOU application consistently, rather than allowing the IOUs different procedural options. For each program, we extend funding for two years, to expire at the end of 2005, and provide some direction for future consideration of these programs. The IOUs shall file annual reports as directed elsewhere in this decision.
1 SoCalGas/SDG&E's Applications
SoCalGas and SDG&E filed a joint application seeking $2,924,000 in total discretionary LEV funding. This amount breaks down as follows:
SoCalGas | |
Item |
Requested Funding (annual) |
Customer information, education and training |
$1,100,000 |
NGV R&D |
$935,000 |
Subtotal SoCalGas |
$2,035,000 |
SDG&E | |
NGV customer information program |
$450,000 |
EV customer information program |
$439,000 |
Subtotal SDG&E |
$889,000 |
Total SoCalGas/SDG&E |
$2,924,000 |
2 PG&E's Application
PG&E seeks $5,026,000 per year in discretionary LEV funding for the period that ends at the end of 2005. Using PG&E's chart, this amount breaks down as follows:
Program Activities |
Program Description |
$ (Million) |
Customer Education | ||
I. LEV Vehicle Safety and Infrastructure Training |
Fueling, Vehicle, and Infrastructure Safety training for PG&E employees as well as outside fleet operators and individuals |
$0.496 |
II. LEV Technology and Infrastructure Introduction; Regulatory Requirements and Funding Availability Education; Emissions Benefits; and Industry Participation |
Matching technology with PG&E fleet requirements; participating on LEV industry boards to ensure coordination and non-duplication of efforts; sharing "learnings" with customers |
$1.799 |
III. PG&E Tariff Availability and Eligibility; and Interconnection Services |
Answer customer inquiries regarding applicable LEV-related gas and electric tariffs, including use of off-peak electric rates to minimize peak |
$0.340 |
Customer Education Subtotal |
$2.635 | |
RD&D | ||
IV. Small Scale Natural Gas Liquefier Demonstration |
Demonstrate INEEL technology to test its ability to safely deliver low-cost liquefied natural gas to PG&E fleet to reduce fleet operation costs. LNG may also be provided, under an experimental rate, to other customers; also, evaluate use of LNG to help reduce gas distribution system costs and avoid |
$0.624 |
V. Small Specialty EV Charging Architecture Development |
Support development of common, global charging systems for on-road and off-road EVs |
$0.184 |
VI. Fuel Cell Vehicle Station Demonstration |
Provide support for a natural gas-to-hydrogen reformer demonstration by the CA fuel cell partnership to ensure safety and understand utility-specific system impacts and load management implications for the future |
$0.540 |
RD&D Subtotal |
$1.348 | |
Technology Application Assessment | ||
VII. Distribution System Load Impact Assessments |
Evaluate EV and NGV load additions to minimize costs to distribution system |
$0.550 |
VIII. Safety Codes and Standards Support |
Minimize utility compliance costs and protect utility and customer interests as EV and NGV codes and standards are developed |
$0.089 |
IX. LEV Performance Assessments |
Determine actual field performance of LEV technology in PG&E fleet applications to ensure safety and to lower fleet costs; share "learnings" with customers |
$0.299 |
X. Participate in Others' LEV Demonstrations |
Gather LEV related performance knowledge through project cost-sharing, to reduce PG&E fleet |
$0.105 |
Technology Application Assessment Subtotal |
$1.043 | |
TOTAL |
$5.026 | |
3 SCE's Application
According to its chart, SCE appears to seek only $182,160 in discretionary funding, although its request is not at all clear.
Activities Related To: |
Utility Role |
Alleged Ratepayer Benefit |
Budget (annual) |
Emergency response to EVs |
SCE primary source of EV safety information concerning issues related to utility operations. |
Safety awareness and emergency preparedness. |
$ 27,342 |
Information Network. |
Source for information on utility EV programs including time-of-use rates, etc. |
Customer information source for EV load management information, safety hook-ups, etc. |
$ 45,540 |
EV Loan program |
Collects EV use profile data and assists in designing load management. |
Load management, time-of-use, etc. |
$ 36,432 |
Customer Outreach |
Disseminate information to customers and public about EV fleets, rates, load management, etc. |
Customer information sources for utility EV load management, safety, energy efficiency, etc. |
$ 72,864 |
TOTAL |
$182,160 | ||
D. Other Parties' Responses to the Applications
The Commission's Office of Ratepayer Advocates (ORA) protested the IOUs' applications, asking that the Commission discontinue ratepayer funding of LEV activities that are not directly related to utility obligations under various government mandates to purchase, operate and maintain LEVs. Specifically, ORA requests that we discontinue funding for LEV RD&D activities, which it alleges should be covered by existing RD&D funding derived from charges for Public Purpose Programs. It also asks us to discontinue funding for consumer information, education and training activities relating to commercially available LEV products and services.
