Details for: PGE's Reply to Protest of AL 5353-E.pdf

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Erik Jacobson
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

September 7, 2018

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

Pacific Gas and Electric Company’s Reply to the Protest of Advice
Letter 5353-E re Proposed Approach for Determining a Bill Credit to
End Cost Recovery from a Competing Demand Response Provider’s

Dear Energy Division Tariff Unit:
Pacific Gas and Electric Company (PG&E) hereby replies to the protest (“DA/CCA
protest”) dated August 30, 2018 from the Joint DA/CCA Parties on Pacific Gas and
Electric Company’s Advice Letter 5353-E, Southern California Edison Company’s
(SCE) Advice Letter 3844-E and San Diego Gas & Electric Company’s (SDG&E) Advice
Letter 3260-E on Determining a Bill Credit to End Cost Recovery from the Customers of
a Competing Demand Response Provider. Also, PG&E responds to and incorporates
elements identified in Public Advocates Office at the California Public Utilities
Commission (Cal PAO, formerly known as Office of Ratepayer Advocates)’s filed
comments (“Cal PAO comments”) on AL 5353-E. These comments are limited to
PG&E and do not necessarily reflect the positions held by SCE and SDG&E.
The Joint DA/CCA Parties protested this advice letter on the following grounds 1:

Some aspects of PG&E’s and SDG&E’s proposals require clarification or
submission of supplemental information.



PG&E and SDG&E fail to meet the requirements in D.17-10-017 (“Decision”) to
justify recovery of implementation costs of the bill credit.

PG&E and SDG&E propose to exclude applicable costs from the bill credit in
violation of D.17-10-017.

DA/CCA protest at p. 6.


