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    California PUC Issues Decision Granting Petition for Modification Involving Pacific Gas and Electric


    August 9, 2022 - Targeted News Service

     

      SAN FRANCISCO, California, Aug. 9 (TNSsro) -- The California Public Utilities Commission issued the following decision granting petition for modification (Case No. 22-08-003) on Aug. 8, 2022:

      * * *

      BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

      Application of Pacific Gas and Electric Company to Describe Cost Allocation Principles Pursuant to Resolution E-4886. (U39E.)

      DECISION GRANTING PETITION FOR MODIFICATION OF DECISION 20-05-008 REGARDING AUDIT REQUIREMENTS FOR RECOVERY OF SUBSTATION UPGRADES CAPITAL COSTS

      Summary

      This decision grants an unopposed petition for modification of Decision 20-05-008, with respect to that decision's requirement for a completed audit of all project costs prior to Commission authorization of cost recovery.

      Application 18-12-017 is closed.

      1. Background

      Decision (D.)20-05-008 approved a settlement agreement between Pacific Gas and Electric Company (PG&E) and the Peninsula Corridor Joint Powers Board (Caltrain) regarding allocation of costs for upgrading PG&E's East Grand and FMC substations to enable electrification of Caltrain's commuter rail service between San Jose and San Francisco (Substation Upgrades)./1 The approved settlement provides, in significant part, that Caltrain will continue to advance payment to PG&E for all Substation Upgrades construction costs, and PG&E must seek California Public Utilities Commission (CPUC or Commission) authority to place 60 percent of the CPUC-jurisdictional portion of the Substation Upgrades capital costs into PG&E's CPUC-jurisdictional rate base. PG&E need not reimburse Caltrain until both the Federal Energy Regulatory Commission and this Commission authorize cost recovery for Substation Upgrades costs (in accordance with the settlement agreement); PG&E is not required to pay Caltrain any interest on the reimbursed amount. Caltrain will also continue to pay income tax for all payments made to PG&E for the Substation Upgrades.

      In approving the settlement agreement, D.20-05-008 directed PG&E to enlist a third party to conduct an audit of Substation Upgrades costs, and to include the completed audit in testimony detailing why the costs for which PG&E seeks cost recovery are just and reasonable, when it seeks recovery of the Substation Upgrades costs.

      At the time the Commission adopted D.20-05-008, PG&E anticipated completing the Substation Upgrades on a timeline that would enable it to seek cost recovery in its current general rate case, Application (A.)21-06-021.

      On May 26, 2022, PG&E and Caltrain jointly filed a petition for modification, requesting to modify D.20-05-008's audit requirement such that PG&E would submit an audit report, in A.21-06-021, that addresses most but not all of the Substation Upgrades capital costs (approximately 95 percent as of May 31, 2022, according to the petition)./2 PG&E would subsequently submit a Tier 2 advice letter to present audit results of the remainder of Substation Upgrades capital costs and seek cost recovery for these remaining costs, subject to Commission confirmation that these remaining costs were appropriately incurred. On June 6, 2022, the California High-Speed Rail Authority filed a response in support of the petition for modification.

      2. Standard of Review

      Rule 16.4 of the Commission's Rules of Practice and Procedure (Rules) governs petitions for modification. Rule 16.4 derives its authority from Public Utilities Code Section 1708 that allows the Commission to rescind, alter, or amend any decision made by it.

      In addressing the petition, we consider whether the joint petitioners met their substantial burden, pursuant to Rule 16.4(b) of the Commission's Rules of Practice and Procedure, to demonstrate that the Commission should exercise its discretion to modify D.20-05-008./3 We also consider whether the petition justifies its late submission in accordance with Rule 16.4(d).

      The petition states the actual completion time of the Substation Upgrades is later than what PG&E had previously anticipated, due to a number of circumstances including, importantly, slowed and at times suspended construction caused by the COVID pandemic./4 The petition identifies this delay to the completed construction as a new or changed fact that warrants modifying D.20-05-008 as requested by the petition. Noting that the petition was not filed within one year of the effective date of D.20-05-008, the petition asserts its filing any earlier, when there was still a reasonable chance of timely submitting an audit report that covered 100 percent of Substation Upgrades costs, would have been premature, and further that the petition is based on the best and most current information on the completion of the audit and the procedural schedule of A.21-06-021. This decision finds the petition satisfies Rule 16.4 and therefore considers the reasonableness of modifying D.20-05-008 in the manner requested by the petition.

