before the public utilities commission of the state of...
TRANSCRIPT
BEFORE THE PUBLIC UTILITIES COMMISSION
OF THE STATE OF CALIFORNIA
Application of Pacific Gas and Electric Company
for Adoption of Electric Revenue Requirements and
Rates Associated with its 2016 Energy Resource
Recovery Account (ERRA) and Generation Non-
Bypassable Charges Forecast and Greenhouse Gas
Forecast Revenue and Reconciliation (U39E).
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Application No. 15-06-001
(Filed June 1, 2015)
OPENING BRIEF OF MARIN CLEAN ENERGY
Scott Blaising
Dan Griffiths
BRAUN BLAISING MCLAUGHLIN & SMITH, P.C.
915 L Street, Suite 1270
Sacramento, California 95814
Telephone: (916) 682-9702
FAX: (916) 563-8855
E-mail: [email protected]
September 21, 2015 Counsel for Marin Clean Energy
Opening Brief of Marin Clean Energy
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TABLE OF CONTENTS
I. INTRODUCTION.......................................................................................................................... 1
A. BRIEF SUMMARY OF MCE AND MCE’S INTEREST IN THIS PROCEEDING .................................. 1
B. ERRA FORECAST PROCEEDINGS - PCIA ..................................................................................... 2
C. SUMMARY OF MCE’S POINTS AND PROPOSALS ......................................................................... 3
II. PROCEDURAL BACKGROUND ............................................................................................... 4
A. MCE TESTIMONY ........................................................................................................................ 4
B. ADMITTANCE OF EXHIBITS .......................................................................................................... 4
III. SHOULD THE COMMISSION ADOPT PG&E’S ERRA FORECAST REQUESTS FOR
2016 ................................................................................................................................................. 5
A. ERRA FORECAST REVENUE REQUIREMENT ............................................................................... 5
B. ONGOING COMPETITION TRANSITION CHARGE (CTC) FORECAST REVENUE REQUIREMENT .... 5
C. POWER CHARGE INDIFFERENCE AMOUNT (PCIA) FORECAST REVENUE REQUIREMENT ........... 5
1. PG&E Is Proposing An Extraordinary Increase In The PCIA That Will Result In A Significant
And Unfair Burden On CCA Customers, Especially Residential And CARE Customers .................... 5
2. PG&E Has Failed To Properly Account For The Billion Dollar Cross-Subsidized Benefit That
PG&E Proposes For The Exclusive Benefit Of Its Bundled Customers .............................................. 7
3. The Commission May Review This Issue Based On Changed Circumstances ............................ 9
4. It Is Wrong For PG&E To Simply Retire The Billion Dollar Negative Indifference Account
Balance; The Balance Must Be Carried Forward And Used To Offset The Indifference Amount .... 10
5. A Mitigation Measure Is Necessary To Address PG&E’s Extraordinary PCIA Increase;
Instead Of Allowing PG&E To Liquidate Its Billion Dollar Negative Indifference Amount Balance,
PG&E Should Be Directed To Use The Balance To Mitigate The PCIA Rate Shock ........................ 12
6. As An Alternative Approach, Community Choice Aggregators Should Be Given the Option To
Amortize The PCIA Balance .............................................................................................................. 13
7. The Commission’s Past Decisions Support The Use Of Mitigation Measures To Address CRS
Volatility And Its Anti-Competitive Impacts on CCA Programs ........................................................ 15
D. COST ALLOCATION MECHANISM (CAM) REVENUE REQUIREMENT ......................................... 16
E. ELECTRIC SALES FORECAST ...................................................................................................... 16
F. NET FORECAST GREENHOUSE GAS (GHG) REVENUE RETURN AMOUNT ................................. 18
G. RATE PROPOSALS ASSOCIATED WITH ITS PROPOSED TOTAL ELECTRIC PROCUREMENT-
RELATED REVENUE REQUIREMENTS ......................................................................................... 18
IV. THE REASONABLENESS OF PG&E’S RECORDED 2014 ADMINISTRATIVE AND
OUTREACH EXPENSES FOR GHG ....................................................................................... 18
V. WHETHER ALL CALCULATIONS, INCLUDING BUT NOT LIMITED TO THE
CALCULATION OF THE ERRA, ONGOING CTC, PCIA, CAM, GHG, NON-
BYPASSABLE CHARGES, ERRA UNDER-COLLECTION, PROCUREMENT COSTS,
VINTAGING, ARE IN COMPLIANCE WITH ALL APPLICABLE RESOLUTIONS,
RULINGS, AND DECISIONS FOR ALL CUSTOMER TYPES ........................................... 18
VI. THE NOVEMBER UPDATE ..................................................................................................... 18
VII. SAFETY ISSUES ......................................................................................................................... 18
VIII. PG&E’S PROPOSED IMPOSITION OF THE NEW SYSTEM GENERATION CHARGE
ON INCREMENTAL TRANSFERRED MUNICIPAL DEPARTING LOAD ..................... 18
IX. CONCLUSION ............................................................................................................................ 19
Opening Brief of Marin Clean Energy
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BEFORE THE PUBLIC UTILITIES COMMISSION
OF THE STATE OF CALIFORNIA
Application of Pacific Gas and Electric Company
for Adoption of Electric Revenue Requirements and
Rates Associated with its 2016 Energy Resource
Recovery Account (ERRA) and Generation Non-
Bypassable Charges Forecast and Greenhouse Gas
Forecast Revenue and Reconciliation (U39E).
