XVII. Assignment of Proceeding
Dian M. Grueneich is the Assigned Commissioner and Sarah R. Thomas is the assigned Administrative Law Judge in this proceeding.
1. Forests can emit and sequester carbon dioxide (CO2).
2. The average residential customer will pay a CPT premium of approximately $4.31 a month ($51.72 per year), based upon a premium of $0.00254 per kWh and $0.006528 per therm) exclusive of A&M costs.
3. CCAR has already developed a forestry protocol, which focuses on forest management, conservation, and reforestation projects.
4. PG&E is one of a large number of members of CCAR.
5. PG&E arrived at its $12 million marketing budget by calculating how many customers it believes it can attract to the program, and assigning a dollar value to acquire each customer. PG&E terms this its "acquisition cost methodology."
6. PG&E's $9.71 per ton GHG reduction cost figure is contradicted by other evidence in the record. The true cost per ton could differ.
7. If CPT premiums are tax deductible, this fact will reduce the real premium paid residential customers who itemize deductions on their tax returns.
8. PG&E's A&M expenses are out of proportion to the revenues it will generate from customers who opt for the CPT.
9. PG&E has not demonstrated that its CPT program is cost effective.
10. The benefits of GHG emission reductions resulting from the offsets procured on behalf of program participants accrue to all ratepayers.
11. Use of manure management programs that are part of the Commission's RPS program in the CPT may result in double counting of emissions reductions unless project protocols include rigorous safeguards to assure the "additionality" of reductions.
12. Education to PG&E customers about the risks of global warming and means to reduce these risks is a public benefit of the CPT program.
13. PG&E will learn about how to procure GHG reductions and offsets as part of its CPT. Such experience should assist PG&E in complying with AB 32, the California Global Warming Solutions Act of 2006.
14. Assigning the A&M costs of the CPT to all PG&E ratepayers is consistent with ratepayer support in the context of other utility programs characterized by substantial public benefits including energy efficiency, the SGIP, and the CSI.
15. Assigning the A&M costs to all ratepayers would have negligible bill impacts.
16. Assigning the A&M costs to program participants would substantially increase the costs of participation.
17. As the costs of program participation increase, participation rates will likely decline.
18. PG&E's shareholders will benefit from the CPT, at the very least through enhanced goodwill for the company.
19. PG&E already works with charitable groups on shareholder-funded programs.
20. More than 60% of customers PG&E surveyed said they would be more likely to sign up for the voluntary rate premium if PG&E would contribute some of its own shareholders' profits to the fund.
21. Under the CPT, revenues collected may be spent far into the future on long-term contractual commitments. Under this scenario, millions of dollars collected today might not be spent for 10 or 20 years, as long-term contractual obligations come due.
22. Development of new protocols for non-forestry offsets will benefit the CPT program by mitigating the risks associated with an all-forestry offset program.
1. We should condition our approval of PG&E's application on several "accountability" measures to ensure funding is spent wisely.
2. PG&E should make regular reports to the Commission so we can determine how the program is working.
3. The Commission has required that all ratepayers bear the costs of innovative programs such as the California Solar Initiative and the energy efficiency program.
4. Given the program's expense and the allocation of A&M costs across all ratepayers, PG&E should guarantee that the program achieves a certain minimum of GHG reductions.
5. PG&E should explore tax deductibility of CPT premiums.
6. PG&E should work with the Commission and the EAG on how best to market the program.
7. PG&E should to the maximum extent possible use recycled products for its marketing materials.
8. Any GHG reduction used in the CPT program should be retired to avoid double counting. The reductions from PG&E's program may not be used to meet any other emissions reduction obligation, voluntary or mandatory.
9. PG&E should share key learnings from the CPT program with other interested parties.
10. PG&E should allow the CCAR to develop new protocols independently.
11. Use of manure management programs that are part of the Commission's RPS program in the CPT may result in double counting of emissions reductions.
12. Given the lag between collection of program revenues and payment under long-term GHG reduction contracts, it does not make sense for program revenues to earn a short-term interest rate.
