Mailed 12/2/2005
ALJ/MLC/eap
Decision 05-12-001 December 1, 2005
BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
Southern California Edison Company’s (U 338-E)
Application for Approval of Advanced Metering
Infrastructure Deployment Strategy and Cost
Recovery Mechanism.
Application 05-03-026
(Filed March 30, 2005)
DECISION ADOPTING SETTLEMENT FOR FUNDING OF
SOUTHERN CALIFORNIA EDISON COMPANY’S
ADVANCED INTEGRATED METER PROJECT
1. Summary
This decision grants the Motion to accept a Settlement Agreement between
Southern California Edison Company (SCE) and several parties to this
proceeding, finding it to be reasonable in light of the whole record, consistent
with law, and in the public interest. The Settlement Agreement establishes a
funding level of $12 million for the proposed Advanced Integrated Meter (AIM)
Project over 18 months as reasonable and establishes the manner by which the
costs will be recovered by adopting specific ratemaking and cost recovery
treatment for the authorized funds.
2. Background
On March 30, 2005, SCE filed the instant application, seeking authorization
to spend up to $31 million over 36 months for costs to develop and deploy its
proposed AIM Project. SCE proposed a two phase effort, the first focused on
defining the requirements of an AIM system and meter and performing due
diligence to determine whether such a product is available in the market. The
second phase was to focus on development of the AIM Project only if the first
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phase demonstrated that products meeting the necessary specifications were not
already available in the market. The application also requested approval of
specific ratemaking and cost recovery treatment for authorized expenditures.
On July 1, 2005, the assigned Administrative Law Judge (ALJ) issued a
ruling laying out a preliminary scope for the case. A prehearing conference was
held on July 13, 2005 at which the scope and schedule was discussed. On
July 21, 2005, following the prehearing conference, Assigned Commissioner
Peevey issued a ruling establishing the scope and schedule, which included a
bifurcation of SCE’s Phase 1. The ruling directed SCE to serve supplemental
testimony on whether the expected benefits of AIM outweigh the costs and so
improve SCE’s business case cost-effectiveness showing that ratepayers should
fund the project, whether SCE has a unique advantage to develop AIM
compared to a private interest, and how future benefits of an AIM project should
be allocated. In response to a subsequent motion, the ALJ modified the schedule
to address only the Phase 1 issues.
On October 3, 2005, SCE and the Office of Ratepayer Advocates (ORA), on
their behalf and on behalf of The Utility Reform Network (TURN), the Coalition
of California Utility Employees (CCUE), and Hunt Technologies, Inc. (Hunt),
filed a motion for adoption of a Settlement Agreement. ORA served testimony
on October 3, 2005, noting that with the filing of the Settlement Agreement, their
concerns with the case were addressed. Responses to the motion were due,
under a shortened schedule, on October 14, 2005. No responses were filed.
The ALJ sought clarification of procedural aspects of the settlement and in
response, SCE, on behalf of the settling parties, filed clarifications on
October 19, 2005.
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3. Outstanding Procedural Matters
Prior to the settlement being received, no exhibits had been marked for
identification. At the request of the parties, the ALJ marked the following
proffered testimony for identification:
Proceeding No.
A.05-03-026
ALJ
Cooke
EXHIBIT INDEX
Exh
Date
.
Ident.
Recd.
No.
1
10/17/05
10/19/05
Sponsor/Witness
SCE/various
Volume 1
1A
10/17/05
10/19/05
SCE
Errata, volume 1
2
10/17/05
10/19/05
SCE/various
Volume 2
3
10/17/05
10/19/05
SCE/various
Volume 3
3A
10/17/05
10/19/05
SCE/various
Errata, volume 3
4
10/17/05
10/19/05
SCE/various
Volume 4
4A
10/17/05
10/19/05
SCE/various
Errata, volume 4
5
10/17/05
10/19/05
SCE/various
Volume 5
100
10/17/05
10/19/05
ORA/Kinosian
ORA Testimony
Description
As identified above, all exhibits are received into evidence as of
October 19, 2005, the date that replies to the motion for adoption of the
Settlement Agreement were due.
