11. Administration Issues
11.1. Affidavit Requirement
PG&E's original proposal included a requirement for a letter from the applicant rather than an affidavit. PG&E states that, based on concerns raised by parties during hearings, it will require a sworn affidavit. However, PG&E proposes that the affidavit requirement not require the applicant to provide a written POU offer because the POUs are not required to put their offers in writing. PG&E also states that requiring a written offer would undermine the utility of its proposal.
TURN recommends use of a sworn affidavit if the proposal is approved.
Hercules states that if the developer's request is based on the POU's tariffs or a written offer, the affidavit should require that the documents be attached to the affidavit so that the claim can be verified. Hercules recommends that all bona fide offers be in writing, and that if verbal offers are allowed they should be fully described in the affidavit including the name of the person providing the offer and the date on which the offer was made. Hercules also states that its recommendations would facilitate the reasonableness review. Hercules represents that, for an offer from Hercules to be a bona fide offer, it would have to be in writing.
MID states that any bona fide offer should be in writing, and attached to the affidavit. MID asserts that, for an offer to be bona fide, it should specify the allowances and costs applicable to the specific development or premises.
MID states that PG&E should specify exactly what information must be included in the affidavit, but has not done so.
PG&E proposes to offer an incentive when the POU's standard tariff amount or a bona fide line extension offer from the POU, that is different from the POU's tariffs, exceeds PG&E's tariff offering. If the POU's offer is based on the POU's tariffs, they are a matter of public record and readily available to PG&E and intervenors to evaluate the reasonableness of the incentive. However, when the POU's offer is different from its tariffs something else is needed.
The parties agree that the developer should provide a sworn affidavit indicating that a bona fide offer has been made by the POU, and this requirement appears reasonable. However, the parties disagree as to what constitutes a bona fide offer and whether a copy of the POU's written offer should be included as part of the affidavit.
Under PG&E's proposal, the incentive contract would be subject to a reasonableness review. Key elements of the review are determining whether a bona fide POU offer was made and whether PG&E's offer matched, but did not exceed, the POU offer. A copy of the POU's written offer is the best evidence that the offer is bona fide. It is also the best evidence of the details of the offer. Therefore, in the case of a written offer from a POU that is different from its tariffs, a copy of the written POU offer should be required.
In support of its proposal that the affidavit not be required to include a copy of a written POU offer whether one was provided to the applicant or not, PG&E alleges that some bona fide POU offers are verbal. In that case, there would be no written document to include in the affidavit. The record does not indicate how many POU offers are verbal. However, if the applicant wants to qualify for an incentive, we see no reason why the applicant could not request a written offer from the POU. More importantly, without such a document, the applicant's representation of the POU offer could not be verified by PG&E in administering the program or by the Commission and parties in the reasonableness review. Thus, PG&E's proposal that the applicant should not be required to obtain a written offer from the POU and include a copy of it with the affidavit is unreasonable.
According to PG&E, requiring a copy of a written offer would adversely affect the utility of the program. This means that the incentive program would attract fewer developers and provide less CTM. This tends to support denial of the application. If the requirement is not imposed, the reasonableness review would likely be more controversial, complex and expensive to implement because of the increased difficulty of verifying the POU's offer, especially if it is not in writing. Since this would make the proposal less practical to implement and decrease the resulting CTM, it too tends to support denial of the application.
11.2. Compliance Period
PG&E states that the developers are currently allowed six months to connect residential developments to PG&E (12 months for non-residential developments). After the compliance period, the developer would be subjected to deficiency billing for the portion of the development that is not connected. Under PG&E's proposal, PG&E would have the discretion to allow developers up to five years to connect. PG&E would base the compliance period for each developer on considerations such as the size of the development, the geographic area, the characteristics of the development, how quickly homes are being built in the area, and the overall financial value of the line extension contract. PG&E represents that POUs do not do deficiency billing.
TURN states that PG&E does not consider the lag between revenues and costs in its CTM calculation when the compliance period is extended for up to five years.
Hercules states that PG&E has not stated whether it intends to match or exceed the POU's compliance period. Hercules also represents that PG&E has not demonstrated that it needs the ability to offer an extended compliance period in order to match the POU's offer.
MID states that PG&E has not proven that it needs the compliance period to be up to five years. MID says that if the Commission approves PG&E's request, it should require some minimum number of homes or premises to be connected each year so that ratepayers would at least see some return on their investment.
NCPA states that PG&E has not developed the procedures necessary to implement its proposal.
