Details for: PGE Advice 5624-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

August 30, 2019

Advice 5624-E
(Pacific Gas and Electric Company ID U 39 E)

Public Utilities Commission of the State of California
Subject:

Establish the Power Charge Indifference Amount (PCIA)
Undercollection Balancing Account and Trigger Mechanism in
Compliance with Decision 18-10-019

Purpose
Pacific Gas and Electric Company (PG&E) submits its proposed Power Charge
Indifference Amount (PCIA) Undercollection Balancing Account (PUBA) and calculates
the trigger mechanism for the PUBA pursuant to Decision (D.) 18-10-019, Ordering
Paragraphs (OP) 9 and 10, issued in the Power Charge Indifference Amount (PCIA)
Order Instituting Rulemaking (OIR), R.17-06-026.
OP 9 caps PCIA rate increases by vintage at no more than 0.5 cents per kilowatt-hour
(kWh) greater than the current PCIA rate for non-exempt departing load customers and
requires PG&E, Southern California Edison Company (SCE), and San Diego Gas &
Electric Company (SDG&E) (collectively, Joint Utilities) to submit to the California Public
Utilities Commission (CPUC or Commission) a Tier 2 Advice Letter to establish an
interest-bearing under-collection balancing account that will track departing load
customers’ accrued PCIA obligation when the 0.5 cent per kWh cap is reached.
OP 10 discusses the trigger mechanism that will allow the Joint Utilities to file an
expediated application, when the balance in PUBA reaches 7 percent of the PCIA
revenues and is forecast to reach 10 percent. The Preliminary Statement changes are
included in Appendix A of this advice letter.
This advice letter also describes how PG&E will implement capped PCIA rates by vintage.
Lastly, PG&E discusses the trigger mechanism for the PCIA capped rates and calculates
the trigger and trigger threshold amounts that would be applicable to the PUBA pursuant
to OP 10 directives.
Background
The PCIA OIR was established to respond to concerns that the existing PCIA cost
allocation was not preventing cost shifting between bundled and departing load





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Advice 5624-E -2- August 30, 2019 customers, as required by law.1 In D.18-10-019, the Commission adopted revised inputs to the market price benchmark (MPB) used to set the PCIA rates, adopted an annual true-up mechanism to ensure that bundled and departing load customers pay equally for the above-market costs of PCIA-eligible resources (OP 6), set a cap of 0.5 cent per kWh increase for departing load customers’ PCIA rate differentiated by vintage (OP 9), and established a trigger mechanism for the PCIA cap (OP 10). 2 Previously, the PCIA rate was set on a forecast basis and not trued-up to actual, recorded costs and there were no provisions for a PCIA cap. In compliance with OP 6, PG&E submitted Advice Letter 5440-E on December 10, 2018 to establish the Portfolio Allocation Balancing Account (PABA) to facilitate the true-up of PCIA-related costs, market revenues, and customers’ billed PCIA revenues. The PABA has vintaged subaccounts that will record vintage-specific above market costs which are then matched to customers’ billed revenues, by vintage. The PABA was approved in Advice Letter 5440-E on May 3, 2019 and effective January 1, 2019. The end-of-year balance in each vintage subaccount is amortized in rates in the following year using the existing ERRA Forecast process, which establishes an initial rate forecast in June of each year for the vintage PCIA rates, and going forward, the June rate forecast will include amortization of any end-of-year projected over- or under-collection from the applicable PABA vintage subaccount. PG&E updates the June PCIA rate forecasts in November of each year for rates effective January 1 each year. Request PUBA and PCIA Cap Pursuant to D.18-10-019, OP 9, the Commission established a cap when setting departing load PCIA rates that only allows the PCIA rate to increase 0.5 cent per kWh over the current year’s vintage PCIA rates and requires the Joint Utilities to establish an interest-bearing undercollection balancing account that will track departing load customers’ accrued PCIA obligation when the 0.5 cent per kWh cap is reached. PG&E is requesting the Commission approve the establishment of the PUBA to track departing load customers’ undercollected PCIA obligation that accrues if the PCIA system average rate increase is capped at the 0.5 cent per kWh by vintage. The undercollected PCIA obligation can be derived by taking the difference between uncapped PCIA rates and the PCIA capped rates that are approved, by vintage and by class, and multiplying 1 2 D.18-10-019, p. 1. D.18-19-019, OPs 1 and 2, and Appendix 1, define the values and calculation methodology for the market price benchmark which is composed of: (1) Brown Power Index, (2) Renewables Portfolio Standard (RPS) Adder, and (3) Resource Adequacy (RA) Adder. See Conclusion of Law (COL) 16 and OP 6, which adopts a true-up mechanism for the Brown Power Index to ensure that bundled and departing load customers pay equitably for [brown power] associated with PCIA-eligible resources, and OPs 9 and 10 adopt the PCIA cap for departing load customers and sets-up a trigger mechanism for the PCIA cap.
