Docket No.: A.17-09-005

Exhibit No.: UCAN-02

Date: June 26, 2018

ERRATA TO TESTIMONY OF BRANDON CHARLES ON BEHALF OF THE UTILITY

CONSUMERS’ ACTION NETWORK CONCERNING SAN DIEGO GAS & ELECTRIC

COMPANY’S APPLICATION FOR AUTHORITY TO IMPLEMENT RATE RELIEF

AND INCREASE SPEND IN SUPPORT OF THE SAN DIEGO UNIFIED PORT

DISTRICT’S ENERGY MANAGEMENT PLAN

2

REVISIONS TO TESTIMONY OF BRANDON CHARLES:

p. 28, FN 64 Original: $4,403,656 = 9,073,946 under discounted Schedule A6-TOU -

$4,670,290 under Schedule TOU-A

p. 28, FN 64 Revision: $4,403,656 $4,343,634 = $9,073,946 $9,013,924 under discounted

Schedule A6-TOU - $4,670,290 under Schedule TOU-A

Table of Contents

I. Introduction and Summary 1

II. SDG&E’s Rate Proposal for the District 5 A. Backdrop for Rate Proposal 5 B. SDG&E’s Rate Proposal is not cost-based and is inconsistent with Commission Direction 11 C. SDG&E’s rate proposal is not structured to transition the District toward appropriate long-term rates 17 D. SDG&E’s rate proposal could be used by the District to gain competitive advantage over other California ports 20

III. UCAN’s Rate Proposal for the District 23 A. Structure of UCAN’s Rate Proposal 23 B. Bill and Cost Recovery Impacts of UCAN’s Rate Proposal 27

IV. SDG&E’s Cost Recovery Proposals 35 A. SDG&E’s proposed allocation of revenue shortfalls from the District’s rate discount should be rejected 35 B. SDG&E’s proposed Port District EMP balancing account should be rejected 39

V. Conclusion 42

Attachments (provided in a separate volume)

1

I. Introduction and Summary 1

Q. Please state the name and business address of the testimony sponsor. 2

A. Brandon Charles of MRW & Associates, LLC (MRW) is sponsoring this 3

testimony.1 MRW’s business address is 1736 Franklin Street, Suite 700, 4

Oakland, California. 5

6

Q. On whose behalf are you testifying? 7

A. This testimony is being provided on behalf of the Utility Consumers’ Action 8

Network (UCAN). 9

10

Q. What is the purpose of your testimony? 11

A. The purpose of this testimony is to address San Diego Gas & Electric 12

(SDG&E)’s request for authorization to implement a five-year rate discount 13

for the San Diego Unified Port District (District) cruise ship terminal account 14

and to increase funding for energy efficiency and an Enhanced Partnership 15

Program (EPP) in support of the District’s Energy Management Plan (EMP).2 16

17

1 Mr. Charles’s qualifications are provided in Attachment A. 2 Application of San Diego Gas & Electric Company (U 902 M) for Authority to Implement Rate

Relief and Increase Spend in Support of the San Diego Unified Port District’s Energy Management

Plan, CPUC proceeding A.17-09-005, September 13, 2017, page 1.

2

Q. Which aspects of these proposals will you address? 1

A. My testimony focuses on the proposed rate discount for the District’s cruise 2

ship terminal and the cost recovery proposals for the proposed rate discount 3

and EMP funding. My testimony does not delve into the merits of the 4

District’s EMP and the associated funding requests; however, this does not 5

signify concurrence with SDG&E’s requests, and UCAN may address these 6

issues at a later point during the course of this proceeding. 7

8

Q. How is your testimony organized? 9

A. This testimony first addresses SDG&E’s rate discount proposal and provides 10

UCAN’s recommendations for alternative rate options. It then addresses 11

SDG&E’s cost recovery proposals. 12

13

Q. Please summarize UCAN’s recommendations regarding SDG&E’s 14

proposed rate discount for the District’s cruise terminal. 15

A. The cruise terminal should be placed on a rate under which the District would 16

contribute a positive contribution to margin (CTM) and would receive price 17

signals that would indicate the most cost-effective investments for reducing 18

the terminal’s cost of service. SDG&E’s proposed rate discount does not meet 19

these requirements. An appropriate discount off of the Schedule A6-TOU rate 20

that provides for a positive CTM contribution would meet these requirements. 21

22

3

If the Commission determines that, due to the unusually high rate increase 1

faced by the District, it would be appropriate to allow the District to take 2

service for a transition period under a rate that does not provide for positive 3