      3. The Uncontested Petition is Reasonable and Should be Granted

      As noted in Section 1 of this decision, the petition requests modifications to D.20-05-008 that would enable PG&E to seek cost recovery for most of the Substation Upgrades capital costs, instead of all of the Substation Upgrades capital costs, in A.21-06-021. As of February 1, 2022, PG&E projected a total capital cost of $135.997 million, exclusive of the Income Tax Component of Contribution, for the Substation Upgrades./5 PG&E projects that all costs incurred and settled as of May 31, 2022 will represent approximately 95.2 percent of the costs it currently expects to incur./6 For the remainder of Substation Upgrades capital costs, which would not be addressed in A.21-06-021, the petition requests permission for PG&E to seek cost recovery via a Tier 2 advice letter. The petition estimates the amount that PG&E would seek to recover via the Tier 2 advice letter would be no more than $612,000./7

      Absent the requested modifications, PG&E would be obligated to defer seeking cost recovery for any of the Substation Upgrades capital costs until its 2027 general rate case. The petition estimates such deferral would, at minimum, cause Caltrain to draw on its line of credit to finance the shortfall, at an incremental cost of $20 to $28 million, which the petition asserts would be inequitable./8 Under the circumstances described by the petition, this decision finds reason to grant the petition with one exception, discussed below.

      The petition's proposed modifications to D.20-05-008 include language that the Commission "shall" authorize cost recovery for the audited Substation Upgrades capital costs. It would be prejudicial to direct a specific outcome in a matter that is actively before the Commission. Further, as the petition acknowledges, D.20-05-008 provides that the purpose of the required audit is to enable the Commission to consider and determine whether the costs PG&E proposes to recover from ratepayers are just and reasonable./9 Therefore, this decision modifies the petition's proposed language as follows (deletion in strikeout and additions underlined):

      a) In its final decision in the PG&E 2023 General Rate Case ("2023 GRC") (A.21-06-021), the Commission shall may authorize PG&E rate recovery to reflect the just and reasonable capital costs for PG&E to construct the upgrades to the East Grand Substation and the FMC Substation ("Substation Upgrades"), as supported by an audit report described above (which is currently contemplated to cover PG&E's incurred and settled costs as of May 31, 2022, which PG&E currently estimates will represent approximately 95% of the total costs to construct the Substation Upgrades).

      4. Comments on Proposed Decision

      The proposed decision of Administrative Law Judge (ALJ) Valerie U. Kao in this matter was mailed to the parties in accordance with Section 311 of the Public Utilities Code and comments were allowed under Rule 14.3 of the Commission's Rules of Practice and Procedure. The Commission received no comments on the proposed decision. This decision corrects one typographical error in the proposed modification to Conclusion of Law 5 of D.20-05-008 (in Ordering Paragraph 1).

      5. Assignment of Proceeding

      Genevieve Shiroma is the assigned Commissioner and Valerie U. Kao is the assigned ALJ in this proceeding.

      Findings of Fact

      1. D.20-05-008 requires an audit of Substation Upgrades capital costs to enable the Commission to determine whether the costs PG&E seeks to recover from ratepayers are just and reasonable.

      2. Construction delays and other factors caused the completion of constructing the Substation Upgrades to occur later than anticipated, and too late for an audit of 100 percent of the costs to be submitted in A.21-06-021.

      3. Deferring consideration of any Substation Upgrades costs to PG&E's 2027 general rate case would impose an incremental cost to Caltrain of at least $20 million.

      Conclusions of Law

      1. It is not reasonable to direct the outcome of a matter that is actively before the Commission.

      2. It is reasonable to modify D.20-05-008 as requested by the petition, except as discussed in Section 3 of this decision.

      ORDER

      IT IS ORDERED that:

      1. Decision 20-05-008 is modified as follows (deletions in strikeout and additions underlined):

      New Finding of Fact:

      12. D.20-05-008 assumed that construction of the East Grand Substation and the FMC Substation would be completed in 2021. Based on that assumption D.20-05-008 believed that PG&E could submit an audit representing 100 percent of the incurred costs to construct the upgrades to the East Grand Substation and the FMC Substation in a timeframe which would enable the Commission to rule on PG&E's request for rate recovery of these costs during the PG&E 2023 General Rate Case ("GRC") proceeding. Due to construction delays and the time projected to complete the audit, an audit which is based on 100 percent of the actual incurred costs cannot be completed until June 2023 at the earliest. Such a date for the completion of the audit will not enable the Commission to rule on PG&E's request for rate recovery for the capital costs to upgrade the East Grand Substation and FMC Substation within the PG&E 2023 GRC.

      Modification to Conclusion of Law No. 4:

      4. The audit of all the project costs should be completed in the manner described in Ordering Paragraph No. 6 before PG&E is authorized to recover costs for the Caltrain Project in a rate case.

      Modification to Conclusions of Law No. 5

      5. PG&E should be required to submit testimony specific to the Caltrain Project when it seeks recovery of the Caltrain Project costs, explaining why the costs that PG&E proposes to recover from ratepayers are prudent and do not result in unjust and unreasonable rates. PG&E shall make a submission of the audit which covers the costs PG&E shall have incurred as of May 31, 2022 by no later than September 30, 2022 provided the audit is available by that date. If all costs through May 31, 2022 cannot be audited in time for submission by September 30, 2022, PG&E may submit an audit of such costs as can be audited by that time. Any such testimony should include a copy of the audit.