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PG&E’s Reply to Protest of Advice Letter 5353-E -2- September 7, 2018 PG&E believes it has met the requirements of the Decision by providing a comprehensive implementation framework in AL 5353-E. Also, PG&E provides clarification to certain points raised in the DA/CCA protest, which it believes negates the need to file supplemental information at this time. Finally, PG&E respectfully disagrees with the DA/CCA protest pertaining to fixed costs and provides its reasons. The comments filed by Cal PAO addresses the following: 2 • The Commission should approve the IOUs’ proposals to exclude certain fixed costs from the bill credit. • The IOUs should track and report on the bill credit to ensure they are working as intended. PG&E agrees and supports Cal PAO’s position on the exclusion of fixed costs. Furthermore, PG&E does not oppose tracking and reporting for the bill credit. Response: In response to the DA/CCA protest and Cal PAO comments, PG&E addresses the following key issues: • • • • Requirements of D. 17-10-017 (“Decision”) Clarifications from the Proposal Cost Elements for Inclusion in the Bill Credit Tracking and Reporting Requirements of D. 17-10-017 PG&E responds to the DA/CCA protest, which appears to confound the Demand Response (DR) program costs to be included in the bill credit with the cost to implement the Competitive Neutrality Cost Causation principle (CNCC). Specifically, the DA/CCA protest claims that “Neither PG&E nor SDG&E provide any detail regarding specific incremental costs, including the “forecast of the activities and costs” that would be included under their respective implementation cost recovery proposals, as required by D. 17-10-017.” 3 While PG&E provided the subset of DR budget costs 4 that it plans to utilize for the bill credit (subject to refresh in the mid-cycle review), it did not provide specific cost estimates for the implementation of the CNCC. The reasons for not doing so include: (1) This information was optional for AL 5353-E. The cite provided by the DA/CCA protest stating the need to provide a “forecast of the activities and costs” appears to be from the Decision on page 29. This language included a qualifier that the IOUs “may 2 PAO comments, Discussion items 1 and 2. DA/CCA protest at p. 13. 4 AL 5353-E, PG&E’s report, Appendix A. 3
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PG&E’s Reply to Protest of Advice Letter 5353-E -3- September 7, 2018 include” these costs. Therefore, this was an optional activity; (2) Such costs would most likely be determined once an ESP or CCA obtains approval for a “similar” program through a CPUC Resolution, as there will be unique elements associated with each program determination that could influence implementation; (3) The outcome of the outstanding Petition for Modification (PFM) 5 would influence this cost estimate -namely the scope of notification letter recipients and the method of delivery (e.g., hard copy letters versus electronic notifications) would have a significant bearing on the overall cost, and (4) The preliminary cost estimates that may exist for each IOU were based on assumptions that may not be reflected in the final CPUC Resolution for AL 5353-E. Even the DA/CCA protest acknowledges that “The Decision merely establishes a process by which IOUs may submit proposals to justify recovery of such costs.” 6 The DA/CC protest asserts that “…the IOUs have a perverse incentive to inflate implementation costs to reduce the DR bill credit and, in turn, reduce the competitiveness of CCA and ESP DR programs.” 7 This statement is far from the truth and from the reality of today’s energy market in California. With the level of load migration away from bundled service that has occurred and is projected to occur primarily due to CCA growth, the IOUs have an inherent interest in maintaining rate competitiveness through cost minimization. In fact, the original joint IOU proposal from February 2017 included several guiding principles, including simplicity and cost minimization. 8 These guiding principles were the driving force for the mechanics of the Joint IOU proposal filed in January 2018. On the other hand, it appears that the DA/CCA entities are the ones advocating for complexity and a rejection of cost minimization. An example of this is the push by DA/CCA parties at the workshop to reject the overall proposal for allocating costs due to the five-digit limiting factor of PG&E’s billing system impacting a very limited number of E-20T customers. The credit due to these E20T customers in a given year is expected to be less than the incremental cost of modifying the billing system to accommodate the six-digit solution. In conclusion, the claim by the DA/CCA protest that PG&E’s proposal fails to meet the requirement of the Decision is misplaced and should be disregarded. Clarifications from the Proposal PG&E responds to several issues that may have been perceived by the DA/CCA parties as needing clarification or submission of a supplemental filing. Overall, PG&E does not believe a supplemental filing is needed based on its clarification herein. 5 Joint PTM filed on July 18, 2018. DA/CCA Protest at p. 12. 7 DA/CCA Protest at p. 13. 8 Joint Utilities’ Proposal on Competitive Neutrality Cost Causation Principles in Response to Administrative Law Judge Hymes’ December 2, 2016 Ruling. See page 3, Item 3. 6
