3. Discussion

A. Introduction

It is axiomatic that improved air quality is a societal benefit. We support the goal, but the question before us is not whether we should endorse better air quality, but whether utility ratepayers should bear the cost of their LEV programs. We stated in D.95-11-035 that "we cannot approve . . . utility programs solely because they may help improve air quality. . . ."²⁶ The IOUs bear the burden of proving that their programs meet the criteria we have adopted in our LEV decisions.

We do not believe the test for continued funding of the IOUs' discretionary programs should depend on whether the market is mature and self-sustaining, because it is not clear that the market will ever reach this level. Nor is it at all clear that IOU spending has moved the market forward. Each of the IOUs claims that the market is far from mature, in an attempt to justify funding, but none explain how continued IOU funding will cause the market to be self-sustaining. We are not prepared to continue to fund IOU programs in this area indefinitely, especially given the serious problems we outline in this decision.

The IOUs have funded programs that violate the guidelines set forth in relevant Commission decisions. They have in many cases failed to show that proposals for future funding do anything more than subsidize, with ratepayer dollars, activities that the market or government regulators should fund.

The IOUs' applications also suffer consistently from a lack of detail. One struggles to determine how they are spending LEV dollars, and the ratepayer benefits of such expenditures. The overall impression their applications leave is that they are stretching to explain how their spending is in the ratepayers' interest. The IOUs bear the burden of proving that we should continue to fund their programs, and we find that in several instances they have failed to meet their burden of proof.

B. Activities Disallowed in D.95-11-035

We find that the IOUs engage in and propose to continue certain activities that our prior decisions have expressly disallowed. We list them here to demonstrate why we believe IOU funding should continue only for one additional year, be subject to stricter reporting requirements, and be narrowed to exclude disallowed activities.

1. Technology Development for Commercial Use

(a) INEEL Program

The IOUs have spent ratepayer R&D funds on products intended for commercial use, in contravention of D.95-11-035. PG&E requests $624,000 to support its development, in conjunction with DOE laboratory INEEL, of a natural gas liquefier demonstration project. We deny this request. PG&E has already spent between $1.6 and $2.1 million on this project to date. SoCalGas has spent $1 million on the project, although it plans to expend no additional funds until "the demonstration unit is up and operational."27

The evidence demonstrates that the INEEL project is aimed at developing a liquefied natural gas product for commercial use. SoCalGas' witness stated that "the liquefier . . . is a technology that will hopefully . . . come to the market . . . ."²⁸ PG&E prepared a draft business plan for commercial development of the natural gas liquefier.²⁹ PG&E intended the product for commercial development; according to its witness, "We think ultimately some product developer, commercialization partner that INEEL will choose will bring a product to market complete with all of the bells and whistles that products have to have to be successful in the market."³⁰

Furthermore, PG&E has an agreement with INEEL providing for revenues from commercialization of the liquefier to accrue to ratepayers.³¹ PG&E picked the INEEL technology and rejected others because, among other things, none of the latter "offered substantial evidence that they had a clear path to commercialization ...."³² PG&E also "sp[oke] to the commercialization potential of the technology in its response to the [California Energy Commission's] request for proposals to join the INEEL project."³³

While the IOUs claim their role in the liquefier project was not for purposes of commercialization, even one of the supporters of their programs disagreed, characterizing IOU programs "as an essential component of the process of innovation inherent in the commercialization of alternative fuel technology."³⁴

While this sort of project may be worthwhile, it runs counter to D.95-11-035's prohibition on activities designed to lead directly to the development of new commercial products. As we stated in that decision, "Their development should be supported by the firms that could profit from their commercialization."³⁵ Here, the evidence supports the conclusion that the project runs afoul of the foregoing prohibition.

Furthermore, "the use of regulated monopoly funds for the development of a private business in this emerging market raises the potential for unfair competition."³⁶ For example, in D.95-11-035, we ordered the utilities to divest themselves of any fuel stations not built on their own land to support their own fleets, due in large part to concerns that such stations would compete unfairly with third parties "interested in competing in the market for the construction and operation of refueling stations at customer or other private sites."³⁷ The liquefier competes with other products in the market,³⁸ giving us concern that ratepayer funds are unfairly subsidizing a competitive product.