)
)
)
)
)
)
)
)
Application No. 15-06-001
(Filed June 1, 2015)
OPENING BRIEF OF MARIN CLEAN ENERGY
In accordance with the schedule set forth in the Scoping Memo and Ruling of Assigned
Commissioner, dated August 5, 2015 (“Scoping Memo”), and in accordance with Rule 13.11 of
the Rules of Practice and Procedure of the Public Utilities Commission of the State of California
(“Commission”), Marin Clean Energy (“MCE”) hereby submits this opening brief. As directed
by assigned Administrative Law Judge (“ALJ”) Wilson at the prehearing conference, this
opening brief follows the common outline for briefs agreed upon by the active parties to this
proceeding.
I. INTRODUCTION
A. Brief Summary Of MCE And MCE’s Interest In This Proceeding
MCE operates the first Community Choice Aggregation (“CCA”) program in California.
MCE currently provides generation service to approximately 170,000 customer accounts
throughout Marin County, unincorporated Napa County, and the Cities of Richmond, San Pablo,
El Cerrito, and Benicia. MCE was launched to achieve ambitious greenhouse gas (“GHG”)
reduction goals set by its member communities. In this regard, MCE offers three electricity
product choices to its customers: (1) a 50% renewable – low GHG – “default” product called
“Light Green,” (2) a 100% renewable – GHG-free – “opt-up” product called “Deep Green,” and
(3) a 100% new local solar electricity product called “Local Sol.”
While MCE’s customers receive generation service from MCE, they continue to receive
transmission, distribution, billing and other services from Pacific Gas and Electric Company
(“PG&E”). Customers that choose to participate in MCE’s CCA program are subjected to
several so-called non-bypassable charges (“NBC”), including the Power Charge Indifference
Opening Brief of Marin Clean Energy
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Adjustment (“PCIA”) and the Cost Allocation Mechanism (“CAM”). MCE’s primary objective
when engaging in PG&E’s Energy Resource Recovery Account (“ERRA”) proceedings is to
evaluate PG&E’s revenue request – especially with respect to the PCIA and CAM – to
determine the potential anti-competitive impacts on MCE’s CCA customers. In this regard,
MCE also evaluates the reasonableness of PG&E’s estimates of departing load associated with
CCA programs.
B. ERRA Forecast Proceedings - PCIA
The PCIA is an NBC paid by direct access (“DA”) and CCA customers in order to
maintain bundled customer indifference to the departure of customers from bundled procurement
service.1 There are different “vintages” of the PCIA.2 “Vintaging” has been defined by the
Commission as “the process of assigning a departure date to departing customers in order to
determine those customers’ generation resource obligations.”3 The Commission is considering
the issue of “vintaging” in a second phase of PG&E’s 2015 ERRA proceeding.
The Commission has designated the IOUs’ ERRA proceedings as the appropriate forum
for addressing issues related to the calculation of the overall Cost Responsibility Surcharge
(“CRS”), and its associated components (including the PCIA).4 Not only have ERRA
proceedings been established by the Commission as the forum for examining routine PCIA
matters, but the Commission anticipated that ERRA proceedings would also be the forum for
meaningfully considering and addressing non-routine PCIA-related issues.5 Accordingly, MCE
urges the Commission to meaningfully consider and address the PCIA-related issues described
1 See D.11-12-018 at 9. 2 See D.11-12-018 at 9. 3 D.08-09-012 at 59. See also D.11-12-018 at 9 (describing how the establishment of
vintages provides a “proper matching of departing load with the utility procurement process.”). 4 See, e.g., D.06-07-030 at 57; Ordering Paragraph 6. See also D.08-09-012 at 69
(“[I]ssues regarding consistency of the implementation and calculation of the CRSs with respect
to this decision can be raised and litigated in the forecast phase of the IOUs’ ERRA
proceedings.”) and D.11-12-018 at 8 (“The indifference amount is updated annually in each
IOU’s Energy Resource Recovery Account (ERRA) proceeding.”). 5 See, e.g., D.08-09-012 at 70 [directing parties to address non-routine PCIA conditions in
the ERRA proceeding] (“We will leave it to the parties to propose such changes, if and when
they become necessary, in the proceedings where the market benchmark is calculated and used
(e.g., the ERRA).”). See also
Opening Brief of Marin Clean Energy
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herein. If the Commission believes that the PCIA-related issues described herein require further
attention or broader participation by the other investor-owned utilities (“IOUs”), MCE asks the
Commission to employ the same procedural mechanism that was employed in PG&E’s 2015
ERRA proceeding, namely, the establishment of a second phase.6
C. Summary of MCE’s Points And Proposals
As described below, MCE makes the following major points and offers the following
proposals:
The Commission must take into account the extraordinary increase in the PCIA.
As proposed by PG&E, the PCIA is expected to increase by upwards of 125
percent, topping out at over two cents per kWh.
Because of its anti-competitive effect on CCA programs, the PCIA is uniquely
susceptible to problems with respect to cross-subsidization and customer
indifference – a matter over which the legislature entrusted the Commission with
specific authority and responsibilities.
The proposed increase in the PCIA will result in a significant, sudden and unfair
burden on CCA customers, especially residential and California Alternative Rates
for Energy (“CARE”) customers.
In this proceeding, PG&E is seeking to surreptitiously retire its negative
indifference account balance, which has a negative balance of over one billion
dollars. PG&E’s refusal to use the negative indifference account balance to offset
positive indifference amounts violates the Commission’s bundled customer
indifference policy.
PG&E should be required to freeze the PCIA at its current level and use its one
billion dollar negative indifference balance to mitigate the rate shock associated
with PG&E’s proposed increase to the PCIA.
