XVI. Comments on Proposed Alternate Decision
The proposed alternate decision of Commissioner Michael R. Peevey in this matter was mailed to the parties in accordance with § 311 of the Pub. Util. Code and Rule 14.2(a) of the Commission's Rules of Practice and Procedure. Comments were filed on December 4, 2006 by PG&E, TURN, Aglet and DRA. Reply comments were filed on December 11, 2006 by PG&E, TURN and Aglet. In addition, a November 29, 2006 letter from the Natural Resources Defense Council (NRDC) addressed to all five Commissioners supported adoption of the CPT and noted its broad educational benefits to all ratepayers.
1. A&M Expense
A. Allocation to PG&E Ratepayers as a Whole
PG&E supports the proposed alternate decision's allocation of A&M expense to ratepayers as a whole. The ratepayer groups ask that a share of these costs be assigned to shareholders or program participants. The proposed alternate decision already addresses these views, and we make no changes.
TURN challenges the logic of the proposed alternate decision, contending that the analogy it draws to public purpose programs is unfounded. TURN implies that only programs that yield "tangible economic benefits to all customers" and that "are properly understood as alternatives to generation related investments" are truly analogous to public purpose programs. This view represents an inaccurate over-simplification of the Commission's multifaceted motivations for adopting public purpose programs, which range from reducing conventional air pollution to aiding low income customers. It also denies the very real impacts of climate change, by characterizing reductions in greenhouse gas emissions as intangible benefits. Moreover, this line of reasoning is inconsistent with the entire rationale for the State's and the Commission's manifold efforts to combat climate change.
TURN also revists the issue of the program's cost-effectiveness. This matter is already addressed in the proposed alternate decision, which explains that the program is not being held to a strict-cost effectiveness standard because it is a demonstration project.
The proposed alternate decision allocates A&M costs across all of PG&E's ratepayers based upon PG&E's proposed formulas (billing the costs to ratepayers based on the percentages of PG&E's revenues they pay) rather than on an "equal cents per unit of energy basis" as the ratepayer advocates urge. The decision does this on the assumption that most of PG&E's CPT participants will be residential. However, PG&E points out in its comments on the proposed alternate that, in fact, the program should not be construed as primarily a residential program given that "the CPT's success also depends on significant participation by business customers, whose premiums, because of these customers' higher total usage, are expected to comprise almost half of the CPT's funding for GHG reduction projects"48 This would appear to undermine the original rationale for accepting PG&E's approach.
In its comments, TURN also notes that an equal cents per kWh approach is used in the context of other public purpose programs, specifically citing the CARE program, nuclear decommissioning, and DWR bond charges. In response, PG&E observes that there are other public purposes programs in which costs are allocated on a percent of revenue basis, including energy efficiency, the California Solar Initiative, and demand response. PG&E further observes that the specific rate treatment for these types of programs is developed through the utility's General Rate Case.
Although, based on PG&E's comments, this program cannot be appropriately characterized as primarily residential, we are not convinced that this fact alone is sufficient to adopt TURN's approach. Many different factors play a role in determining the cost allocation methodology used in the context of public purpose programs. Given that the specific methodology is developed through a stakeholder process in the context of the utility's GRC, we believe it is better to defer to that process and apply the methodology here that is consistent with that used in the case of other public purpose programs that are similar to the CPT. We believe the CPT is more akin to energy efficiency, demand response and the California Solar Initiative than it is to nuclear decommissioning, DWR bond repayment, or the CARE program. Because the former programs allocate costs on a percent of revenue basis, we believe the same approach is appropriate in the case of the CPT. We therefore adopt PG&E's recommended approach.
2. Guarantee of Minimum GHG Reductions
PG&E opposes the minimum GHG reductions the proposed alternate decision requires. We believe that given the program's expense and the spreading of A&M costs across all ratepayers, it should achieve a minimum amount of GHG emissions reductions in addition to the anticipated educational benefits. The results we require are 75% of PG&E's own projections. We make no change in this general requirement.
3. Contract Commitments
The proposed alternate decision provides that "PG&E shall only enter into contract commitments under the CPT as the dollar amount of the payment obligation is collected from enrolled customers." PG&E contends that in light of the shareholder performance guarantee, this requirement is overly restrictive. Although PG&E stipulated to this provision during hearing, as Aglet points out49, this commitment was made in the context of discussing PG&E's proposed program, which did not require a shareholder guarantee. We find that the effect of the shareholder guarantee is to shift much of the price and performance risk of realizing GHG reductions through the program onto PG&E's shareholders. PG&E should therefore be provided with greater flexibility in managing these risks. This decision has been modified accordingly.
It is worth nothing that we are not requiring that the GHG reductions occur simultaneously with PG&E's collection of premiums. We recognize that reductions may occur well into the future, given, for example, that new forests take time to sequester carbon. We will require PG&E to make the lag between collection and premiums and GHG reductions clear in marketing materials so customers are aware that they may not be purchasing immediate GHG reductions.
We have clarified the reporting requirements and the Energy Division's tasks in response, and changed the report due dates as PG&E requests. If the reporting shows serious problems with the program, the Energy Division should recommend remedies to the Commission.
48 PG&E reply comments on Proposed Alternate at iii.
49 Aglet reply comments on proposed decision at 4-5, citing hearing Exhibit 3: "[T]he contract commitments are only entered into as the dollar amount of the payment obligation is collected from enrolled customers."