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Advice 5624-E -3- August 30, 2019 the rate difference times the applicable customer load, by vintage and by class. The undercollected PCIA obligation for each customer vintage will be the summed for all customer classes in that vintage and the total will be recorded to the PUBA vintage subaccounts. PG&E proposes that the evaluation of whether the 0.5 cent per kWh PCIA cap has been reached be measured based on the system average PCIA rate by vintage. If the system average PCIA rate by vintage increases more than 0.5 cent per kWh, then all PCIA rates for that vintage would be capped and the capped PCIA rates by customer class would be determined based on the revenue allocation among classes. The net result is that some customer classes may pay an increase that is slightly more than 0.5 cent per kWh and some customer classes may pay slightly less than the 0.5 cent per kWh increase. However, using the currently authorized generation revenue allocation factors to determine the class-specific capped PCIA rates maintains the proper rate design within the vintage subaccount so each customer class has responsibility for any balance in the vintage subaccount in proportion to the generation allocation rate design. Adding a flat 0.5 cent rate on each customer class’s PCIA rate would distort the generation rate design allocation. PG&E implements the generation revenue allocation for the PCIA rate design using rate ratios, which compare the class-specific average generation rate to the system average generation rate. An illustration showing how the cap would be derived for the classspecific rates, when the system average PCIA rate is capped at 0.5 cent per kWh is shown in the table below using PG&E’s 2020 generation revenue allocation rate ratios.3 3 Table 1 is illustrative only and is not indicative of an actual rate request.
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Advice 5624-E -4- August 30, 2019 TABLE 1 ILLUSTRATIVE PCIA REVENUE ALLOCATION AND PCIA CAP INCREASES Revenue Allocation Rate Ratios Line No. 1 2 3 4 5 6 7 8 9 10 11 Line No. 1 2 3 4 5 6 7 8 9 10 11 Customer Class Residential Small Commercial Medium Commercial Large Commercial Streetlights Standby Agriculture E-20 T E-20 P E-20 S System Average 2009 Vintage 105.2% 100.8% 108.6% 99.5% 83.8% 76.0% 94.0% 85.4% 92.0% 95.7% 100.0% Customer Class Residential Small Commercial Medium Commercial Large Commercial Streetlights Standby Agriculture E-20 T E-20 P E-20 S 2020 Cap Increase 2020 Cap Increase by Rate Class 2009 2010 Vintage Vintage 0.00526 0.00526 .... 0.00504 0.00504 .... 0.00543 0.00543 .... 0.00497 0.00497 .... 0.00419 0.00419 .... 0.00380 0.00380 .... 0.00470 0.00470 .... 0.00427 0.00427 .... 0.00460 0.00460 .... 0.00478 0.00478 .... 0.00500 0.00500 2010 Vintage 105.2% 100.8% 108.6% 99.5% 83.8% 76.0% 94.0% 85.4% 92.0% 95.7% 100.0% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2019 Vintage 105.2% 100.8% 108.6% 99.5% 83.8% 76.0% 94.0% 85.4% 92.0% 95.7% 100.0% 2020 Vintage 105.2% 100.8% 108.6% 99.5% 83.8% 76.0% 94.0% 85.4% 92.0% 95.7% 100.0% 2019 Vintage 0.00526 0.00504 0.00543 0.00497 0.00419 0.00380 0.00470 0.00427 0.00460 0.00478 0.00500 2020 Vintage N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A The need for a PCIA cap by vintage will be determined as part of the annual ERRA Forecast application. Once it has been determined that the PCIA rates for a vintage need to be capped, PG&E will present the capped PCIA rates applicable to departing load customers in its testimony and will forecast the total PCIA obligation that is expected to accrue in PUBA for the forecast year. PG&E expects to make this showing for its 2020 Forecast as part of its November Update testimony, which will be filed on or before November 7. Beginning in 2021, PG&E would make this showing