GOVERNOR MAKES APPOINTMENTS TO CPUC, CEC
Governor Brown has filled some key vacancies at the CPUC and CEC. CPUC Commissioner Timothy Simon's term expired December 31, 2012. Simon, a Schwarzenegger appointee, had been very public about his interest in continuing at the CPUC. That is not going to happen. Instead, Governor Brown is moving Carla Peterman, who has been a Commissioner at the CEC since 2011, over to the CPUC. At the CEC, Peterman was
lead commissioner for renewables, transportation, natural gas, and the 2012 Independent Energy Policy Report. Peterman conducted research at the University of California Energy Institute from 2006 to 2011 and the Lawrence Berkeley National Laboratory from 2008 to 2010. She also served on the board of directors for The Utility Reform Network from 2008 to 2011. Peterman will complete her doctoral studies this year in energy and resources at the University of California, Berkeley.
Brown has reappointed CEC Commissioner Karen Douglas to a second five-year term. Douglas fills the lawyer seat on the CEC. Prior to joining the CEC in 2008, she worked at the Planning and Conservation League from 2001 until 2005, where she served as acting executive director and general counsel.
Both positions require Senate confirmation and are paid an annual salary of $128,109. Douglas and Peterman are both Democrats.
ENERGY EFFICIENCY
Shareholder Incentive Mechanism
The CPUC on December 20 adopted a shareholder incentive mechanism for the investor-owned utilities for the 2010-2012 program cycle, and awarded the utilities incentives totaling $42.2 million for 2010 (D.12-12-032). PG&E will receive $21 million, Southern California Edison will receive $15 million, San Diego Gas & Electric will receive $3.3 million, and Southern California Gas will receive $2.7 million. The Decision institutes a new method for calculating the shareholder incentive mechanism. It awards the utilities a management fee equal to 5% of actual energy efficiency portfolio expenditures (less costs associated with EM&V), and a performance bonus of up to an additional 1% of expenditures (less EM&V costs). None of the utilities received the maximum performance bonus.
D.12-12-032 was sponsored by Commissioner Mark Ferron, and was an alternate to the Proposed Decision put forward by Administrative Law Judge ("ALJ") Pulsifer. The ALJ's decision would have denied the utilities any award for 2010-2012 and instead moved right in to developing a mechanism for the 2013-2014 Transition Period. The new methodology replaces one that had never produced an incentive award timely, and was controversial. The Decision justifies providing an incentive to the utilities as follows:
"We believe that denial of a shareholder incentive payment sends the wrong signal to the greater market place. For 2010-12, the utilities managed a $3 billion portfolio comprising an energy resource at the top of the state's loading order. Effective management of EE also ensures progress towards a significant component of California's greenhouse gas reduction goals. We believe it would be a bad policy outcome to deny a shareholder incentive for energy efficiency. Rather, we agree with NRDC and PG&E that continued regulatory certainty in this area will help motivate the IOUs and investors to continue to support and commit to a long term, aggressive EE program that will help meet state policy goals." (D.12-12-032, p. 23)
The Decision was approved on a split vote, with Commissioners Peevey and Florio voting no. Peevey opposed the decision as being a complex process that did not sufficiently reward utilities compared to prior years and other states. Florio opposed it because it comes at the end of the program cycle, when it cannot influence performance objectives. Florio also noted that the shareholder incentive mechanism has become highly political, when it was intended to be an objective review.
The utilities will file advice letters for incentives for 2011 and 2012 in 2013 and 2014, respectively. The 2011 and 2012 awards will be based solely on expenditures as audited by the CPUC for each year, and will use the formulas and incentive percentages outlined in D.12-12-032. The proceeding will remain open so the CPUC can continue to revise the mechanism for 2013-2014.
Upcoming Compliance Filings
On January 14, 2013, the utilities, the Regional Energy Networks, and the Marin Energy Authority will submit compliance filings that present their updated workpapers and Program Implementation Plans for the 2013-2014 Transition Period. The utility filings will include any updates to local government partnership programs made since the utility applications were submitted in July. There will be a review and approval period. In the meantime, local governments should have draft contracts in hand for the Transition Period by January 14.