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PG&E’s Reply to Protest of Advice Letter 5353-E -4- September 7, 2018 Scope of Customers Receiving Bill Credit The DA/CCA protest claims that E-20T customers “do not actually receive the bill credit to which they are entitled pursuant to D. 17-10-017.” 9 On the contrary, this issue was discussed in the workshop with PG&E subsequently clarifying that PG&E could make system enhancements to extend the rate factor to six digits, thereby enabling the delivery of the bill credit to this unique rate class. This was made clear in PG&E’s proposal filed on August 10, 2018. 10 The DA/CCA parties appear to have misunderstood PG&E’s proposal. Communications PG&E provided a significant amount of information, including a specific proposal covering an “on-bill message” to the degree possible and various other communication options (e.g., letter, email, bill insert) if an “on-bill message” could not be executed. However, it appears that PG&E’s willingness to work with CCA and DA parties to develop a solid communication plan is not perceived positively by the DA/CCA parties. Further, the DA/CCA parties’ criticism is egregious in light of the fact that the IOUs and the DA/CCA parties jointly filed a PFM requesting to address certain communication elements, which is still open and subject to deliberation by the CPUC. Rate Credit Information The DA/CCA protest claims that PG&E (and SDG&E) did not provide sample bill credits by customer class, “Unlike SCE.” This is false as PG&E provided an Attachment in its report identifying a pro-forma set of rate credits based on current sales volume (See Attachment Appendix C to the PG&E Report). 11 This information was updated from the workshop presentation originally circulated on March 24, 2018 12, and it contains the same level of information provided by SCE. Cost Elements for Inclusion in the Bill Credit This section addresses the issue of the type of costs and the reason for exclusion in the bill credit. PG&E categorically responds to the specific budget cost sub-categories that the DA/CCA protest would require inclusion in the bill credit. Furthermore, PG&E addresses budget Category 2, which appears to not have been addressed explicitly in the workshops or in party comments. • 9 Cost Elements Are Open to Interpretation: The interpretation of what costs are to be included in the bill credit is open to interpretation by the Commission as facts and circumstance during the determination re similar programs unfolds, as well as ongoing changes that may occur with DR programs. As it stands, the Decision clarified that pilots, including the current Demand Response Auction DA/CCA Protest on page 14, Section c. AL 5353-E, PG&E Report in Attachment B, on p. 5 (top paragraph). 11 SCE’s equivalent illustration is found in its Tables 2 and 4 from the Joint Advice Letter dated 8/10/2018. 12 PowerPoint presentation prepared for the original April 2, 2018 workshop date. See slide 7. 10
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PG&E’s Reply to Protest of Advice Letter 5353-E -5- September 7, 2018 Mechanism (DRAM) are not part of the Competitive Neutrality Cost Causation Principle (CNCC). 13 Furthermore, the CNCC workshop led to a general consensus that budget categories 3-5 would be excluded from the CNCC. 14 This being the case the establishment of budget categories for inclusion or exclusion is one that the Commission can make and can be dynamic based on both the evolution of current programs or the introduction of new programs down the road. 15 This means that the proposed cost elements could vary based on: 1) The specific elements of a CCA/DA’s proposed “similar” program, and 2) The nature of IOU DR programs and budgetary categories/sub-categories at a point in time. 16 • The Scope of Returned Costs Are to be Limited to the Impacted DR Program(s): Costs that are not avoidable and pertain to DR activities which support other DR program besides the program deemed to be “similar” should not be subject to CNCC exclusion, if the CCA/ESPs customers are eligible to participate in those other non-similar DR activities or receive benefits. The budget categories that are subject to clarification by the CPUC, include Category 2 17 (Load Modifying Programs), parts of Category 6 (Marketing, Education, and Outreach) and parts of Category 7. Further discussion follows on each of the three budget categories. o Category 2 (Load Modifying Programs): As explained in PG&E’s attachment to AL 5353-E, the Optional Binding Mandatory Curtailment (OBMC) and Scheduled Load Reduction Program (SLRP) are emergency programs, which are not DR programs per se. Moreover, these two programs are either fully subscribed and capped (OBMC) or have no enrolled customers (SLRP), 18 which would make it either impossible or infeasible to replicate as a “similar” DR program. 19 That being said, PG&E does not contest the notion that a future Load Modifying Program it develops could be subject to the CNCC principle. o Category 6 (Marketing, Education and Outreach): Under Category 6, PG&E would return the allocated share of DR Core Marketing and 13 D.17-10-017 at p. 31. Energy Division’s post workshop notes released via email on July 9, 2018. 15 D. 17-10-017, OP 6: The Decision called for an evaluation of CNCC by the Energy Division 30 months after the CPUC adopts a DA or CCA providers “similar” DR program via a Commission Resolution. 16 The current budget categories could change in the 2020 mid-cycle review based on program offerings and may see more significant changes in the next budget cycle (2023-2027). 17 While the Joint DA/CCA parties do not appear to contest the exclusion of budget category 2, guidance by the CPUC as to its treatment should be provided. 18 OBMC is fully subscribed and capped at 10.9MW; SLRP has no customers and is capped at 0 MW per D.09-08-027 until modified or terminated in a General Rate Case. 19 D. 17-10-017 at p. 7 stipulates that the assessment to determine if a program is “similar” include an “approximate number” of customers. 14
