STATE OF CALIFORNIA GRAY DAVIS, Governor

PUBLIC UTILITIES COMMISSION

505 VAN NESS AVENUE

SAN FRANCISCO, CA 94102-3298

June 10, 2003 Agenda ID #2370

TO: PARTIES OF RECORD IN APPLICATION 02-03-047 ET AL.

This is the proposed decision of Administrative Law Judge (ALJ) Prestidge, previously designated as the principal hearing officer in this proceeding. It will not appear on the Commission's agenda for at least 30 days after the date it is mailed. This matter was categorized as ratesetting and is subject to Pub. Util. Code § 1701.3(c). Pursuant to Resolution ALJ-180 a Ratesetting Deliberative Meeting to consider this matter may be held upon the request of any Commissioner. If that occurs, the Commission will prepare and mail an agenda for the Ratesetting Deliberative Meeting 10 days before hand, and will advise the parties of this fact, and of the related ex parte communications prohibition period.

The Commission may act at the regular meeting, or it may postpone action until later. If action is postponed, the Commission will announce whether and when there will be a further prohibition on communications.

When the Commission acts on the proposed decision, it may adopt all or part of it as written, amend or modify it, or set it aside and prepare its own decision. Only when the Commission acts does the decision become binding on the parties.

Parties to the proceeding may file comments on the proposed decision as provided in Article 19 of the Commission's "Rules of Practice and Procedure." These rules are accessible on the Commission's website at http://www.cpuc.ca.gov. Pursuant to Rule 77.3 opening comments shall not exceed 15 pages. Finally, comments must be served separately on the ALJ and the assigned Commissioner, and for that purpose I suggest hand delivery, overnight mail, or other expeditious method of service.

/s/ ANGELA K. MINKIN BY CAROL BROWN

ANG:hl2

ALJ/TOM/hl2 DRAFT Agenda ID #2370

Ratesetting

Decision PROPOSED DECISION OF MYRA PRESTIDGE (Mailed 6/10/2003)

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

DECISION ON FUNDING FOR LOW EMISSION VEHICLES

TABLE OF CONTENTS

Title Page

DECISION ON FUNDING FOR LOW EMISSION VEHICLES 1

1. Summary 2

2. Background 4

A. Market for LEVs 4

B. History of IOU LEV Funding 6

C. The IOUs' Applications 11

1. SoCalGas/SDG&E's Applications 11

2. PG&E's Application 11

3. SCE's Application 13

D. Other Parties' Responses to the Applications 14

E. IOUs' Current Staffs and Fueling Stations 18

3. Discussion 19

A. Introduction 19

B. Activities Disallowed in D.95-11-035 20

1. Technology Development for Commercial Use 20

(a) INEEL Program 20

(b) California Fuel Cell Partnership 24

2. Marketing 25

C. Other Compliance Problems 26

1. Limits on Duplicative Programs 27

2. Sharing of IOU "Learnings" With Customers 29

D. Activities Allowed in D.95-11-035, But Overbudgeted 34

1. Programs That Enhance Safety 34

2. Programs That Enhance Reliability - Load Balancing 36

E. Other Funding Requests 38

F. Other Parties' Support for Ratepayer Funding 38

1. CALSTART 38

2. SCAQMD 40

3. CEC 41

G. Other Issues 42

1. Change in Funding Source 42

2. Utility Proposals to Incorporate LEV Programs into Other
Proceedings 43

H. Allowed Funding 44

4. Reporting Requirements 51

5. Comments on Draft Decision 52

6. Assignment of Proceeding 52

Findings of Fact 52

Conclusions of Law 55

ORDER 61

DECISION ON FUNDING FOR LOW EMISSION VEHICLES

1. Summary

This decision acts on 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. We continue to support the environmental benefits of programs designed to develop and support motor vehicles powered by electricity and natural gas.

However, we find that the utilities' discretionary¹ LEV spending provides few ratepayer benefits, is often focused in areas that the Commission expressly disallowed in earlier decisions, and is vaguely described in many instances. For these reasons, we will allow the IOUs one additional year of ratepayer funding of discretionary LEV programs, with strict limitations and reporting requirements. The IOUs should be aware that we are unlikely to continue funding these programs after the year is over unless they make a far better showing than they have to date. They shall discontinue the types of activities we find of no ratepayer benefit or that contravene earlier Commission decisions.

We do not now provide a process for the IOUs to seek new LEV discretionary funding after the year is over. If, upon review of the reports we order the IOUs to submit, we determine that there is any basis to justify continued discretionary funding, we will invite the IOUs to submit new funding applications at that time. However, it is unlikely that such funding will continue after the one-year period given the problems we detail in this decision.

The ratepayer-funded LEV activities break down into three key areas. First, the IOUs share information they have gained as operators of their own LEV fleets with other actual or potential fleet owners. This information sharing is the key focus of the IOUs' "customer education" activities. Second, they evaluate new LEV products to determine their impact on the energy grids they operate. This appears to be their principal activity aimed - at least allegedly - at enhancing system reliability. Third, they provide information on safe fueling and charging techniques to third parties who use IOU-owned fueling stations and charge electric vehicles.

The utilities claim that each of these activities meets the Commission's requirement that the IOUs' LEV funding be used to provide safer, more reliable, or less costly gas or electrical service. We do not believe the IOUs' customer education activities meet the foregoing standard, as they simply subsidize fleet owners at ratepayer expense. While we agree that on their face, the second and third types of activity relate to safety and reliability, the budgets the IOUs request for safety- and reliability-related activities are overstated.

While we believe some of the safety-related work the IOUs perform is necessary, we believe the IOUs also are overstating the budget impacts of this activity. As we explain below, the discretionary LEV budgets include safety education only for non-IOU employees, and the evidence shows a low volume of customers needing IOU safety training. Thus, we halve the IOU's requested safety budgets.

With regard to reliability-related work, the IOUs appear to argue that every dollar they spend on evaluating new LEV products is devoted to ascertaining whether the grid will be able to bear the load impacts of such technology. This position overstates the load burden of LEVs. We believe much of the IOUs' technology evaluation and assessment activity, while interesting, is not necessary to ensure reliability. We cut most of this activity from the IOUs' budgets.

Finally, we deny each IOU funding request not linked to the requirement that LEV funding promote safer, more reliable or less costly gas or electric service on the ground the IOUs have failed to meet their burden of proof.