If additional time is necessary to examine whether and how to use PG&E’s
negative indifference balance, the Commission could establish a second phase to
this proceeding, as it did in last year’s ERRA proceeding and provide temporary,
interim relief to CCA customers until a final decision is reached.
PG&E should update its departing load forecast to account for CCA programs that
PG&E acknowledges in its General Rate Case will be established in 2016.
6 See Administrative Law Judge’s Ruling Establishing Second Phase And Amending Scope
of the Proceeding, dated February 26, 2015, and Assigned Commissioner’s Ruling Amending
Scope And Setting Out Briefing Schedule, dated August 10, 2015.
Opening Brief of Marin Clean Energy
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II. PROCEDURAL BACKGROUND
A. MCE Testimony
PG&E filed its application and initial testimony on June 1, 2015. MCE filed a protest on
July 2, 2015 in which MCE stated various concerns with respect to the PCIA. On August 14,
2015, MCE submitted and served a copy of its testimony (Exhibit MCE-1).
B. Admittance of Exhibits
The parties engaged in significant discovery following the prehearing conference in this
proceeding. Responses to these discovery requests provide helpful factual information related to
issues in this proceeding. On September 9, 2015, counsel for PG&E communicated to ALJ
Wilson that the parties had reached agreement that an evidentiary hearing was unnecessary in
light of the fact that the parties had agreed, in lieu of cross-examination at an evidentiary hearing,
to submit into the record as exhibits certain discovery responses and other information. In
furtherance of this communication, on September 11, 2015 counsel for PG&E transmitted a copy
of the agreed-upon exhibit list that would be used in this proceeding. On September 16, 2015,
MCE submitted a motion to admit testimony and additional exhibits into the record, and served
copies of its exhibits on parties to the proceeding.7 The exhibits served by MCE are as follows:
Exhibit No. Description
MCE-1 Marin Clean Energy’s Testimony
MCE-2 PG&E’s Response to MCE Data Request Set #2, Question 3
MCE-3 PG&E’s Response to MCE Data Request Set #3, Question 3
MCE-4 PG&E’s Response to MCE Data Request Set #4, Question 1
MCE-5 PG&E’s Response to MCE Data Request Set #4, Question 3
MCE-6 PG&E’s Response to MCE Data Request Set #4, Question 7
MCE-7 PG&E’s 2017 GRC Work Paper (Details of CCA Growth
Projections)
7 PG&E and other parties filed similar motions, and served copies of their respective
exhibits.
Opening Brief of Marin Clean Energy
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III. SHOULD THE COMMISSION ADOPT PG&E’S ERRA FORECAST REQUESTS
FOR 2016
A. ERRA Forecast Revenue Requirement
[MCE has no position regarding the matters described in this section of the common
briefing outline.]
B. Ongoing Competition Transition Charge (CTC) Forecast Revenue
Requirement
[MCE has no position regarding the matters described in this section of the common
briefing outline.]
C. Power Charge Indifference Amount (PCIA) Forecast Revenue Requirement
1. PG&E Is Proposing An Extraordinary Increase In The PCIA That Will
Result In A Significant And Unfair Burden On CCA Customers,
Especially Residential And CARE Customers
Based on calculations provided to MCE by PG&E through discovery within this
proceeding, ratepayers that elect to participate in CCA programs should expect anywhere from a
47 percent to 127 percent increase in the PCIA.8 This is extraordinary. Of the different
customer classes, residential customers will face some of the highest increases in their PCIA
rates.9 Residential customers will experience increases to their PCIA rate ranging anywhere
from 68.2 percent to 72.0 percent, depending upon their specific vintage.10 As illustrated in
MCE’s testimony, residential ratepayers that participate in CCA programs are disproportionately
impacted by PCIA rates and are therefore subject to greater volatility in their generation-related
rates due to annual changes in ERRA revenue requests.11 Residential CCA customers currently
face PCIA rates ranging from 1.122 to 1.226 cents per kWh depending upon their specific
vintage. If PG&E’s 2016 ERRA revenue request is adopted, as proposed, these customers will
face PCIA rates ranging from 1.887 to 2.027 cents per kWh depending upon their specific
8 See Exhibit MCE-1 (MCE Testimony) at 3-4 (referencing Table 1 and Attachment A). 9 Id. 10
Id. 11
See id. at 3-4.
Opening Brief of Marin Clean Energy
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vintage effective January 1, 2016.12 It is almost inconceivable that departing CCA customers
will, under PG&E’s proposal, pay PG&E over two cents per kWh (or roughly 22 percent of
PG&E’s bundled generation rate)13 for the presumed privilege of departing PG&E bundled
service.
The problem is worse for MCE’s most vulnerable residential customers – those that are
served under the CARE program. PG&E imposes the PCIA on CARE customers; special
protection does not extend to these customers. In spite of being recognized by the legislature
and the Commission as a cost-sensitive low-income segment of ratepayers that necessitates
special rate protections in the form of on-bill discounts, these customers are still exposed to the
full cost associated with the PCIA. It is important to understand the relative impact of the PCIA
on CARE customers. As proposed by PG&E, a residential CARE customer consuming a modest
amount of electricity per month (500 kWh) would pay approximately $10 per month in PCIA
charges. For comparison, the Commission just spent a great deal of time and process
deliberating over various residential rate changes within Rulemaking (“R.”)12-06-013, including
the merits of whether to increase minimum bill charges for residential customers from $4.60 to
$10.00 per month. PG&E’s extraordinary PCIA increase will also negatively impact
communities that participate in CCA programs. MCE approximates that $30.6 million will be
collected from customers within MCE’s participating communities due to PCIA charges in
2016.14
The amount of additional money collected from MCE’s customers due to PG&E’s
proposed PCIA increase is of significant scale that MCE believes that the Commission must take
action to mitigate the impact, as further described below. Failure to do so would run counter to
repeated statements by the legislature and Commission regarding their concerns about cross-
subsidization – an occurrence to which the PCIA is uniquely susceptible.15 Extra vigilance in
12
See Exhibit MCE-1 (MCE Testimony) at 4 (Table 2). 13
See Exhibit PG&E-1 (PG&E Testimony) at 14-3; Table 14-1. 14
See Exhibit MCE-1 (MCE Testimony) at 6. 15
See, e.g., D.13-08-023 at 17 (emphasis added) (“The Commission remains committed to
ensuring that Community Choice Aggregators and other non-utility LSEs may compete on a fair
and equal basis with regulated utilities. Toward this end, we will continue to consider both the
mechanics and overall fairness of cost allocation and departing load charge methodologies
proposed in the future, with the specific goal of avoiding cross-subsidization.”).
