Details for: PG&E AL 3982-G_5306-E.pdf


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Erik Jacobson
Director
Regulatory Relations

Pacific Gas and Electric Company
77 Beale St., Mail Code B13U
P.O. Box 770000
San Francisco, CA 94177
Fax : 415-973-3582

June 7, 2018

Advice 3982-G/5306-E
(Pacific Gas and Electric Company ID U 39 M)

Public Utilities Commission of the State of California
Subject:

Filing in Compliance with Administrative Law Judge Roscow’s May
8, 2018 Email Ruling in the 2017 General Rate Case Regarding
PG&E’s June 12, 2017 Advice 3851-G/5087-E

Purpose
This advice letter is submitted in compliance with Administrative Law Judge (ALJ)
Roscow’s May 18, 2018 email ruling (the Ruling) in Pacific Gas and Electric Company’s
(PG&E) 2017 General Rate Case (GRC) proceeding (Application 15-09-001).
The Ruling states that “PG&E appears to have confirmed that the 2017 revenue
requirement authorized in D.17-05-[013] should have been $43.279 million lower,
because PG&E should have removed that amount from the expense amounts that
served as the basis for the settled-upon revenue requirement that was reviewed and
adopted by the Commission in D.17-05-[013].” The Ruling directs PG&E to file a Tier 1
advice letter to “correct this oversight, and reduce its authorized revenue requirement
accordingly, or propose a procedural alternate that achieves the same result.”
As a point of clarification, PG&E does not believe that the 2017 revenue requirement
should be so lowered. Despite PG&E’s concerns, PG&E is filing this advice letter in
compliance with the Ruling. This advice letter provides two calculations for passing
through a revenue requirement reduction.
The first calculation is that sought by the Ruling. Specifically, the calculation effects a
2017 revenue reduction comprised of two components: 1) a $40 million reduction in
depreciation expense; and 2) a $3.279 million reduction in executive compensation
expense related to executive staffing reductions.
The second calculation, which PG&E contends is more accurate, would effect a 2017
revenue reduction of $21.279 million, comprised of an $18 million reduction in
depreciation expense and a $3.279 million reduction related to executive compensation
expense.





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Advice 3982-G/5306-E -2- June 7, 2018 Background On September 1, 2015, PG&E filed its 2017 GRC Application. On August 3, 2016, PG&E and 14 other parties filed with the California Public Utilities Commission (CPUC or Commission) a comprehensive Settlement Agreement that resolved nearly all issues in the proceeding. The Settlement Agreement provided a revenue requirement for 2017 that was $231 million below PG&E’s forecast in the application. Outside of the Commission’s 2017 GRC proceeding, however, PG&E was forecasting higher costs than PG&E had previously forecasted for 2017.1 In an effort to align 2017 spending levels with the Settlement Agreement and the amounts adopted or filed in other rate cases (e.g., Gas Transmission and Storage and electric Transmission Owner), PG&E commenced an effort to identify $300 million (company-wide, not just GRC) in expense-related cost reductions and “efficiencies” for 2017. In November 2016, PG&E informed Energy Division staff of the anticipated cost reductions and efficiencies. On December 2, 2016, in response to an Energy Division data request, PG&E described to Energy Division staff the process PG&E undertook to establish the $300 million in reductions. On January 11, 2017, PG&E publicly announced its plans for streamlined management structures and the efficiency initiative. On May 11, 2017, the CPUC issued Decision (D.) 17-05-013 approving the Settlement Agreement with certain modifications. In the decision, the Commission sought additional information regarding how the reductions related to the revenue requirement adopted in the decision. (D.17-05-013, pages 129 -130.) In accordance with Ordering Paragraph (OP) 6 of D.17-05-013, on June 12, 2017, PG&E filed a Tier 1 advice letter (Advice 3851-G/5087-E) to submit the detailed information described in OP 6: 1) A mathematical demonstration, with reference to specific line items in PG&E’s General Rate Case (GRC) testimony and/or workpapers in the record of this proceeding, that accounts for the $300 million in 2017 cost reductions announced by PG&E on January 11, 2017. The demonstration should show whether, after accounting for $300 million in reductions, PG&E is still planning to spend, on a forecast basis, the 2017 revenue requirement authorized in this 1 In PG&E’s annual Integrated Planning process, PG&E develops a 5-year Operating plan (known as Session 1) and a 2-year Execution plan (known as Session 2). In PG&E’s Session 1 planning in July and August of 2016, the Company identified various spending projections for 2017 that would have exceeded the amount that would be agreed to in the GRC Settlement Agreement and the amounts either adopted or filed in other rate cases. The forecasts that were developed in the Session 1 process in the summer of 2016 were different than those prepared over 18 months earlier that formed the basis for the 2017 GRC forecast that was filed in September 2015.