CTM, SDG&E should offer the District a rate that reduces the District’s 4

immediate bill impact and provides cost-based price signals consistent with 5

those provided to other M/L C&I customers. One option to achieve this would 6

be to make the District’s cruise ship terminal eligible for Schedule DG-R for a 7

limited period of time. Another option would be to offer a steeper version of 8

the Schedule A6-TOU discount with a declining level of discount so that 9

positive CTM is achieved by the end of the discount period. 10

11

Any discounted rate option should be limited to a transition period of no more 12

than five years and to the cruise terminal’s existing load, defined as the 13

terminal’s annual maximum load from 2015 through 2018. 14

15

Q. Please summarize UCAN’s recommendations regarding SDG&E’s cost 16

recovery proposals. 17

A. UCAN recommends the following: 18

1. SDG&E’s proposal to recover the cost of the District’s rate discount 19

through Public Purpose Program (PPP) charges should be rejected. These 20

costs should instead be recovered through the distribution rates of 21

medium and large commercial and industrial (M/L C&I) customers. 22

2. SDG&E’s proposed Port Energy Management Plan Balancing Account 23

4

(PEMPBA) should be rejected. SDG&E should instead be provided hard 1

caps for rate recovery for the rate discount, the EPP, and the specialized 2

energy efficiency measures, along with one-way balancing accounts for 3

each of these cost categories to return unused funds to ratepayers. 4

5

II. SDG&E’s Rate Proposal for the District 1

A. Backdrop for Rate Proposal 2

3

Q. Why is SDG&E proposing a rate discount for the District? 4

A. As explained in the testimony of Ms. Fang, the District’s cruise ship terminal 5

is currently being served under the TOU-A small commercial rate schedule; 6

however, once the eligibility rules for this rate schedule are adjusted to 7

conform with the decision in SDG&E’s 2015 General Rate Case (GRC) Phase 8

II proceeding, the cruise terminal will no longer be eligible for the TOU-A 9

rate schedule and will need to transition to a medium/large commercial and 10

industrial (M/L C&I) rate schedule.3 SDG&E anticipates that such a transition 11

would increase annual bills for the cruise terminal by over 400%.4 12

13

Q. Why did the 2015 GRC Phase II decision modify the rules for Schedule 14

TOU-A eligibility? 15

A. Current eligibility rules for Schedule TOU-A state that the Schedule “is the 16

Utility's standard tariff for commercial customers with a demand less than 20 17

kW” and that the Schedule “is not applicable to any customer whose 18

Maximum Monthly Demand equals, exceeds, or is expected to equal or 19

exceed 20 kW for 12 consecutive months.”5 Under these rules, a TOU-A 20

customer could have demand exceeding 200 kW or even 20,000 kW for up to 21

3 Prepared Direct Testimony of Cynthia Fang on behalf of SDG&E (“Fang Testimony”), A.17-09-005,

September 13, 2017, page CF-3. 4 Prepared Direct Testimony of Todd Cahill on behalf of SDG&E (“Cahill Testimony”), A.17-09-005,

September 13, 2017, page TC-12. 5 SDG&E Rate Schedule TOU-A, Sheet 1, April 2018.