Opening Brief of Marin Clean Energy
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this regard is warranted in light of the unique role that the Commission has in facilitating CCA
programs.16
2. PG&E Has Failed To Properly Account For The Billion Dollar Cross-
Subsidized Benefit That PG&E Proposes For The Exclusive Benefit Of
Its Bundled Customers
In last year’s ERRA proceeding, MCE introduced the fact that PG&E had accumulated
over one billion dollars in its so-called Negative Indifference Amount Memorandum Account
(“Negative Indifference Account”).17 According to the Commission, what this means is that the
departure of customers for DA and CCA service has been “economic” for bundled customers;18
bundled customers have been “better off.”19 The condition of being “better off” would violate
the bundled customer indifference principle but for the fact that PG&E is required to carry this
negative balance forward and eventually use the negative balance to offset a positive balance,
thereby resulting in bundled customer indifference.20 But a problem exists this year with this
approach; PG&E has chosen this year to retire the billion dollar Negative Indifference Account
balance and no longer carry-forward the balance.
In its application and testimony, PG&E did not provide any information about its billion
dollar Negative Indifference Account balance. PG&E acknowledged this point in a discovery
16
See D.12-12-036 at 6 (citing Senate Bill (“SB”) 790, § 2(h), and Pub. Util. Code §
707(a)(4)(A)) (“In SB 790, the legislature directed the Commission to develop rules and
procedures that ‘facilitate the development of community choice aggregation programs, … foster
fair competition, and … protect against cross-subsidization paid by ratepayers.’”). See also
D.04-12-046 at 3 (emphasis added) (“The state Legislature has expressed the state’s policy to
permit and promote CCAs by enacting AB 117….”) and D.10-05-050 at 13 (emphasis added)
(“Certainly, Section 336.2(c)(9) [the provision in AB 117 that requires cooperation from the
utilities] evidences a substantial governmental interest in encouraging the development of CCA
programs and allowing customer choice to participate in them.”). 17
The Negative Indifference Account is generally described in PG&E’s Electric Preliminary
Statement Part EH, found at http://www.pge.com/tariffs/tm2/pdf/ELEC_PRELIM_EH.pdf 18
See, e.g., D.08-09-012 at 41 (“If the total portfolio costs are lower than market costs
resulting in a negative indifference amount, the customers’ departure is economic.”). 19
Bundled customers are better off because the departure of customers has allowed PG&E
to use more of its low-cost generation resources to serve bundled customers. 20
See D.08-09-012 at 10 (emphasis added) (“[B]undled customers should be no worse off,
nor should they be any better off as a result of customers choosing alternative energy suppliers
(ESP, CCA, POU or customer generation).”).
Opening Brief of Marin Clean Energy
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response.21 However, as described in MCE’s testimony, in 2015 the balance in the Negative
Indifference Account was over one billion dollars - negative.22 Specifically, PG&E reported the
amount to be negative $1,079,512,000.23 Since PG&E was silent in its testimony about the status
of the Negative Indifference Account, MCE inquired about this matter, asking PG&E to “please
describe how PG&E plans to treat the negative cumulative indifference amount that exists….”
In response, PG&E stated as follows: “For PG&E, the last DWR contract expires in September
2015. … The cumulative negative indifference amount that accrued in forecast years 2006
through 2008 and 2011 and 2012 simply goes away.”24 As such, with no notice to or requested
authorization from the Commission, PG&E plans to simply (and silently) retire the billion dollar
Negative Indifference Account balance.
PG&E seeks to explain and justify its unilateral and unauthorized decision to retire the
billion dollar Negative Indifference Account balance by relying on “logic” from a 2006
Commission decision.25 The problem with PG&E’s explanation, however, is that it is stuck in
time. As further described below,26 the Commission issued several key decisions since 2006 in
which it clarified its “logic” regarding the proper use of negative amounts in the context of the
PCIA.
PG&E’s surreptitious plan to cause the billion dollar Negative Indifference Account
balance to “simply go away” is wrong and unauthorized. As further described below, it is
appropriate for the Commission to consider in this proceeding (or a subsequent phase) whether
PG&E should be required to carry-forward part of the billion dollar Negative Indifference
Account balance to mitigate, in part, some of the PCIA rate shock on CCA customers. MCE
21
See Exhibit MCE-4 (PG&E Data Response) at 1 (“PG&E did not address the expiration
of the Decision 06-07-030 PCIA [and the associated Negative Indifference Account balance] in
this year’s testimony.”). 22
See Exhibit MCE-1 (MCE Testimony) at 11 and Attachment C (PG&E Table 9-3 from
the 2015 ERRA proceeding – 2015 Indifference Calculation). 23
Exhibit MCE-1 (MCE Testimony); Attachment C, line no. 8. 24
Exhibit MCE-6 (PG&E Data Response) at 1. 25
See Exhibit MCE-6 (PG&E Data Response) at 2 (“The rationale for discontinuation of
the negative indifference for pre-2009 customers follows the same logic that was used D.06-07-
030.”). 26
See Section III.C.4, below.