IT IS ORDERED that:
1. Pacific Gas and Electric's (PG&E's) application is granted with modification. PG&E may only operate the Climate Protection Tariff (CPT) program if it abides by the modifications in this decision.
2. We approve PG&E's administrative and marketing (A&M budget), as follows:
Cost Category |
2006 |
2007 |
2008 |
2009 |
Total |
Program administration |
$700,000 |
$1,370,000 |
$1,120,000 |
$1,070,000 |
$4,260,000 |
Marketing |
$600,000 |
$2,400,000 |
$4,000,000 |
$5,000,000 |
$12,000,000 |
Total Budget |
$1,300,000 |
$3,770,000 |
$5,120,000 |
$6,070,000 |
$16,260,000 |
3. PG&E may not transfer funds among budget categories nor spend budgeted funds in different years than those indicated without making an advice letter filing seeking such change.
4. By advice letter filing, PG&E shall submit a detailed budget for the A&M costs concurrently with its detailed marketing plan.
5. The A&M costs shall be spread out among all PG&E ratepayers.
6. PG&E shall guarantee that the CPT program produces 1.5 million (75% of 2 million) tons of carbon dioxide equivalent reductions. The funding to meet this guarantee may come from any source except ratepayers as a whole, unless such ratepayer funding comes from the unused A&M funds.
7. PG&E shall pay interest at the same rate as its authorized cost of capital percentage on funds collected from CPT customers but not yet paid out on contractual commitments.
8. PG&E shall credit to ratepayers any tax benefits created by retirement of GHG reductions from the CPT program.
9. PG&E shall allocate the program A&M costs to ratepayers on a percentage of revenue (rather than an equal cents per unit of energy) basis.
10. We reject PG&E's backstop funding proposal. If revenues from the CPT program are insufficient to meet contractual commitments, PG&E may not charge the balance to ratepayers, either through a balancing account or any other mechanism.
11. PG&E shall permanently retire all certified GHG reductions procured by the CPT. PG&E may not use any retired reduction to meet an existing or future voluntary or mandatory emission standard or emission reduction requirement. Neither PG&E nor its enrolled customers may sell certified CPT-funded GHG reductions.
12. PG&E shall be bound by all program commitments it made in testimony at hearing or in its post-hearing brief, unless otherwise stated in this decision. Those commitments are as follows:
· To assist local governments in meeting their own GHG reduction targets, we require PG&E to provide, upon request, an annual accounting of all the GHG reductions for customers in their jurisdictions.
· PG&E commits that it will not seek attrition adjustments during the 2007 GRC cycle, as Aglet has suggested. No attrition is needed is because the CPT proposal specified a revenue requirement for each program year, 2006-2009.
· Because PG&E never proposed that GHG contracts should be granted debt equivalence treatment, PG&E may not seek such treatment as part of the CPT.
· PG&E's may not use the CPT to argue against proposals for mandatory regulatory structures to address climate change in the future.
13. PG&E may operate its program during calendar years 2007, 2008 and 2009. If it wishes to continue the program past that date, or discontinue the program early, it shall do so by application. If PG&E files no such application, the program shall sunset on December 31, 2009.
14. PG&E shall make annual reports, due March 15, 2008, 2009 and 2010, which shall contain the information required in this decision for the previous calendar year (with the March 15, 2008 report containing data for January 1, 2007-December 31, 2007). These reports shall be publicly filed, without redaction, with the Commission's Executive Director, with a copy to the Director of the Energy Division and all parties listed as "Appearances" in A.06-01-012. PG&E shall also make the reports available on its website. The Commission's Energy Division should review the reports in order to determine 1) whether the program meets the requirements of this decision, 2) whether projected program participation levels are being achieved, and 3) the degree of success in GHG contracting and amount of GHG reductions. If the Energy Division discovers serious problems with the program, it should make recommendations to the Commission on appropriate next steps.
15. PG&E shall make annual reports to participating customers summarizing program results, including the amount of GHG emissions reductions realized to date, projected future reductions from projects for which it has contracted and the timeframe in which those reductions are expected to occur. PG&E should provide these reports to the Commission with its annual reports, as discussed above.