RESOURCE PLANNING AND RENEWABLES
Long Term Procurement
On December 18, the CPUC approved planning assumptions for utility long-term procurement planning in Decision 12-12-010. These assumptions will be used for forecasting system reliability needs for California's electricity grid. Based on these forecasts, future decisions will determine specific procurement system and bundled need authorizations or requirements for California investor-owned utilities. The Commission formally requests that the California Independent System Operator use the Standardized Planning Assumptions and Scenarios in the Decision to conduct operational flexibility modeling.
The first test of the planning assumptions will come in the form of a Proposed Decision specific to Southern California Edison, issued December 21. That Proposed Decision directs SCE to procure electrical capacity in specific sub-areas of its service territory to ensure adequate available electrical capacity to meet peak demand, and ensure the safety and reliability of the local electrical grid. The Proposed Decision further specifies how much of the new capacity should be energy storage and natural gas. Parties will comment on the Proposed Decision in January, and the issue could come to the CPUC for consideration at the end of the month.
San Onofre Nuclear Generating Station Still Out
It has been nearly a year since the San Onofre Nuclear Generating Station ("SONGS") was taken off line due to abnormal wear. State and federal energy regulators are looking at what they should do without SONGS for the foreseeable future. The CPUC is examining what Southern California Edison, the majority owner of the plant, should do in terms of resource planning, and whether ratepayers should be on the hook for costs associated with capital payments and maintenance while the plant is offline. SCE recently submitted a plan to the Nuclear Regulatory Commission to partially restart one of the two units that is offline. The NRC has indicated it will take months for it to decide whether to approve the restart plan.
In the meantime, without SONGS the California Independent System Operator ("CAISO") is looking at how it will replace power SONGS provides. The CAISO is looking at repowering various plants, building new generation, and/or constructing new transmission and transmission upgrades. Accommodating the loss of electricity from SONGS has been a major issue as well in the CPUC's proceeding on utility long term procurement plans.
The CPUC will be holding a public participation hearing to hear from the public about whether the Commission should remove the value of any portion of the SONGS facility from rate base, disallow rate recovery of any expenses related to the operation of SONGS, and/or direct SCE to take other actions (Investigation 12-10-013). The notice for the hearing states "During the first hour of the PPH, local government representatives will be given priority for public comment."
2:00 - 5:00 p.m. and 6:00 - 9:00 p.m.
Thursday, February 21, 2013
Costa Mesa Neighborhood Community Center
1845 Park Avenue
Costa Mesa, CA 92627
COMMUNITY CHOICE AGGREGATION
CPUC Adopts Code of Conduct for Utility Interactions with Community Choice Aggregators
On December 28, the CPUC issued Decision 12-12-036 Decision 12-12-036, implementing Senate Bill 790 (Leno) and adopting a code of conduct to govern how utilities interact with community choice aggregators ("CCAs"). SB 790 was motivated in large part by PG&E's marketing and other interactions around CCA, particularly in Marin County, and the utility's $46 million sponsorship in 2010 of Proposition 16, which would have virtually eliminated CCA.
The Decision requires a separation between a utility's marketing division and its other functional divisions, such as billing and customer service, for any utility that intends to market against actual or potential CCAs within its territory. This includes a "revolving door" clause, which prohibits temporary assignment of employees to the independent marketing division, a one-year period before an employee can return to the main utility, and, if the employee does return to the utility, two years before the employee can be re-assigned to the independent marketing division. It also prohibits utilities from offering goods, services, or programs to local governments in exchange for the local government not pursuing CCA. The decision institutes a number of related requirements, and reiterates some previous policies, all supposed to limit the ability of utilities to undermine CCA initiatives.
Petition on Cost Allocation
On November 30, the Marin Energy Authority and 40 other parties, including direct access customers and energy service providers, petitioned the CPUC to review the cost allocation that applies to CCAs (P.12-12-010). Specifically, MEA et al. want the CPUC to reverse policies that they assert has allowed the utilities to shift costs to departing customers, including stranded cost recovery and mandatory charges for departing load customers. They call on the CPUC to adopt policies that will facilitate competition between utilities and other providers, such as community choice aggregators and energy service providers. These concerns have been brewing for many years. The CPUC only began to process the case at the end of December. The petitioners want the CPUC to open a rulemaking to determine how cost allocation policies can be realigned.