In addition, PG&E is charging a below-cost rate related to the liquefier project, further raising concerns that it is competing unfairly. PG&E has received Commission approval of an experimental liquefied natural gas (LNG) rate, in which it proposes to charge a "liquefaction fee" to LNG retailers.³⁹ However, the tariffed rate is not cost based; for example, it does not recoup PG&E's research costs: "We are unusual in the regulated utility that our budget for this project is ratepayer provided. So to turn around and charge ratepayers again for the cost of our research project in [the tariffed] price isn't fair."⁴⁰ PG&E set the tariff price to recover a capital cost of $630,000⁴¹ even though it spent far more than this ($1.6 to $2.1 million) on the demonstration project.⁴² This below-cost rate is evidence that PG&E is using LEV funding to compete unfairly with nonutility enterprises or interferes with the development of a competitive market.⁴³

Past spending in this area is inappropriate for the same reasons. SoCalGas' witness stated that his company has spent $1 million to date on the INEEL liquefier demonstration,⁴⁴ and PG&E has spent between $1.6 and $2.1 million to date.⁴⁵ PG&E did not apply to the Commission to fund the INEEL project.⁴⁶ Rather, it shifted funds allocated to other RD&D to this project, relying on D.95-11-035's provision allowing fund shifting.⁴⁷ The IOUs shall make the balancing accounts whole with shareholder funds.

(b) California Fuel Cell Partnership

The California Fuel Cell Partnership, for which PG&E requests $540,000, presents similar concerns about whether the IOUs' activities are in the ratepayers' interest. The partnership includes automobile manufacturers who have installed several sites (three currently, with the plan to expand by three more) to house their prototype demonstration vehicles.

According to PG&E's witness, the auto manufacturers have asked "infrastructure providers" to provide fuel for those vehicles and other testing. They have asked PG&E to participate in the form of providing a host site for the manufacturer's prototype.⁴⁸ PG&E claims the benefit is that it "get[s] to see the performance of the equipment, check on the reliability, operating costs, maintenance costs. [PG&E] analyze[s] that and provides that to [its] customers."⁴⁹

This aspect of the project has no ratepayer benefit that we can discern. PG&E's analysis of prototypes for its customers - who we show elsewhere to be almost exclusively fleet customers - does not further the goals of safety, reliability or less costly gas or electric service. Rather, this service gives fleet purchasers free services that they otherwise would have to pay for. Nor does hosting an auto manufacturer's demonstration site help anyone but the manufacturers.

Finally, PG&E claims that the project is "mostly targeted at managing the impact of a coming load." However, as we discuss in the section entitled "Load Balancing," we believe the IOUs overstate the need for funding to determine the impact of new LEVs on load. Thus, we disallow this funding.

2. Marketing

The IOUs are also prohibited from using ratepayer dollars to market LEV programs. For example, in D.95-11-035, we declined to fund marketing research designed to identify potential markets for NGVs by use of surveys to determine preferences and attitudes, stating that such programs were "clearly marketing or promotional efforts by [the IOU] that do not carry direct benefits for ratepayers in terms of greater safety or reliability."⁵⁰ As we stated in that decision, "There is no direct ratepayer interest in having the utility encourage others to use less-polluting vehicles."⁵¹

Despite this ban, SoCalGas' witness admitted that the company uses ratepayer funding to promote the use of natural gas over other fuels:

Q. Do you tell them about the advantages of natural gas over other fuels?

A. We certainly do; and we certainly make that statement then in all other markets: residential earnings [sic] commercial, industrial, cogeneration.

Q. And, then, so you're an advocate in that sense for natural gas?

A. I think from the standpoint of The Gas Company, yes, we are.⁵²

PG&E's witness also acknowledged that PG&E conducted two marketing studies related to LNG, and participated in a third study with CALSTART.⁵³

Such market activities are disallowed. We do not believe that IOU participation at trade shows, in LEV loaner programs, on industry boards and committees, and in other activities designed to promote use of LEVs, further the ratepayers' interest, and decline all funding requests for such activities.

C. Other Compliance Problems

There are other ways in which the IOUs do not appear to be in full compliance with Commission rules and statutory requirements for LEV programs.