6

11 months of the year, as long the customer’s demand does not reach 20 kW 1

during a single month of the year. 2

3

In SDG&E’s 2012 GRC Phase II proceeding, parties, including the Division 4

of Ratepayer Advocates, raised a concern that these eligibility rules are too 5

permissive and that they have allowed “customers with large demands to 6

create an upward bias in the marginal customer costs and a small commercial 7

rate that was not reflective of the small customer class.”6 In SDG&E’s 2015 8

GRC Phase II proceeding, SDG&E addressed this concern by proposing to 9

amend the Schedule TOU-A eligibility rules such that any commercial 10

customer whose demand exceeds 200 kW in two out of twelve consecutive 11

months would also not be eligible for the small commercial rate7 “to ensure 12

that [SDG&E’s small commercial tariffs] truly reflect small commercial 13

customers.”8 The Commission adopted this change in Decision (D.) 17-08-14

030, explaining, “The proposed applicability change better reflects the 15

expectation that a small commercial customer’s load will generally hover near 16

the 20 kW level that establishes its eligibility for small commercial 17

Schedules.”9 18

19

6 CPUC Resolution E-4812, August 10, 2017, page 2. 7 CPUC Resolution E-4812, pages 2-3. 8 D.17-08-030 in A.15-04-012, August 2017, page 35. 9 D.17-08-030, page 35.

7

Q. How will the District be affected by this change? 1

A. Under the new rules, the District’s cruise ship terminal will no longer be 2

eligible for the TOU-A small commercial rate schedule.10 Data from SDG&E 3

indicate that the terminal’s annual average maximum demand has averaged 4

more than 11,000 kW over the last three years, with demand exceeding 4,000 5

kW for nine months during each of these years.11 This level of demand greatly 6

exceeds the demand cap under the new rules of 200 kW for two of twelve 7

months as well as the 20 kW level of demand that is expected for small 8

commercial customers12 (Figure 1). Indeed, the cruise terminal’s demand is 9

over 20 times higher than that of the TOU-A customer with the next highest 10

load, and this customer with the much smaller demand has also be found to be 11

ineligible for small commercial rates due to its demand being too high.13 12

10 Fang Testimony, page CF-3. 11 SDG&E response to UCAN Data Request 02 Question 2. Data from prior to 2015 was not made

available. (Attachment B) 12 D.17-08-030, page 35. 13 Resolution E-4812, page 4.

8

Figure 1: Demand at District’s Cruise Terminal compared with Small 1

Commercial Demand Parameters14 2

3

Q. If the cruise ship terminal load is so large, why has it been on a small 4

commercial rate? 5

A. The cruise ship business is highly seasonal, with a cruise season of about nine 6

months.15 Even though the terminal’s demand can exceed 11,000 kW during 7

these nine months, during the off-season, demand at the terminal falls to 8

zero.16 Since the terminal’s load does not exceed 20 kW for every month of 9

14 The cruise terminal’s maximum demand was obtained from SDG&E’s response to UCAN Data

Request 02 Question 2 (Attachment B). 15 Application of San Diego Gas & Electric Company (U 902 M) for Authority to Implement Rate

Relief and Increase Spend in Support of the San Diego Unified Port District’s Energy Management

Plan (SDG&E Application), A. 17-09-005, September 13, 2017 page 4. 16 SDG&E response to UCAN Data Request 02 Question 2. (Attachment B).

11,39211,072

10,848

0

2,000

4,000

6,000

8,000

10,000

12,000

2015 2016 2017

kW

CruiseTerminalAnnualMaxDemand,kW

ScheduleTOU-ADemandLimit(200kWfortwomonths)

SmallCommercialDemandExpecta on(20kW)

9

the year, this seasonality has allowed the terminal to remain on small 1

commercial rates per the eligibility rules that are currently in place.17 2

3

Q. Is it appropriate for the cruise ship terminal to remain on small 4

commercial rates? 5

A. No. An entity with demand measured in megawatts should not take service on 6

a small commercial rate schedule intended for customers with demands that 7

“generally hover near the 20 kW level,”18 even if, for a few months of the 8

year, the entity’s demand drops to below 20 kW. The new eligibility rules 9

appropriately require the cruise ship terminal to take service under a M/L C&I 10

rate schedule. 11

12

Q. Why will this tariff change result in such a large bill increase for the 13

cruise ship terminal? 14

A. Schedule TOU-A does not have demand charges,19 so the demand cost 15

responsibility, which is established based on demand-related marginal costs 16

and Small Commercial class demands, is recovered via volumetric energy 17

charges based on expected Small Commercial class energy usage. For a 18

Small Commercial customer with a load factor similar to the class-average 19

load factor,20 the demand cost responsibility per kWh will be similar, on 20

17 SDG&E Application, page 5. 18 D.17-08-030 in A.15-04-012, August 2017, page 35. 19 SDG&E Rate Schedule TOU-A, Sheet 2, April 2018. 20 Calculated from SDG&E’s dynamic load profiles, downloaded on April 5, 2018 from

http://www2.sdge.com/eic/dlp/DownloadRange.cfm.