We affirm all rulings made by the ALJ up to this point in the proceeding.
To the extent that any motions remain outstanding, all such motions are denied.
4. Settlement Agreement Provisions
The primary feature of the settlement is that a funding level of $12 million
for an 18 month period be adopted, found reasonable and recovered by the
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ratemaking accounts described in the Settlement Agreement. The Settlement
Agreement describes the activities that make up the $12 million in funding, the
deliverables expected out of this project, and how the project will be staffed.
Although no implementing tariffs were submitted, the Settlement Agreement
describes in sufficient detail the necessary ratemaking account to enable prompt
implementation, the types of costs that may be recorded in the account and the
timing by which the balances in the account will be recovered annually.
As part of the settlement, SCE commits to hold quarterly meetings to brief
ORA and other parties on various aspects of its activities, like meter and system
requirements, and technology assessment, and to allow for and consider input
from ORA and other parties on such aspects. The Settlement Agreement also
allows for more frequent meeting and access to confidential information for
ORA. SCE commits to promptly file an Advice Letter to modify the scope and
timing of the approved activities if it determines that certain activities are no
longer necessary. SCE’s proposed allocation of any future benefits of its AIM
Project to ratepayers is also affirmed in the settlement.
5. Issues Identified by Protestants
Because the parties reached a settlement before testimony was filed, the
record we have before us is limited to the testimony served by SCE and ORA, the
filed protests and responses to the application, and the Settlement Agreement.
SCE’s testimony, as described in Exhibits 1-5, addresses all of the issues
identified in the scoping ruling as part of this case. Because no testimony was
filed by parties other than SCE and ORA, we turn to their protests and responses
to the application to describe the issues initially identified.
Protests were filed by ORA and TURN and a response was filed by CCUE.
TURN’s position in its protest was that “the Commission should not authorize
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SCE to design, develop, and implement AIM technology, nor should it authorize
SCE’s proposed cost recovery mechanism.” (TURN Protest, p. 3.) Essentially,
TURN opposed authorizing funding for the AIM project without additional
evidence of cost-effectiveness and rationale for SCE entering a new business
venture to develop the AIM technology. As a fallback position, TURN suggests
that “the Commission authorize implementation and cost recovery only for
Phase I design activities, and order SCE to submit a progress report prior to any
authorization of Phase II testing activities.” (TURN Protest, p. 1.) TURN also
recommended that, to the extent that the Commission authorizes SCE to become
a meter developer, all such future profits should be the property of SCE
ratepayers and not treated under the Other Operating Revenues profit sharing
mechanism.
In its protest, ORA generally supported SCE’s “application as a reasonable
and prudent approach to evaluation and deployment of advanced metering
technology.” (ORA Protest, p. 1.) ORA focused its protest on coordination with
other advanced metering infrastructure (AMI) applications, allocation of risks
and benefits of AIM development to ratepayers, the appropriateness of ratepayer
funding for meter development efforts, and the lack of deliverables identified in
the application. Much of ORA’s protest focuses on broader issues regarding the
need for consistency between utilities assumptions about demand response for
purposes of evaluating AMI deployment decisions, which are important, but are
not per se directed to SCE’s application which does not propose a deployment
approach at this time.
CCUE supports approval of SCE’s Phase I proposal as reasonable. CCUE
suggests that if “design and development of a new meter prove successful, the
Commission should then consider approval of Phase II.” (CCUE Response, p. 2.)
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CCUE distinguishes SCE’s application for funding for its AIM Project from the
predeployment applications of San Diego Gas & Electric Company and Pacific
Gas & Electric Company by pointing out that “SCE is asking for recovery of costs
to develop an AIM system that may make AMI cost effective. Only if the
development process is successful will SCE submit a business case application
for actual deployment of the new meters.” (CCUE Response, p. 8.) CCUE’s
response also focuses on impacts of advanced metering deployment on
employees, privacy, and reduction in energy usage generally, not just load
shifting.
