7. Definition of Pre-Deployment

The scoping memo in this proceeding provided initial guidance on how to define pre-deployment and categorize various proposed activities of SCE for the purposes of this proceeding. Parties were asked to comment on the appropriateness of the standard described in the scoping memo and suggest alternative standards if necessary.

TURN does not address these criteria in its testimony nor does it offer other specific standards for evaluating the appropriateness of SCE's proposed expenses, instead making a general statement that some categories of proposed expenses are more "legitimately associated with predeployment activities" than others, which it classifies as early deployment.¹¹ DRA states its support of the guidance suggested in the scoping memo, and interprets the guidance to mean that only activities and costs associated with preparation for the filing of SCE's business case (so-called "research and reports") and completed before the deployment application is filed should be considered pre-deployment.¹² DRA uses this interpretation of the guidance throughout its analysis of SCE's proposed activities and expenses.

In its rebuttal testimony, SCE defines pre-deployment broadly to encompass: 1) the research and reports needed to develop its initial business case and file that case as an application before the Commission; 2) continuing activities whose primary value is to validate and refine that business case and ensure the feasibility of the chosen options; and 3) preparation activities intended to ensure that SCE is ready to proceed with AMI deployment in early 2008 or when the Commission makes a final decision on its deployment application.

SCE disagrees with DRA's contention that activities can inform the business case only if they are completed before the deployment application is expected to be filed. SCE proposes that activities should be considered pre-deployment if they will determine or validate the accuracy of cost-benefit assumptions,¹³ even if they are completed after the deployment application is filed, as long as they may become part of the record of that case before a Commission decision is issued.¹⁴ In addition, SCE cites D.05-09-044 in PG&E's AMI pre-deployment application in arguing that activities that may be more logically associated with deployment may be considered "reasonable" under the Commission's standard for approving pre-deployment activities and costs,¹⁵ if those activities would be necessary for any full or partial AMI deployment in its service territory and are necessary to meet SCE's current timeline for beginning deployment in early 2008.¹⁶ As discussed above, SCE explicitly states its assumption that the Commission is likely to approve some form of AMI and argues that because the activities within this application would generally be necessary for any full or partial deployment of its anticipated AMI system, the risk to ratepayers of sunk costs is minimal.

7.1 Discussion and Conclusion

As discussed in Section 6, above, certain pre-deployment activities have value for the Commission whether or not full deployment is approved, and can reasonably be approved before a full cost-effectiveness analysis is conducted. Therefore, arguments about the likelihood of the final business case being cost-effective are misplaced at this time; the Commission's concern here, as described in the scoping memo for this proceeding, is whether the proposed activities will inform that business case and make it more accurate, to assist the Commission in making the ultimate determination about whether SCE should proceed to full deployment.

Based on this and on the interpretations espoused by DRA and SCE, we adopt the guidance found in the scoping memo to determine what activities are properly considered pre-deployment. That is, we find that pre-deployment includes activities whose primary purposes are: 1) to determine the equipment, technology, and approach to be included of SCE's full deployment proposal; and 2) to gather and refine data that will improve estimates of the costs and benefits to be included in the cost-benefit analysis of the full AMI deployment proposal, to ensure that the final deployment application contains accurate data and reasonable estimates.

This does not mean, however, that pre-deployment includes only work that can be completed before the Phase 3 application is initially filed; such a definition would result in the loss of information that could play an important part in the Commission's review of the costs and benefits of AMI.  Deployment of AMI, if approved, would be an important investment, both in terms of the funding required to make it possible and in its potential impact on energy use in California, and may further state policy goals such as increasing demand response.  It makes sense for this Commission to get as much information as reasonably possible on which to base its final decision in that proceeding, and activities that may refine the business case and related cost effectiveness calculations should not be arbitrarily excluded simply because they may be completed after the Phase 3 deployment application is expected to be filed.  It also does not make sense to specifically exclude funding for activities that could provide information after the date that that case is filed but before a decision is likely to be made in the deployment proceeding.

We expect SCE to file its AMI deployment application when sufficient information is available to develop a complete and accurate business case; this will enable parties to analyze SCE's proposal and ensure that the Commission's record contains sufficient information to make an informed decision on the merits of deployment.  SCE expects to file its Phase 3 application in late summer 2007. If relevant information becomes available during the Commission proceeding on Phase 3, however, we expect SCE to provide updated or amended testimony and supporting information to other parties to ensure a complete and accurate record in that proceeding and an opportunity for full participation by all parties.

¹¹ Exhibit 200, p. 6.

¹² Exhibit 100, p. 1-2.

¹³ Exhibit 5, p. 16.

¹⁴ Exhibit 5, p. 15.

¹⁵ Exhibit 5, p. 16.

¹⁶ Exhibit 5, p. 17.