10

average, to the demand component of the Schedule TOU-A volumetric 1

charge. Since the cruise terminal’s load factor is only about 2%, which is 2

likely much lower than the class-average load factor, the demand cost 3

responsibility per kWh for the cruise terminal is instead, on average, much 4

higher than the demand component of the Schedule TOU-A volumetric 5

charge. As a result, Schedule TOU-A rates recover only a fraction of the 6

cruise terminal’s demand costs. 7

However, SDG&E’s M/L C&I rate schedules have both non-8

coincident demand charges and maximum on-peak demand charges,21 and 9

therefore do not rely on individual customers’ load factors relative to the class 10

average load factor to recover demand-related costs. Under these tariffs, the 11

District would be charged directly for its demand on the system and would not 12

shift such a large share of its burden to other customers. 13

14

Q. Please summarize the backdrop for SDG&E’s proposed rate discount for 15

the District’s cruise terminal. 16

A. As SDG&E has stated, the District is not currently paying the cost of service 17

for the cruise terminal “and is thereby being supported by other ratepayers.”22 18

When the cruise terminal is shifted to a M/L C&I rate schedule and loses 19

significant price support from other ratepayers, the District’s electric bill for 20

21 SDG&E Rate Schedule AL-TOU, Sheet 3, April 2018, and SD&E Rate Schedule A6-TOU, Sheet 1,

April 2018. 22 SDG&E AL-2896-E, page 4.

11

the cruise terminal is expected to increase by more than 400%.23 SDG&E’s 1

rate proposal is intended to mitigate this increase. 2

3

B. SDG&E’s Rate Proposal is not cost-based and is 4

inconsistent with Commission Direction 5

6

Q. Has the Commission provided guidance to SDG&E on how to address the 7

bill impacts that are expected for the District upon transitioning the 8

cruise terminal to M/L C&I rates? 9

A. As SDG&E notes, the Commission has determined that “[i]t is in the best 10

interest of the state, SDG&E and the Port to come to an agreement on an 11

appropriate long term rate solution for the Port.”24 In addition, the 12

Commission has stressed the need for this solution to be cost-based, noting the 13

problematic effects of having the District’s costs be subsidized by other 14

customers:25 15

While the potential cost impact of switching to AL-TOU is undesirable 16

for the Port, the Commission must also consider the effects of allowing 17

a customer with such high demand to remain on a rate that is 18

inappropriate for its cost of service and is therefore cross-subsidized 19

by other customers. We agree that the Port and its cruise ships are an 20

important aspect of the San Diego economy and should not face such 21

significant negative bill impacts that may affect the continued 22

operation of the Port and docking of cruise ships. However, we ask 23

that SDG&E pay particular attention to the cost basis of the long-term 24

rate solution it proposes in a forthcoming application. 25

26

23 Cahill Testimony, page TC-12. 24 Cahill Testimony, p. TC-13. (citing Resolution E-4812 at p. 7, Finding 7) 25 Resolution E-4812, pp. 4-5

12

Q. Please describe SDG&E’s rate proposal for the District. 1

A. SDG&E has proposed to provide the District with a discounted rate for a five-2

year period beginning in 2019.26 Under this proposal, SDG&E would 3

nominally bill the District’s cruise ship terminal account under Schedule A6-4

TOU, but, in practice, discount the bill “to provide the equivalent benefit to 5

the District as if the account received service on SDG&E’s current effective 6

class-average rate per kilowatt-hour (kWh) applicable to the M/L C&I 7

customer class for each kilowatt hour of electricity used.”27 In other words, 8

the District would pay for electricity based on a flat volumetric rate that 9

reflects the average price per kWh paid by the M/L C&I class as a whole28 10

while receiving a shadow bill that indicates what the bill would have been had 11

