By Rory D. Sweeney and Michael Kuser

FERC on Thursday rejected a second attempt by several Pacific Gas and Electric transmission customers to potentially receive a larger-than-normal refund related to a rate increase the utility submitted in 2016 for its 18th transmission owner tariff filing (TO18) (EL17-59).

But in a separate decision (EL17-95), the commission also ruled that a complaint by the same customers about PG&E’s TO19 rate filing be subject to hearing and settlement judge procedures and consolidated it with the ongoing proceeding covering the TO18 complaint (ER17-2154).

In EL17-59, the complainants — which include the Transmission Agency of Northern California; the city of Santa Clara; M-S-R Public Power Agency; State Water Contractors; the California Public Utilities Commission; Modesto Irrigation District; and Sacramento Municipal Utility District — had requested a rehearing of FERC’s November denial of their initial complaint over TO18.

While the TO18 rate increase is the subject of an ongoing proceeding on tariff revisions PG&E wants approved (ER16-2320), FERC shut down the complaint and an alternative request for consideration of supplemental evidence. It rebuffed the argument that its initial rejection failed to provide the complainants protection to receive the refund that they argued they could proved justifiable if the complaint was accepted.

The complaint stemmed from PG&E’s request to increase its wholesale base transmission revenue requirement from $1.319 billion, as set in its previous rate case, to $1.705 billion, and boost its retail base transmission revenue requirement from $1.331 billion to $1.718 billion. The complainants had argued that they could show through discovery that PG&E actually required less revenue than it is already approved to collect, that FERC should allow for refunds below the current $1.319 billion revenue requirement and that their complaint should be consolidated with the rate increase proceeding.

FERC denied the complaint, saying the complainants failed to show that their proposed rate adjustments would result in a revenue requirement below $1.319 billion, leaving the standard refund protection intact. The complainants responded that not providing them the opportunity to prove their case through discovery in the proceeding “arbitrarily and capriciously deprived” them of protections in the Federal Power Act, but FERC said they must show evidence of the problem as part of the complaint, not ask the commission to trust them to prove it later.

FERC also rejected an alternative request, which asked the commission to consider evidence from PG&E’s ongoing tariff proceeding.

“The commission’s longstanding policy is to not accept additional evidence at the rehearing stage of a proceeding, absent a compelling showing of good cause,” it said. “Because other parties are precluded … from filing answers to requests for rehearing, allowing complainants to introduce new evidence at this stage would raise concerns of fairness and due process for other parties to the proceeding.”

TO19 Complaint

The commission accepted PG&E’s TO19 filing last September but suspended it for five months to become effective on March 1, 2018, subject to refund and the establishment of settlement judge procedures.

In EL17-95, the complainants alleged that PG&E failed to justify the proposed TO19 rate increase, which forecast a retail network transmission revenue requirement of $1.8 billion and a wholesale network transmission revenue requirement of $1.78 billion.

The complainants contended that PG&E overstated its proposed rates with inappropriate expenses, an excessive wholesale network transmission revenue requirement; a return on equity inconsistent with commission precedent; and an excessive composite depreciation rate. They claimed the utility failed to be transparent on expenses and made errors in its capital structure and cost of debt that require adjustment.

They also said that formal discovery should provide for additional adjustments to reduce PG&E’s rates below the last clean rate established in the TO17 settlement.

Complainants alleged that reducing PG&E’s proposed rates by $511.4 million, based on supporting materials, would bring the final rate below the last clean rate.

In addition, the amended complaint alleged the need to reduce PG&E’s federal corporate income tax rate from 35% to 21%, consistent with the recently enacted Tax Cuts and Jobs Act, which it said effectively made PG&E’s TO19 rate unjust and unreasonable.

PG&E countered that the complainants should not be allowed to attack the settled TO17 rate, that granting the complaint will make reaching a settlement in future rate cases more difficult and would be contrary to the policy behind the last clean rate doctrine.

Specifically, PG&E said that the last clean rate doctrine “prevents retroactive ratemaking and avoids penalizing a company for filing a rate increase,” which would happen if the commission granted the complaint.

PG&E also argued that complainants failed to carry their burden of proof under Section 206 of the FPA.

The commission’s May 17 order found “that the complaint raises issues of material fact that cannot be resolved based on the record before us.”

“We are unpersuaded by PG&E’s arguments that complainants have failed to meet their burden under Section 206 of the FPA, and find that complainants’ allegations, as amended, are sufficient to initiate an investigation into PG&E’s rates,” the commission said.

FERC emphasized “that we are not here making a finding on the merits of complainants’ arguments in their amended complaint; rather, we are simply finding that complainants have made a prima facie case warranting further investigation by providing sufficient support for their allegation.”

The commission said it was likewise unpersuaded by PG&E’s policy arguments.

“Specifically, we find that the complaint does not request that the commission reject the settled TO17 rates, nor does it seek to undo the results of any compromise reflected among the parties to the settlement,” it said.

The TO17 rates were in effect from March 1, 2016, through Feb. 28, 2017, when they were superseded by PG&E’s proposed TO18 rates, and therefore remain unaffected by this complaint for that period, the commission said.

“Here, complainants are using new data provided by PG&E in its TO19 rate case to allege that PG&E’s TO19 rates are overstated to such an extent that the final just and reasonable rates will be below those agreed to in the TO17 rate case,” the commission said. “The TO17 rates are thus relevant only to the extent that they establish the last clean rate and the floor below which additional refund protection is necessary.”

Based on its review of the record, the commission expects that the presiding judge should be able to render a decision within approximately 12 months of the commencement of hearing procedures, or May 17, 2019.

“Thus, we estimate that, absent settlement, we would be able to issue our decision within approximately 12 months of the filing of briefs on and opposing exceptions, or by July 17, 2020,” the commission said.