Details for: PGE reply to Protest of 5440-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

January 8, 2019

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

Response of Pacific Gas and Electric Company (U 39 E) to California
Community Choice Association’s Protest to Advice Letter 5440-E

Dear Energy Division Tariff Unit:
Pacific Gas and Electric Company (PG&E) hereby replies to the protest from the
California Community Choice Association (CalCCA) dated December 31, 2018, to
PG&E’s Advice Letter 5440-E (Advice Letter) request to establish the Portfolio
Allocation Balancing Account (PABA) and modify other generation-related balancing
accounts to be consistent with the PABA vintage subaccount structure adopted in
Ordering Paragraphs (OPs) 7 and 8 of Decision 18-10-019 (Decision).
CalCCA’s protest requests that the California Public Utilities Commission (CPUC or
Commission): (1) grant PG&E’s request to establish the accounts identified in the
Advice Letter, (2) clarify that the account structure and recorded amounts will be subject
to modification based on the outcome of the true-up mechanism adopted in Phase 2 of
Rulemaking (R.) 17-06-026, (3) require PG&E to track utility-owned generation (UOG)
costs separately from other resource costs in the vintaged subaccounts, and (4) require
PG&E to schedule a webcast to discuss its PABA structure and any proposed allocation
methodologies. 1 In addition, CalCCA’s protest objects to PG&E’s inclusion of certain
common or “indirect” costs in the PABA subaccounts, asserting that the scope of
indirect costs that are authorized to be included lacks clear definition and thus the costs
should be tracked in a memorandum account until the issue is resolved in Phase 2 of
the Power Charge Indifference Adjustment (PCIA) proceeding, R.17-06-026. 2
PG&E appreciates CalCCA’s support of PG&E’s request to establish the PABA, modify
the Energy Resource Recovery Account (ERRA), and other balancing accounts

CalCCA’s Protest to Advice Letter 5440-E, pp. 1-2.