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Advice 3982-G/5306-E -3- June 7, 2018 decision, or some other specified amount. Annotated copies of the pages cited in the referenced testimony and/or workpapers shall be included as an attachment to the analysis. 2) Separate verification and demonstration, by reference to testimony or workpapers in the record of this proceeding, that the reductions in executive positions also announced by PG&E on January 11, 2017 are accounted for in the GRC forecast for executive compensation that is part of the 2017 revenue requirement authorized in this decision. If the announced reductions are in fact already funded as part of the authorized amount, PG&E should provide a revised forecast that removes those costs for 2017. Annotated copies of the pages cited in the referenced testimony and/or workpapers shall be included as an attachment to the analysis. In Advice 3851-G/5087-E, PG&E provided additional detail and explained that overall PG&E budgeted to spend $44 million more in expense than the adopted 2017 revenue requirement, even after accounting for the $300 million in company-wide efficiencies.2 The Ruling summarizes Energy Division’s review of the advice letter as follows: Although PG&E eliminated certain executive positions in 2017, the funding for those positions, $3.279 million, was not removed from PG&E’s Test Year (TY) 2017 expense forecast. Another area of identified reductions was “Corporate items, primarily related to reduced depreciation expense as a result of lower IT capital spending offset by increased spending on gas and electric capital projects.” PG&E identifies $40 million in lowered depreciation expense due to the reduction in IT capital spending. It appears that this $40 million was not removed from PG&E’s TY 2017 depreciation expense revenue requirement.3 Discussion PG&E disagrees with Energy Division’s conclusion that a reduction to the 2017 revenue requirement is warranted. Nonetheless, as directed by the Ruling, PG&E provides below its approach for passing through a $40 million reduction in depreciation expense and a $3.279 million reduction in executive compensation for 2017. This approach is labeled “Option 1” below. In addition to the calculation ordered by the Ruling, PG&E also offers a more accurate calculation that corrects for an apparent miscalculation made by Energy Division. That is, as described in Attachment 2 of Advice 3851-G/5087-E, the difference between the 2 3 PG&E Advice 3851-G/5087-E, Attachment 1, page 1. ALJ Roscow’s May 8 Email Ruling (emphasis in the original).
