CPUC Business Plan for 1998 - 1999

Section 8

Energy Division 

The Energy Division gives technical support to the five Commissioners and their offices, and the Administrative Law Judges (ALJs) in the ALJ Division.  The Energy Division is not a formal party to Commission proceedings.  The Energy Division assists Commission activities in four industries:  electricity, natural gas, steam, and petroleum pipelines. 

TWO TO THREE YEAR OUTLOOK

In 1998, California’s electricity industry implemented an historic realignment toward competition and customer choice.  California is first in the nation to dismantle the monopoly structure of the electricity industry and allow competition in generation, metering, billing, and other former monopoly services.  With competition now established for all customers, the new market mechanisms call for new regulatory responses in consumer education, consumer protection, distribution system reliability, and regulatory streamlining.  

The deregulation of substantial parts of the natural gas industry in the nation and in California during the 1980s has created a fully competitive wellhead commodity market for natural gas.  In addition, all large gas users in California, as well as many smaller consumers, enjoy direct access to transmission, storage, and distribution services.  Over the next several years,  the Commission will investigate issues associated with providing direct access to all customers.  Following this investigation, the Commission will report its findings and recommendations to the Legislature.

The Commission regulates a number of investor-owned petroleum pipelines, including oil pipelines and jet fuel lines at airports.  There is one investor-owned steam-heating company in California.  

The energy industries are increasingly converging toward a unified marketplace where consumers have a broad choice of providers for various services, including electricity, natural gas, meters and meter reading, billing, 
and energy-efficiency improvements.  Several new market participants already offer both electricity and gas and related services, and we can expect the boundaries between the industries to continue to blur, to the benefit of consumers.  Consumer protection and consumer education issues increasingly cross industry boundaries (in fact, they look increasingly similar across the energy, telecommunications, and even water industries), as do regulatory streamlining, environmental protection, and strategies to attract new competitors into traditional utility industries.

The Commission will continue its commitment to ensuring safety and environmental sensitivity in all the energy industries.
The historic changes in regulation of the energy industries have been reflected in the Commission’s Energy Division, formed in 1997 to reflect the new marketplace.  Nothing about the Energy Division, its organization and its outlook,  is the same as its predecessors of as recently as three years ago. 

The Energy Division is organized into the following sections and their corresponding work, outlined for 1998 - 1999 in the following pages, defines the Division’s major responsibilities: 
 
•	Energy Distribution System Reliability and Maintenance
•	Accounting, Auditing and Finance
•	Federal Policy and Ratemaking
•	Environmental and Public Purpose 
•	Consumer Education and Consumer Protection
•	Market Rules
•	PBR and Ratemaking
•	Document Processing and Control

CHANGES IN PRIORITIES From February 1998

Two events assumed greater importance than we originally planned, causing staff redirection during the year.  Energy Division expects that most of the effort described below is now behind us, permitting us to resume our initial priorities in the coming year.

•	El Nino rains spurred exceptional rates of vegetative growth in early 1998, making contacts between power lines and vegetation more of a hazard than usual.  When public safety concerns obliged the Commission to inspect utility compliance with clearance standards, Energy Division staff deferred Reliability work to join with Consumer Services Division, leading to at least two enforcement OIIs.  In 1999, the Energy Division’s deferred priorities will be resumed.

•	Year 2000 (Y2K) and other date-related computer problems have the potential for triggering service interruptions or other problems.  The Energy Division responded to widespread interest in this subject and can report that electric and gas utilities have devoted major resources to preparing for the century turnover.  The Energy Division will continue to monitor the situation and will report the utilities’  progress on a quarterly basis until the transition into the new century is accomplished.

1998 - 1999 ENERGY DIVISION OBJECTIVES

Objective A:  Ensure System Reliability and Maintenance      The Energy System Reliability and Maintenance Section sees that the reliability and dependability of the state’s power distribution system, essential to delivering electricity from newly-competing generating sources to their customers throughout the state, is maintained and improved.  

The section team comprises a supervisor,  a project manager, engineers, analysts, and computer specialists, who examine outage data to identify and promote cost-effective improvements.  This section also coordinates with the Consumer Services Division to oversee tree-trimming programs necessary for long-term system reliability, and on compliance with tariff rules, line inspections, and undergrounding.  Energy and Consumer Services divisions will examine high bill complaints.

Strategy 1	Work with the Governor’s office when requested to support efforts 
to secure an interstate compact to focus on reliability and maintenance standards, as required by AB 1890.    
   
