ALJ/JPO/jt2 Date of Issuance 12/6/2007
Decision 07-12-005 December 6, 2007
BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
Application of Pacific Gas and Electric Company for Pre-Approval of Exceptional Case Contracts Pursuant to Electric Rules 15.I.3 and 16.G. (U39E) |
Application 06-07-027 (Filed July 31, 2006) |
Clifford J. Gleicher, Attorney at Law, for Pacific Gas and Electric Company, applicant.
Rashid A. Rashid, Attorney at Law, for the Division of Ratepayer Advocates; Nina Suetake, Attorney at Law, and Jeffrey Nahigian, for The Utility Reform Network; C. Susie Berlin, Attorney at Law, for Northern California Power Agency; Gregory L. Wheatland, Attorney at Law, for the City of Hercules; Stephen A. S. Morrison, Attorney at Law, and Sean Casey, for the City and County of San Francisco; Dan L. Carroll, Attorney at Law, for the Modesto Irrigation District and the Merced Irrigation District; Joy A. Warren, Attorney at Law, for the Modesto Irrigation District; Tanya A. Gulesserian, Attorney at Law for Coalition of California Utility Employees; Maricruz Prado, Attorney at Law for Southern California Edison Company, interested parties.
OPINION DENYING PACIFIC GAS AND ELECTRIC COMPANY'S REQUEST FOR PRE-APPROVAL OF EXCEPTIONAL CASE LINE EXTENSION CONTRACTS
Title Page
OPINION DENYING PACIFIC GAS AND ELECTRIC COMPANY'S
REQUEST FOR PRE-APPROVAL OF EXCEPTIONAL CASE LINE
EXTENSION CONTRACTS 11
2. Line Extension Allowance Background 22
5. Analytical Approach and Conclusion 1010
6. Need for the Incentives 1313
7. Consideration of New Customer Costs 2222
10. Whether PG&E's Shareholders Should Contribute to Program Costs 3434
10.1. Positions of Parties 3434
11. Administration Issues 3535
11.1. Affidavit Requirement 3535
11.3. Administrative Discretion 4040
12. Issues Related to After-the-Fact Reasonableness Review 4242
12.1. Proceeding in Which the Review Should Take Place 4242
12.2. Consequences of a Finding of Unreasonableness 4444
13. Backbone-Only Electric Main Line Extensions 4747
14. Public Utilities Code Section 783 4848
14.1. Positions of Parties 4848
15. Comments on Proposed Decision 5050
Attachment A - List of Acronyms
OPINION DENYING PACIFIC GAS AND ELECTRIC COMPANY'S REQUEST FOR PRE-APPROVAL OF EXCEPTIONAL CASE LINE EXTENSION CONTRACTS
In this application, Pacific Gas and Electric Company (PG&E) requests approval of a proposed incentive program. Under the incentive program, PG&E would offer pre-approved exceptional case electric line extension contracts (contracts) for residential and commercial line extensions in portions of its service territory where publicly-owned utilities (POUs) are offering electric distribution service under more generous terms than PG&E is otherwise able to offer. The contracts would include an incentive amount in addition to the line extension allowance PG&E would normally offer. By this decision, we deny the application because the proposed incentive program is not needed, could disadvantage some new customers, and is not practical to implement.
2. Line Extension Allowance Background
When a residential or non-residential building is constructed, the entity that owns the building (applicant) will have to apply to PG&E to be connected to the PG&E's system.1 The facilities that will have to be built to make the connection are of two kinds. First, PG&E's distribution line will have to be extended to the edge of the applicant's property if not already there. This is called a line extension. Second, PG&E's distribution line will have to be connected to the building's meter. This is called a service extension. As used herein, the term "line extension" refers to both the line and service extension unless specified otherwise.
The cost of a line extension is divided into two parts: non-refundable and refundable. The non-refundable costs (trenching, conduit, etc.) are paid by the applicant. The refundable costs are covered in whole or in part by the line extension allowance.
PG&E's residential line extension allowance is currently fixed at $1,313 per dwelling expected to be connected within six months from the date PG&E's facilities are first available to provide service. The refundable costs (electric wire, etc.), in excess of the allowance, are advanced by the applicant to PG&E. Refunds are paid to the applicant due to additional services subsequently connected to the line extension and continue for up to 10 years from the date PG&E is first ready to serve.2 In most cases, the applicant will be the developer who constructs the dwelling, not the customer who ultimately occupies it.
The allowance goes into PG&E's rate base. PG&E is responsible for the operation, maintenance, and replacement of the line extension facilities. For any portion of the refundable amount that has not been refunded to the applicant after 12 months, the applicant is charged a monthly cost of ownership (COO) charge to recover the operations and maintenance (O&M) costs and other costs of the facilities.3 The COO charge is deducted from the refundable amount. After the 10-year period, any unrefunded amount becomes PG&E's property.
The residential line extension allowance is calculated using the following general formula:
Allowance = Net Revenue
COS factor
The net revenue is the annual revenue expected to be received by the utility from the customer residing in the building. It is calculated based on PG&E's average annual distribution revenue per residential customer.
Associated with the cost of the line extension facilities that go into rate base are costs for such things as depreciation, return, income taxes, property taxes, O&M costs, administrative and general (A&G) costs, and franchise fees and uncollectibles (FF&U). The cost of service (COS) factor is the ratio of such costs to the cost of the line extension. Thus, a COS factor of 0.16 means that for every $100 of line extension cost, $16 in revenues is needed to recover the associated costs. Using this hypothetical example, if the net revenue is $160 and the COS factor is 0.16, the allowance would be $1,000.
Non-residential line extensions are calculated in the same general manner. However, the net revenue is based on an estimate of the anticipated revenues from loads to be connected and in use within 12 months.
If a residential building for which an allowance was given does not take service from PG&E within six months, the allowance for that building will be recovered from the applicant. Similarly, if the estimated load for a non-residential building does not materialize within 12 months, a portion of the allowance will be recovered from the applicant based on the amount of load that did not materialize. The allowance recovery is referred to herein as deficiency billing. The six-month and 12-month periods are referred to herein as compliance periods.
Under PG&E's 50% nonrefundable discount option, the developer has the option of paying only half of the refundable costs of the line extension, but the developer would not be eligible for a refund. This option allows the developer to have lower up-front costs.
Under PG&E's third-party installation option, the developer can have the line extension installed by a third party rather than PG&E. Depending on the availability of third party installers, this option may allow the developer quicker or lower cost installation.
PG&E's tariff rules regarding line extension allowances are found in Electric Rules (Rules) 15 and 16. Rule 15 governs distribution line extensions and Rule 16 governs service extensions.
A list of the acronyms used in this decision is included in Attachment A.
1 The term "applicant," as used herein, refers to the applicant for the line extension, rather than PG&E.
2 Refunds are made on line extensions, not service extensions.
3 The COO charge does not apply to individual applicants, such as a person building his or her own home.