1. Limits on Duplicative Programs

To ensure ratepayer funding of LEVs does not duplicate other expenditures, D.93-07-054 obligated the IOUs to demonstrate that they had reviewed programs of the motor vehicle industry, state, regional and local agencies, other utilities, and state and national electric and natural gas LEV research groups to ensure their programs did not unnecessarily duplicate and were complementary with the programs of these entities.⁵⁴

Given the IOUs' obligation to ensure their programs are not duplicative, we are concerned, for example, that PG&E's witness was not familiar with several LEV programs. He explained he was only "vaguely" familiar with the California Energy Commission's programs for alternative fuels, and was not familiar with any specific R&D CALSTART has done.⁵⁵

Several witnesses associated with government and nonprofit LEV programs testified that the IOU programs are necessary. However, many of the witnesses could not identify specific ratepayer benefits from the IOU programs that did not extend to the broader population as a whole. For example, the SCAQMD witness equated the ratepayer benefits from improved air quality with those of the broader population⁵⁶ and could not differentiate between ratepayer and nonratepayer health benefits.⁵⁷

Similarly, CARB claimed that the utilities' LEV programs have been and continue to be supportive of the agency's efforts to reduce transportation-related emissions, a societal benefit, but not one that necessarily benefits ratepayers. In particular, CARB claimed, the utilities have provided valuable input into developing guidelines for LEV incentives and promoting the availability of grants. However, we have never funded LEV incentives; indeed, the IOUs withdrew their requests for such incentives in their 1995 funding requests, and we expressly disallowed rebates in D.95-11-035.⁵⁸ Further, as we discuss below, we do not believe informing fleet owners of available grants produces ratepayer benefits.

Indeed, SCE's and PG&E's own expert report on the market for LEVs comments acknowledges that the utilities' services are not truly unique: "Although utilities participate in many of the same or similar activities as other organizations, their focus is providing service to their customers, whereas other stakeholders have different objectives."⁵⁹ As we discuss below, the customers at whom the IOUs' efforts are primarily aimed - fleet owners - are not the appropriate subjects of ratepayer subsidies. Thus, the "unique" aspect of IOU programs, as reported by SCE's and PG&E's expert, is not one eligible for ratepayer funding.

Moreover, it is to be expected that government and nonprofit programs that operate in the LEV area would support continued IOU funding, since the market is so small and funding so scarce. All parties supporting the continued funding have legitimate interests in promoting better air quality. It would be surprising if they were to step up and advocate the loss of nearly $10 million in funding for a goal to which they are deeply committed. As the SCGC's witness put it, "[I]t may be a chicken-or-egg question; that as long as the utility programs are there, the market is not going to step up to the problem."⁶⁰

2. Sharing of IOU "Learnings" With Customers

Each IOU seeks funding to pass on to customers key "learnings"⁶¹ it has obtained in its role as a fleet purchaser and user. This function involves gathering literature about LEVs, maintaining a website, attending trade shows and conferences, participation in industry boards and committees, and fielding customer inquiries.

The record shows that this "customer service" function primarily involves maintaining customer service staffs to field contacts from potential fleet purchasers.⁶² As PG&E's witness explained, "Primarily the audience [targeted by the customer education funds] is targeted fleets that we work with, but on occasion we will distribute it to customers who ask for it that may not be represented by fleets."⁶³ Indeed, the key reason why PG&E's program does not duplicate other programs, according to the witness, is that PG&E "deal[s] with one-on-one fleet inquiries."⁶⁴

Mr. Eaves, witness for SoCalGas/SDG&E, explained that his company gets calls on a daily basis from customers seeking to determine whether they are bound by federal EPAct regulations or various air quality management district fleet rules.⁶⁵ These staffs, among other things, tell callers of the utility's experience with its own fleet, furnish callers lists of LEV-related vendors⁶⁶ and written information on new products,⁶⁷ and provide free grant-writing assistance to third parties seeking to obtain grants and other incentives for LEV purchases.⁶⁸

Even some third party agencies supporting continuing IOU funding could not identify IOU functions not targeted at potential fleet buyers. For example, the SCAQMD witness supported IOU customer education efforts because they reinforce the District's fleet rules.⁶⁹

While SoCalGas/SDG&E and the Environmental Coalition claimed that the IOUs "are usually the first point of contact for anyone considering investing in LEVs,"⁷⁰ no party introduced evidence showing that it had polled other obvious sources of LEV information such as automakers to determine if the assertion was correct.