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Advice 3982-G/5306-E -4- June 7, 2018 2017 GRC adopted depreciation expense of $2,398 million and the 2017 budgeted depreciation expense of $2,380 million is $18 million, not $40 million as referenced in the Ruling.4 The $40 million shown in Advice 3851-G/5087-E is a reduction to PG&E’s then-updated Session 1 forecast depreciation expense, not to PG&E’s 2017 GRC adopted depreciation expense.5 The Session 1 forecast of depreciation expense never was part of the record of the GRC. As described in the background section above, PG&E’s Session 1 forecast was developed in the summer of 2016 and forecasted a higher level of overall spending compared to the Settlement Agreement amounts, including depreciation expense. This corrected approach is labeled “Option 2” below. Option 1: PG&E Approach for $40 Million Depreciation and $3.279 Million Executive Compensation Reductions If the Commission proceeds with the Ruling and requires PG&E to reduce the 2017 authorized revenues by $43.279 million, PG&E proposes to include the $43.279 million reduction in the 2019 Annual Electric True-up (AET) and Annual Gas True-up (AGT) filings to be passed through to customers in rates in 2019. The reduction will be spread $22.445 million to electric distribution, $11.436 million to electric generation and $9.398 million to gas distribution according to revenue requirement allocation percentages for each of the functional groups as adopted in D.17-05-013. Option 2: PG&E Alternative Approach for $18 Million Depreciation and $3.279 Million Executive Compensation Reductions PG&E proposes to include the $21.279 million reduction in the 2019 AET and AGT filings to be passed through to customers in rates in 2019. The reduction will be spread $11.036 million to electric distribution, $4.621 million to electric generation and $5.623 million to gas distribution according to revenue requirement allocation percentage for each of the functional groups as adopted in D.17-05-013. Conclusion PG&E believes that the 2017 revenue requirement should not be lowered. However, in compliance with the Ruling, PG&E has provided herein an approach, labeled Option 1, for passing through to customers a $43.279 million reduction for 2017. In addition, PG&E has provided an approach, labeled Option 2, that corrects for an apparent miscalcuation Energy Division made in determining what its recommended depreciation reduction should be. PG&E proposes this alternative approach, which would pass through to customers a $21.279 million reduction for 2017. 4 5 PG&E Advice 3851-G/5087-E, Attachment 2, page 7. PG&E has also attached this document in this filing as Attachment A. PG&E’s final depreciation budget was completed in Q1 2017, after all the LOB budgets were finalized.
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Advice 3982-G/5306-E -5- June 7, 2018 Protests Anyone wishing to protest this filing may do so by letter sent via U.S. mail, facsimile or E-mail, no later than June 27, 2018, which is 20 days after the date of this filing. Protests must be submitted to: CPUC Energy Division ED Tariff Unit 505 Van Ness Avenue, 4th Floor San Francisco, California 94102 Facsimile: (415) 703-2200 E-mail: EDTariffUnit@cpuc.ca.gov Copies of protests also should be mailed to the attention of the Director, Energy Division, Room 4004, at the address shown above. The protest shall also be sent to PG&E either via E-mail or U.S. mail (and by facsimile, if possible) at the address shown below on the same date it is mailed or delivered to the Commission: Erik Jacobson Director, Regulatory Relations c/o Megan Lawson Pacific Gas and Electric Company 77 Beale Street, Mail Code B13U P.O. Box 770000 San Francisco, California 94177 Facsimile: (415) 973-3582 E-mail: PGETariffs@pge.com Any person (including individuals, groups, or organizations) may protest or respond to an advice letter (General Order 96-B, Section 7.4). The protest shall contain the following information: specification of the advice letter protested; grounds for the protest; supporting factual information or legal argument; name, telephone number, postal address, and (where appropriate) e-mail address of the protestant; and statement that the protest was sent to the utility no later than the day on which the protest was submitted to the reviewing Industry Division (General Order 96-B, Section 3.11). Effective Date PG&E requests that this Tier 1 advice filing become effective upon resolution by the Commission of the outstanding issues set forth above.
