6. Assignment of Proceeding

Carl Wood is the Assigned Commissioner and Myra Prestidge is the assigned Administrative Law Judge in this proceeding.

Findings of Fact

1. The market for LEVs is quite small.

2. The IOUs have the following fueling stations for LEVs, only a subset of which are public access stations:

· SoCalGas has 20 or 21 NGV fueling stations. Fourteen are open to the public. SDG&E has 3 fueling stations.

· PG&E has 22 NGV fueling stations.

· SCE has no NGV fueling stations since it is an electricity-only utility.

3. The IOUs' applications suffer consistently from a lack of detail. One struggles to determine how they are spending LEV dollars, and the ratepayer benefits of such expenditures.

4. The INEEL project, in which PG&E and SoCalGas have participated (and PG&E proposes to participate in the future), is aimed at developing a liquefied natural gas product for commercial use.

5. PG&E has already spent between $1.6 and $2.1 million on the INEEL project to date, and SoCalGas has spent approximately $1 million on the project.

6. The INEEL liquefier competes with other products in the market.

7. PG&E is charging a below-cost rate related to the INEEL liquefier project.

8. The California Fuel Cell Partnership, for which PG&E requests $540,000, gives fleet purchasers free services that they otherwise would have to pay for.

9. SoCalGas uses ratepayer funding to promote the use of natural gas over other fuels.

10. PG&E conducted two marketing studies related to LNG.

11. PG&E's witness was not familiar with several LEV programs.

12. Several witnesses associated with government and nonprofit LEV programs could not identify specific ratepayer benefits from the IOU programs that did not extend to the broader population as a whole.

13. The SCAQMD witness equated the ratepayer benefits from improved air quality with those of the broader population and could not differentiate between ratepayer and nonratepayer health benefits.

14. Most of the IOUs' customer education function involves maintaining customer service staffs to field contacts from potential fleet purchasers.

15. 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

16. The IOUs' customer service staffs, among other things, tell potential fleet purchasers or fleet owners of the utilities' experience with their own fleets, furnish callers lists of LEV-related vendors and written information on new products, and provide free grant-writing assistance to third parties seeking to obtain grants and other incentives for LEV purchases. This customer service function involves gathering literature about LEVs, maintaining websites, attending trade shows and conferences, participation in industry boards and committees, and fielding customer inquiries.

17. No party introduced evidence that it had polled other obvious sources of LEV information such as automakers to determine if it is correct that IOUs are usually the first point of contact for anyone considering investing in LEVs.

18. There is a growing number of consultants in the market who evaluate the LEV market and give potential fleet purchasers recommendations on their fleet purchases and assist them with grant writing.

19. 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.

20. PG&E informs customers of the availability of used LEVs even though we expressly disallowed such activity in D.95-11-035.

21. The manufacturers of the IOUs' CNG stations could train users of the stations that are open to the public.

22. The entire natural gas fueling training exercise appears to be limited to educating a small number of public users at a small number of unattended fueling stations.

23. Given the tiny number of EVs on California's roads, safe charging education should not involve a great outlay of funds.

24. CALSTART and SoCalGas acknowledged that natural gas fueling is now safe.

25. Much of the IOU funding directed at ensuring "reliable" service focuses on assessment of the load impacts of electric LEVs.

26. SCE already knows how to manage the load impacts presented by LEVs successfully because it has been doing so for 6 years.

27. The impact of LEVs on PG&E's electric grid is minimal.

28. 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.

29. The CEC urges this Commission to consider non-IOU-ratepayer sources for funding LEV programs, including public-private partnerships.

30. SCGC's members do not currently pay the § 890 Natural Gas Surcharge.

Conclusions of Law

1. Pub. Util. Code § 740.3 et seq. prohibits the Commission from passing funding for LEV programs through to ratepayers unless the programs are in the ratepayers' interest.

2. Ratepayers should not fund IOU LEV programs unless such programs produce direct benefits that are specific to ratepayers in the form of safer, more reliable, or less costly gas or electrical service.

3. The IOUs bear the burden of proof in these proceedings. To the extent they cannot prove that their ratepayer-funded LEV programs provide direct ratepayer benefits, the Commission must disallow the funding

4. To receive ratepayer LEV funding, the IOUs must demonstrate that they have 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 do not unnecessarily duplicate and are complementary with the programs of these entities.