the District paid the full rate under Schedule A6-TOU. 12

13

Q. Would this rate proposal require a subsidy from other customers? 14

A. Yes. SDG&E calculated that to provide a neutral contribution to margin 15

(CTM), meaning that the rate would cover all marginal costs plus non-16

bypassable charges but provide no contribution towards fixed costs, the 17

District’s rate would need to be $0.61 cents per kWh.29 Under SDG&E’s 18

proposal, the District’s rate would be just $0.21 cents per kWh, requiring 19

other customers to pay about $0.40 cents for each kWh of electricity used at 20

26 Cahill Testimony, page TC-18. 27 Fang Testimony, p. CF-8. 28 SDG&E Response to UCAN Data Request 03, Question 2. (Attachment B) 29 SDG&E Response to ORA Data Request 07, Question 1. (Attachment B)

13

the cruise terminal just to cover marginal costs of this energy usage and 1

associated non-bypassable costs.30 2

3

Q. Is this level of discount in-line with other discounts that have been 4

approved by the Commission? 5

A. To my knowledge, the level of discount being proposed is unprecedented. 6

According to SDG&E’s projections, over the five-year period that would be 7

covered by the discount, the District’s bills for the cruise terminal would be 8

71% below what they would be under Schedule A6-TOU31 and 79% below 9

what they would be under Schedule AL-TOU.32 As a comparison, these 10

discount are more than double the 30 percent Enhanced Economic 11

Development Rate (EDR) discount that is offered to eligible PG&E and SCE 12

customers located in areas with unemployment rates greater than 25 percent 13

above the state average.33 SDG&E does not have an EDR discount program 14

and reports that it has not provided any special discounts to customers over 15

the past ten years.34 16

30 SDG&E Response to ORA Data Request 07, Question 1. (Attachment B) 31 -71% = $4,134,444 projected bill under SDG&E’s proposal/$14,100,532 projected bill under

Schedule A6-TOU - 1. Prepared Supplemental Testimony of Cynthia Fang on behalf of SDG&E

(Fang Supplemental Testimony), A.17-09-005, March 28, 2018, Attachment B workpaper, provided in

response to UCAN Data Request 01 Question 01. (Attachment B). Notably, it is apparent from the

workpaper that the labels in Attachment B for “Shore Power Rate Proposal at Small Commercial Class

Average” and “Shore Power Rate Proposal at M/L C&I Class Average” are reversed. SDG&E’s rate

proposal is reflected in the first of these two rows. 32 -79% = $4,134,444 projected bill under SDG&E’s proposal/$19,847,293 projected bill under

Schedule AL-TOU - 1. Fang Supplemental Testimony, Attachment B workpaper, provided in response

to UCAN Data Request 01 Question 01. (Attachment B) 33 PG&E Electric Schedule EDR, sheet 1, April 2018, and SCE Schedule EDR-R, sheet 1, April 2018. 34 In this context, “special discounts” exclude discounts that are available to all customers meeting

tariff eligibility requirements (such as CARE discounts). SDG&E response to UCAN Data Request 02

Question 4. (Attachment B)

14

1

Q. Under SDG&E’s proposed discount plan, how much would the District’s 2

electric bill for the cruise terminal increase compared to the bill under 3

small commercial rates? 4

A. Remarkably, under SDG&E’s proposal electric bills for the cruise terminal 5

would be 11% below what they would be under the highly subsidized 6

Schedule TOU-A small commercial rate.35 SDG&E has not explained why the 7

District should receive a rate discount below the TOU-A rate instead of a rate 8

that provides a transition away from the subsidized rate schedule and towards 9

an appropriate M/L C&I rate schedule. 10

11

Q. Do the job retention benefits provided by the District’s cruise ship 12

activity outweigh the costs to ratepayers of this discount subsidy? 13

A. The Commission has previously found in the context of EDR programs that 14

job retention benefits alone are insufficient to justify ratepayer funding of 15

discounts. Instead, the Commission has found that “CTM is the most 16

appropriate measure of the extent to which non-participating customers are 17

better off as a result of added or retained states [sic],”36 and that both job 18

retention/creation benefits and positive CTM must be demonstrated for an 19

EDR program.37 In addition, as the Commission recently noted in rejecting a 20

35 -11% = $4,134,444 projected bill under SDG&E’s proposal/$4,670,290 projected bill under

Schedule TOU-A - 1. Fang Supplemental Testimony, Attachment B workpaper, provided in response

to UCAN Data Request 01 Question 01. (Attachment B) 36 D.13-10-019 in R.12-03-001, October 3, 2013, Finding of Fact 22, page 41. 37 D.13-10-019, p. 38.