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Advice 3982-G/5306-E -6- June 7, 2018 Notice In accordance with General Order 96-B, Section IV, a copy of this advice letter is being sent electronically and via U.S. mail to parties shown on the attached list [and the parties on the service list for A.15-09-001. Address changes to the General Order 96-B service list should be directed to PG&E at email address PGETariffs@pge.com. For changes to any other service list, please contact the Commission’s Process Office at (415) 703-2021 or at Process_Office@cpuc.ca.gov. Send all electronic approvals to PGETariffs@pge.com. Advice letter filings can also be accessed electronically at: http://www.pge.com/tariffs/. /S/ Erik Jacobson Director, Regulatory Relations Attachment Attachment A - PG&E Advice 3851-G/5087-E, Attachment 2, page 7 cc: Service List A.15-09-001
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CALIFORNIA PUBLIC UTILITIES COMMISSION ADVICE LETTER FILING SUMMARY ENERGY UTILITY MUST BE COMPLETED BY UTILITY (Attach additional pages as needed) Company name/CPUC Utility No. Pacific Gas and Electric Company (ID U39 M) Utility type: Contact Person: Yvonne Yang  ELC  GAS  PLC  HEAT Phone #: (415) 973-2094  WATER E-mail: QXY1@pge.com and PGETariffs@pge.com EXPLANATION OF UTILITY TYPE ELC = Electric PLC = Pipeline GAS = Gas HEAT = Heat (Date Filed/ Received Stamp by CPUC) WATER = Water Advice Letter (AL) #: 3982-G/5306-E Tier: 1 Subject of AL: Filing in Compliance with Administrative Law Judge Roscow’s May 8, 2018 Email Ruling in the 2017 General Rate Case Regarding PG&E’s June 12, 2017 Advice 3851-G/5087-E Keywords (choose from CPUC listing): Compliance, Agreements AL filing type:  Monthly  Quarterly  Annual  One-Time  Other _____________________________ If AL filed in compliance with a Commission order, indicate relevant Decision/Resolution #: D.17-05-013 Does AL replace a withdrawn or rejected AL? If so, identify the prior AL: No Summarize differences between the AL and the prior withdrawn or rejected AL: N/A Is AL requesting confidential treatment? If so, what information is the utility seeking confidential treatment for: No Confidential information will be made available to those who have executed a nondisclosure agreement: N/A Name(s) and contact information of the person(s) who will provide the nondisclosure agreement and access to the confidential information: __________________________________________________________________________________________________ Resolution Required? Yes No Requested effective date: Effective upon resolution by the Commission of the N No. of tariff sheets: N/A outstanding issues set forth above Estimated system annual revenue effect (%): N/A Estimated system average rate effect (%): N/A When rates are affected by AL, include attachment in AL showing average rate effects on customer classes (residential, small commercial, large C/I, agricultural, lighting). Tariff schedules affected: N/A Service affected and changes proposed: N/A Pending advice letters that revise the same tariff sheets: N/A Protests, dispositions, and all other correspondence regarding this AL are due no later than 20 days after the date of this filing, unless otherwise authorized by the Commission, and shall be sent to: California Public Utilities Commission Energy Division EDTariffUnit 505 Van Ness Ave., 4th Flr. San Francisco, CA 94102 E-mail: EDTariffUnit@cpuc.ca.gov Pacific Gas and Electric Company Attn: Erik Jacobson Director, Regulatory Relations c/o Megan Lawson 77 Beale Street, Mail Code B13U P.O. Box 770000 San Francisco, CA 94177 E-mail: PGETariffs@pge.com
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Advice 3982-G/5306-E June 7, 2018 Attachment A PG&E’s Advice 3851-G/5087-E, Attachment 2, page 7