5. Utilities' LEV programs may not unfairly compete with nonutility enterprises or interfere with the development of a competitive market.

6. D.95-11-035 prohibited ratepayer funding to develop products for commercial use and to market LEVs.

7. D.95-11-035 and D.98-12-098 made clear that ratepayer funding of LEV programs would not continue indefinitely.

8. D.02-12-056 made clear that we would be considering only "discretionary" LEV program activities, such as customer service, training, research and development and other "non-mandatory" LEV programs, in this proceeding. This decision acts only on the IOUs' discretionary funding requests.

9. D.02-12-056 provided that we would review "mandatory" LEV program activities in each utility's GRC or cost-of-service proceeding. "Mandatory" LEV activities involve the acquisition of alternative fuel use fleet vehicles pursuant to federal law, operation and maintenance costs associated with use of alternative fuel use fleet vehicles and associated infrastructure, infrastructure (fueling facilities and related equipment) needed to support alternative fuel use fleet vehicles, employee training and instruction necessary for the use of alternative fuel use fleet vehicles, and accounting for the costs of these mandatory activities. These activities are outside the scope of this decision.

10. We cannot approve utility LEV programs solely because they may help improve air quality or reduce emissions.

11. The test for continued funding of the IOUs' discretionary programs should not depend on whether the market is mature and self-sustaining, because it is not clear that the market will ever reach this level.

12. The IOUs have in some cases funded programs that violate the guidelines set forth in relevant Commission decisions.

13. The IOUs 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.

14. The use of regulated monopoly funds for the development of a private business in the LEV market raises the potential for unfair competition.

15. The INEEL project, for which PG&E requests $624,000, and for which PG&E has already spent between approximately $1.6 and $2.1 million and SoCalGas has already spent approximately $1 million, violates D.95-11-035's proscription on LEV funding for projects aimed at developing products for commercial use.

16. PG&E's below-cost INEEL rate helps establish that PG&E is using LEV funding to compete unfairly with nonutility enterprises or interfere with the development of a competitive market.

17. The California Fuel Cell Partnership does not provide ratepayer benefits.

18. The IOUs are prohibited from using ratepayer dollars to market LEV programs.

19. LEV marketing includes IOU participation at trade shows, in LEV loaner programs, on industry boards and committees, and in other activities designed to promote use of LEVs. Such activities do not further the ratepayers' interest.

20. We have never granted ratepayer funding for LEV incentives; therefore, utilities' work in providing CARB input into developing guidelines for LEV incentives is not in the ratepayers' interest.

21. We expressly disallowed ratepayer funding of LEV rebates in D.95-11-035, and work aimed at promoting rebates is therefore not in the ratepayers' interest.

22. Providing customer information to fleet purchasers is not in the ratepayers' interest.

23. There is no direct ratepayer interest in having the utility encourage others to use less-polluting vehicles.

24. It is not appropriate for ratepayers to fund activities that help individual LEV purchasers.

25. 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.

26. IOUs should share what they have learned about LEVs with customers regardless of whether we continue to fund their LEV programs.

27. The sale of used NGVs should be developed by the market without ratepayer funding.

28. Not every LEV activity that could conceivably be linked to safety is eligible for ratepayer funding.

29. It does not further ratepayer interest to promote the concept that LEVs are safe, reliable and efficient.

30. The use of ratepayer funds to educate customers on how to fuel and charge their vehicles safely 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.

31. 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. What remains is training of non-IOU personnel who use IOU-owned public access fueling stations or who charge their own EVs.

32. The IOUs did not prove that they need significant ratepayer funding to train customers to fuel and charge LEVs safely given the small number of public access natural gas fueling stations they operate and the small number of EVs on the roads in California.

33. The IOUs have failed to prove that the efforts they make to analyze the impact of new LEV technology or products is necessary for the reliability of the grid.

34. Few parties to this proceeding cited reasons for funding that meet statutory and Commission mandates.

35. Even if LEVs have been "underfunded at all levels of government" and "[e]very dollar that a utility can bring to the table to support LEV-related RD&D will help move this industry forward," the requirement of ratepayer benefit is not met.