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PG&E’s Reply to Protest of Advice Letter 5440-E -2- January 8, 2019 identified in the Advice Letter. However, PG&E disagrees with CalCCA’s assertion that the scope of the Advice Letter is overly broad. Moreover, CalCCA’s recommendations to (1) further disaggregate UOG costs and (2) to track indirect costs already authorized for recovery in a separate memorandum account are unwarranted. Further disaggregating UOG costs and revenues beyond what was ordered in the Decision is unnecessary and tracking indirect costs in a separate memorandum account without explicit rate recovery in a fashion that prevents cost shifting between bundled and departing load customers is without merit. PG&E further discusses the topics raised in CalCCA’s protest below. Background On October 11, 2018, the Commission approved the Decision, which adopted revised inputs to the market price benchmarks used to set the Ongoing Competition Transition Charge (CTC) and the PCIA rates. In compliance with the Decision, PG&E submitted Advice Letter 5440-E, establishing the PABA and modifying the ERRA and any other balancing accounts, as necessary, to be consistent with the PABA vintage subaccount structure adopted in the Decision in OPs 7 and 8. CalCCA submitted a letter on December 31, 2018 to the Commission’s Energy Division supporting and protesting certain aspects of the Advice Letter. Response to CalCCA Letter A. The Scope of the Advice Letter is Both Appropriate and Necessary, and CalCCA’s Assertion that PG&E Goes Beyond the Bounds of D.18-10-019 is Inaccurate As a general matter, PG&E notes that CalCCA’s protest characterizes the Commission directives for this Advice Letter as “narrow in purpose” and “narrowly focused on setting up the account and subaccount structure.” 3 CalCCA’s characterization of the Decision’s directives ignores standard advice letter ratemaking procedures that are common and necessary to establishing balancing accounts authorized by Commission decisions, including those related to revenue allocation and details needed to describe and define the respective costs to be recorded or allocated to the relevant balancing account. 3 CalCCA PG&E Protest, p. 2 (emphasis in original). CalCCA’s protest tries to bolster support of its “narrow purpose” characterization by inferring language in SCE’s advice letter (SCE Advice Letter 3914-E, p. 7). However, contrary to CalCCA’s assertion, SCE’s advice letter simply states that, “[p]ursuant to OPs 7 and 8 of the Decision, the sole purpose of [Advice Letter 3914-E] is to establish the general structure of the PABA and make the necessary modifications to ERRA and BRRBA”. SCE does not use the term “narrow”, nor does SCE suggest that allocation of costs, revenues, or that the disposition of the balance in the balancing account would not be addressed in its advice letter.
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PG&E’s Reply to Protest of Advice Letter 5440-E -3- January 8, 2019 PG&E’s PABA advice letter establishes a new balancing account and modifies three existing generation-related balancing accounts (i.e., the ERRA, the Utility Generation Balancing Account (UGBA), and Modified Transition Cost Balancing Account (MTCBA)) that record over $5 billion in annual generation-related costs. Characterizing the request in this Advice Letter as “narrow in purpose and scope” understates the breadth and scope of the new PABA and structural changes required to the existing balancing accounts to implement the Decision’s important directives. Commission-approved preliminary statements for balancing accounts are legally binding tariffs that define the rate revenue that PG&E is authorized to use to recover the costs defined as recoverable in the balancing account’s preliminary statement. A balancing account preliminary statement that does not define and describe the billed revenues and debit/credit entries recorded to the account or describe how the disposition of the balance in the account would be handled would disregard the Commission’s past practice and would not and could not be approved by the Commission. Finally, it is required that preliminary statements must describe the disposition of any outstanding balance in the account. Taking into consideration the above requirements, PG&E’s request is neither overbroad nor beyond the scope of issues that the Commission must approve regarding PG&E’s proposed PABA and other necessary modifications to other existing generation-related balancing accounts. B. It is Appropriate to Record Indirect Costs to the Portfolio Allocation Balancing Account and is in Fact Necessary to Maintain Customer Indifference CalCCA’s assertion that PG&E’s approach to allocate certain indirect costs as part of this Advice Letter is beyond the scope of the Commission directives is without merit. CalCCA suggests that, “[t]he Commission did not direct the utilities to propose through the advice letter how costs would be allocated or how the values recorded in the accounts would be used in the calculation of the [PCIA].” 4 Contrary to CalCCA’s assertion, any proposal that requests the establishment of a new balancing account and/or modifies existing generation-related balancing accounts, must describe and define the costs and revenues that will be recorded to the new and existing accounts. The description and/or the definition of these costs and revenues needs to be consistent, or sufficiently flexible enough, to comply with the Commission’s existing or future directives of costs authorized for recovery. In the context of this Advice Letter, which materially overhauls PG&E’s existing annual $5 billion-dollar generation-related ERRA, MTCBA and UGBA balancing accounts, PG&E’s approach to directly record and allocate certain indirect costs to the PABA that have previously been authorized for recovery through ERRA or UGBA, or authorized as 4 CalCCA Protest, p. 2.
