9. Threshold CTM

9.1. Positions of Parties

PG&E states that a NPV CTM of one dollar would be sufficient to merit provision of the incentive.

TURN states that if the Commission approves PG&E's proposal, there should be a threshold amount of CTM. TURN recommends that the threshold amount be sufficient to overcome any potential margin of error in the CTM analysis, including the margin of error in the inputs to the calculation, and sufficient to ensure that the current ratepayers will begin to see a positive CTM.

CCSF states that there should be a threshold CTM if for no other reason than to cover the administrative costs.

Hercules states that there is a substantial risk to ratepayers that the incentive will result in a negative CTM due to the lack of a threshold amount of CTM and the margin of error in the CTM calculation. Hercules also points out that PG&E's calculations do not take into account the costs of administering the proposal, including the reasonableness review.

MID recommends a threshold CTM of 20% above marginal cost to overcome the margin of error in the CTM calculation and any time lag between provision of the allowance and the realization of revenues from the new customers. MID states that the Commission adopted a 20% of marginal cost threshold CTM in D.95-10-033 for rate discounts.

9.2. Discussion

Under PG&E's proposal, it could provide an incentive for a development that would be estimated to produce a CTM as low as $1 over a 30-year period. Under such circumstances existing ratepayers would essentially break even over a 30-year period. In such a case, since there would be essentially no net benefit to existing ratepayers over the 30-year period, there would be no reason to offer the incentive and assume the attendant risk that a negative CTM will result.

In any forecast of costs and revenues going 30 years into the future, there is a significant margin of error. If a CTM estimate falls within the margin of error it essentially means that there is no real certainty that a positive CTM will be realized. If the estimated CTM is significantly above the margin of error it is more likely that the CTM will be positive. If the ratepayers are to fund the proposed incentives, they should have a reasonable assurance that there will be a positive CTM. Therefore, it is reasonable to set a minimum level of CTM at or above the margin of error. However, PG&E has provided no forecast of the CTM it believes the incentives are likely to produce or the likely margin of error in its estimates.

As discussed previously, PG&E's proposal does not address administrative costs or reasonableness review costs. The existence of such costs will reduce any CTM generated by PG&E's proposal and supports the need for a threshold CTM.

Overall, we find a threshold CTM necessary. However, PG&E has not proposed one and the record is insufficient to determine what it should be.