Ratepayers should not subsidize utility actions to educate these potential fleet purchasers. Potential purchasers of LEV fleet vehicles include school bus operators, transit districts, government entities, garbage companies, shared-ride shuttle operators, utilities and taxicab companies who generally are acting in response to statutory or air quality management district requirements.⁷¹ If PG&E's experience is any indication, 95% of the NGV vehicles are fleet vehicles, and only 5% (in PG&E's case, 196 vehicles) are privately owned.⁷² Thus, the customer demand derives from those who own - or are required to procure - LEV fleets.

As SCGC's witness testified, "The ratepayers don't necessarily have to subsidize their [fleet managers'] budget constraints."⁷³ These entities should be able to hire consultants to evaluate the LEV market, give them recommendations on their fleet purchases and assist them with grant writing. Indeed, SoCalGas and SDG&E acknowledge that there is "a growing number of consultants in the market that provide information and services for a fee."⁷⁴ Even if fleet purchasers cannot pay for their own consultants, the alternative is not to subsidize their business needs with ratepayer dollars. As we stated in D.95-11-035, "There is no direct ratepayer interest in having the utility encourage others to use less-polluting vehicles."⁷⁵

We also explained in D.95-11-035 that it is not appropriate for ratepayers to fund activities that help individual LEV purchasers. There, SDG&E proposed ratepayer subsidies for time-of-use meters and electric vehicle charging equipment on the ground that such subsidies "overcome the installation cost barrier." We explained that, "while this is a result which may be beneficial to the vehicle purchasers, this argument does not establish a ratepayer benefit, as required by § 740.8 and the [Commission's] first guideline [requiring that ratepayer-funded LEV programs support reliable and efficient utility service]."⁷⁶ Thus, it is incorrect that benefits to individual vehicle purchasers - in this case, purchasers of fleet vehicles - are equivalent to ratepayer benefits that meet the § 740.8 definition, and ratepayers should not subsidize individual fleet purchasers.

The IOUs claim that the ratepayers have funded IOU fleet purchases to date, and that it is best that the utilities share their "learnings" with third parties rather than keeping them under lock and key solely for the utilities' own benefit. This argument has surface appeal, since it makes sense that if ratepayers fund utility education, they should reap the benefits of that funding. However, what the IOUs are suggesting is that that they will not share their "learnings" with third parties unless ratepayers continue to fund IOU customer education activities. This argument assumes perpetual ratepayer funding of IOU programs, something we expressly disallowed in D.95-11-035.

We believe the IOUs should share what they have learned regardless of whether we continue to fund their LEV programs. We do not, however, believe ratepayers should perpetually fund activities we find of questionable ratepayer benefit solely to ensure that the IOUs continue to "unlock" their "learnings."

We are also concerned whether the information the IOUs furnish customers is useful or unique. PG&E's witness, for example, was asked to describe a typical scenario customer request for information:

Most of the time they will come to us, if it is a natural gas vehicle or electric vehicle, they will come to us: What do you know? What do you have? Have you heard anything? To the extent we know, we will share; to the extent that manufacturers have provided product literature about a particular product, we will provide that. To the extent that we have gleaned information and put that in a fact sheet of some sort, we will provide the information to them.⁷⁷

The process of gathering and disseminating information to customers appears almost haphazard. Moreover, the California Air Resources Board is already implementing a "comprehensive public education and outreach program. Activities include the development of literature and websites; conducting vehicle loan and demonstration programs; participating in public events like fairs, trade shows and conferences; and conducting outreach events at college campuses."⁷⁸ The existence of this comprehensive program undermines the IOUs' claims that their customer education program is unique and non-duplicative, except perhaps as to fleet customers, whom we do not believe ratepayers should subsidize.

PG&E's witness also acknowledged that the company informs customers of the availability of used LEVs⁷⁹ even though we expressly disallowed such activity in D.95-11-035: "The sale of used natural gas vehicles (NGVs) should be developed by the market without ratepayer funding."⁸⁰

Thus, we disallow the IOUs' requests for customer education funding, except to the extent such education relates directly to the safety activities we discuss below.