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PG&E’s Reply to Protest of Advice Letter 5440-E -4- January 8, 2019 part PG&E’s base generation revenue requirement, is neither over-broad nor beyond the scope appropriate for this Advice Letter. The investor-owned utilities’ (Joint Utilities or IOU) Testimony in the PCIA OIR identified that certain indirect costs were currently included in the PCIA, 5 and the Decision recognizes that the intent in Assembly Bill (AB) 117 was to prevent any shifting of recoverable costs between bundled service and departing load customers. 6 Through the process of modifying the existing balancing accounts, PG&E identified certain indirect costs currently authorized for recovery through ERRA and UGBA that are incurred on a total portfolio basis in order to manage the total portfolio. Going forward, these costs will be recorded and recovered recover through the ERRA, MTCBA, PABA, and the New System Generation Balancing Account. As noted in the advice letter and originally described in the Joint Utilities’ PCIA OIR Testimony, UGBA costs will be recorded to PABA and the revised ERRA and UGBA will eventually be eliminated after the costs have been successfully transferred to these new accounts. The responsibility for the costs recorded in the revised ERRA lies solely with current bundled service customers. Continuing to recover these costs solely through the revised ERRA would saddle bundled service customers, which will be very soon the minority of PG&E’s electric customers, with these costs alone. That result would be plainly unlawful and inconsistent with the clear statutory mandates of customer indifference. It is worth noting that allocating indirect costs such as credit facilities and administrative fees across all of the affected portfolios does not inappropriately shift cost responsibility away from bundled service customers onto departing load customers. Instead, it appropriately implements a pro-rata distribution of the costs necessary to maintain the respective portfolios based on respective load shares of the relevant portfolio. In the case of PG&E, the 2019 split between bundled service customers and departing load customers is roughly 50/50. Accordingly, bundled service customers would thus still pay approximately 50 percent of any indirect costs allocated to the PABA subaccounts. Therefore, PG&E’s approach that these costs should be allocated directly to the PABA subaccounts is reasonable, equitable, and within the scope of the directives to establish PABA and the directives of the Legislature and the Decision to maintain customer indifference. CalCCA’s proposal to track these costs in a separate memorandum account and to further debate these issues in Phase 2 of the PCIA OIR should be rejected. C. CalCCA’s Request that Utility-Owned Generation Resource Costs be Tracked Separately from Contracted Resources is Unnecessary and Should be Denied As described in the Advice Letter, each PABA subaccount will have a separate line item for UOG costs (not just the Legacy UOG subaccount) and therefore, these costs are 5 6 Joint Utilities Exhibit 1, Appendix B, p. AppB-86-87. D.18-10-019, Conclusion of Law 10.
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PG&E’s Reply to Protest of Advice Letter 5440-E -5- January 8, 2019 already sufficiently segregated and tracked within PG&E’s proposed PABA structure. No further separation is needed, and CalCCA’s recommendation should be rejected. D. PG&E’s PABA Subaccount Structure Complies with the Decision and Should be Approved CalCCA’s protest requests that the Commission “make clear that the account structure as well as the amounts credited/debited to the PABA subaccounts will remain subject to modification depending on the details of the true-up mechanism adopted in Phase 2 of R.17-06-026.”7 The Commission should reject that proposal as it is unnecessary given the Commission’s existing processes to implement its final decisions is adequate and the PG&E’s obligation to comply with the Commission directives is unequivocal. Any decisions issued Phase 2 that require tariff modification or adjusting entries to the proposed PABA will be ordered in the Commission’s Phase 2 decisions and PG&E will implement those directives as ordered. No deviation from that historical practice is necessary or warranted here. The Decision directed PG&E in OPs 7 and 8, as further clarified in Section 9.3, 8 to file a preliminary statement for PABA and to amend other preliminary statements as necessary to (1) track actual costs and revenues associated with the PCIA portfolio, (2) true up the Brown Power benchmark, and (3) not true up the Renewable Energy Credit (REC) and RA benchmarks at this time. Finding of Fact 17 also states, “[t]he ratemaking proposal in Exhibit IOU-1 provides general concepts that can be used to implement an annual true-up process for part [Brown Power Index] of the PCIA”. 9 The Advice Letter and draft preliminary statements submitted by PG&E, SCE and SDG&E are materially similar, while satisfying the Commission’s various directives contained in the Decision, and should be approved as filed. If structural changes to the PABA or any other preliminary statements are needed to incorporate decisions arising out of PCIA Phase 2, PG&E and the other IOUs will make subsequent compliance advice filings at that time. Conclusion For the foregoing reasons, PG&E respectfully requests that the Commission approve its Advice Letter as filed and reject CalCCA’s proposals to: (1) establish a separate 7 CalCCA Protest, p. 1. “We have revised the true-up to be consistent with the conceptual approach recommended by the Joint Utilities, albeit without provisions to true up RA and REC components, which we determined should not be subject to true-up at this time. If the Joint Utilities’ proposed balancing account structure would aid in collecting information necessary to eventually true up those components (RA and RECs), we authorize each utility to establish the necessary structure (D.18-10-019, p. 126).” 9 D.18-10-019, Finding of Fact 17. 8
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PG&E’s Reply to Protest of Advice Letter 5440-E -6- January 8, 2019 memorandum account to track PG&E’s indirect costs and (2) separately track UOG resource costs from contracted resources. /S/ Erik Jacobson Director, Regulatory Relations cc: Evelyn Kahl, Counsel for California Community Choice Association, Franz Cheng, CPUC Energy Division, Michael Zelazo, CPUC Energy Division, Service List R.17-06-026
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