BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF ...files.ctctcdn.com/20382ed6201/c7df3bdc-bcaa-46f1-b... · 6 See Administrative Law Judge’s Ruling Establishing Second Phase

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


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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).

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)

)

)

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)

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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


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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


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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.


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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-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.


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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


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.


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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.”).


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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).”).


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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.


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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.”).


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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.


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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.


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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.


13

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.”).


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.


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.


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


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.”).


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.


18

F. Net Forecast Greenhouse Gas (GHG) Revenue Return Amount


briefing outline.]

G. Rate Proposals Associated With Its Proposed Total Electric Procurement-

Related Revenue Requirements


briefing outline.]

IV. THE REASONABLENESS OF PG&E’S RECORDED 2014 ADMINISTRATIVE

AND OUTREACH EXPENSES FOR GHG


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


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


briefing outline.]

VIII. PG&E’S PROPOSED IMPOSITION OF THE NEW SYSTEM GENERATION

CHARGE ON INCREMENTAL TRANSFERRED MUNICIPAL DEPARTING

LOAD



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

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