36. The fact that "utilities have been very successful at using their funds to attract government RD&D funds" is not a ratepayer benefit.

37. Programs that facilitate the development of clean off-road vehicles, heavy-duty on-road vehicles or natural gas hybrid electric vehicles do not meet our definition of ratepayer interest.

38. Utility efforts to inform consumers which types of LEVs may use carpool lanes do not provide a ratepayer benefit.

39. Utility efforts to create a common database of vehicle information listing available vehicles from Ford, Caterpillar, Mack, Deere and other large vehicle manufacturers do not produce safer, more reliable or less costly gas or electric service.

40. 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.

41. It is not the ratepayers' job to assist air quality management districts in implement their rules for clean fleet vehicles.

42. Since D.95-11-035 required IOUs to divest all non-utility stations because of their potential for anticompetitive impacts, using ratepayer dollars to expand on the IOUs' public access station base is not a proper use of ratepayer funding.

43. Hosting an auto manufacturer's demonstration site, as PG&E proposes to do with California Fuel Cell Partnership funding, does not further the ratepayers' interests.

44. While Pub. Util. Code § 890 Public Purpose Program surcharge revenue may be an appropriate funding source for IOU RD&D programs, we should deny SCGC's and ORA's request to shift funding to this source given that we are only extending the IOU programs for one additional year.

45. We should deny the IOUs' request to incorporate discretionary LEV funding into their GRCs or cost-of-service proceedings.

ORDER

IT IS ORDERED that:

1. We grant in part and deny in part the applications by Southern California Gas Company (SoCalGas), San Diego Gas & Electric Company (SDG&E), Southern California Edison Company (SCE), and Pacific Gas and Electric Company (PG&E) (collectively, utilities or IOUs) for funding for the discretionary aspects of their Low Emission Vehicle (LEV) programs as set forth below.

2. For each approved IOU program, we extend funding for one year, to expire one year from the effective date of this decision.

3. Due to the concerns we express in this decision, we approve no funding for the period after this one-year period ends.

4. Commencing 90 days from the effective date of this decision, and continuing every 90 days thereafter, the IOUs shall file and serve the IOU Low Emission Vehicle (LEV) Programs Quarterly Report, attached hereto as Appendix A, covering the previous 90 day period of program activity. The Quarterly Report requires that the IOUs identify how each program activity relates to safety, reliability or less costly gas or electric service, report on how many people were served, submit program materials, and otherwise establish that they are meeting the requirements of D.95-11-035 and this decision.

5. To the extent the IOUs have included requests for mandatory funding in their applications - even interim funding pending the outcome of their general rate cases (GRCs) or cost-of-service proceedings - we do not act on them here. They must seek interim funding in those other proceedings.

6. PG&E's and SoCalGas' past spending on the Idaho National Engineering and Environmental Laboratory (INEEL) project violates the Commission's proscription of LEV ratepayer funding for new commercial products. These IOUs shall make their respective LEV balancing accounts whole with shareholder funds.

7. We deny PG&E's request for funding for the INEEL project on the ground it does not serve the ratepayers' interest.

8. We deny PG&E's request for funding for the California Fuel Cell Partnership on the ground it does not serve the ratepayers' interest.

9. We halve each IOU's request for ratepayer funding for customer education related to safe fueling and charging. PG&E seeks $496,000 million 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.

10. We deny each IOUs' request for funding to assess the impact of new LEV technology and products on load.

11. We deny the IOUs' request for customer education funding that is not safety related.

12. We deny the request of the Southern California Generation Coalition (SCGC) and the Office of Ratepayer Advocates (ORA) to shift funding for LEV research and development (RD&D) to Pub. Util. Code § 890 public purpose surcharge funding, given that we are only approving continued funding for one additional year.

13. In summary, the IOUs are prohibited from using the ratepayer LEV funding 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 prove a linkage to safety, reliability or less costly gas or electric service.

14. This proceeding is closed.

This order is effective today.

Dated ___________________, at San Francisco, California.

STATE OF CALIFORNIA GRAY DAVIS, Governor



PUBLIC UTILITIES COMMISSION

505 VAN NESS AVENUE

SAN FRANCISCO, CA 94102-3298

IOU Low Emission Vehicle (LEV) Programs

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