Opening Brief of Marin Clean Energy
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asserts that doing so would be consistent with Commission precedent and legislative directive
regarding CCA programs.
3. The Commission May Review This Issue Based On Changed
Circumstances
A related issue was addressed in last year’s ERRA decision. As described by the
Commission, “[p]re-2009 vintage customers have accumulated a negative indifference amount to
exceed 1 billion by the end of 2014, and MCE proposes that it be used to offset the indifference
amount for customers in other vintages.”27 The Commission found MCE’s proposal to be
unpersuasive. According to the Commission, “[p]re-2009 DA customers accrued the negative
PCIA credits, and the credits should rightfully stay with that group.”28 In other words, the
Commission directed that the billion dollar Negative Indifference Account balance should carry-
forward and stay with pre-2009 DA customers. This, however, is not what PG&E has done;
circumstances have changed this year.
Unlike last year, in which PG&E was directed to carry-forward its massive Negative
Indifference Account balance, PG&E proposes this year to simply and silently retire the billion
dollar Negative Indifference Account balance. This is a major changed circumstance, and one
that inures unfairly and singularly to PG&E’s bundled customers. As a result, PG&E’s bundled
customers are no longer indifferent to past departures; they are better off.29
The Commission has made clear that when circumstances have changed, especially in the
context of departing load charges, the Commission will entertain proposals to mitigate or address
the changed circumstances.30 This is especially so when issues of cost allocation and cross-
subsidization are involved. “[With respect to CCA programs, we] will continue to consider both
27
D.14-12-043 at 11. 28
D.14-12-043 at 12. 29
See note 20, above (referencing See D.08-09-012 at 10 [“[B]undled customers should be
no worse off, nor should they be any better off as a result of customers choosing alternative
energy suppliers (ESP, CCA, POU or customer generation).”]). 30
See, e.g., D.13-08-023 at 17 (“[W]e continue to be open to re-evaluating specific
departing load charges in appropriate proceedings if changed circumstances warrant doing so.”).
Opening Brief of Marin Clean Energy
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the mechanics and overall fairness of cost allocation and departing load charge methodologies
proposed in the future, with the specific goal of avoiding cross-subsidization.”31
In light of the changed circumstances surrounding the Negative Indifference Account, it
is reasonable and appropriate for the Commission to review this issue de novo.
4. It Is Wrong For PG&E To Simply Retire The Billion Dollar Negative
Indifference Account Balance; The Balance Must Be Carried Forward
And Used To Offset The Indifference Amount
As previously stated, in this proceeding PG&E surreptitiously proposes to retire its
billion dollar Negative Indifference Account balance – an action that will inure to the exclusive
benefit of PG&E’s bundled customers. PG&E’s proposed action is unfair, and contrary to
Commission precedent. With respect to the CRS, the Commission has repeatedly stated that
“[t]he threshold policy issue underlying cost responsibility surcharges is to ensure that remaining
bundled ratepayers remain indifferent to stranded costs left by the departing customers.”32
“Indifference” is defined as the scenario in which “bundled customers should be no worse off,
nor should they be any better off as a result of customers choosing alternative energy suppliers
(ESP, CCA, POU or customer generation).”33 In order to ensure that bundled customers are not
“better off” because of the departure of CCA customers, the Commission has repeatedly (and at
times stridently) insisted that the IOUs’ accrued negative indifference amount balances be used
to offset positive indifference amounts. PG&E has a long history of trying to buck, resist and
ignore this Commission directive.
At seemingly every juncture in the storied history of the CRS, PG&E has tried to
eliminate the mitigating effect of negative CRS elements, whether it is the PCIA or other
charges. In response, the Commission has repeatedly rejected PG&E’s efforts, principally
because PG&E’s proposals undermine and violate the overarching rule governing NBCs – the
bundled customer indifference policy. The use of negative PCIA balances was first addressed by
the Commission in D.06-07-030, in which the Commission expressly held that “[t]he PCIA
component of DA CRS may be a negative number in those instances in which ongoing
competition transition charge (CTC) is larger than the indifference charge, so that overall
31
D.13-08-023 at 17. 32 D.08-09-012 at 10 (referencing D.04-12-048; Finding of Fact 28). 33 D.08-09-012 at 10.
