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Abandonment Incentive - PG&E

Paul Dumais's picture
CEO Dumais Consulting

Owner and CEO of Dumais Consulting ( which provides expert ratemaking services to energy companies. Dr. Dumais is a ratemaking and regulatory expert who specializes on...

  • Member since 2018
  • 157 items added with 120,606 views
  • Aug 20, 2020

On August 6, 2020, in Docket No. EL20-60, Pacific Gas and Electric Company (“PG&E”) filed for a Petition for Declaratory Order (“Petition”) for 100% recovery of prudently-incurred abandoned plant costs (if abandoned for reasons outside the control of PG&E) for PG&E’s portion of two significant reliability-driven transmission projects approved in CAISO’s 2018-2019 Transmission Plan: (1) the Gates 500 kV Dynamic Reactive Support Project (“Gates Project”) and (2) the Round Mountain 500 kV Area Dynamic Reactive Support Project (“Round Mountain Project”) (collectively “Projects”).  Under its competitive solicitation process, the CAISO selected LS Power Grid California, LLC (“LS Power Grid”) as the Project Sponsor for the Gates Project on January 17, 2020, and the Round Mountain Project on February 28, 2020.  As the incumbent transmission owner, PG&E is required to complete significant supporting work for the Projects.  For the Gates Project, PG&E is responsible for all system upgrades, including telecommunications and protection system upgrades using advanced fiber optic technology and for all equipment installation to connect the Gates voltage control equipment to the Gates 500 kV bus on the PG&E side of the point of change of ownership switch.  For the Round Mountain Project, PG&E will be responsible for various project specific telecommunications and protective system upgrades at both the target substations and adjacent substations. For example, new tripping schemes will need to be installed to account for voltage support equipment operations in non-normal system configurations. This work is extensive, often entails significant work at other, more remote, substations and will not be known with certainty until much later in the project design process as detailed design comes to completion.  PG&E asserts that since LS Power Grid received the abandonment incentive for these two projects, PG&E is entitled to the abandonment incentive for its related investments as PG&E faces the same risk and challenges as LS Power Grid.  Finally, the substantial cost, long-lead time for equipment, risk of cost escalation, and risk of a shortage in skilled labor are all risk factors that could lead to the cancellation of one or both projects, exposing PG&E to the risk of unrecovered costs without the Abandoned Plant Incentive. 

Bob Meinetz's picture
Bob Meinetz on Aug 20, 2020

Paul, looking through CAISO's 2018-2019 Transmission Plan, it seems PG&E is requesting the right to bill ratepayers for not only any abandonment costs, but entire project costs for grid improvements necessitated by the premature abandonment of Diablo Canyon Power Plant.

Is it typical for the California Public Utilities Commission to permit recovery of the costs of profit-driven decisions of utilities and their holding companies - ones where customers can expect no benefits in increased reliability, or lower rates?

Paul Dumais's picture
Paul Dumais on Aug 22, 2020

Since these are tranmsission assets, PG&E is subject to FERC regulation for these investments.  I am not familar with the issues around the retirement the power plant, but whatever transmission is built is to address reliability needs resulting from its retirement.  The transmission investments needed likely come from CAISO transmission planning processes.    

Paul Dumais's picture
Thank Paul for the Post!
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