6. Evaluation of the Settlement Agreement
The proposed Settlement Agreement is an uncontested “all-party”
settlement. The Commission applies two complementary standards to evaluate
such agreements. The first standard, set forth in Rule 51.1(e) of the Commission's
Rules of Practice and Procedure and applicable to both contested and
uncontested agreements, requires that the "settlement is reasonable in light of the
whole record, consistent with law, and in the public interest." The second
standard applies to all-party settlements, and requires that all active parties
support the proposed settlement, the parties fairly represent all affected interests,
no settlement term contravenes statutory provisions or prior Commission
decisions, and settlement documentation provides the Commission with
sufficient information to permit it to discharge its future regulatory obligations.
San Diego Gas & Electric, 46 CPUC 2d 538 (1992).
We turn first to the Rule 51.1(e) standards. The Settlement Agreement is
reasonable in light of the whole record because it commits SCE to a due diligence
process whereby its AIM meter and system requirements will be defined before
additional ratepayer funding is authorized. The activities that will occur are
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necessary to determine whether there are commercially available products that
can meet the specifications and price requirements to make pursuit of the project
cost-effective. SCE has demonstrated, and the parties are satisfied, that it is
uniquely positioned to establish the AIM meter and system specifications and
that the reasonably expected benefits of SCE’s proposal will sufficiently improve
the cost-effectiveness of SCE’s advanced metering infrastructure deployment
business case to support ratepayer funding of the activities funding under the
settlement. The $12 million in funding that would be approved under the
Settlement Agreement represents an increase of only 0.4% of SCE’s 2005
distribution revenue requirement, and would be limited only to funds actually
expended on the AIM design activities. The Settlement Agreement provides for
effective ongoing participation from ORA and other interested parties during the
design process and, to the extent that any future benefits accrue from the AIM
Project they would be allocated to ratepayers. In order to determine whether the
settlement is reasonable in light of the whole record, we must assess whether the
Settlement Agreement adequately addresses the issues raised by protestants to
the application. Most of the issues identified by protestants have been addressed
through the terms of the settlement, and the parties have concluded that the
activities, and funding, identified therein represent a reasonable resolution to the
issues. We concur.
Similarly, the Settlement Agreement is consistent with law because it
establishes a framework to evaluate investment in advanced metering
infrastructure that is consistent with the direction provided in
Rulemaking 02-06-001 and recent federal legislation (Energy Policy Act of 2005).
The Settlement Agreement is in the public interest because it will allow SCE to
assess the reasonableness of ratepayer investment in a meter development
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project after it establishes its AIM meter and system specifications rather than
prejudging that such ratepayer investment is necessary. Consequently, we
conclude that the Settlement Agreement meets the Rule 51.1 standards.
The standards for all-party settlements are also met. SCE, ORA, TURN,
CCUE, and Hunt are the only parties to this proceeding. ORA and TURN
represent the interests of ratepayers, CCUE represents the interests of utility
employees, and Hunt represents a meter developer who might seek to supply
metering technology to SCE, while SCE represents its own interests. As noted
above, the Settlement Agreement is consistent with the law, and the regulatory
accounts that it requires provide the Commission with sufficient information to
permit it to discharge its future regulatory obligations. No settlement term
contravenes statutory provisions or prior Commission decisions.
Therefore, the Settlement Agreement satisfies the Commission's
requirements for settlements under Rule 51.1 and the all-party settlement
standards. Accordingly, we will approve it.
The ALJ sought clarification from the settling parties about whether this
proceeding should remain open to address the activities identified as Phase 2
issues, given that the anticipated schedule for the activities approved as part of
the Settlement Agreement are anticipated to take 18 months to complete. ORA
and CCUE supported closure of the application, SCE preferred that the
proceeding remain open, but acknowledged that, should it decide to pursue
Phase 2 of the development of its AIM Project, it will need to submit additional
testimony for the Phase 2 activities, regardless of whether this proceeding
remains open. For this reason, and to comply with the statutory requirement
that cases be disposed of within 18 months of the scoping memo, this proceeding
should be closed upon adoption of the Settlement Agreement.