D. Activities Allowed in D.95-11-035, But Overbudgeted

1. Programs That Enhance Safety

We have always supported LEV funding designed to enhance ratepayer safety, but not everything that could conceivably be linked to safety is eligible for funding. For example, we held in D.95-11-035 that it does not further ratepayer interest "to promote `a concept, that [LEVs] are safe, reliable and efficient.'"⁸¹

The IOUs use funds to educate customers on how to fuel and charge their vehicles safely, and we agree that this activity on its face meets the requirement that LEV funding enhance customer safety. However, even in this area, we question how much funding the IOUs need. For example, while SoCalGas' witness testified that local fire marshals require that all users of compressed natural gas (CNG) stations that are open to be public be trained to use them, he conceded that the IOU need not provide this training: "They could be trained by the manufacturer of the station."⁸²

The IOUs' training of its own employees on safe fueling and charging techniques is part of the mandatory LEV budget and not at issue here.⁸³ What remains is training of non-IOU personnel who use IOU-owned public access fueling stations or who charge their own EVs.

It is not clear to us that this training effort should involve a significant outlay of funds. PG&E and SoCalGas appear to have no more than 20-25 natural gas fueling stations each, only a subset of which are public access stations. It does not appear that the IOUs staff any of these stations with attendants. Therefore, the entire natural gas training exercise appears to be limited to educating a small number of public users at a small number of unattended fueling stations. We presume such education consists of written instructions at the station. Given the tiny number of EVs on California's roads - 2,300 battery-charged EVs according to CARB statistics - we do not believe that safe charging education involves a great outlay of funds either.

CALSTART's president acknowledged that while there were some issues about safety early on, and PG&E and SoCalGas and others worked with the National Gas Research Institute to really try to address that safety issue . . . , there haven't been any instances in the past couple of years, and that has I think really made it more possible for institutions like the South Coast Air Quality Management District to then mandate the use of natural gas and say . . . that . . . this technology is now safe enough for us to require that fleets use that.⁸⁴

SoCalGas also acknowledges that NGV fueling is now safe, with no injuries associated with millions of vehicle fueling events.⁸⁵

Thus, while we support ratepayer funding of safety activity, the efforts the IOUs make do not justify the budgets they are requesting. We will halve each IOU's request. PG&E seeks $496,000 and shall receive $248,000. Because SoCalGas/SDG&E and SCE did not break out their budget requests to show safety-related functions, they failed to meet their burden of proving that their programs relate to an approved goal, and therefore we deny their requests for customer education funding. If these IOUs can clarify their funding requests, we will treat them similarly to PG&E.

2. Programs That Enhance Reliability - Load Balancing

Much of the IOU funding directed at ensuring "reliable" service focuses on assessment of the load impacts of electric LEVs. However, SCE's witness conceded that the company already knows how to manage the load successfully because it has been doing so for 6 years.⁸⁶ PG&E also acknowledges that the impact of LEVs on the electric grid is minimal:

Even if all light duty EVs statewide were charging from the grid at the same time, the total current EV load would be about 4.6 MW [megawatts], or less than one-thousandth of the average load during a summer day. Plus, electric vehicles are encouraged through special rates to recharge off-peak. . . . Given that total electricity usage for California is 260 billion kWh [kilowatt hours], light duty EV usage currently comprises only 0.0006% of that total. . . . The additional power demand from other EVs such as buses, trolleys and non-road vehicles is similarly comparatively miniscule.⁸⁷

We were also struck by how little information the IOUs furnished about how they spend ratepayer funding to assess load impacts. We are concerned that the IOUs are attempting to shoehorn activities into this category, even if their linkage to load management is tenuous. For example, the Environmental Coalition, which supports the IOUs' applications, appears to categorize all efforts at "infrastructure development, vehicle technology evaluation and strategic planning"⁸⁸ as activity "critical to the safe and reliable operation of the natural gas and electric grids."⁸⁹

We do not believe the IOUs' reliability obligations can be construed to include everything they do to promote infrastructure development or evaluate new technology. If IOU funding in this area is to continue, the linkage between IOUs' obligation to enhance grid safety and reliability must be far clearer. As things stand, we find the IOUs have failed to justify their reliability-related requests.

E. Other Funding Requests

Finally, many of the IOU funding requests contain little or no justification based on the § 740.8 requirements of safer, more reliable or less costly gas or electric service. We simply cannot tell as to these requests what the funding covers or how it relates to these required goals. As to each of these items, we disallow the funding on the ground the IOU has failed to meet its burden of proof. We reflect these disallowed items in the tables in Section H of this decision.