Strategy 2	Identify cost-effective improvements to the systems.  Design 
and operation of the Western and California Grid will affect the potential for and likelihood of major outages.  When requested, we will participate in the Independent System Operator’s (ISO) western reliability study.                          

Strategy 3   Analyze Utility Outage Reports: Use utility outage reports to 
identify why certain localities experience worse reliability than others, whether increased inspection or maintenance would help improve reliability, why reliability indexes vary so much between utilities, what statistical tests will shed light on these questions, and what data should be collected from utilities.                           

•	further standardize reporting by utilities

•	consider collecting more detailed data from utilities

•	survey available material on the value of reliability to consumers.

Strategy 4   Assess Standards for Utility Inspection and Repair Reporting to 
determine whether they are adequate or should be modified, or new standards set.

•	The first reports were submitted by July 1, 1998.  

•	The Energy Division plans to establish audit procedures to verify the utilities’ compliance with GO 165,  and then perform periodic field and record audits.
Strategy 5   Determine Degree of Compliance with Tree-Trimming
                   Requirements:	

•	One hundred percent of utility systems should be in compliance with the new CPUC rules by late January 1999. 

•	Energy Division is coordinating with Consumer Services Division as necessary to schedule and perform inspections of trimmed areas.

•	Review tree-trimming standards on an on-going basis.

Strategy 6   Add details to measures of reliability now available for public 
                   inspection on the CPUC’s web site.

Strategy  7  Handle Line Extension Inquiries:   Existing tariff rules governing
line extension laterals to customer premises and dealing with substantial sums earmarked for power line undergrounding are complex and subject to interpretation. Staff experts field these and related inquiries, and handle advice letters and resolutions in this area.                 	

Strategy 8   Establish Emergency Standards and Procedures:	Emergency 
standards required by AB 1890 were developed by utilities and other parties. 

•	Review and evaluate the adopted standards, and outage histories, to further develop policy and procedural requirements.   

•	Continue developing a system, jointly with the CEC and other affected organizations, to receive timely information and generate accurate, consistent reports on utility system problems for CPUC Management, Commissioners, and Public Information Officers as appropriate.                                      

•	Examine utility prioritization plans for rotating outages to determine why certain districts are targeted, and if possible, examine how such systems operated in actual emergencies.                                                           

Strategy 9   Investigate the Importance of Electric Power Quality at the 
distribution level, including allowable voltage and frequency deviations, and counting cycles.    

Strategy 10 	Study Undergrounding of Power Lines as a means to improve 
aesthetics and reliability.  

•	Determine criteria for improving reliability via undergrounding circuits, versus conditions where overhead construction is more reliable.

•	Utilities share the costs of undergrounding distribution lines in areas chosen by local governments.   Although popular with local governments, coordination on the joint funding is difficult.  In recent years, several hundred million dollars of CPUC authorized funds remain unspent with only about 100 miles of line undergrounded yearly.  We seek alternatives for the program.

Strategy 11 Consider Revisions to General Order 95 Governing Overhead 
Lines:  Convene parties to consider revisions to GO 95 that reflect current regulatory policy and available technology, cover safety of utility employees and the public, address joint pole attachments in a competitive market, and address cost-effective reliability improvements.  Consider incorporating part or all of a national standard now adopted by other states.

Objective B:  Accounting, Auditing and Finance Section Responsibilities 
                     and Projects

Strategy 1  Audit Utilities and Maintain Financial Expertise

•	D.97-09-117 ordered the Energy Division to conduct annual financial and administrative audits of California Board for Energy Efficiency and Low-Income Governing Board operations for 1997, 1998, and 1999.  (1997 audit report completed.  1998 audit report due July 1, 1999)

•	Transfers to Transition Cost Balancing Accounts Audit.  ECAC balancing accounts, ERAM, etc. for balances to be transferred to TCBA will be completed in 1999.  

•	Transition Cost Balancing Account Compliance Report Audits.  Utilities filed first annual report July 1998.  The annual report and monthly compliance reports must be reviewed for compliance.                                     

•	Diablo Canyon Audit for sunk costs including nuclear fuel inventories has been filed.   

•	PG&E Holding Company - Phase 2 Proceeding.  ORA filed an Audit of PG&E Affiliate Transactions on December 1, 1997.  Audit report recommends 23 new or modified holding company conditions and continuation of 15 of the conditions adopted in the Phase 1 Interim Decision (D.96-11-017).  Phase 1 Interim decision granted conditional approval of the holding company subject to these conditions:  the outcome of an audit of PG&E’s affiliate transactions, and any further conditions or modifications of existing conditions that may arise from Phase 2 of the proceeding which is in progress.