PG&E proposes that it be allowed to extend the compliance period up to five years. The length of the compliance period, relative to the POU compliance period, would have a value to the applicant that is relevant to ascertaining whether PG&E's offer matches, but does not exceed the POU's offer. One way to address this is to calculate the dollar value to the applicant of any differences in the compliance period. PG&E has provided no information explaining how its proposed extended compliance period compares to the compliance periods offered by the POUs or how to value any difference between PG&E's and the POU's compliance periods. The fact that PG&E does deficiency billing and the POUs do not also has value. However, PG&E has not addressed how deficiency billing should be valued. Thus, PG&E has not proposed a means of assigning a dollar value to any difference in compliance periods or the absence of deficiency billing by the POUs. In addition, PG&E has proposed no other means of considering differences in the compliance period or the absence of deficiency billing in assessing whether PG&E's offer meets but does not exceed the POU's offer. Thus, we would not be able to ascertain the reasonableness of PG&E's offer.
If the compliance period is extended beyond the present requirements, there will be a longer period of time before any positive CTM is realized. Since the uncertainty of an estimate increases as it goes farther out into the future, the risk that the development will not provide a positive CTM will increase. This tends to support the need for a threshold CTM and/or a contribution by shareholders to the cost of the incentives to reduce ratepayer risk.
11.3. Administrative Discretion
PG&E requests authority to use its discretion regarding the time period allowed the developer to connect the development to PG&E's system, and whether to make an offer. PG&E represents that it would support establishment of detailed implementation guidelines (through workshops or otherwise) to flesh out any remaining clarifying criteria that may be appropriate. The workshops would take place after this application is approved.
CCSF states that PG&E's intent to offer the incentive selectively, especially since it has not established criteria for doing so, constitutes undue discrimination among developers.
NCPA states that PG&E has not developed the procedures necessary to implement its proposal.
PG&E does not propose to offer the incentive as a standard tariff offering to qualified applicants. Instead it requests authority to use its discretion regarding the time period allowed the developer to connect the development to its system.
PG&E's request for discretion regarding what compliance period to offer the applicant raises the possibility of similarly situated applicants being treated differently. PG&E has not explained in any detail what criteria it would use in determining what compliance period to offer an applicant. Therefore, we cannot determine whether offering different compliance periods to similarly situated applicants would constitute unreasonable discrimination.
PG&E also requests authority to use its discretion in determining whether to offer the incentive when PG&E has reason to believe the offer should not be made even though the customer otherwise meets the eligibility criteria.
If an applicant is not qualified for an incentive, the incentive should not be offered. However, when an applicant is qualified for in incentive, then there are at least two likely reasons not to offer it. One reason would be that there is reason to believe the applicant will not accept the offer. In that case, there would be no harm in offering the incentive anyway because there is always the possibility that the applicant will accept it.
Another possibility is that the applicant is likely to take service from PG&E even without the incentive. Logically, if an applicant is eligible to receive an incentive, but will take service with PG&E even without the incentive, the incentive would generate costs without benefits thus reducing the overall CTM provided by the incentive proposal. Therefore, existing customers would be better off if the incentive is not offered. However, this would likely mean that similarly situated applicants would be treated differently.
PG&E has not explained in any detail what criteria it would use in determining not to offer the incentive to an applicant who appears eligible. While we can speculate on possible reasons, we do not know with any specificity what PG&E has in mind. PG&E's request raises the possibility of similarly situated applicants being treated differently. Thus, we cannot determine whether not offering the incentive would constitute unreasonable discrimination.
PG&E has expressed its willingness to hold workshops after its application is approved to flesh out the criteria it would use in exercising its requested discretion. However, this is unreasonable for several reasons. First, without knowing PG&E's criteria in at least some detail, we can not determine whether its proposal could lead to unreasonable discrimination and we will not authorize a proposal that could do so. In addition, unless such a workshop results in agreement by all the parties, which we believe unlikely, further hearings would be necessary before the proposal could be implemented.
Overall, PG&E has not justified its request for discretion.
The above analysis points out the possibility that there may be some applicants who would qualify for the incentive, but would take service from PG&E without the incentive or should not be offered the incentive or extended compliance period for other reasons. Offering the incentive in such instances would incur costs with diminished or no corresponding benefits thus reducing the overall CTM provided by the proposal. PG&E has not addressed these possibilities in its CTM calculation and it is unclear whether its request for discretion could eliminate the possibility without unreasonable discrimination. This tends to support the need for a threshold CTM or denial of the application.