F. Other Parties' Support for Ratepayer Funding

While several parties support continued ratepayer funding of LEV programs, few of them cited reasons for funding that meet statutory and Commission mandates.

1. CALSTART

None of the purposes CALSTART cites for continuing to fund IOU programs benefits ratepayers. CALSTART first states that LEVs have been "underfunded at all levels of government" and that "[e]very dollar that a utility can bring to the table to support LEV-related RD&D will help move this industry forward."⁹⁰ However, ratepayers should not subsidize projects simply because government cannot afford them.

CALSTART's second rationale - that "utilities have been very successful at using their funds to attract government RD&D funds"⁹¹ - is not a ratepayer benefit either. If the funded projects do not produce ratepayer benefits in the form of safer, more reliable or less costly gas or electrical service, it makes no difference that these funds encourage other investment.

CALSTART's third "benefit" - that IOU programs help major fleet customers⁹² - assumes that ratepayers should subsidize large fleet customers. We do not agree with this premise, as we have said elsewhere in this decision.

Nor is it clear how ratepayers benefit if "[t]he utilities, combining with vehicle manufacturers and government funding sources ... facilitat[e] the development of clean off-road vehicles," "heavy-duty on-road vehicles" or "natural gas hybrid electric vehicles."⁹³ While development of such vehicles may well help solve air quality problems or help truck and bus manufacturers meet environmental regulations, as the witness points out, such purposes do not meet our definition of ratepayer interest.

Indeed, CALSTART, which since 1992 has "launched over $150 million dollars in [advanced transportation] technology ... [RD&D] programs" with "funding from over 20 different government agencies" and includes among its participants General Motors, Volvo and Michelin,⁹⁴ seems a far better sponsor of such research than captive utility ratepayers.

2. SCAQMD

Nor do we understand why ratepayers should fund several programs advocated by the SCAQMD. It claims utilities are well situated to inform consumers which types of LEVs may use carpool lanes, and to create a "common database" of vehicle information listing available vehicles from Ford, Caterpillar, Mack, Deere and other large vehicle manufacturers.⁹⁵ Neither program produces safer, more reliable or less costly gas or electric service.

Moreover, SCAQMD acknowledges that IOU programs benefit fleet users and indirectly "the state as a whole. . . ."⁹⁶ We have already demonstrated that ratepayers should not subsidize fleet users by providing them free information, and that benefits that accrue to the population at large do not benefit ratepayers in particular.

In addition, ratepayers should not pick up the slack caused because "corporate R&D outside the utility programs has dwindled substantially in the face of budgetary challenges nationally,"⁹⁷ as the SCAQMD suggests. Indeed, if we were to act consistently with the trend, we would decrease or eliminate IOU LEV funding, just as corporations have decreased their funding of LEV programs.

Nor is it the ratepayers' job to "assist the [SCAQMD] in helping implement [its] rules for clean fleet vehicles."⁹⁸ Even if the SCAQMD lacks the budget to enforce its rules, captive ratepayers should not make up the shortfall.

3. CEC

The CEC's support for IOU LEV programs is based in part on its interest in having IOUs fund public access fueling stations and EV charging stations.⁹⁹ However, since D.95-11-035 required IOUs to divest all non-utility stations because of their potential for anticompetitive impacts, we do not believe that using ratepayer dollars to expand on the IOUs' public access station base is a proper use of ratepayer funding.

The other IOU program the CEC advocates - "R&D intended to support expanded use of alternative fuels in EPAct covered fleets"¹⁰⁰ - cites PG&E's INEEL project. However, as we illustrate above, such programs run afoul of D.95-11-035's prohibition on ratepayer funding of products intended for commercial development.

In fact, the CEC urges this Commission to consider non-IOU-ratepayer sources for funding LEV programs. It suggests that the Commission consider public-private partnerships to fund transportation energy R&D in this proceeding, and urges promotion of non-fiscal incentives to promote LEV programs such as allowing LEVs to use carpool lanes with or without passengers.¹⁰¹ While such programs are beyond the scope of this proceeding, the CEC's position illustrates that, contrary to the IOU's claims, there are other sources of LEV funding besides IOU ratepayers.