•	Affiliate Rulemaking (R.97-04-011) decision orders utilities to have an independent auditor conduct an annual audit at shareholder expense to verify compliance with the rules.

•	SoCalGas’s PBR, D.97-07-054, orders SoCalGas to file an annual PBR performance report including workpapers by April 1 of each year.  Energy Division must submit its audit analysis of SoCalGas’s sharable earnings. 

Strategy 2   Coordinate Financial Proceedings, including cost of capital 
                   and Section 851 applications                  

•	Ordered by D.97-08-056, utilities filed applications for unbundled cost of capital on May 8, 1998.  The Energy Division continues to provide support to the ALJ in this proceeding and will review advice letters for compliance with the decision in 1999.  
•	Section 851 Applications

Strategy 3   Initiate Investigations to evaluate effectiveness of streamlined 
                    Commission regulation.

•	Investigate and monitor the effectiveness of market power mitigation measures adopted to prevent utilities from thwarting competition in the restructured electricity market.                         

•	Analyze the effectiveness of the PBR mechanisms for base rates in the newly-restructured electricity market.                         

Objective C: Federal Policy and Ratemaking Technical Advice.
      Advise Commissioners and their offices and Legal Division’s federal attorneys on energy issues before Federal agencies and related regional and state forums.  Provide expert testimony and exhibits to support Commission positions.  Representation for California consumers' interests before the Federal Energy Regulatory Commission (FERC) and regional bodies will be developed in collaboration and consultation with the Governor, the Legislature, and the California Electricity Oversight Board.

Strategy 1	The Budget Bill (AB1656) directs the negotiation of a
Memorandum Of Understanding (MOU) between this Commission and the California Electricity Oversight Board to provide explicit and comprehensive representation on electrical issues affecting California.  This MOU is now being negotiated.  

Strategy 2	Participate in electric proceedings at the FERC, as appropriate 
and within the constraints of the Budget Bill.

Strategy 3	Participate in the FERC’s proposed rulemaking on natural gas 
pricing policies for new capacity and the existing long term market, and other natural gas proceedings.

Strategy 4	Participate in other formal proceedings in state or federal 
courts and other forums where ratemaking and policy issues impact the ratepayers in California.   

Objective D:  Prepare Environmental Reviews Pursuant to CEQA     The Environmental Section conducts and manages environmental reviews under the California Environmental Quality Act (CEQA) where the Commission is a lead or responsible agency, administers mitigation monitoring plans when ordered by the Commission, and participates in other agencies’ reviews of utility-related projects.  These are activities and projects for 1998:

Strategy 1  Prepare CEQA Documentation as Lead Agency for:             

•	PG&E and Southern California Edison (Edison) Hydroelectric Generation Assets Divestiture (Electric Restructuring), and SDG&E fossil generation asset divestiture.

•	Lodi Gas Field Project

•	WGR-Cal Gas Pipeline Project 

•	Santa Fe Pacific Pipeline Expansion Project (Petroleum product, L.A.) 

•	Competitive Local Telecommunications Carriers 

•	General Order 131-D, Power Line and Substation Construction Permits 
•	Edison- Lucerne Valley Power Line (Bear Valley) 
•	Edison- CalNev Substation
•	Edison- Six Flags Substation 
•	PG&E - Vasona Substation (Los Gatos)
•	PG&E - Corona Substation (Petaluma)
•	PG&E - Los Esteros Line & Substation (San Jose)
•	PG&E - 230 kV Line Newark to Los Esteros 
            (CPCN) 
•	PG&E - FMC Substation (San Jose) 
•	PG&E - Re-Loop Project T-Line (Cupertino)
•	Sierra Pacific Power (Sierra) 

•	Others as filed by Utilities.  Note: increasing power needs in the South Bay Area are resulting in increasing numbers of applications for both transmission reconductoring projects to increase transmission transfer capacity into the Bay Area and for additional substation facilities to step down the power for distribution-level service.  These projects are generally listed in PG&E’s Quarterly GO131-D Report.

•	Advise Executive Director on Protests to Exemptions Claimed by Utilities.  

•	PG&E Property Sales:  Various Sec. 851 applications pending. 
These applications are becoming quite numerous – possible impact of Electric Restructuring because IOUs may want to “clean house” and pare down ratebase to recover value from unneeded assets and become more competitive in the new market.  Workload impact unclear at this time:  most applications may not require substantial if any review; others may require significant review as Lead or Responsible Agency.

