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PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

ENERGY DIVISION RESOLUTION E-3777

RESOLUTION

Resolution E-3777. Pacific Gas and Electric Company

By Advice Letter 2124-E Filed on June 11, 2001.

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SUMMARY

This Resolution approves PG&E's Advice Letter 2124-E, which revises PG&E's Standard Rate Schedules, Schedule S-Standby Service, Preliminary Statement-Distributed Energy Resources Memorandum Account (DERMA), and Form 79-285 -Special Agreement for Electrical Standby Service. PG&E's AL 2124-E is approved with modifications. The Advice Letter was filed to implement Senate Bill (SB) X1- 28, which added Article 3.5 to the California Public Utilities Code to implement tariff provisions related to distributed energy resources (DER.)

BACKGROUND

On May 22, 2001, Governor Davis signed Senate Bill (SB) X1-28, which added Article 3.5 to the California Public Utilities Code to establish tariff requirements for customers that install eligible distributed energy resources.

Section 353.1 defines as eligible any electric generation technology that commences operation between May 1, 2001 and June 1, 2003. Gas-fired DER that does not operate in a combined heat and power (CHP) application must commence operation no later than September 1, 2002. Eligible DER must meet the following additional requirements:

Section 353.3 requires electric utilities to modify their tariffs so that DER customers that meet the eligibility requirements of Section 353.1 will be served under rates, rules and requirements identical to those customers that do not use DER. To qualify for these tariffs, customers must participate in a real-time pricing (RTP) program, when available. Until (RTP) is available, customers must participate in time-of-use (TOU) pricing.

Section 353.9 directs the Commission to establish a firewall to ensure that the net costs resulting from these tariff modifications, after consideration of any potential DER benefits, are recovered only from that customer class.

On May 31, 2001, an Assigned Commissioner Ruling (ACR) directed utilities to submit pro forma tariffs to implement SBX1 28. The ACR indicated the tariffs would be made effective retroactive to May 22, 2001, subject to a compliance review by the Energy Division.

On July 12, 2001, the Commission adopted standby rate policies for DG that is ineligible for the SBX1-28 standby rate exemption. Decision (D.) 01-07-027 directed the UDCs to file rate applications by September 11, 2001 to implement these new policies.

NOTICE

Notice of Advice Letter 2124-E was made by publication in the Commission's Daily Calendar. PG&E states that a copy of the Advice Letter was mailed and distributed in accordance with Section III-G of General Order 96-A.

PROTESTS

PG&E's Advice Letter (AL) 2124-E was timely protested by the Office of Ratepayer Advocates (ORA.)

Energy Division received PG&E's response to the protest of ORA on July 13, 2001.

The following is a more detailed summary of the major issues raised in the protest.

ORA recommends the Commission coordinate the SBX1-28 provisions within Rulemaking R.99-10-025, primarily by monitoring the DERMA within R. 99-10-025. ORA also urges the Commission to determine in Phase 2 of R.99-10-025 which specific benefits should be quantified for entry into the memorandum accounts.

ORA recommends adding language to Section 5(b) - Accounting Procedures, to clarify that any quantifiable benefits provided by DER within a customer class must be applicable to that customer class. ORA suggests the Commission require PG&E to file simultaneously with the other utilities for recovery of costs net of benefits (the memorandum account balance.)

ORA objects to PG&E's lack of specificity in describing the eligibility requirements for DER technologies in the Applicability section of each standard tariff.

PG&E's Response

In general, PG&E opposes most of ORA's proposals. PG&E does not oppose certain minor modifications to the text of the AL filing.

PG&E opposes ORA's recommendation to track DERMA amounts in R.99-10-025 rather than the Revenue Adjustment Proceeding. PG&E notes that R.99-10-025 may not remain open for the duration of the DERMA. PG&E further observes that R.99-10-025 is not a ratemaking proceeding, and the Commission has, so far, not implemented new rates within the rulemaking. As an example, PG&E cites the Commission's July 12, 2001 decision establishing standby rate policies. In D.01-07-027, the Commission directed the utilities to file separate rate applications to implement the adopted policies.

PG&E raises no objection to ORA's recommendation that the Commission determine specific DER benefits within Phase 2 of R.99-10-025.

Lastly, PG&E proposes language for Rule 1 which clarifies eligibility requirements for DER, and adds language revising Section 5 (b) making explicit the firewalls between customer classes.

DISCUSSION

The Energy Division has reviewed PG&E's's advice letter 2124-E, the protests, and PG&E's responses. By Advice Letter (AL) 2124-E, PG&E requests to establish a DER Memorandum Account and the associated tariff structure for implementation of SBX1-28 effective May 22, 2001. The Energy Division agrees with PG&E's request, with modifications.

We decline to require PG&E to seek cost recovery within R.99-10-025. As noted by PG&E, R.99-10-025 is not a ratesetting proceeding. As stated in the May 31, 2001 ACR, the purpose of the DERMA is to implement the firewall provisions of §353.9 until such time as new rates are designed to achieve this goal. An additional requirement of §353.9 is to track actual costs and benefits of DER utilizing the standby rate exemption to achieve appropriate assignment of net costs. We reaffirm that valuation of DG benefits is an issue to be considered within Phase 1 and Phase 2 of R.99-10-025.

COMMENTS

Public Utilities Code section 311(g)(1) provides that this resolution must be served on all parties and subject to at least 30 days public review and comment prior to a vote of the Commission. Section 311(g)(2) provides that this 30-day period may be reduced or waived upon the stipulation of all parties in the proceeding.

The 30-day comment period for the draft of this resolution was neither waived or reduced. Accordingly, this draft resolution was mailed to parties for comment on July 23, 2002. No comments were received.

FINDINGS

1. On May 22, 2001, Governor Davis signed Senate Bill (SB) X1-28, which added Article 3.5 to the California Public Utilities Code to establish tariff requirements for customers that install eligible distributed energy resources.

2. On May 31, 2001, an Assigned Commissioner Ruling (ACR) directed utilities to submit pro forma tariffs to implement SBX1 28.

3. PG&E filed Advice Letter 2124-E on June 11, 2001.

4. ORA filed a timely protest to PG&E's Advice Letter AL 2124-E.

5. Energy Division received PG&E's response to the protest of ORA on July 13, 2001.

6. Advice Letter 2124-E seeks to establish the Distributed Energy Resources Generation Memorandum Account. PG&E's filing is generally consistent with the provisions of SBX1-28. PG&E's AL 1551-E should be approved with modifications.

7. ORA's protest request to coordinate the disposition of the DERMA is denied in part and granted in part as follows:

8. ORA's request for PG&E to include descriptions of qualifying DER from PU Code Sections 353.1(a-f) and 353.3 is granted.

9. PG&E will file its amended advice letter within 10 days of the effective date of this Resolution.

THEREFORE IT IS ORDERED THAT:

1. The request of Pacifc Gas and Electric Company to establish a memorandum account and associated tariff changes to implement the provisions of SBX1-28 with an effective date of May 22, 2001 as requested in Advice Letter 2124-E is approved with modifications.

2. PG&E shall filed revised tariffs within 10 days of the effective date of this Resolution.

3. This Resolution is effective today.

I certify that the foregoing resolution was duly introduced, passed and adopted at a conference of the Public Utilities Commission of the State of California held on August 22, 2002; the following Commissioners voting favorably thereon:

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