16. We reject TURN's offset only proposal, without prejudice.
17. PG&E shall start with forestry projects, but will fund other CCAR-certified GHG reductions projects (with conditions) as the CPT program matures.
18. PG&E shall immediately investigate the feasibility of residential CPT customers deducting their premiums on their tax returns. At a minimum, PG&E shall 1) ask for guidance from the Internal Revenue Service and California Franchise Tax Board, 2) analyze whether it can accommodate deductibility through an existing charitable foundation within PG&E, and 3) if it prefers an outside partnership, discuss such a partnership with a number of third party charitable organizations. PG&E shall report to the Commission on the results of its efforts no later than March 1, 2007 by making a compliance advice letter filing, served on the Commission's Executive Director and copied to the Director of the Energy Division. The Commission delegates to the Energy Division authority to issue a resolution addressing PG&E's advice letter filing, including an order that PG&E institute deductibility, if such program is feasible and consistent with the goals of the CPT.
19. PG&E need not demonstrative that its 3-year demonstration of the CPT project is cost-effective.
20. Since PG&E will gain valuable experience about GHG reductions and offsets during its program, PG&E shall make information about its program available to third parties (and Commission staff) who seek it, even outside the normal reporting period.
21. PG&E may use $900,000 of its A&M budget to fund further protocol development by CCAR. This funding shall only be used for protocol development. PG&E shall ensure this funding is refundable if CCAR ceases to operate or have responsibility for certifying GHG reductions. If PG&E proposes to use a different entity to certify GHG reduction protocols or projects, it shall report such change by advice letter served on the Commission's Executive Director, with a copy to the Director of the Energy Division.
22. PG&E shall not attempt to influence CCAR's choice of future protocols for development as a result of the $900,000 in funding from the CPT. It may interact with CCAR in the same way other CCAR members do.
23. The External Advisory Group (EAG) shall include representatives of the following groups: residential customers, large business, small business, non-profits, environmental groups, environmental justice groups, local governments and state environmental agencies, agriculture, low income groups and the Commission staff. PG&E shall coordinate with the Commission and the EAG on marketing its program to ensure that California consumers are educated about the risks of global warming and how they can make a difference. To the extent that GHG reductions are to be realized through long-term projects, PG&E shall disclose in its marking materials that the time-frame of reductions does not match that of the emissions to be offset.
24. To the maximum extent possible, PG&E shall used recycled products for the CPT marketing materials.
25. PG&E need not defer to the EAG on program decisions but shall respond to EAG input into the CPT.
26. We encourage PG&E to consider creative alternatives to enable their low income customers to participate in reducing GHG emissions. In addition, to the extent that there is an educational component to the marketing campaign, it is appropriate for PG&E to consider outreach to all customers regardless of income level.
27. We strongly encourage PG&E to contribute shareholder funding to the CPT program.
28. PG&E shall ensure that GHG reductions contracted for in the CPT meet the CCAR (or other approved) protocols.
29. PG&E shall file an advice letter with the Executive Director (copy to Director, Energy Division) if it wishes to contract for manure management programs as part of the CPT and shall demonstrate that these projects meet stringent standards to prevent double counting.
30. As additional project protocols are developed by CCAR or some other appropriate entity PG&E shall file an advice letter with the Executive Director (copy to Director, Energy Division) seeking blanket permission to enter into contracts for that class of projects. In its advice letter filing PG&E shall demonstrate that any new protocol provides rigorous safeguards to assure that projects undertaken under it shall be "additional" and pose no double counting problem.
31. Application 06-01-012 is closed.
This order is effective today.
Dated December 14, 2006, at San Francisco, California.
MICHAEL R. PEEVEY
President
GEOFFREY F. BROWN
DIAN M. GRUENEICH
JOHN A. BOHN
RACHELLE B. CHONG
Commissioners
James Weil |
APPENDIX A Matthew Freedman |
Sarah R. Thomas |
Jeanne M. Sole |
John W. Leslie |
Greg San Martin |
Janet Combs |
Laurie A. Wayburn |
