5. Overview
As discussed in this decision, we conclude it is reasonable for PG&E to deploy AMI, as modified in this decision, because we find PG&E's proposal has sufficient probable and quantifiable economic operating and demand response benefits now, including sufficient flexibility to up-grade for enhanced features, over the expected 20-year useful life. PG&E's AMI project business case analysis shows approximately 90% of the project costs would be covered through operational savings, on a net present value basis (Ex. 5, pp. 1-1 through 1-7). The additional 10% is expected to be covered by demand response benefits from the Critical Peak Pricing (CPP) tariff. (Ex. 1, p. 1-1.) The incremental revenue requirement needed to pay for the AMI project is approximately one percent9 of PG&E's combined gas and electric revenue requirement (estimated by PG&E using a 15-year Present Value of Revenue Requirements (PVRR)).
There is sufficient discretion in our AMI requirements, and the likelihood of long-term benefits - from utility operating cost savings as well as demand response and consumer energy consumption management potential - that the project merits approval. Further, AMI can provide improved customer data so that in the future rates may be set to more equitably allocate electricity costs. Also, PG&E will be able to more accurately forecast load and identify load centers. We find that the proposed AMI has a closed or proprietary architecture but it does not preclude outside vendors from developing other applications such as consumer-side of the meter communication and load control devices. We believe that given the uncertainty of any very long-term forecast (in this case for operational savings and demand response effects forecast for the next 20 years), we must act with the best information now even though we know no forecast is ever fully accurate. We also recognize any failure to act loses the tangible benefits that can be achieved with the proposed system.
TURN suggests that the scope of the AMI project is excessive to implement critical peak pricing "in order to charge fewer than 15% of PG&E's customers higher prices for up to 75 hours" per year. (TURN's Opening Brief p. 4.) This ignores the potential of AMI to allow the Commission to more accurately allocate costs and fairly reflect the true cost of service in energy rates to all customers. In subsequent proceedings, with adequate time and an appropriate record, AMI opens the door to true real-time pricing which accurately reflects the cost of energy.
TURN has not moved forward from its posture in R.02-06-001 where the Commission found: "TURN does not support universal deployment of advanced meters, but believes there may be specific applications of dynamic pricing and advanced meters that provide meaningful demand reduction and participant savings for small customers. However, it feels that inquiry has been sacrificed in this rulemaking for an "all or nothing" approach." (D.03-03-036, mimeo, pp. 19-20.) We will therefore address those aspects of TURN's showing that productively contributed to develop and interpret the record developed here to determine whether or not to deploy PG&E's proposed AMI project.
We now discuss specific aspects of PG&E's proposal.
9 Ex. 1, p. 1-2
