By Robert Mullin
FERC last week accepted Pacific Gas and Electric’s filing for a proposed rate increase under the utility’s transmission owner tariff, but the commission suspended implementation of the increase for five months out of concern that the proposed rates could yield “substantially excessive revenues.”
The utility’s filing raised “issues of material fact” that would be better addressed through further proceedings, the commission said in its Sept. 30 order (ER16-2320).
The new rates will become effective March 1, 2017, but they remain subject to a refund based on the outcome of settlement and hearing proceedings.
In its filing, PG&E proposed a 10.9% return on equity for 2017 — composed of a 10.4% base return plus a 50-basis-point incentive adder for its continued participation in CAISO. The utility said its transmission rate base will jump 29% to $6.71 billion, while its retail network transmission service revenue requirement is projected to increase 15.4% to $1.718 billion.
Opponents of the rate increase, which include the California Public Utilities Commission, contend that the utility should be required to calculate its ROE based on the median of its own discounted cash analysis, which would reduce the base rate to 8.65% and lower the revenue requirement by about $114 million.
Those opponents also argue that PG&E’s proposed 3.26% depreciation rate is excessive and represents an unjustified increase from its currently authorized depreciation rate of 2.52%.
The commission denied a CPUC request that it not approve PG&E’s 50-basis-point adder based on the fact that the justification for the adder is the subject of a proceeding before the 9th U.S. Circuit Court of Appeals. The CPUC contends the adder is unnecessary because PG&E is required to be a member of CAISO under California law.
“While we recognize that appeal is pending, such an appeal does not operate as a stay of the commission’s consideration of this issue here,” FERC said.
The commission will appoint a settlement judge on the matter later this month, but it encouraged PG&E and opponents to settle their disputes before the start of settlement proceedings.
