PG&E 2010 Annual Report Download - page 36

diagnostic tools. The Utility will provide $10 million to
fund this new entity at no cost to customers. The Utility is
currently developing the parameters of the proposed
Pipeline 2020 program and cost forecasts, and anticipates
filing an application with the CPUC to authorize the
program in the second quarter of 2011. On December 1,
2010, the Utility requested the CPUC to permit the Utility
to establish a memorandum account before the CPUC acts
on the Utility’s application so the Utility can track costs
incurred under the program for possible future recovery
through rates. Several protests have been filed to the
Utility’s request, and the CPUC has not yet acted on the
Utility’s request. It is possible that some of the work
contemplated in the Pipeline 2020 program will be
required under legislation that may be enacted in the future
or by regulatory order. In that case, the Utility’s cost
recovery for the mandated activities would be addressed
separately by the CPUC.
PG&E Corporation and the Utility anticipate that the
CPUC will issue final decisions on the Gas Accord V, the
litigated issues, and the safety phase during the first or
second quarters of 2011.
ENERGY EFFICIENCY PROGRAMS
AND INCENTIVE RATEMAKING
The CPUC has established a ratemaking mechanism to
provide incentives to the California investor-owned utilities
to meet the CPUC’s energy savings goals through
implementation of the utilities’ 2006 through 2008 energy
efficiency programs. On December 16, 2010, the CPUC
awarded the Utility a final true-up payment award of $29.1
million for the 2006 through 2008 energy efficiency
program cycle. Including this award, the Utility has earned
incentive revenues totaling $104 million through
December 31, 2010 based on the energy savings achieved
through implementation of the Utility’s energy efficiency
programs during the 2006 through 2008 program cycle.
With respect to the utilities’ 2009 through 2011 energy
efficiency programs, the CPUC issued a decision on
September 24, 2009 that changed the program cycle to
cover 2010 through 2012. The CPUC authorized the
Utility to collect $1.3 billion to fund its 2010 through 2012
programs, a 42% increase over the amount authorized for
the 2006 through 2008 programs. The CPUC also
confirmed that the risk and reward incentive mechanism
would apply to the 2009 program year, subject to various
modifications. The CPUC stated that applications for 2009
incentive awards are due by June 30, 2011 to enable the
CPUC to issue a final decision by the end of 2011.
On November 15, 2010, a proposed decision was issued
that, if adopted by the CPUC, would modify the incentive
mechanism that would apply to the 2010 through 2012
program cycle. Among other changes, the proposed
modification would limit the total amount of the incentive
award or penalty that could be awarded to, or imposed on,
all the investor-owned utilities to $189 million. If the
proposed decision is adopted, the Utility’s opportunity to
earn incentive revenues would be limited compared to the
mechanism that was in place for the 2006 through 2008
program cycle.
The proposed decision notes that the CPUC may
establish a new rule-making proceeding to determine what
mechanism, if any, will apply to programs beginning in
2013 and later.
CPUC RESOLUTION REGARDING THE TAX
RELIEF ACT
On February 7, 2011, the CPUC staff released a draft
resolution that proposes to establish a memorandum
account for most cost-of-service rate-regulated utilities. The
memorandum account would allow the CPUC to
determine whether any future rate reduction is appropriate
to reflect the benefits of the Tax Relief Act not otherwise
reflected in rates.
The proposed resolution is scheduled to be considered
by the CPUC on February 27, 2011. The Utility is unable
to predict the outcome of this matter and whether, if the
resolution is adopted, it will have a material financial
impact on PG&E Corporation’s and the Utility’s financial
condition, results of operations, or cash flows.
DEPLOYMENT OF SMARTMETER™TECHNOLOGY
The CPUC has authorized the Utility’s program to install
approximately 10 million advanced electric and gas meters
throughout the Utility’s service territory by the end of
2012. Advanced electric meters, which record energy usage
in hourly or quarter-hourly increments, allow customers to
track energy usage throughout the billing month and thus
enable greater customer control over electricity costs. Usage
data is collected through a wireless communication
network and transmitted to the Utility’s information
system, where the data is stored and used for billing and
other Utility business purposes. Advanced electric meters
enable the implementation of “dynamic pricing” rates for
customers that reflect the higher cost of electricity during
periods of high demand. As of December 31, 2010, the
Utility has installed 7.5 million meters. The CPUC has
authorized the Utility to recover a maximum of $2.3
billion in estimated project costs. Costs that exceed $2.3
billion will not be recoverable through rates. As of
December 31, 2010, the Utility has incurred costs of $2.0
billion. The Utility has also recorded a provision of
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