Opening Brief of Marin Clean Energy
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indifference is maintained.”34 The Commission addressed a similar issue in D.07-05-005, which
was issued in response to a petition for modification filed by PG&E. PG&E argued that negative
CRS amounts should not be carried-forward to be used to offset positive CRS amounts. In D.07-
05-005, the Commission rejected PG&E’s proposed modification, expressly stating that
“PG&E’s proposed modification would not result in bundled customer indifference.”35 The
Commission affirmed that “in order to maintain indifference, both positive and negative
indifference effects must still be tracked, with the negative amounts offsetting positive
amounts.”36 Seemingly ignorant of the Commission’s past directives, PG&E again tried to
upend these directives in R.06-02-013 – the proceeding that examined, among other things, how
the indifference amount should be calculated with the inclusion of so-called “new world”
generation resources. In that proceeding, as it had done repeatedly in past proceedings, PG&E
advanced a proposal that, if approved, would have resulted in a negative indifference element not
being used to offset a positive indifference element. In D.08-09-012, the Commission again
flatly rejected PG&E’s proposal. In that decision, the Commission first affirmed the ongoing
relevance of D.07-05-005 with respect to the principle of bundled customer indifference, stating
that “[w]hile the Commission’s reasoning in [D.07-05-005] applied to the existing DA/DL CRS
calculations, the basic principles directly relate to handling of negative charges in this
proceeding….”37 As it had previously concluded in D.07-05-005, the Commission likewise
concluded in D.08-09-012 that “[i]t is similarly necessary that negative indifference amounts be
carried over for use in subsequent years to maintain bundled customer indifference. The total
portfolio approach is consistent with this principle. PG&E’s separate approach is not.”38
Unaffected by the Commission’s repeated rejections, PG&E again advanced a proposal in R.07-
05-025 (PCIA Reforms) that would have had the effect of eviscerating negative indifference
amounts. In D.11-12-018, the Commission again rejected PG&E’s proposal, recounting the
34 D.06-07-030; Ordering Paragraph 7 (emphasis added). 35 D.07-05-005 at 19. 36 D.07-05-005 at 19. 37 D.08-09-012 at 48. 38
D.08-09-012 at 48.
Opening Brief of Marin Clean Energy
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numerous times in which the Commission had rejected PG&E’s “similar proposals” and
reiterating its enduring view that negative amounts must be used offset positive amounts.39
Although PG&E would prefer to ignore the Commission’s views with respect to negative
indifference amounts, it should not be allowed to do so.
5. A Mitigation Measure Is Necessary To Address PG&E’s Extraordinary
PCIA Increase; Instead Of Allowing PG&E To Liquidate Its Billion
Dollar Negative Indifference Amount Balance, PG&E Should Be
Directed To Use The Balance To Mitigate The PCIA Rate Shock
The Commission must do something with PG&E’s billion dollar Negative Indifference
Account balance; this amount cannot simply be ignored or allowed to go away. The
Commission previously concluded that “[i]f only positive amounts were recognized while
negative amounts were ignored, the resulting calculation would be inconsistent and would not
achieve indifference.”40 Moreover, it is clear that, because of the significant impact and potential
anti-competitive effect of PG&E’s proposed PCIA increase, CCA customers and CCA programs
would be harmed, in contravention of legislative and Commission pronouncements to the
contrary. As a result of these factors, it is reasonable and appropriate for the Commission to
adopt a mitigation measure that involves the billion dollar Negative Indifference Account
balance.
MCE’s proposal is relatively simple. PG&E’s PCIA rates for 2016 should be frozen at
their 2015 levels. As stated above, residential CCA customers currently face PCIA rates ranging
from 1.122 to 1.226 cents per kWh, depending upon their specific vintage. If PG&E’s 2016
ERRA revenue request is adopted, as proposed, these customers will face PCIA rates ranging
from 1.887 to 2.027 cents per kWh, depending upon their specific vintage. To address the
revenue shortfall associated with freezing PCIA rates at their current levels, PG&E should be
directed to draw from its billion dollar Negative Indifference Account balance.41 It is unclear
39
See D.11-12-018 at 40 (“Consistent with our prior review of similar proposals as noted in
the above-referenced decisions, we find no basis to approve PG&E’s proposed modification
here. … PG&E’s proposal would violate the bundled customer indifference principle by
recognizing only the cost to bundled customers…while not recognizing the offsetting benefit
accruing to bundled customers….”). 40
See D.07-05-005 at 25 (emphasis added). 41
See Exhibit MCE-1 (MCE Testimony) at 13-15.
Opening Brief of Marin Clean Energy
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how much of the balance would need to be tapped to hold PCIA rates constant. However, it is
highly likely that MCE’s proposal would not deplete the massive Negative Indifference Account
balance.
MCE recognizes that, under its proposal, bundled customers’ costs in ERRA would
increase. However, this outcome has been authorized by the Commission as a counter-balance to
the decrease in ERRA costs that bundled customers previously experienced – a decrease in costs
that led to the incurrence of the massive balance in the Negative Indifference Account. In D.11-
12-018, the Commission stated that “…a negative PCIA effectively results in increased ERRA
costs, which bundled customers are required to pay.”42 The Commission acknowledged that
while departing “customers would be paying a net result that is zero or at least lower than the
Ongoing CTC, bundled customer costs in ERRA would increase.”43 The fairness of this increase
in costs turns on the fact that bundled customers had previously been economically benefitted by
the departure of customers.44
MCE recognizes that consideration of this issue may warrant additional time to consider
MCE’s proposal. Likewise, since MCE’s proposal may implicate issues affecting the other
IOUs, MCE acknowledges that it may be appropriate to establish a separate phase and invite
broader participation. If that is the case, MCE requests that PG&E be directed to freeze the
PCIA at their current levels pending a decision on this issue. Any difference in the PCIA
resulting from this action could be tracked by PG&E, placed into a balancing account and
addressed at a later time. As such, PG&E would not be harmed by this deferral.
6. As An Alternative Approach, Community Choice Aggregators Should Be
Given the Option To Amortize The PCIA Balance
If amounts within the Negative Indifference Account balance are not applied to offset or
freeze current-level PCIA rates, Community Choice Aggregators should have the option to elect,
on behalf of their respective CCA customers, to amortize a PCIA undercollection balance over a
30-month period or amortize to the extent necessary to cap any annual increase at 15%. The
“undercollection balance” would be the difference between revenue under PG&E’s proposed
42
D.11-12-018 at 38. 43
D.11-12-018 at 38. 44
See, e.g., D.08-09-012 at 41 (“If the total portfolio costs are lower than market costs
resulting in a negative indifference amount, the customers’ departure is economic.”).
