CPUC Approves PG&E Rate Hike

By Published On: May 6, 2011

The three new California Public Utilities Commission members are not following CPUC president Mike Peevey’s lead--as was usual during the last decade. Regulators did not pass a Peevey-backed decision to allow Pacific Gas & Electric a 7.4 percent rate of return on the utility’s remaining investment in old analog meters that are replaced with “smart” meters. Instead, the commission approved a 6.3 percent rate of return on the retired meters, which was higher than the original administrative law judge’s proposal. The “old meter” investment was the controversial part of a larger decision on PG&E’s triennial general rate case. The larger non-controversial settlement between parties increases utility revenue by about 8.1 percent this year, with additional bump ups in 2012 and 2013. Peevey and commissioner Tim Simon favored the higher rate, while commissioners Catherine Sandoval and Mark Ferron backed a lower return of 5.7 percent. In the end, Ferron joined Peevey and Simon to break the deadlock, casting a yes vote for the 6.3 percent rate on the meters. Sandoval remained in opposition, raising questions about whether it conformed to previous legal precedents regarding rates of return on equipment taken out of service. Ferron agreed that there may be legal grounds for a lower return, but called the vote “a reasonable compromise.” Consumer advocates, notably TURN, wanted a zero rate of return on the old meters. It called the plan to pay for assets that are no longer “used and useful” akin to paying for garbage. Peevey maintained that picking the in between rate of return does not conflict with regulatory policy. “There are no hard and fast rules,” he said. Some commissioners maintained a low or no return would send the wrong signal to shareholders about investments in clean technology. The commissioners maintained that the new smart meters will benefit ratepayers, though many customers who are showing up at commission meetings for the last year disagree. “It is critical that we send the proper signal to investors about the future of clean technology investment,” Simon said in backing Peevey’s initial proposal. Under the remainder of the decision, PG&E gets an increase of $454 million, or 8.1 percent, for 2011 over previously authorized base revenue of $5.582 billion. The commission authorized $241 million more for electric distribution, $47 million more for gas distribution, and $166 million more for electric generation. The decision also authorized additional post-test year “attrition” (inflation) increases of $180 million in 2012 and $185 million in 2013. PG&E said in a statement following the vote that the settlement would have no impact on its electric rates immediately, since it amounts to one-tenth of a percentage point. The utility said it doesn’t plan to raise electric rates until January 2012. The utility noted the settlement bumps gas rates by about 2.4 percent beginning June 1. The CPUC said in a statement that its action on meters would bring PG&E $17.3 million in additional revenue. In other action, the commission opened a rulemaking aimed at implementing the state’s new 33 renewables portfolio standard law. Ferron said one of the chief aims is to protect against “renewable rate shock.” The commission also approved enhanced standards for utility procurement from minority-, woman-, and disabled veteran-owned businesses. Utility reports on contracts with the companies are now subject to random audits. Finally, the commission okayed a rate hike for PacifiCorp in California to help cover the cost of a settlement agreement under which hydroelectric dams along the Klamath River could be removed. It amounts to an average increase of $1.61/month for PacifiCorp customers over the next nine years.

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