as part of its opening testimony filed on or before June 1 of each year. The undercollected PCIA obligation PG&E expects to accrue will be derived by taking the difference between the uncapped PCIA rate, by customer class and vintage, and the capped PCIA rate, by customer class and vintage and the resulting rate difference will be multiplied by the applicable departing load, by class and vintage. The departing load customers’ undercollected PCIA obligation represents a revenue shortfall and the revenue shortfall will be reflected in the balance of PUBA vintage subaccounts. The PCIA revenue shortfall from departing load customers will be financed through an increase to bundled customers’ generation rate. In D.18-10-019, the Commission authorized that any balances in the under-collection balancing account will be repaid to bundled customers with interest so that the PCIA cap does not violate statutes that forbid cost-shifting.4 4 Conclusion of Law 23
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Advice 5624-E -5- August 30, 2019 PG&E’s ERRA will track that portion of bundled customers’ generation rate that is dedicated to financing the PCIA revenue shortfall from departing load customers in a new subaccount. Separately, the revenue shortfall attributable to departing customers will be accruing in the PUBA vintage subaccounts, as discussed above. PG&E also requests that the excess generation revenue recorded to the new subaccount in ERRA be excluded from the ERRA balance used to evaluate the ERRA Trigger mechanism. PG&E also proposes that the repayment of the PCIA revenue shortfall financed by bundled customers through generation rates occur concurrently with departing load customers’ repayment of the undercollected PCIA obligation recorded in the PUBA. Specifically, repayment to bundled customers will be based on the amount of accrued undercollected PCIA obligation that can be collected from departing load customers in any subsequent PCIA rate change authorized by the Commission, which may only partially amortize the PUBA subaccount balances. Changes to vintaged PCIA rates that have been capped would occur as part of the annual ERRA Forecast application or through an expediated Trigger Application as provided for in OP 10. The modified ERRA Preliminary Statement – CP is included in Attachment A. Trigger for PCIA Cap OP 10 established a trigger mechanism for the capped PCIA rates applicable to departing load customers, which will be reflected by the amount of accrued undercollected PCIA obligation owed by departing load customers as reflected in PUBA’s vintage subaccounts. Specifically, the framework for the trigger mechanism discussed in OP 10 is as follows: a. The PCIA trigger threshold is 10% of the forecast PCIA revenues. b. If [the under-collection balancing account] reaches 7%, and forecast that the balance will reach 10 percent, [the utility] shall, within 60 days, file an expedited application for approval in 60 days from the filing datewhen the balance reaches 7%.5 c. The application shall include a projected account balance as of 60 days or more from the date of filing depending on when the balance will reach the 10% percent threshold. d. The application shall propose a revised PCIA rate that will bring the projected account balance below 7% and maintain the balance below that level until January 1 of the following year, when the PCIA rate adopted in PG&E’s ERRA forecast proceeding will take effect. 5 Though not called out specifically in the decision, PG&E would note that changes to the PCIA rate resulting from the Trigger Application will also impact the Generation Rate. That is, any resulting PCIA revenue change (increase) for departing customers would have an offsetting change to bundled customers generation rate (decrease) that reflects the PUBA balance amortization.