Opening Brief of Marin Clean Energy
14
PCIA and revenue under PG&E’s current PCIA. As stated below,45 the Commission has
expressed concerns many times over the volatility of the CRS, including the anti-competitive
effect on CCA programs created by a high CRS. Implementing an amortization plan for the
undercollection balance would soften the rate shock on CCA customers and dampen the impact
on CCA viability. Moreover, the Commission has repeatedly demonstrated its willingness to
adopt and implement amortization plans as a proper mitigation measure to repay undercollection
balances. Accordingly, implementing such a plan would not only mitigate PG&E’s revenue
shortfall from freezing the current PCIA, but also would protect Community Choice Aggregators
and their customers from the implications of unpredictable PCIA levels.
Amortization is an accepted mitigation measure to recover undercollection balances from
customers. In fact, the Commission has repeatedly shown its willingness to adopt and implement
amortization plans by which undercollected balances could be repaid over a reasonable
amortization period. In D.06-07-030, the Commission adopted proposals for repayment of a
CRS undercollection balance through an amortization period.46 The Commission adopted
PG&E’s proposal with respect to a 30-month amortization period.47 The Commission adopted a
similar proposal for Southern California Edison Company’s (“SCE”) CRS undercollection
balance, expressing its acceptance of a reasonable amortization period.48 While it is unclear
precisely how much revenue shortfall might exist in MCE’s proposal to freeze PCIA rates, it is
doubtful that this amount would be greater than the amounts at issue for PG&E ($325 million)
and SCE ($95 million) under the above-described amortization plans. Therefore, an amortized
period of 30 months should be feasible and would not cause any unnecessary administrative
burdens.
In Resolution E-4256, the Commission also countenanced another payment plan
arrangement. The Commission found reasonable and approved a “payment plan by which
[Cerritos’ customers] can remain current on their current CRS obligations and pay off the
45
See Section III.C.7. 46
See D.06-07-030 at 18-20. 47 See D.06-07-030 at 62. 48 See D.06-07-030 at 20.
Opening Brief of Marin Clean Energy
15
undercollection balance over a three-year period.”49 Cerritos requested this plan “in the interest
of fairness and so as to not cause economic hardship….”50 The Commission found this request
reasonable.51 Similarly, it is fair and reasonable to provide an optional amortization plan for
CCA customers to repay the undercollection balance caused by freezing the PCIA at current
levels. This plan would, among other things, avoid “dramatic fluctuations in the [PCIA],” a
situation the Commission rightly acknowledged as a concern in past CCA-related decisions.52
If adopted outright, the PCIA proposed by PG&E in this proceeding will undoubtedly
create an economic hardship for CCA customers. An amortization plan would allow CCA
customers to adapt to the unexpected changes in their energy costs. This is consistent with the
Commission’s willingness to employ mitigation measures in order to avoid unfair and anti-
competitive effects of departing load charges.53 Thus, MCE proposes that Community Choice
Aggregators be given the option to elect to amortize the PCIA undercollection balance over a
reasonable amortization period.
7. The Commission’s Past Decisions Support The Use Of Mitigation
Measures To Address CRS Volatility And Its Anti-Competitive Impacts
on CCA Programs
The Commission has consistently expressed its concerns regarding the volatility of the
CRS. For example, in its initial decision on the CRS, the Commission stated: “CCAs, like all
customers, are entitled to some expectation that their charges will be predictable and subject to
review by the Commission.”54 Likewise, in developing the CRS, the Commission found it a
preliminary matter to “balance accuracy, equity among different generations of CCAs,
administrative simplicity, and certainty for CCAs and the utilities.”55 When the Commission
reevaluated the CRS cap for DA customers, it recognized that the risk of increases in the cap
49 Resolution E-4256 at 24. 50 Resolution E-4256 at 24. 51 See Resolution E-4256 at 24. 52
See D.04-12-046 at 26-27.
53 See D.13-08-023 at 17 (“[W]e will continue to consider both the mechanics and overall
fairness of cost allocation and departing load charge methodologies proposed in the future, with
the specific goal of avoiding cross-subsidization.”).
54 D.04-12-046 at 22 (emphasis added).
55 D.04-12-046 at 27.
Opening Brief of Marin Clean Energy
16
could “create incentives to leave DA for bundled service, relocate out of state, or go bankrupt”
and that “maintaining the existing caps avoids risking erosion of DA levels while protecting
bundled customers.”56 Thus, the Commission has previously recognized the anti-competitive
effect of the CRS.
The PCIA plays an important role in the viability of CCA programs. Community Choice
Aggregators operate on the generation services side of the electric utility business model, and
therefore must compete with the IOUs’ generation services. Since the only means of
competition is based on those costs, the PCIA, which is imposed upon the generation-services
portion of customers’ bills, cuts into the competitive margin of Community Choice
Aggregators.57 A high PCIA thus impacts a Community Choice Aggregator’s viability by
artificially creating higher bills for CCA customers. For example, MCE’s customers would
associate the increase in their bills as an increase from MCE’s generation rates alone (rather than
from the PCIA).58 This flawed perception would create customer confusion and potential for
return to IOU bundled service, threatening a Community Choice Aggregator’s viability.
In reviewing PG&E’s PCIA proposal, the Commission should take into account the
competitive effect of the proposal on CCA programs. This would follow SB 790’s directive.59
In addition, Commission precedent has always appreciated the importance of sustaining CCA
programs.60
D. Cost Allocation Mechanism (CAM) Revenue Requirement
[MCE has no position regarding the matters described in this section of the common
briefing outline.]
