PG&E 2012 Annual Report Download - page 34

investments in infrastructure and, to a lesser extent, anticipated increases in wages and other expenses. The Utility
also has requested that revenue requirements be adjusted to reflect certain externally driven changes in the Utility’s
costs, such as changes in franchise fees. The Utility estimates that this mechanism would result in increases in
revenue of $492 million in 2015 and an additional $504 million in 2016.
Independent consultants engaged by the SED are reviewing and evaluating certain operational plans underlying
the Utility’s 2014 cost forecast to ensure that safety and security concerns have been addressed and that the plans
properly incorporate risk assessments and mitigation measures. The SED has also engaged independent consultants
to conduct a financial audit of the Utility’s gas distribution system, which will examine the Utility’s authorized and
budgeted capital investments and operation and maintenance expenditures for its last two authorized GRC cycles.
The SED reports on the results of the consultants’ evaluations and financial audit are due May 31, 2013. The Utility
and other parties will be able to respond to the reports.
According to the CPUC’s current procedural schedule for the proceeding, which may be subject to change in the
future, the CPUC’s Division of Ratepayer Advocates (‘‘DRA’’) is scheduled to serve its report on the Utility’s
application by May 3, 2013. Additional testimony from other parties must be submitted by May 17, 2013. The
schedule contemplates evidentiary hearings to be held this summer, followed by a proposed decision to be released
in November 2013 and a final CPUC decision to be issued in December 2013. If the decision is delayed, the Utility
will, consistent with CPUC practice in prior GRCs, request that the CPUC issue an order directing that the
authorized revenue requirement changes be effective January 1, 2014, even if the decision is issued after that date.
FERC Transmission Owner Rate Case
On September 28, 2012, the Utility filed an application with the FERC to increase the Utility’s retail and
wholesale electric transmission customer rates that have been in effect since March 1, 2011. The proposed rate
changes will become effective on May 1, 2013, subject to refund following the FERC’s issuance of a final decision.
The most significant factors driving the requested increase are the Utility’s continuing needs to replace and
modernize aging electric transmission infrastructure; to interconnect new electric generation, including renewable
resources; and to accommodate the magnitude and location of forecasted electric load growth in California. The
Utility forecasts that it will make investments of $783 million in 2012 and an additional $837 million in 2013 in
various capital projects, including projects to add transmission capacity, expand automation technology, improve
overall system reliability, and maintain and replace equipment at substations. The proposed rate base in 2013 is
forecast to be $4.5 billion compared to $3.6 billion in 2011. The operations and maintenance costs associated with
this request are forecast to be approximately $191 million in 2013, compared to $152 million in 2011.
Compared to present rates, the Utility estimated that revenues would increase by $254 million based on the
Utility’s requested ROE of 11.5%, for total 2013 electric transmission revenues of $1.2 billion. On November 29,
2012, the FERC issued an order that accepted the Utility’s application but directed the Utility to reduce its proposed
revenue requirement and rates to reflect the median ROE of a comparative group of other utilities. In response to
the FERC’s order, on December 21, 2012, the Utility revised its requested revenue requirements and rates to reflect
a 9.1% ROE. Based on the reduced ROE, the Utility estimates that revenues would increase by approximately
$158 million, for total annual electric transmission revenues of $1.1 billion beginning on May 1, 2013. On
December 21, 2012, the Utility also filed a request for rehearing of the FERC’s order. It is uncertain when the
FERC will act on the request for rehearing. The ultimate resolution of revenue requirements and rates will be
addressed through hearings and settlement procedures.
Energy Efficiency Programs and Incentive Ratemaking
On December 20, 2012, the CPUC approved a new energy efficiency incentive mechanism to reward the Utility
and other California energy utilities for the successful implementation of their 2010-2012 energy efficiency programs.
The CPUC awarded the Utility $21 million for the successful implementation of the Utility’s 2010 energy efficiency
programs. The CPUC decision also established the process that is expected to apply to incentive claims for program
years 2011 and 2012. After the CPUC completes its audit of the utilities’ 2011 program expenditures, the utilities
must file their incentive claims in the third quarter of 2013 for approval by the CPUC in the fourth quarter of 2013.
Similarly, the utilities will file their incentive claims based on the CPUC-audited 2012 program expenditures in the
third quarter of 2014 for approval by the CPUC in the fourth quarter of 2014.
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