7. Consideration of New Customer Costs
The new customers who are relevant to this proceeding are those who would occupy the developments PG&E's proposal is intended to attract. Such new customers would not be the recipients of the incentives, but would be the ratepayers that provide the CTM necessary to justify the proposed incentives.13
7.1. Positions of Parties
PG&E states that the Ratepayer Impact Measure (RIM) test is appropriate for evaluating its proposal. The RIM test is described in the California Standard Practice Manual: Economic Analysis of Demand-Side Programs and Projects dated July 2002 (manual). The RIM test evaluates cost-effectiveness by measuring the effects of a program on rates. PG&E states that the RIM test has been used for years by the Commission to evaluate demand-side management programs. PG&E further argues that the manual demonstrates that different cost-effectiveness tests apply to different types of programs. Specifically, PG&E says the manual specifies the RIM test for load building programs such as its proposal.
The Total Resource Cost (TRC) test evaluates the cost-effectiveness of a demand side management program based on the total program costs, including the participant's and utility's costs. PG&E says the manual provides that the TRC test cannot be meaningfully applied to load building programs.
DRA states that neither the RIM test nor the TRC test calculates the effect on new and existing customers and there is no specific test that does so. DRA proposes that the Commission adopt a test that considers both new and existing customers. It included in its exhibits a modified TRC test to illustrate what might be done.
TURN states that the RIM test is generally appropriate for use in determining the effect on non-participants. TURN states that the TRC test is usually used for programs that reduce load, which is not the case with PG&E's proposal, and would not produce meaningful results in this case.
7.2. Discussion
The RIM test is generally used for evaluating load building programs. Most load building programs offer an incentive to the customer the utility is trying to attract or retain. The participating customer is offered the incentive and can choose whether to participate in the program. Therefore, a customer who chooses to participate can be assumed to benefit from the program. The question then becomes whether it makes sense for existing customers to pay for the program. This is addressed by the RIM test, which calculates the effect of the program on ratepayers who pay for the program through rates, but do not participate. However, in this case the incentive is not usually paid to the new customer. Instead, the incentive is paid to the developer. Thus, the new customer can not be assumed to benefit from the program. While the RIM test is still appropriate for determining the effect on the existing ratepayers, it does not address the effect on the new customers.
The TRC test determines the effect on existing and new customers in the aggregate. Thus, the TRC test could indicate that the program is beneficial to customers as a whole, even though new customers could be worse off. As we stated in D.82-04-069: "any request or proposal which ostensibly promotes the benefit of the majority at the expense of a minority interest requires substantial justification."14 The TRC test, since it aggregates new and existing customers, does not provide such justification.
PG&E states that it is possible some new customers would pay higher rates than if they were served by a POU. PG&E points out that the relative rates of PG&E and POUs may change over time. PG&E then concludes that it makes good sense and is sound policy to have a relatively small number of customers pay a modestly higher rate while millions of PG&E's distribution customers benefit from a positive CTM. PG&E has presented no analysis or quantification of the effect of the incentives on new customers or existing customers. Thus PG&E has not shown how modest the effect on new customers would be or how substantial the effect on existing customers would be.
The record shows that in many cases the POU rates are lower than PG&E's rates. In some cases they are quite a bit lower. For example, a residential summer month electric bill for MID in Baseline Territory R as compared to PG&E would be about the same for a usage of 500 kilowatt hours (kWh), 1% lower for a usage of 750 kWh and 5% lower for a usage of 1,000 kWh. The same comparison for Redding Electric Utility would be 5% lower, 17% lower, and 32% lower. A comparison of average monthly bills for small commercial customers shows that bills from POUs range from 5% higher to 39% lower than PG&E.15 A comparison of average monthly bills for medium commercial customers shows that POU bills range from 9% higher to 31% lower than PG&E.16 Thus the adverse effect on some new customers may not be minimal and could be substantial. As discussed previously, PG&E has not demonstrated that existing customers will receive any substantial benefit. Thus, PG&E has not demonstrated that it would be good policy to disadvantage some new customers to achieve a minimal advantage to existing customers.
13 The incentives would be given primarily to developers who will not occupy the development.
14 D.82-04-069, p. 24.
15 For 10,000 kWh.
16 For 100 kW demand.