      New Conclusion of Law:

      7. The Petition for Modification filed on May 26, 2022 to modify D.20-05-008 complies with and satisfies the requirements of Commission Rule 16.4 and should be granted.

      Modification to Ordering Paragraph No. 6

      6. Pacific Gas and Electric Company (PG&E) shall submit testimony specific to the Caltrain Project when it seeks recovery of the Caltrain Project costs explaining in detail why the costs that PG&E proposes to recover from ratepayers are prudent and do not result in unjust and unreasonable rates. Any such testimony shall include the completed independent third-party audit of costs incurred to complete the Caltrain Project. PG&E shall make a submission of the audit as prescribed in modified Conclusions of Law No. 5. PG&E shall submit the audit covering the remaining portion of the incurred costs in the manner described in this Ordering Paragraph No. 6. The Commission shall grant PG&E rate recovery for the capital costs it will have incurred to construct the upgrades to the East Grand Substation and the FMC Substation in accordance with the procedures set forth below.

      a) In its final decision in the PG&E 2023 General Rate Case ("2023 GRC") (Application 21-06-021), the Commission may authorize PG&E rate recovery to reflect the just and reasonable capital costs for PG&E to construct the upgrades to the East Grand Substation and the FMC Substation ("Substation Upgrades"), as supported by an audit report described above (which is currently contemplated to cover PG&E's incurred and settled costs as of May 31, 2022, which PG&E currently estimates will represent approximately 95 percent of the total costs to construct the Substation Upgrades).

      b) Upon the Commission ruling in the 2023 GRC on the audited costs as described above, PG&E shall reimburse Caltrain 100 percent of the CPUC-jurisdictional and 100 percent of the Federal Energy Regulatory Commission-jurisdictional reimbursement amounts in the manner described in the Settlement Agreement.

      c) Within 30 days after PG&E has incurred 100 percent of the actual Substation Upgrades capital costs and the auditor has completed its audit of those costs, PG&E shall submit a Tier 2 advice letter with an audit of the remaining incurred capital costs.

      d) In the Tier 2 advice letter, PG&E and/or the auditor shall disclose and highlight any material changes from the auditor's conclusions regarding the previously audited amounts.

      e) The Energy Division would review, by Tier 2 advice letter, the audit of the remaining costs and have the authority to authorize the addition of those amounts to PG&E's rate base.

      2. Application 18-12-017 is closed.

      This order is effective today.

      Dated August 4, 2022, at San Francisco, California.

      ALICE REYNOLDS, President

      CLIFFORD RECHTSCHAFFEN

      GENEVIEVE SHIROMA

      DARCIE L. HOUCK

      JOHN REYNOLDS

      Commissioners

      * * *

      Footnotes:

      1/ D.20-05-008 Decision Adopting Settlement Agreement Between Peninsula Corridor Joint Powers Board and Pacific Gas and Electric Company, issued May 14, 2020 (D.20-05-008). D.20-05-008 refers to the Substation Upgrades as the Caltrain Project; the petition for modification of D.20-05-008 refers to the Substation Upgrades as encompassing the work to be completed pursuant to Supplement Nos. 3 and 4 to the Master Agreement, which covers the overall relationship between PG&E and Caltrain with respect to the Caltrain Modernization Program, also referred to as the Electrification Project.

      2/ Joint Petition for Modification of Decision 20-05-008 by Pacific Gas and Electric Company (U39M) and the Peninsula Corridor Joint Powers Board, filed May 26, 2022 (Petition for Modification), at 3.

      3/ Rules of Practice and Procedure, Rule 16.4; see also PG&E Corp. v. Public Utilities Com. (2004) 118 Cal.App.4th 1174, 1215 [California Public Utilities Code Section 1708, which authorizes the Commission to "rescind, alter, or amend any order or decision made by it," is permissive]. See also 2017 Cal. PUC LEXIS 514, at 7; 1998 Cal. PUC LEXIS 658, at 2: The Commission's exercise of authority under Public Utilities Code Section 1708 is an "'extraordinary remedy' that must be 'sparingly and carefully applied.'"

      4/ Petition for Modification, at 13-14.

      5/ Petition for Modification, at 7, citing petitioners' A.21-06-021 Joint February 2022 Audit Status Report at 3.

      6/ Petition for Modification, footnote 2 and Appendix B - Declaration of Jamie Dean on Behalf of PG&E, at 2. PG&E and Crowe, LLP have reached an agreement for performing the Caltrain Audit, which Energy Division finds acceptable and consistent with the roles of PG&E, the auditor, and the CPUC set forth in D.20-05-008.

      7/ Petition for Modification, at 15.

      8/ Petition for Modification, at 15-17.

      9/ D.20-05-008, at 9-10.

      * * *

      Original text here: https://docs.cpuc.ca.gov/PublishedDocs/Published/G000/M496/K423/496423537.PDF

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