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Attachment Annotated GRC Testimony Page TABLE 10-1 2017 FORECAST DEFRECIATION EXPENSE AND WAVG RESERVE EV GAS AND E.ECTRIC AND a_EcTRIc GENERATION ucc (THOUSANDS OF NOMINAL DOLLARS) (PG&E-10) 2017 201'/Wevghled Line Deprecramn Average No ucc use Expense Reserve 601 Gas Prpes and servrees 475533 5170‘-459 602 Gas Precuremen: 50‘ 21735 603 Pubhc Purpose Program Gas 21575 ‘V449 605 Rewsed Cusmmer Energy sta1ernen1 Gas 505 195° ems srnammexer Opt am Gas 223 752 Gas D|smb1mur1 Total 4321570 51715354 301 Elecmc wrres semcea 1405551 151452575 302 Electnc Trar1sm1ss1Dr1-Level Drrect Connects 195‘ 251990 303 Pubhc Purpose Program Electnc 131333 47.743 305 srnanrmexer Opt am Eremne 551 21250 1‘ 310 Electnc D1strIbuflon SmarIGnd Pflots 5-515 915‘? 11 311 Customer Data Access 2,133 51284 13 312 Rewsed cusrorner Energy Statement Erecmc 5‘ 2333 1" 320 LED Incrernenvarl 957 (51414) 15 321 Hercmes 75 ‘93 1e Elecmc Total 114351721 131539.655 17 1u1 Fzcflmes (a) 11») 471951 3551120 15 102 FnSS1lTvanSm1Ss1On 4-929 19 106 Olher Generalmrr Solar 2915? 125-9°‘ 20 120 Hydro Fac1ImeS(b) ‘3°1‘9‘ 21‘93r“‘3 2‘ 121 Hydro 2-554 ‘23-79° 22 130 Dlablo Canyon Facrmra Kb) 3°°1°75 512471557 23 131 Dlablu Canyon "100 591095 24 141 Electnc Procurement 351106 166,974 25 15:1 Electnc Generatmrr Puots (Demand Forecasting) 1.339 21560 25 Electnc T0131 5541511: 51355575 27 Tera: Gas and Elemnc and E\ec'mc 231613734 2017 GRC Forecast (2) Depreciation expense and reserve snewn In Tame 1111 Include ucc (b) expense and reserve shown In Tame 1071 Include URG Regmalory Asse« amomzatron for these uccs (c) Depreciation expense and reserve shown In Tame 1111 rnclude hydra U00 2017 Adopted $2,398 million 2017 Budet $2,380 million 10—3
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PG&E Gas and Electric Advice Filing List General Order 96-B, Section IV AT&T Albion Power Company Alcantar & Kahl LLP Anderson & Poole Atlas ReFuel BART Barkovich & Yap, Inc. Braun Blaising Smith Wynne P.C. CalCom Solar California Cotton Ginners & Growers Assn California Energy Commission California Public Utilities Commission California State Association of Counties Calpine Casner, Steve Cenergy Power Center for Biological Diversity City of Palo Alto City of San Jose Clean Power Research Coast Economic Consulting Commercial Energy County of Tehama - Department of Public Works Crossborder Energy Crown Road Energy, LLC Davis Wright Tremaine LLP Day Carter Murphy Dept of General Services Don Pickett & Associates, Inc. Douglass & Liddell Downey & Brand Ellison Schneider & Harris LLP Energy Management Service Evaluation + Strategy for Social Innovation GenOn Energy, Inc. Goodin, MacBride, Squeri, Schlotz & Ritchie Green Charge Networks Green Power Institute Hanna & Morton ICF International Power Technology Intestate Gas Services, Inc. Kelly Group Ken Bohn Consulting Keyes & Fox LLP Leviton Manufacturing Co., Inc. Linde Los Angeles County Integrated Waste Management Task Force Los Angeles Dept of Water & Power MRW & Associates Manatt Phelps Phillips Marin Energy Authority McKenzie & Associates Modesto Irrigation District Morgan Stanley NLine Energy, Inc. NRG Solar Office of Ratepayer Advocates OnGrid Solar Pacific Gas and Electric Company Pioneer Community Energy Praxair Regulatory & Cogeneration Service, Inc. SCD Energy Solutions SCE SDG&E and SoCalGas SPURR San Francisco Water Power and Sewer Seattle City Light Sempra Utilities Southern California Edison Company Southern California Gas Company Spark Energy Sun Light & Power Sunshine Design Tecogen, Inc. TerraVerde Renewable Partners Tiger Natural Gas, Inc. TransCanada Troutman Sanders LLP Utility Cost Management Utility Power Solutions Utility Specialists Verizon Water and Energy Consulting Wellhead Electric Company Western Manufactured Housing Communities Association (WMA) Yep Energy
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