Details for: PGE Reply to Protest of Advice 3975-G.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 11, 2018

California Public Utilities Commission - Energy Division
Attention: Tariff Unit
505 Van Ness Avenue
San Francisco, CA 94102
Subject:

Pacific Gas and Electric Company’s Reply to the Protest of Advice
Letter 3975-G Natural Gas GHG Advice Letter in Compliance with
Decision 18-03-017, Ordering Paragraph 9

Dear Energy Division Tariff Unit:
Pacific Gas and Electric Company (PG&E) hereby replies to a protest dated June 4,
2018 from the Office of Ratepayer Advocates (ORA) to Advice 3975-G regarding
PG&E’s Natural Gas GHG Advice Letter in Compliance with Decision (D.) 18-03-017,
Ordering Paragraph (OP) 9.
ORA argues that PG&E should not include rate base treatment of natural gas-related
greenhouse gas (GHG) compliance instrument prepayments in its natural gas GHG
compliance costs because (1) The authorization for rate base treatment of electricrelated GHG compliance instrument prepayments in D.14-10-033 does not apply to
natural gas GHG compliance instrument prepayments; (2) PG&E may not implement
rate base treatment of natural gas GHG compliance instrument prepayments outside of
General Rate Cases (GRCs), even though D.18-03-057 orders PG&E to implement
ratemaking for all natural gas GHG compliance costs in this advice letter; and (3) PG&E
is prohibited from rate base treatment of GHG compliance instrument prepayments
pursuant to a 1985 Commission decision, D.85-12-107.
Response:
ORA’s arguments have no merit and should be rejected, for the reasons discussed in
more detail below.
First, contrary to ORA, the ratemaking methodology for electric-related GHG
compliance costs required by D.14-10-033, including rate base treatment of electricrelated GHG compliance instrument prepayments, has been expressly adopted and
required for natural gas-related GHG compliance costs in D.14-12-040, Decision
Resolving Phase 1 Issues and Addressing the Motion for Adoption of Settlement
Agreement. Ordering Paragraph 8 of D.14-12-040 expressly required PG&E and the





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PG&E’s Reply to Protest of Advice Letter 3975-G -2- June 11, 2018 other natural gas utilities to “…include revised forecasts of 2015 Cap-and-Trade-related compliance costs and allowance revenues according to the requirements of this decision and that reflect, as closely as possible, the methodologies that the Commission defined for the electric utilities in Decision 14-10-033.”1 Also contrary to ORA’s assertion, D.15-10-032 expressly repeated the requirement that natural gas utilities follow the ratemaking methodology adopted for electric utilities in D.14-10-033. 2 Nothing in D.15-10-032 or D.18-03-017 modified or changed the direction in D.14-12040 that the natural gas utilities must follow the same ratemaking and cost forecasting methodology adopted for electric utilities in D.14-10-033. Second, contrary to ORA, PG&E could not have sought or implemented rate base treatment for natural gas compliance instrument prepayments in PG&E’s 2017 General Rate Case, because the Commission had expressly prohibited the utilities from including any natural gas-related GHG compliance costs in rates until the cost allocation issues raised on rehearing had been resolved, which did not happen until D.18-03-017. 3 Thus, PG&E’s advice letter is not “circumventing” its GRC base revenue requirements, but in fact fully complying with the direction of the Commission not to include recovery of such revenue requirements until the issuance of D.18-03-017. 4 Third, ORA’s reference to a 1985 Commission decision which asserts required removal of “fungible commodities” from rate base is simply inapplicable to the GHG compliance instrument prepayments, because the Commission’s subsequent decisions, D.14-10033 and D.14-12-040, expressly authorize rate base treatment for GHG compliance instrument prepayments. 5 Subsequent to the original advice letter, PG&E updated its 2018 forecast of natural gas GHG financing costs based on year-to-date recorded costs, and has determined these to be confidential. In addition, PG&E inadvertently omitted Rate Schedule G-WSL from the original advice letter. PG&E submitted Advice 3975-G-A as a supplemental advice 1 D.14-12-040, p. 42 (emphasis added); see also, discussion at p. 23 “The natural gas utilities should … provide forecasts that follow as closely as possible the methodologies and rules established in D.14-10-033.” 2 D.15-10-032, p. 9. 3 D.16-04-013, also referenced in ORA’s protest, p. 2. 4 Now that D.18-03-017 has authorized inclusion of natural gas GHG compliance costs in rates, PG&E can implement the rate base portion of such costs in subsequent GRCs. PG&E’s advice submittal only seeks recovery of the rate base portion of such costs between GRCs. PG&E notes that ORA apparently opposes any rate base treatment of such prepayments, whether in GRCs or elsewhere, notwithstanding the express authorization of rate base treatment in Section 7.6.2 of D.14-10-033 as adopted in D.14-12-040. (ORA protest, p. 4, referencing its opposition to rate base treatment of SDG&E’s and SoCal Gas’s cost recovery in A.17-10-007.) 5 Even if D.85-12-107 were relevant, GHG compliance instruments are not “fungible commodities,” they are elements of AB 32’s regulatory mechanism by which GHG compliance costs are calculated and under certain circumstances, e.g. when they are transferred to a compliance account, not freely tradeable.
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PG&E’s Reply to Protest of Advice Letter 3975-G -3- June 11, 2018 letter on June 5, 2018, to replace the original in its entirety. The issues raised in ORA’s protest are not affected by the supplemental advice letter. PG&E respectfully requests that the Commission reject ORA’s protest and approve Advice 3975-G-A as filed. /S/ Erik Jacobson Director, Regulatory Relations cc: Christian Lambert, Christian.Lambert@cpuc.ca.gov Thomas Garrifo, Thomas.Garrifo@cpuc.ca.gov Service List for R.14-03-003
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