•	Unocal Pipeline System Sale to Tosco 
       
•	Washington Water Power, Susanville Gas Distribution CPCN

Strategy 2  Prepare CEQA Documentation as Responsible Agency for:

•	Richmond Marine Link Pipeline (Wickland) 

•	Cal American Water, Carmel River 

Strategy 3  Do Mitigation Monitoring as CEQA Lead Agency for:

•	Southwest Gas Expansion Projects 

•	Competitive Local Telecommunications Carriers 

•	Sierra, Alturas-to-Reno Transmission Line 

•	Pacific Pipeline (crude oil)

•	Wine Train 

•	PG&E/PGT Natural Gas Pipeline Expansion Project:  Monitoring PG&E compliance with 1/97 Bethany Station re-landscaping order.
•	Alpine Natural Gas Distribution 

•	Wild Goose Natural Gas Storage System 

Strategy 4   Research and Interagency Facilitation    Conduct Research and
Education with the California Department of Health Services (DHS) on Electric and Magnetic Fields (EMF).                                     

Objective E:  Provide Staff Support for Public Purpose Programs
The California Board for Energy Efficiency (CBEE) and the Low Income Governing Board (LIGB) were created to provide policy and technical advice to the Commission regarding energy efficiency and low income programs and to assist in the transfer of the administration of these programs from utilities to independent contractors.  As a result of legal challenges brought by civil service unions, the Energy Division has been required to supply the staffing for these Boards. 

Strategy 1	A Budget Change Proposal has been submitted to create and to fill 
ten civil service positions to support the CBEE and LIGB.

Strategy 2	The Commission is in the process of reconsidering its policy 
preference for independent administration of the energy efficiency and low income programs and may adopt an alternative structure.

Objective F:  Implement an Effective Energy Service Provider Registration Program	As part of restructuring of the electric industry, the Commission is required to balance the need to maximize competition by reducing barriers to entry into the small retail electricity procurement market with the need to protect small consumers against deceptive, unfair, or abusive business practices, or insolvency of the entity offering retail electric service.  An effective energy service provider registration program is one tool to accomplish this.

Strategy 1	Register New Energy Service Providers:   ESPs are required to 
register with the Commission and submit information including a description of the nature of service provided and proof of financial viability and technical and operational capacity.            

•	Develop and maintain uniform standards for proof of financial viability and technical and operational capacity.  Initial standards established March 1998.

•	Keep copies submitted by ESPs of their written notice to potential customers of the price, terms, and conditions of the service.  The CPUC may assist in developing terms and conditions of service and suggest the inclusion of consumer protection language.                                            

Strategy 2   Carry Out a Meter Service Providers (MSP) Certification 
Program:  The  Commission established an MSP certification program in December 1997.  Procedures for implementation are underway.   

Objective G:   Establish  Market Rules     The Energy Division’s Market Rules Section coordinates with other Energy Division sections to ensure that current policies and programs are providing for an orderly transition to competitive energy markets and maximum customer choice.  

Strategy 1   Establish procedures to monitor market development. 

•	Develop database to track ESP activity, direct access saturation, and billing and metering activity.

•	Develop consumer protection rules for gas providers.

•	Track and monitor complaints related to affiliate transactions and activities.

Strategy 2   Develop and provide comprehensive energy-related 
information on market activity which will be used to correct and adjust market policies and programs under the Commission’s jurisdiction.                                             

•	Monitor market development in the area of distribution competition, including franchise developments, and localized utility providers serving new developments.

•	Participate in the development of policy related to distributed generation.
 
Strategy 3   Initiate Rulemakings or Investigations necessary to facilitate 
competitive market development, and participate in pending proceedings:

•	Distribution Competition - Participate in a process to establish policies defining the role of the utility distribution company facing competitive challenges.

•	Distributed Generation - Investigate the feasibility of using distributed generation as a component of transmission and distribution and develop policies to facilitate the development of competitive markets.

•	Affiliate Rules - Establish a process to enforce Affiliate Transaction Rules, including complaint procedures and appropriate penalties.

•	Direct Access Implementation - Conduct workshops to develop final electric restructuring implementation details.  Subsequently, the Commission will issue decisions to implement a customer information data base, load profiling, direct access implementation plans and related tariffs, and meter and data communications standards. 

•	Participate in a process to support and expedite the renegotiations of high cost QF contracts.

•	Gas Strategy Implementation -  Participate in development and implementation of the Commission’s natural gas regulatory reform strategy.		

Objective H:  Advise the Commission in Ratemaking Proceedings

Strategy 1	Assist with scoping issues, generating rate tables, and 
providing technical support and advisory services to ALJs and Commissioners for:  

•	PG&E GRC (Phase 1 - Results of Operations):  Hearings end October 16,1998; PD on interim rate relief due November 16,1998; Update hearings to be held December 1998; Decision on interim rate relief due December 1998; PD to be served February 1999;  Final Decision on Phase 1 due March 25,1999.