E. Electric Sales Forecast
With respect to departing load due to CCA programs, PG&E only included departures
associated with MCE’s and Sonoma Clean Power’s (“SCP”) existing CCA programs; no new
56 D.03-07-030 at 102. See also D.02-11-022 at 115-124 (application of the 2.7 cents per
kWh cap on the CRS). 57 See Exhibit MCE-1 (MCE Testimony) at 7-10. 58
See Exhibit MCE-1 (MCE Testimony) at 7-8. 59
See note 16, above. 60 D.04-12-046 at 46 (“We balance this objective with our wish to avoid setting the CRS too
high and thereby create a barrier to CCA development.”).
Opening Brief of Marin Clean Energy
17
CCA programs were included in PG&E’s load forecast.61
PG&E states that “[a]s of the time this
testimony and forecast was prepared, two CCAs have formed and are providing service.”62
However, PG&E states that it “may also update 2016 load in the November Update for any other
CCAs that satisfy any of the three criteria described above and intend to provide service in
2016.”63
PG&E’s testimony in this proceeding differs with respect to PG&E’s expectations for
CCA program development, as reflected in PG&E’s General Rate Case (A.15-09-001)
(“GRC1”). In GRC1, in addition to MCE’s and SCP’s CCA programs, PG&E expresses its
expectation that the city and county of San Francisco (“SF”) and Alameda County will initiate
CCA programs in 2016.64 PG&E estimates that 114,992 service accounts will depart PG&E
bundled service in favor of CCA service from SF, and that 182,402 service accounts will depart
PG&E bundled service in favor of CCA service from Alameda County.65
PG&E apparently does not believe that miscalculating departing CCA load would have a
material impact on issues in this proceeding. MCE asked PG&E “Hypothetically, if the actual
adoption rate of Departing Load were greater than what was forecasted in the latest procurement
planning process, what would happen to the costs of the resulting excess energy and capacity
procurement?”66
To which, PG&E responded as follows: “PG&E’s ERRA balancing account is
used to record actual procurement-related costs and revenue collected subject to Commission-
approved revenue requirements in this proceeding; and any difference between the revenue
collected on a forecast basis and actual costs flows back to or is collected from customers.”67
This is not the case, however. While other accounts may be trued up, the PCIA is not trued-up.
As a result, it is important for PG&E to provide the best possible CCA departing load
information. This is consistent with expectations set by the Commission.
61
See Exhibit PG&E-1 (PG&E Testimony) at 2-11 – 2-12. 62
Exhibit PG&E-1 (PG&E Testimony) at 2-11:15-16. 63
Exhibit PG&E-1 (PG&E Testimony) at 2-12:6-8. 64
See Exhibit MCE-7 (PG&E Data Response) at 1. 65
Id. 66
Exhibit MCE-2 (PG&E Data Response) at 1. 67
Exhibit MCE-2 (PG&E Data Response) at 1.
Opening Brief of Marin Clean Energy
18
F. Net Forecast Greenhouse Gas (GHG) Revenue Return Amount
[MCE has no position regarding the matters described in this section of the common
briefing outline.]
G. Rate Proposals Associated With Its Proposed Total Electric Procurement-
Related Revenue Requirements
[MCE has no position regarding the matters described in this section of the common
briefing outline.]
IV. THE REASONABLENESS OF PG&E’S RECORDED 2014 ADMINISTRATIVE
AND OUTREACH EXPENSES FOR GHG
[MCE has no position regarding the matters described in this section of the common
briefing outline.]
V. WHETHER ALL CALCULATIONS, INCLUDING BUT NOT LIMITED TO THE
CALCULATION OF THE ERRA, ONGOING CTC, PCIA, CAM, GHG, NON-
BYPASSABLE CHARGES, ERRA UNDER-COLLECTION, PROCUREMENT
COSTS, VINTAGING, ARE IN COMPLIANCE WITH ALL APPLICABLE
RESOLUTIONS, RULINGS, AND DECISIONS FOR ALL CUSTOMER TYPES
As stated above, PG&E’s calculation of the PCIA is not in compliance with previous
Commission decisions insofar as PG&E has failed to correctly apply the Negative Indifference
Account balance as an offset to avoid cross-subsidization and ensure customer indifference.
VI. THE NOVEMBER UPDATE
[MCE has no position regarding the matters described in this section of the common
briefing outline. The November Update has not yet been distributed by PG&E. MCE plans to
review the November Update when it is distributed by PG&E. As directed in the Scoping Memo,
MCE will include any comments related to the November Update in MCE’s comments on the
Proposed Decision.]
VII. SAFETY ISSUES
[MCE has no position regarding the matters described in this section of the common
briefing outline.]
VIII. PG&E’S PROPOSED IMPOSITION OF THE NEW SYSTEM GENERATION
CHARGE ON INCREMENTAL TRANSFERRED MUNICIPAL DEPARTING
LOAD
[MCE has no position regarding the matters described in this section of the common
Opening Brief of Marin Clean Energy
19
briefing outline.]
IX. CONCLUSION
MCE thanks ALJ Wilson and Commissioner Florio for their attention to the matters
discussed herein.
Dated: September 21, 2015 Respectfully submitted,
Scott Blaising
Dan Griffiths
BRAUN BLAISING MCLAUGHLIN & SMITH, P.C.
915 L Street, Suite 1270
Sacramento, California 95814
Telephone: (916) 682-9702
FAX: (916) 563-8855
E-mail: [email protected]
Counsel for Marin Clean Energy