The Southern California Generation Coalition (SCGC), consisting of the Los Angeles Department of Water and Power, the City of Burbank, the City of Glendale, the City of Pasadena, the Imperial Irrigation District, Williams Energy and Reliant Energy, protested the application of SoCalGas and SDG&E. SCGC recommends that the SoCalGas customer service function be limited to providing safe service to entities that directly fuel NGVs. It also alleges that government agencies or other organizations should provide NGV information to the public, rather than the utility. For NGV RD&D, it claims that ratepayers should not fund these activities because LEV product manufacturers are better suited to do so. Finally, it asserts that utility RD&D activities should be funded through the Natural Gas Public Purpose Program surcharge.
The Western States Petroleum Association (WSPA), a non-profit trade organization representing companies involved in the petroleum industry, protested the application of SoCalGas and SDG&E. WSPA is concerned that the proposed LEV programs exceed the parameters adopted in D.95-11-035 and that additional clarification is needed to fully understand the utilities' customer education and RD&D activities.
Liberty Fuels (Liberty), an equipment developer, opposes the utilities' applications. Liberty claims that the utilities have used ratepayer funds to monopolize the NGV market and that continued funding will provide the utilities with an unfair advantage over the private sector. In support of its allegations, Liberty says that past spending has been inappropriately devoted to lobbying and promotional efforts that are contrary to D.95-11-035. Additionally, Liberty claims, utility RD&D efforts have been directed toward developing new products that should be undertaken by private companies. As a case in point, Liberty suggests that natural gas compressor manufacturers are better suited to conduct RD&D for such products than the utilities.
The California Energy Commission (CEC), a state agency with an interest in the conservation and/or displacement of petroleum fuels and promotion of fuel diversity, supports the utilities' continued role in expanding the use alternative fuels. Its primary interest is to define the scope and scale of the utilities' LEV programs. In particular, CEC maintains that ratepayer funded RD&D is appropriate to support compliance with the EPAct, although public-private partnerships should be explored.
The California Air Resources Board (CARB), a state agency authorized to adopt regulations intended to meet clean air standards, supports the utilities' applications. CARB claims that the utilities' LEV programs have been and continue to be supportive of the agency's efforts to reduce transportation-related emissions. CARB also states the utilities have provided valuable input into developing guidelines for LEV incentives and promoting the availability of grants. According to CARB, utility training and education activities based on their fleet experience is important in fostering the public's acceptance of zero emission vehicles. Additionally, the utilities' continued participation in CARB's Infrastructure Working Group is important for developing infrastructure standards.
The South Coast Air Quality Management District (SCAQMD), a public agency with air quality regulatory authority over the South Coast Air Basin, supports the utilities' applications. It claims that the proposed utility LEV programs, including public information and RD&D components, are vitally necessary to assist the agency with its expedited implementation of its air quality management plan. SCAQMD also says that utility public information programs help users understand a myriad of governmental certification categories and equipment options. Furthermore, issues related to fuel specifications concerning the agency benefit from utility involvement. Utility participation in SCAQMD's Technology Advancement Office promotes non-duplicative LEV RD&D efforts and certain other enhancements.
CALSTART, an organization that works with industry and government to develop advanced transportation technologies to improve air quality, supports the utilities' applications. Since 1992, CALSTART has "launched over $150 million dollars in [advanced transportation] technology ... [RD&D] programs" with "funding from over 20 different government entities"18 as well as private companies such as General Motors, Volvo, and PG&E. CALSTART claims that ratepayer funding is needed for LEV RD&D because manufacturers are unwilling to make investments in this area and there are government spending shortfalls. The group also cites a need for utility involvement in the development of natural gas hybrid electric vehicles.
The Environmental Coalition (Environmental Coalition or Coalition), consisting of the National Resources Defense Council, the Coalition for Clean Air, the Planning and Conservation League, and the American Lung Association of California, supports the utilities' applications. The Coalition disputes the characterization that some elements of the utilities' programs are "discretionary" and claims that all aspects of the IOUs' programs are necessary. According to the Coalition, utility LEV programs benefit ratepayers by playing a key role in improving air quality, sharing LEV related information with customers and promoting safety. In its view, unless these programs are extended, the ratepayers' investment in the utilities' past activities and experience with LEVs would be lost.
E. IOUs' Current Staffs and Fueling Stations
As best we can discern, the IOUs currently have the following staffs handling LEV activities:
· SoCalGas/SDG&E have downsized their staff from 39 to 7 employees.
· PG&E has approximately 10 full time equivalent staff persons (FTEs) performing the customer service function,19 3 FTEs in the RD&D area, and 2-1/2 FTEs in the Technology Application Assessment group.20
· SCE did not provide relevant information.
The IOUs have the following fueling stations for LEVs:
· SoCalGas has 20 or 21 NGV fueling stations.21 Fourteen are open to the public. SDG&E has 3 fueling stations.22
· PG&E has 22 NGV fueling stations.23
· SCE has no NGV fueling stations since it is an electricity-only utility.