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Advice 5624-E -6- August 30, 2019 e. The [utility is] authorized to notify the Commission through advice letter filing, instead of expedited application, when the PCIA balance exceeds its trigger point and the Utility does not seek a change in rates, if the IOU reasonably believes the balance will self-correct below the trigger point within 120 days of filing. The advice letter filing shall include necessary documentation to support the IOU’s conclusion that the PCIA balance will self-correct below the trigger point with 120 days and that a rate change is not needed. The trigger mechanism associated with the capped PCIA rate would be calculated based on the departing load customers’ portion of the PCIA revenue requirement. For example, if the total PCIA revenue requirement is $2 billion and departing load customers’ share of the PCIA revenue requirement is $1 billion, the 7 percent trigger and 10 percent trigger threshold for PUBA would be $70 million and $100 million, respectively. PG&E proposes that the trigger mechanism for the PUBA be established as part of the annual ERRA Forecast process and updated as part of the ERRA November Update based on the departed load customers’ portion of the revenue requirement for the forecast year. Tariff Changes The new and modified preliminary statement for implementing the directives in OPs 9 and 10 are discussed below and included in Attachment A. New Preliminary Statements PCIA Under-collection Balancing Account - Electric Preliminary Statement Part HZ Purpose The purpose of the PUBA is to record the revenue shortfall or undercollection PCIA obligation associated with capped PCIA rates for departing load customers. The balancing account will include vintage subaccounts to track the revenue shortfall, by customer vintage. Customers are assigned cost responsibility for vintages of generation resources based upon the timing of the departure as defined in the various rules which governing notice and customer departures.6 The PUBA Preliminary Statement Part HZ is included in Attachment 1. PUBA Account Structure Subaccounts in the PUBA will be based on customer vintages, which begin with the 2009 vintage. The revenue shortfall tracked in each PUBA vintage subaccount will be the difference between the uncapped class-specific vintaged PCIA rate and the 6 See Electric Rules 22 and 22.1 for Direct Access (DA) and DA Switching Exemptions and Rules 23 and 23.2 for Community Choice Aggregation (CCA) Service and CCA Open Season.
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Advice 5624-E -7- August 30, 2019 capped class-specific vintaged PCIA rates multiplied by the departing customers’ class specific load for each vintage. The diagram below shows a simplified illustrative example for a 2013 vintage where the revenue shortfall for departing customers will be moved from PABA to PUBA. In the illustrative example, assume that the current PCIA rate for a 2013 vintage customer is 3.0 cents per kWh and is forecast to increase to 4.1 cents per kWh. The capped PCIA rate will be 3.5 cents per kWh and the uncollected PCIA obligation will be 0.6 cents per kWh. The PCIA revenue shortfall will be credited out of PABA and debited to PUBA. PUBA’s 2013 vintage subaccount will reflect the revenue shortfall of 0.6 cents per kWh multiplied by the customer’s load. The PABA credits for the revenue shortfall will be 0.6 cent per kWh in total but will be disaggregated and credited from the PABA vintage subaccount based on the resource vintage where the revenue shortfall occurs. The impact to generation rates would be determined based on the total revenue shortfall divided bundled load. For simplicity, the assumption illustrated below is that that bundled load was the same as the departing load with the revenue shortfall and as such, the generation rate impact is the same as the revenue deferral rate.7 ILLUSTRATIVE 2013 PCIA CAPPED RATE AND REVENUE SHORTFALL 7 The generation rate impact in the illustrative example has been simplified to demonstrate the concept. The reality will be that the impact to bundled customers generation rate will be dependent on the total amount of the uncollected PCIA obligation (revenue deferral) and bundled load available to finance the revenue shortfall. In all cases, the generation rate impact will diverge from the revenue deferral rates, where there will be a unique deferral rate for each vintage and customer class.