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PG&E’s Reply to Protest of Advice Letter 5353-E -6- September 7, 2018 Outreach costs as it can be traced to a specific DR program. Therefore, the DA/CCA position to include this sub-category is moot as PG&E intends to return the allocated amount. On the other hand, Education& Training would not be refunded at this time as it does not pertain to a specific DR program and benefits all parties by promoting DR, including DR offered by third-parties. o Category 7 (Portfolio Support): As explained in PG&E’s Attachment B to AL 5353-E, none of the sub-categories associated with this budget category would be subject to the CNCC at this time. By way of a quick recap of each sub-category, the DR Potential Study is being utilized to assess new models of DR, which will ultimate benefit all DR participants, whether enrolled with IOUs directly, or through Aggregators, along with third-party DRPs and ultimately CCA/ESPs once they launch their DR programs. The cost implications of the DR potential study are not being contested by the DA/CCA parties. The remaining sub-categories support the underpinning of all DR programs and DR policy development, which as described in PG&E’s Attachment B in the joint Tier 3 filing is not tied to a specific DR program 20 or benefits all DR participants 21 enrolled through IOUs, Aggregators, thirdparty DRPs and CCA/ESPs. 22 Finally, PG&E recognizes that while each IOU has identical master budget categories 1-7 per D. 17-12-003 (2018-2022 DR Funding), each utility may treat budget sub-categories differently as the underlying cost drivers can vary. PG&E believes that this is appropriate, and the Commission acknowledged this when it indicated that the “…Decision also recognizes that utility systems are not exactly the same and may require slightly different approaches by each utility.” 23 20 Sub-Categories that support all programs include: DRMEC (“DREMAC”), Support for Market Activities, and Support for Retail & Customer Facing. 21 Sub-category for DR Integration & Policy. 22 An example of this, which was provided in PG&E’s Report in AL 5353-E (p. 3), pertains to the systems used to check eligibility and confirm that a CCA customer does not also enroll in an IOU DR program. 23 D.17-10-017 at p. 29.
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PG&E’s Reply to Protest of Advice Letter 5353-E -7- September 7, 2018 • Competitive Neutrality Applies to ALL Customers: Competitive neutrality means that all (bundled and unbundled) customers should be left in a neutral position. That does not happen if the CCA/ESP customers can escape costs that are unavoidable. Effectively, this would result in the remaining bundled customers having to “pick-up” the costs associated with costs that are unavoidable. There has been and continues to be a significant level of load migration away from PG&E bundled service due to CCA growth. 24 Ultimately, remaining bundled customers should remain indifferent to the activities undertaken by non-IOU Load Serving Entities such as CCAs and ESPs. This is an important issue not only for DR but also for overall procurement costs, as reflected in the reform efforts of the Power Charge Indifference Adjustment. 25 Moreover, as cited in the PAO’s comments, several provisions of the CPUC Regulations clearly require that bundled customers remain indifferent with respect to cost. 26 • A Blanket Return of All Costs Would Harm Viability of IOU DR Programs: Increasing the burden of unavoidable costs on remaining customers can adversely impact the cost effectiveness of programs, and possibly cause the IOU programs to cease to be approved, thus depriving those customers of opportunities to participate in DR. The joint IOU Proposed Approach filed in January 2018, referred to this issue as having the potential to create a “tipping point” where the IOUs may no longer have a sufficient number of remaining customers to offer a DR program in a cost-effective manner. 27 This concern is also shared by the CPUC where it stated in the Decision that: ...the Commission should also ensure that the implementation of the principle does not create unintended consequences that could undermine the State's ability to meet the demand response goal and associated objectives and principles adopted by the Commission. 28 Ultimately, the CPUC should feel emboldened to take pro-active steps in addressing a potential risk to the viability of Utility DR programs, which support California’s overall goals. Periodic Reporting PG&E does not oppose the semi-annual reporting proposal specifically set forth by Cal PAO’s comments and more generally by the DA/CCA protest. 24 According to the California Energy Commission’s 2018-2030 California Energy Demand forecast (Mid Baseline, Mid AAEE and AAPV, form 1.1) non-PG&E LSEs will serve more than 50% of the energy delivered to PG&E distribution customers in 2020 compared to less than 15% in 2014. 25 R. 17-06-026. 26 ORA Comments referencing PU Code Sections 365.2, 366.2(a)(4) and 366.3. 27 Joint IOU “…Proposed Approach to Determine Cost Refunds to Eligible Community Choice Aggregation and Direct Access Customers” dated January 30, 2018 at pp. 4-5. 28 D.17-10-017 at p. 30.
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PG&E’s Reply to Protest of Advice Letter 5353-E -8- September 7, 2018 PG&E respectfully requests that the Commission approve Advice 5353-E as filed. /S/ Erik Jacobson Director, Regulatory Relations cc: David Peffer, Braun Blaising Smith Wynne, P.C., Sue Mara, RTOADVISORS, L.L.C., Nathaniel Malcolm, Marin Clean Energy, Paula Palomo, Braun Blaising Smith Wynne, P.C., Nelly Sarmiento, Campbell, Michael,
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