PG&E 2008 Annual Report Download - page 62

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On January 29, 2009, the CPUC instituted a new proceed-
ing to modify the existing incentive ratemaking mechanism,
to adopt a new framework to review the utilities’ 2008 energy
effi ciency performance, and to conduct a fi nal review of the
utilities’ performance over the 2006-2008 program period.
The CPUC also plans to develop a long-term incentive mech-
anism for program periods beginning in 2009 and beyond.
The utilities are required to submit their 2008 performance
reports to the CPUC by February 28, 2009. The CPUC has
stated it intends to adopt a new framework to examine these
reports so as to allow any interim awards (or obligations)
attributable to 2008 performance to be made (or imposed)
no later than December 2009, and to allow any fi nal awards
(or obligations) attributable to performance over the 2006-2008
period to be made (or imposed) no later than December 2010.
Whether the Utility will receive all or a portion of the
remaining $77 million in incentives for the 2006-2007 pro-
gram years, whether the Utility will receive any additional
incentives or incur a reimbursement obligation in 2009
based on the second interim claim, and whether the fi nal
true-up in 2010 will result in a positive or negative adjust-
ment, depends on the new framework and rules to be
adopted by the CPUC.
The Utility intends to fi le an amended application
on March 2, 2009 to seek CPUC approval of the Utility’s
2009-2011 energy effi ciency programs and funding authoriza-
tion of approximately $1.8 billion over the three-year cycle,
an approximate increase of $860 million over the 2006-
2008 budget. The CPUC has authorized bridge funding of
approximately $33 million per month to allow the Utility to
continue existing energy effi ciency programs into 2009 until
the CPUC issues a fi nal order on the 2009-2011 application.
APPLICATION TO RECOVER HYDROELECTRIC
GENERATION FACILITY DIVESTITURE COSTS
On April 14, 2008, the Utility fi led an application with the
CPUC requesting authorization to recover approximately
$47 million, including $12.2 million of interest, of the
costs it incurred in connection with the Utility’s efforts to
determine the market value of its hydroelectric generation
facilities in 2000 and 2001. These efforts were undertaken at
the direction of the CPUC in preparation for the proposed
divestiture of the facilities to further the development of
a competitive generation market in California. The Utility
continues to own its hydroelectric generation assets. On
February 18, 2009, a proposed decision was issued by the
administrative law judge, which if adopted by the CPUC,
would allow the Utility to recover these costs. It is expected
that the CPUC will issue a fi nal decision in 2009.
and 88% will accrue to customers. If the utilities achieve
less than 65% of any one of the individual metric savings
goals (i.e., kWh, kW, or gas therm), then the utilities must
reimburse customers based on the greater of (1) 5 cents per
kWh; 45 cents per therm; and $25 per kW for each kWh,
therm, or kW unit below the 65% threshold, or (2) a dollar-
for-dollar payback of negative net benefi ts, also known as
a cost-effectiveness guarantee. The maximum amount of
revenue that the Utility could earn, and the maximum amount
that the Utility could be required to reimburse customers,
over the 2006-2008 program cycle is $180 million.
Under the existing incentive ratemaking mechanism,
the utilities are required to submit two interim claims; the
fi rst claim is based on estimated performance achieved
during the fi rst and second years of the three-year period,
and the second claim is based on estimated performance
achieved over the entire three-year period. Estimated
performance will be calculated based on the number and
cost of energy effi ciency measures installed by the utilities
and estimates and assumptions about the energy savings
per energy effi ciency measure.
On December 18, 2008, based on the Utility’s fi rst
interim claim, the CPUC awarded the Utility $41.5 million
in shareholder incentive revenues for the Utility’s energy
effi ciency program performance in 2006-2007. The awarded
amount represents 35% of $119 million in estimated share-
holder incentive revenues for the 2006-2007 program years.
The CPUC ruled that 65% of the incentives calculated for
the utilities’ 2006-2007 interim claims will be “held back”
until completion of fi nal measurement studies and a fi nal
verifi cation report for the entire three-year program cycle.
As long as the fi nal measured energy savings are at least
65% of each of the CPUC’s individual savings goals over
the 2006-2008 program cycle, the utilities will not be
required to pay back any incentives received on an interim
basis. The CPUC also ruled that the utilities will not be
entitled to any additional incentives for the 2006-2008
program period beyond the incentives already received
if the utility’s performance falls within a “deadband”;
i.e., if a utility achieves (1) less than 80% of the CPUC’s
goal for any individual savings metric or (2) less than 85%
of the CPUC’s overall energy savings goal but greater than
65% of the CPUC’s goal for each individual savings metric.
On February 2, 2009, The Utility Reform Network and the
CPUC’s Division of Ratepayer Advocates fi led an application
for rehearing of the CPUC’s December 18, 2008 award.