STATE OF CALIFORNIA ARNOLD SCHWARZENEGGER, Governor
PUBLIC UTILITIES COMMISSION
505 VAN NESS AVENUE
SAN FRANCISCO, CA 94102-3298
June 15, 2006 Agenda ID # 5750
Ratesetting
TO: PARTIES OF RECORD IN APPLICATION 05-06-028
This is the proposed decision of Administrative Law Judge (ALJ) Long, 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). Upon the request of any Commissioner, a Ratesetting Deliberative Meeting (RDM) may be held. If that occurs, the Commission will prepare and publish an agenda for the RDM 10 days before hand. When an RDM is held, there is a related ex parte communications prohibition period. (See Rule 7(c)(4).)
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," accessible on the Commission's website at www.cpuc.ca.gov. Pursuant to Rule 77.3 opening comments shall not exceed 15 pages.
Comments must be filed with the Commission's Docket Office. Comments should be served on parties to this proceeding in accordance with Rules 2.3 and 2.3.1. Electronic copies of comments should be sent to ALJ Long at dug@cpuc.ca.gov. All parties must serve hard copies on the ALJ and the assigned Commissioner, and for that purpose I suggest hand delivery, overnight
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mail or other expeditious methods of service. The current service list for this proceeding is available on the Commission's web site, www.cpuc.ca.gov.
/s/ ANGELA K. MINKIN
Angela K. Minkin, Chief
Administrative Law Judge
ANG:niz
Attachment
ALJ/DUG/niz DRAFT Agenda ID # 5750
Ratesetting
Decision PROPOSED DECISION OF ALJ LONG (Mailed 6/15/2006)
BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
Application of Pacific Gas and Electric Company for Authority to Increase Revenue Requirements to Recover the Costs to Deploy an Advanced Metering Infrastructure. (U 39 E) |
Application 05-06-028 (Filed June 16, 2005) |
FINAL OPINION AUTHORIZING PACIFIC GAS AND ELECTRIC COMPANY
TO DEPLOY ADVANCED METERING INFRASTRUCTURE
(See Appendix A for List of Appearances)
FINAL OPINION AUTHORIZING PACIFIC GAS AND ELECTRIC COMPANY
TO DEPLOY ADVANCED METERING INFRASTRUCTURE 11
4. Positions of the Parties 77
6.3. Deploy Meters in New Construction 1515
9. Operating Costs and Benefits 2828
10. Critical Peak Pricing 3030
Appendix A - List of Appearances
Appendix B - List of Acronyms and Abbreviations
Opinion Authorizing PG&E to Deploy Advanced Metering Infrastructure
This opinion authorizes Pacific Gas and Electric Company (PG&E) to deploy a new Advanced Metering Infrastructure (AMI). We adopt a modified revenue requirement and guaranteed ratepayer benefits. The rate making mechanisms will be in place at least until PG&E's next general rate case which we expect to occur for test-year 2010 or later. We also adopt PG&E's rate proposal for critical peak pricing tariffs. This proceeding is closed.
1. Background
The Commission opened Rulemaking (R.) 02-06-001 as a policymaking forum to develop demand response as a resource to enhance electric system reliability, reduce power purchase and individual consumer costs, and protect the environment.1 This application emerged from the Rulemaking and is PG&E's proposal for full deployment of an advanced metering infrastructure. PG&E's application seeks authorization of its AMI deployment proposal and associated cost recovery mechanisms.
AMI consists of metering and communications infrastructure as well as the related computerized systems and software.2 It is often overly-simplified to imply that only meters are involved. In fact, in most instances, PG&E will not replace residential meters with new meters - most of the existing inventory will be retrofitted with communications modules and redeployed.3
PG&E revised its application on October 13, 2005. As amended, the application requests that the Commission approve PG&E's recovery of the actual AMI deployment cost without further reasonableness review if the actual cost is less than or equal to $1.61 billion,4 and to recover additional reasonable amounts, if any, upon appropriate reasonableness review. PG&E also proposes new balancing accounts to track actual costs and pre-approved benefits of the AMI deployment. Because deployment will reduce certain current operating costs, PG&E proposes refunding a forecast per-meter benefit, tied to the actual AMI deployment.
PG&E proposes to change rates on July 1, 2006, and again on January 1 of 2007, 2008, and 2009 to recover the approved forecast revenue requirements for the AMI project. PG&E's rate changes are based on the balancing account balances that record for actual costs for AMI and credits benefits in the form of operating savings, as estimated for each rate change date. The AMI costs include the rate effect for estimated plant additions, and annual depreciation. PG&E also seeks limited authority to temporarily estimate bills while PG&E tries to obtain physical access to the meter to install the AMI modules.
1.1. Prior Approval of Pre-Deployment Funding
In D.05-09-044,5 the Commission authorized PG&E to spend and recover in rates up to $49 million in advance of any possible approval in this proceeding for a full-scale deployment. The Commission stated:
...it is worth noting that although PG&E's policy arguments for approval of its AMI predeployment expenses largely rest on the demand response benefits of AMI, PG&E's case, as presented in A.05-06-028, asserts that the majority of the benefits of the deployment would be operational. That is, deployment of AMI would actually be nearly cost-effective from a utility operations point of view with the potential to save the utility costs over time. The various versions of PG&E's AMI business case that have been submitted in R.02-06-001 over time have shown steady progress in improving the cost-effectiveness of AMI such that less of the benefit would need to be covered by demand response peak demand cost savings. With this in mind, and although we have not yet thoroughly evaluated PG&E's cost-effectiveness claims in A.05-06-028, our sense is that PG&E's AMI deployment, if approved, will have at least some significant benefits to the utility beyond demand response. Therefore, and for all the reasons stated above, we will approve PG&E's request for $49 million in pre-deployment expenses for AMI, as reflected in more detail in section 8 below.
We remind PG&E that this authorization, while separate from the issues to be decided in A.05-06-028, nonetheless sets the Company on the path of designing and building systems that will one day become new infrastructure. Therefore, we advise once again that we wish to promote open architecture standards, uniform business practices, and data exchange standards. ... (mimeo, pp. 13-14, emphasis added.)
The Commission also made three significant findings and conclusions about PG&E's proposed AMI project:
· The AMI system selected is sufficiently flexible to accommodate different approaches to rate design and informational tools.
· PG&E's proposed AMI Project will meet the minimum functionality criteria established by Commissioner Peevey. (Findings of Fact 1 and 2, mimeo p. 20.)
· The finding that PG&E's proposed AMI Project meets the minimum functionality criteria does not establish that the system selected by PG&E is the correct or best system, or provides the best value for ratepayers. These are issues to be decided in A.05-06-028. (Conclusion of Law 2, mimeo p. 21.)
The above findings of fact and conclusion of law allowed PG&E to continue with the development of the AMI project included in this application.
1 Order Instituting Rulemaking on policies and practices for advanced metering, demand response, and dynamic pricing, filed June 6, 2002. The Commission's rulemaking named as respondents the following investor owned utilities: PG&E, San Diego Gas & Electric, and Southern California Edison Company. The Rulemaking was closed by Decision (D.) 05-11-009, dated November 18, 2005.
2 PG&E's AMI project includes automation of its gas and electric metering and communications network (5.1 million electric meters and 4.2 million gas meters).
3 PG&E's plan is to retrofit 54% of the existing electric meters and 96.1% of its existing gas meters.
4 Revised from an original estimated cost of $1.46 billion, consisting of an estimated capital cost of $1.25 billion, estimated expense of $213 million.
5 Application (A.) 05-03-016, filed March 15, 2005.