G. Other Issues

1. Change in Funding Source

SCGC urges us to change the funding source for natural gas LEV programs from the dedicated funds collected from ratepayers and accounted for in a one-way balancing account, to the Natural Gas Surcharge, a public goods charge embodied in Pub. Util. Code § 890. That statute, enacted in 2000, provides, in relevant part, for a ratepayer surcharge to fund "cost-effective energy efficiency and conservation activities and pubic interest research and development authorized by Section 740 not adequately provided by the competitive and regulated markets." SCGC claims that LEV programs in part fit the "public interest research and development authorized by Section 740" category.

SCGC may be correct that such programs meet the statutory standard, which provides essentially for R&D that "provides a reasonable probability of providing benefits to ratepayers" and supports objectives such as environmental improvement, public and employee safety and conservation.¹⁰² ORA, for example, claims that IOU RD&D related to LEVs should be paid for out of existing RD&D funding derived from charges for public purpose programs. (ORA also asks us to discontinue funding for consumer information, and education and training activities related to commercially available LEV products and services.)

It is no coincidence that SCGC's members do not currently pay the § 890 Natural Gas Surcharge, and would benefit financially if we were to change the funding source for RD&D LEV funding. We do not believe the statute requires us to make this change, however, or that we are precluded from funding LEV-related RD&D from sources other than Public Purpose Program funding. Given that we are curtailing the RD&D funding substantially, and only allowing funding for another year, we will leave the funding stream as is.

2. Utility Proposals to Incorporate LEV Programs into Other Proceedings

The IOUs generally favor abolishing separate review of LEV programs in proceedings such as this one, and support moving up-front review of funding to their respective GRCs or cost-of-service proceedings. While we have moved the mandatory aspects of their LEV programs to the GRCs, we do not believe that we should consider the discretionary LEV programs in that forum. PG&E justifies its request on the ground that its programs have developed and grown more integrally related to PG&E's traditional utility functions.¹⁰³

However, we never intended ratepayer-funded LEV programs to be permanent or become part of the IOUs' entrenched operations:

[O]ur intent at the time we issued the current authorization was to fund the utilities' programs for a set period of time with the expectation that at some point further subsidization of the LEV market by utility ratepayers would not be warranted. As stated in Findings of Fact No. 3 in D.93-07-054, "It is not clear how long a utility presence is needed to provide a bridge to a sustainable competitive market for LEVs."¹⁰⁴

Indeed, SoCalGas and SDG&E recognized that ratepayer funding was not a guarantee:

We do not believe the utility's role needs to be ratepayer funded up to the full point of sustainability....¹⁰⁵

We decline to move LEV discretionary funding into the IOUs' GRCs or cost of service proceedings, especially given our concerns with how the utilities are spending ratepayer dollars, our limited one-year funding authorization, and our quarterly reporting requirement.

H. Allowed Funding

In summary, we allow each IOU the following discretionary LEV funding for the period of one year from the effective date of this decision.

SoCalGas
Item	Requested Funding (annual)	Allowed/ Disallowed	If Disallowed, Reason
Customer information, education and training	$1,100,000	Disallowed (exception: safety if IOU clarifies request)	Failure to meet burden of proof: no link to safety, reliability, less costly service
NGV R&D	$935,000	Disallowed	Failure to meet burden of proof: no link to safety, reliability, less costly service
Subtotal SoCalGas	$2,035,000
SDG&E
NGV customer information program	$450,000	Disallowed (exception: safety if IOU clarifies request)	Failure to meet burden of proof: no link to safety, reliability, less costly service
EV customer information program	$439,000	Disallowed (exception: safety if IOU clarifies request)	Failure to meet burden of proof: no link to safety, reliability, less costly service
Subtotal SDG&E	$889,000
Total SoCalGas/SDG&E	$2,924,000