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Advice 5624-E -8- August 30, 2019 Modifications to Existing Preliminary Statements Portfolio Allocation Balancing Account - Electric Preliminary Statement Part HZ PABA Revenue Shortfall A line item to transfer the monthly revenue shortfall in the PABA vintage subaccounts equal to the monthly revenue shortfall recorded in the PUBA will be added as follows: (1) A credit/debit entry to transfer the undercollection in the applicable PABA subaccount due to the PCIA revenue shortfall. The PCIA revenue shortfall is equal to the difference between the uncapped vintaged PCIA rate by customer class minus the capped vintaged PCIA rate by customer class applicable to departing load customers, net of RF&U, multiplied by the departing load’s usage by customer class for each vintage. The PCIA revenue shortfall is mapped to the PABA vintage subaccounts based on incremental revenue shortfall rates. Corresponding debit/credit entries will be recorded in the PCIA Undercollection Balancing Account (PUBA), Electric Preliminary Statement Part XX, based on the cumulative revenue shortfall rates, by customer vintage. The illustration above shows how the revenue shortfall would be transferred from PABA to PUBA. The PABA subaccounts record incremental PCIA revenues by vintage to align with vintage resource costs and the PCIA revenue shortfall by customer vintage recorded in PUBA. The PUBA revenue shortfall will record the cumulative PCIA revenue shortfall by customer vintage. In PABA, the cumulative PUBA rate by customer vintage be disaggregated and mapped to the PABA vintage subaccounts which track costs and revenues incrementally. Table 2 below continues the illustrative example using a 2013 PCIA vintage capped PCIA rate and shows the revenue shortfall rates for PABA and PUBA and how the shortfall rates and revenue entries in the two accounts will map to each other. The illustrative example is also expanded to show vintages 2009 through 2012 and the impact of capped rates on those vintages. The PABA vintage subaccounts will have one incremental PCIA shortfall rate that applies to each customer vintage that has an obligation for resource costs in the vintage PABA subaccount. Each PABA vintage subaccount will credit the incremental revenue shortfall from many customer vintages as shown in the rows of Table 2 below. The revenue shortfall for PUBA is recorded based on the customer vintage and will be a debit equal the sum across all applicable PABA vintage subaccounts as shown in the last column in the Table 2 below.
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Advice 5624-E -9- August 30, 2019 TABLE 2 ILLUSTRATIVE PABA AND PUBA REVENUE DEFERRAL RATES AND ENTRIES Please refer to the PABA and PUBA Preliminary Statement included in Appendix A for descriptions of the accounting procedures for each of these entries. Energy Resource Recovery Account – Electric Preliminary Statement Part CP The following entry will be added to the Accounting Procedures section of the ERRA: A debit/credit entry to record the transfer of the revenues financed by bundled customers related to the revenue shortfall associated with capped PCIA rates for departing load customers. A corresponding credit/debit entry is reflected in Accounting Procedure 6a below. Additionally, a new PCIA Financing Subaccount will be added to the ERRA to track the amount financed by bundled customers related to the revenue shortfall associated with capped PCIA rates for departing load customers. The purpose of the Financing Subaccount and the monthly entries are shown below:
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Advice 5624-E - 10 - August 30, 2019 The purpose of the PCIA Financing Subaccount is to track the amount financed by bundled customers related to the revenue shortfall associated with capped PCIA rates for departing load customers. PG&E shall maintain the PCIA Financing Subaccount by making the following entries at the end of each month: a) A credit/debit entry to record the transfer of the revenues financed by bundled customers related to the revenue shortfall associated with capped PCIA rates for departing load customers. A corresponding debit/credit entry is reflected in Accounting Procedure above. b) A debit or credit entry, as appropriate, to record the transfer of amounts to or from other accounts, upon approval by the CPUC. c) A monthly entry equal to interest on the average balance in the subaccount at the beginning of the month and the balance after the above entries, at a rate equal to one-twelfth of the rate on three-month Commercial Paper for the previous month, as reported in the Federal Reserve Statistical Release, H.15 or its successor. Finally, PG&E has updated accounting procedures 5c and 5d to clarify that the corresponding credit entries for renewable energy credits and resource adequacy includes imputed revenue recorded in the Tree Mortality Non-Bypassable Charge Balancing Account (TMNBCBA). Protests Anyone wishing to protest this submittal may do so by letter sent via U.S. mail, facsimile or E-mail, no later than September 19, 2019, which is 20 days after the date of this submittal. 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:
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Advice 5624-E - 11 - August 30, 2019 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 2 advice submittal become effective September 30, 2019. 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 R.17-06-026 and A.19-06-001. 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 submittals can also be accessed electronically at: http://www.pge.com/tariffs/. /S/ Erik Jacobson Director, Regulatory Relations Attachments: Attachment 1 – Tariff Revisions Attachment 2 – Tariff Revisions Redline cc: Service List R.17-06-026, A.19-06-001
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