•	SoCalGas BCAP:  Application filed October 1, 1998; Intervenor testimony expected by December 1998; PD/Final Decision expected Spring or early Summer 1999.

•	Revenue Adjustment Proceeding:  First annual proceeding applicable to PG&E, SDG&E and SCE in which "headroom" revenues used to offset transition costs will be determined.  Utilities filed in July 1998,  Intervenors file in October 1998, hearings in November 1998.  Decision expected in April 1999.

•	Annual Transition Cost Proceeding: First annual proceeding applicable to PG&E, SCE and SDG&E.  Purpose is to:  review entries to must-run, non-must-run memo accounts and ensure that excess revenues are properly credited to TCBA; adjust TCBA for generation capital additions and QF contract buyouts; review reasonableness of costs and revenues from ISO and PX, etc.  Decision expected in Spring 1999.

•	Section 376 applications to recover electric restructuring implementation costs for PG&E, SDG&E, and SCE, determine eligibility of costs recoverable pursuant to PU Section 376, and the reasonableness of those costs.  Decision expected in April 1999.

•	SDG&E/SoCalGas Application for gas transmission tariff for use by shippers serving CFE's Rosarito power plant and U.S. Gen's generation plant to be built in San Diego county.  Decision expected in Winter/Spring 1999.

•	SDG&E Electric Distribution and Gas base-rate PBR/Cost of Service application (A.98-01-014).  Decision expected in February 1999.

•	PG&E Electric Distribution PBR. To be filed on completion of TY 1999 GRC (estimated Spring/Summer 1999).

•	SCE Mid-Term Review of its Distribution PBR -- Compliance filing expected in Spring 1999. 

Strategy 2:  Monitor existing PBRs

•	SoCalGas Gas Cost Incentive Mechanism -- SoCal files in June 1999

•	SDG&E Gas PBR - SDG&E files in October 1999

Objective I:  Document Processing and Control      This Section ensures timely review and processing of advice letters and other matters delegated by the Commission;  plans, organizes and coordinates the Energy Division’s information resources and reporting, including its Web Site;  provides information, guidance and assistance to other programs and teams on process options/innovations, compliance and implementation, and on information resource development and maintenance;  monitors and assesses the effectiveness of Energy Division policies, practices and procedures in meeting Business Plan goals and objectives, and develops and/or implements improvements.

Strategy 1	Eliminate Advice Letter Backlog   The Energy Division’s goal is 
to process all advice letters within 90 days of filing.  To eliminate the current backlog, the Energy Division needs to fill current staff vacancies and devote extra resources to advice letter processing.  The Energy Division will continue its efforts to coordinate with utilities to eliminate unneeded or stale advice letters, and will maintain its tracking and reporting system to show results.        

Strategy 2   Revise General Order 96A   The Commission is expected to issue 
a proposed new General Order for advice letter processing early in 1999.  The Energy Division has played a key role in developing the revision proposals, and will assist the Commission in deciding on and implementing a new General Order. 

ENERGY DIVISION KEY PERFORMANCE INDICATORS

•	Advice Letter Processing Time
•	Age of Pending Advice Letters

RESOURCES

Staffing

The objectives laid out in this Business Plan depend for their achievement on an aggressive and successful staffing-up process now being conducted Commission-wide, and are presented assuming that the Energy Division will fill its vacancies before the end of the fiscal year.  

Below, by Objective, is the current Energy Division staffing picture.

Staff with administrative home in a section may be assigned to other sections to
  achieve Business Plan objectives.

Objective | Authorized | Filled | Vacancies

A - Ensure System Reliability and 
      Maintenance

9

6

3

B - Accounting, Auditing and Finance 
     Section Responsibilities and Projects

9

7

2

C - Provide Federal Policy and Ratemaking 
     Technical Support and Advice

8

6

2

D/E - Prepare Environmental Reviews 
          Pursuant to CEQA and staff Public
          Purpose Programs

8

6

2

F - Carry Out An Effective Consumer 
      Education and Protection Program

8

7

1

G - Establish Market Rules | 7 | 5 | 2

H - Advise the Commission in Ratemaking 
      Proceedings

8

5

3

I - Document Processing and Control | 6 | 4 | 2
Support Staff | 11 | 10 | 1
Senior Area Experts | 6 | 6 | 0
Division Administration | 4 | 4 | 0
Totals | 84 | 66 | 18

1998 - 1999 CPUC Business Plan                                                   Energy Division