PG&E
Program Activities	Program Description	$ (Million)	Allowed/ Disallowed	If Disallowed, Reason
Customer Education		$2.635
XI. LEV Vehicle Safety and Infrastructure Training	Fueling, Vehicle, and Infrastructure Safety training for PG&E employees as well as outside fleet operators and individuals	$0.496	$248,000 allowed; remainder disallowed	PG&E employee training part of mandatory; failure to prove linkage to safety
XII. LEV Technology and Infrastructure Introduction; Regulatory Requirements and Funding Availability Education; Emissions Benefits; and Industry Participation	Matching technology with PG&E fleet requirements; participating on LEV industry boards to ensure coordination and non-duplication of efforts; sharing "learnings" with customers	$1.799	Disallowed	Ratepayers should not subsidize fleet customers
XIII. PG&E Tariff Availability and Eligibility; and Inter-connection Services	Answer customer inquiries regarding applicable LEV-related gas and electric tariffs, including use of off-peak electric rates to minimize peak	$0.340	Allowed
RD&D		$1.348
XIV. Small Scale Natural Gas Liquefier Demonstra-tion	Demonstrate INEEL technology to test its ability to safely deliver low-cost liquefied natural gas to PG&E fleet to reduce fleet operation costs. LNG may also be provided, under an experimental rate, to other customers; also, evaluate use of LNG to help reduce gas distribution system costs	$0.624	Disallowed	Commercial product
XV. Small Specialty EV Charging Architecture Development	Support development of common, global charging systems for on-road and off-road EVs	$0.184	Disallowed	Failure to meet burden of proof: No link to safety, reliability, less costly service
XVI. Fuel Cell Vehicle Station Demonstration	Provide support for a natural gas-to-hydrogen reformer demonstration by the CA fuel cell partnership to ensure safety and understand utility-specific system impacts and load management implications for the future	$0.540	Disallowed	Failure to meet burden of proof: No link to safety, reliability, less costly service
Technology Application Assessment		$1.043
XVII. Distribution System Load Impact Assessments	Evaluate EV and NGV load additions to minimize costs to distribution system	$0.550	Disallowed	Failure to meet burden of proof: No link to safety, reliability, less costly service
XVIII. Safety Codes and Standards Support	Minimize utility compliance costs and protect utility and customer interests as EV and NGV codes and standards are developed	$0.089	Disallowed	Failure to meet burden of proof: No link to safety, reliability, less costly service
XIX. LEV Performance Assessments	Determine actual field performance of LEV technology in PG&E fleet applications to ensure safety and to lower fleet costs; share "learnings" with customers	$0.299	Disallowed	Failure to meet burden of proof: No link to safety, reliability, less costly service; ratepayers should not subsidize fleet customers
XX. Participate in Others' LEV Demonstra-tions	Gather LEV related performance knowledge through project cost-sharing, to reduce PG&E fleet	$0.105	Allowed
TOTAL		$5.026

SCE
Activities Related To:	Utility Role	Ratepayer Benefit	Budget	Allowed/ Disallowed	If Disallowed, Reason
Emergency response to Evs	SCE primary source of EV safety information concerning issues related to utility operations.	Safety awareness and emergency preparedness.	$27,342	Allowed
Information Network.	Source for information on utility EV programs including time-of-use rates, etc.	Customer information source for EV load manage-ment in-formation, safety hook-ups, etc.	$45,540	Allowed
EV Loan program	Collects EV use profile data and assists in designing load management.	Load manage-ment, time-of-use, etc.	$36,432	Disallowed	Failure to meet burden of proof: No link to safety, reliability, less costly service
Customer Outreach	Disseminate information to customers and public about EV fleets, rates, load management, etc.	Customer information sources for utility EV load management, safety, energy efficiency, etc.	$72,864	Disallowed	Failure to meet burden of proof: No link to safety, reliability, less costly service
TOTAL			$182,160

The IOUs are prohibited from using this funding in the areas we have disallowed, as follows:

· The INEEL liquefied natural gas project, the California Fuel Cell Partnership, or other RD&D programs aimed at commercialization.

· Marketing of LEV products, including the type of activities we describe in the section entitled "Marketing," above.

· Sharing of IOU "learnings" with fleet customers, including the type of activities we describe in the section entitled "Sharing of IOU `Learnings' With Customers," above. (Exception: necessary safety programs.

· Programs that duplicate efforts of other industry players, including the type of activities we describe in the section entitled "Limits on Duplicative Activities," above.

· Activities related to customer incentives or rebates for purchasing LEV equipment.

· Any other activity for which the IOUs have failed to meet their burden of proving a linkage to safety, reliability or less costly gas or electric service.