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7. Categorization and Need for Hearings
In Resolution ALJ 176-3151, dated April 21, 2005, the Commission
preliminarily categorized this proceeding as ratesetting, and preliminarily
determined that hearings were necessary. On July 21, 2005, the Assigned
Commissioner issued a scoping memo confirming the preliminary categorization
of the proceeding as ratesetting and that hearings were necessary.
On October 3, 2005, SCE and ORA filed a motion for adoption of the
Settlement Agreement. The parties seek expeditious approval of the Settlement
Agreement, including a shortened comment period on the settlement. The
record of the proceeding provides sufficient information for us to evaluate
whether the Settlement Agreement meets our standards for approval. No
hearing is necessary.
8. Comments on Draft Decision
The draft decision of the assigned administrative law judge (ALJ) was
mailed to the parties in accordance with Pub. Util. Code § 311(g)(1) and Rule 77.7
of the Rules of Practice and Procedure. Comments were filed by SCE on behalf
of the settling parties. Minor corrections are made in response.
9. Assignment of Proceeding
Michael R. Peevey is the Assigned Commissioner and Michelle Cooke is
the assigned ALJ in this proceeding.
Findings of Fact
1. SCE, ORA, TURN, CCUE, and Hunt have entered into a voluntary
settlement to resolve Phase I AIM funding and cost recovery issues.
2. The proposed settlement is supported by all of the active parties eligible to
participate in this proceeding.
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3. The active parties are fairly reflective of the affected interests in this
proceeding.
4. No term of the proposed settlement contravenes statutory provisions or
prior Commission decisions.
5. The settlement conveys sufficient information to permit the Commission to
discharge its future regulatory obligations with respect to the parties and their
interests.
6. No party opposes approving the proposed settlement.
7. No hearing is necessary on the Phase I issues.
Conclusions of Law
1. The proposed settlement is an uncontested agreement as defined in
Rule 51(f) and an all-party settlement under San Diego Gas & Electric, 46 CPUC 2d
538 (1992). The proposed settlement satisfies the requirements of Rule 51.1(e) and
San Diego Gas & Electric.
2. The settlement agreement is reasonable in consideration of the whole
record, consistent with law, and in the public interest.
3. No settlement term contravenes statutory provisions or prior Commission
decisions.
4. The Settlement Agreement should be adopted.
5. This decision should be made effective immediately to enable applicant to
implement the settlement without delay.
6. SCE’s request for additional funding beyond that authorized in the
Settlement Agreement should be dismissed without prejudice and this
proceeding should be closed.
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O R D E R
IT IS ORDERED that:
1. The October 3, 2005 Motion to adopt the Settlement Agreement among
Southern California Edison Company (SCE), Office of Ratepayer Advocates, The
Utility Reform Network, Coalition of California Utility Employees, and Hunt
Technologies, Inc. is granted and the Settlement Agreement is approved and
adopted.
2. SCE shall file an Advice Letter to implement the ratemaking account
described in the Settlement Agreement. The Advice Letter shall be effective
immediately provided that the tariff language filed in the Advice Letter is
consistent with that described in the Settlement Agreement.
3. The parties shall comply with all provisions of the settlement agreement,
as filed on October 3, 2005.
4. SCE’s request for additional funding beyond that authorized in the
Settlement Agreement is dismissed without prejudice.
5. SCE shall file a new application and supporting testimony should it decide
to seek ratepayer funding of its Advanced Integrated Meter Project beyond the
funding and activities approved herein.
6. No hearing is necessary.
7. This proceeding is closed.
This order is effective today.
Dated December 1, 2005, at San Francisco, California.
MICHAEL R. PEEVEY
President
GEOFFREY F. BROWN
SUSAN P. KENNEDY
DIAN M. GRUENEICH
JOHN A. BOHN
Commissioners
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