PG&E 2008 Annual Report Download - page 58

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On December 12, 2007, and supplemented on May
14, 2008, the Utility fi led an application with the CPUC
requesting approval to upgrade elements of the SmartMeter™
program at an estimated cost of approximately $572 mil-
lion, including approximately $463 million of capital expen-
ditures to be recovered through electric rates beginning in
2009. The Utility has proposed to install upgraded electric
meters with associated devices that would offer an expanded
range of service features for electric customers that would
provide energy conservation and demand response options,
such as the enablement of “smart” appliances that could
use energy more wisely in response to near real-time energy
data. These upgraded meters would also increase operational
effi ciencies for the Utility through, among other things,
the ability to remotely connect and disconnect service to
electric cus tomers. In addition, the upgraded electric meters
are designed to facilitate the Utility’s ability to incorporate
future advanced metering technology innovations in a timely
and cost-effective manner.
On December 23, 2008, a proposed decision was
issued by an administrative law judge, which if adopted
by the CPUC, would allow the Utility to proceed with the
SmartMeter™ Upgrade and authorize funding of $495.2 mil-
lion, including $410 million in capital costs, to be recovered
through an increased revenue requirement. PG&E Corporation
and the Utility are unable to predict when the CPUC will
issue a fi nal decision.
On July 31, 2008, the CPUC ordered the Utility to
implement “dynamic pricing” electric rates in 2010 and 2011
for certain customers who do not take affi rmative action
to opt out of the dynamic pricing rates. Dynamic pricing
rates use price signals (e.g., critical peak pricing and real-time
pricing) to encourage energy effi ciency and reduce demand.
The Utility is required to implement critical peak pricing
rates for these customers starting in 2010 and early 2011.
The Utility is also required to offer real-time pricing to
all customers starting in May 2011, at the customer’s elec-
tion. The Utility has been directed to fi le a request with the
CPUC by February 28, 2009 to approve the Utility’s rate
proposal for critical peak pricing and to authorize recovery
of the Utility’s estimated costs of approximately $155 million
(including estimated capital costs of approximately $107 mil-
lion) to meet the required schedule for implementation. The
Utility expects to fi le a request for approval of real-time pricing
rates and the associated implementation costs by March 1,
2010 in connection with the Utility’s 2011 GRC proceeding.
POTENTIAL NATURAL GAS
PIPELINE PROJECTS
PG&E Corporation, through its subsidiary, PG&E Strategic
Capital, Inc., along with Fort Chicago Energy Partners, L.P.
and Northwest Pipeline Corporation, have agreed to jointly
pursue the development of the proposed 230-mile Pacifi c
Connector Gas Pipeline that would connect the proposed
Jordan Cove liquefi ed natural gas (“LNG”) terminal in
Coos Bay, Oregon with the Utility’s transmission system near
Malin, Oregon. The development of the Pacifi c Connector
Gas Pipeline is dependent upon the development of the
Jordan Cove LNG terminal by Fort Chicago Energy Partners,
L.P. In addition, the development and construction of the
proposed LNG terminal and the proposed Pacifi c Connector
Gas Pipeline are subject to obtaining permits, regulatory
approvals, and commitments under long-term capacity con-
tracts. It is expected that the FERC will issue a certifi cate
authorizing construction and operation of the pipeline
in 2009.
SMARTMETER™ PROGRAM
Since late 2006, the Utility has been installing an advanced
metering infrastructure, known as the SmartMeter™ program,
for virtually all of the Utility’s electric and gas customers.
This infrastructure results in substantial cost savings associ-
ated with billing customers for energy usage, and enables the
Utility to measure usage of electricity on a time-of-use basis
and to charge time-differentiated rates. The main goal of
time-differentiated rates is to encourage customers to reduce
energy consumption during peak demand periods and to
reduce peak period procurement costs. Advanced meters can
record usage in time intervals and be read remotely. The
Utility expects to complete the installation throughout its
service territory by the end of 2011.
The CPUC authorized the Utility to recover the
$1.74 billion estimated SmartMeter™ project cost, including
an estimated capital cost of $1.4 billion. The $1.74 billion
amount includes $1.68 billion for project costs and approx-
imately $54.8 million for costs to market critical peak
pricing programs such as SmartRate that are made possible
by SmartMeter™ technology. In addition, the Utility can
recover in rates 90% of up to $100 million in costs that
exceed $1.68 billion without a reasonableness review by the
CPUC. The remaining 10% will not be recoverable in rates.
If additional costs exceed the $100 million threshold, the
Utility may request recovery of the additional costs, subject
to a reasonableness review. Through 2008, the Utility has
spent an aggregate of $730 million, including capital costs
of $589 million, to install the SmartMeter™ system.