Sonoma County Moves Ahead
On December 4, the Sonoma County Board of Supervisors and Water Agency Board of Directors approved a CCA ordinance and formation of a joint powers authority that will operate the program: Sonoma Clean Power. The Board approved a $50,000 funding agreement with the Marin Energy Authority, whereby MEA will provide consulting services to Sonoma Clean Power as it targets a launch in 2014.
East Bay Municipal Utility District Halts Exploration of CCA
On December 11, the East Bay Municipal Utility District's Board of Directors decided 7-0 against dedicating additional resources to a CCA exploration effort. The board made it clear that EBMUD will not be taking the lead on forming an aggregation program that would procure power on behalf of customers in its service territory. This is a blow to local CCA advocates, who had hoped that EBMUD would serve as the aggregator for a CCA that would include Berkeley, Oakland, Emeryville, Albany, and any of the 31 other cities in the EBMUD service territory. Berkeley, Oakland, and Emeryville had preliminarily considered CCA about five years ago, but did not proceed. The EBMUD study identified several options for EBMUD, including forming an electric utility, forming a JPA, or joining the Marin Energy Authority. You can see the full report at EBMUD CCA Staff Report.
RATES AND OTHER MONEY MATTERS
In November, the CPUC approved increases in SCE's revenue requirement for 2012, 2013, and 2014 (
D.12-11-051
in Application10-11-015).
The Decision approved rates that are 5.04 percent above current rates. SCE had requested a 16.6 percent increase.
PG&E has applied for an 8 percent increase in its revenue requirement for 2014-2016, or $2.2 billion. The request is being considered in Application 12-11-009.
On December 20 the CPUC approved a pipeline safety plan for PG&E (D.12-12-030). Ratepayers will pay 65 percent of the $1.8 billion PG&E requested to inspect and upgrade its 1,100 mile urban gas transmission system. PG&E had wanted ratepayers to foot the entire bill. This decision is in large part a response to the 2010 San Bruno pipeline explosion, which killed eight people and destroyed a neighborhood. The Commission declined to impose a fine in the form of a five-year profit sanction. The Administrative Law Judge had recommended reducing PG&E's legally guaranteed rate of return on what it spends on the overhaul from the current 11.35 percent to 6.05 percent. PG&E has yet to pay fines for safety violations resulting from the San Bruno explosion.
Separately, the CPUC voted to cut the 2013 rate of return for all capital spending by major utilities - including PG&E - to a little more than 10 percent. The Commission took care to state this is not to punish the companies, rather to reflect reduced financing costs.
The CPUC also adopted new protections for safety whistleblowers, in accordance with Assembly Bill 705. The new protections ensure that all natural gas utilities in the state post in a prominent physical location, as well as in electronic form on their website where employees are likely to see it, information about whistleblower protections, including the CPUC's Whistleblower Hotline.
Also on December 20, the CPUC in D.12-12-031 approved a plan that allows the investor-owned utilities to enter into a five-year reseach and development agreement with the Lawrence Livermore National Laboratories. Utilities will be allowed to recover $152 million from ratepayers to fund research on cyber security, renewable integration modeling, and gas safety issues. Ratepayer groups had opposed the proposal, saying the benefits are theoretical and CPUC President Peevey was too intimately involved in developing it. http://docs.cpuc.ca.gov/PublishedDocs/Published/G000/M041/K694/41694931.PDF
In early December, the Little Hoover Commission released a report calling for a streamlining of California's energy regulatory structure. The report, Rewiring California: Integrating Agendas for Energy Reform Rewiring California: Integrating Agendas for Energy Reform, was prompted by the Little Hoover Commission's concerns about system reliability, lack of clarity regarding the cost of California's energy policy goals, and the interplay of renewable energy targets with greenhouse gas reduction goals and system reliability. The Commission "believes the state must provide greater clarity to California utility customers as to how implementation of the state's new energy policies, and attendant environmental policies, will affect their electricity bills." The report criticizes California for having noble energy policies, but no plan for integrating and achieving them. It reiterates previous calls to consolidate the many agencies that have a role in energy policy under an Energy Secretary who reports to the Governor.