15

proposed 12.5 percent discount for San Diego public schools38 (some of which 1

had experienced increases of 70 percent over a four-year period39), a 2

compelling showing of public interest in insufficient to justify a rate discount 3

because the cost of the discounts “will be borne by other customers 4

who…may also serve a public good.”40 5

6

Q. Does the proposed rate structure comply with SDG&E’s criteria for a 7

cost-based rate? 8

A. No. SDG&E states that “[a] rate design based on cost-causation principles is 9

critical to ensure that consumption occurs in a manner consistent with electric 10

grid conditions and provides customers with price signals to incent behavior 11

that minimizes demand on the system.”41 SDG&E also explains that for a rate 12

design to have price signals that are cost-based, it should include a demand 13

charge to recover distribution demand costs, a demand charge to recover 14

generation capacity costs, energy charges to recover variable energy 15

commodity costs at the time of delivery, and a fixed or monthly charge to 16

recover customer costs that do not vary with energy demand or usage.42 17

18

Per SDG&E’s own definitions, the volumetric rate that would be paid by the 19

District is not cost-based because it includes no demand charge to recover 20

38 D.17-08-030, in A.15-04-012, August 24, 2017, p. 55. 39 D.17-08-030, p. 54. 40 D.17-08-030, p. 58. 41 Fang Testimony, p. CF-5. 42 Fang Testimony, pp. CF-5 – CF-6.

16

distribution demand costs, no demand charge to recover generation capacity 1

costs, no time-variability to the energy charges, and no fixed or monthly 2

charge to recover customer costs that do not vary with energy demand or 3

usage. Under SDG&E’s proposal, the bill that would be paid by the District 4

would be unchanged regardless of whether electricity was consumed during 5

the peak period or the super off-peak period and regardless of whether the 6

District’s peak demand increased or decreased. The District would also have 7

no cost responsibility during months without electricity demand, providing no 8

payment towards metering costs and other fixed costs during these months, 9

and as previously noted, a massive subsidy from other customers would still 10

be required. This rate structure therefore is not cost-based. 11

12

Q. Does the shadow bill that would be provided using Schedule A6-TOU 13

rates make the proposal cost-based? 14

A. No. While the shadow bill may be useful as an educational tool, it does not 15

change the fact that the actual rates paid by the District would not be cost-16

based and do not provide price signals to reduce the District’s per-kWh costs 17

in the near-term. A shadow bill is not a substitute for a true economic 18

incentive, which is why, for example, other non-residential customers are 19

billed under time-of-use rates instead of being billed under flat volumetric 20

rates and being provided a shadow bill to indicate what the price signals 21

17

would have been under time-of-use rates. To provide a true economic 1

incentive, the customer must be billed at a rate that provides a price signal.43 2

3

C. SDG&E’s rate proposal is not structured to 4

transition the District toward appropriate long-term rates 5

6

Q. At the end of the five-year discount period, under which rate schedule 7

will the District’s cruise ship terminal obtain electric service? 8

A. My expectation is that after the discount period, the District’s cruise ship 9

terminal will take service under an appropriate M/L C&I rate schedule. This 10

would be in keeping with SDG&E’s statement, in requesting permission for 11

the District to continue taking service under Schedule TOU-A on an interim 12

basis, that it would offer a rate proposal in a subsequent EMP application (i.e., 13

the application under consideration in the present proceeding) for a rate and 14

transition plan to an appropriate M/L C&I rate schedule:44 15

SDG&E acknowledges that granting this interim rate relief could 16

potentially extend the Port’s Cruise Ship Terminal’s tenure on a small 17

commercial rate that is not representative of its cost of service and is 18

thereby being supported by other ratepayers. However, long term, 19

SDG&E intends to ensure that the Port’s Cruise Ship Terminal is 20

transferred to an appropriate medium/large commercial and industrial 21

rate schedule. The specific rate and transition will be outlined as part 22

of the subsequent EMP application. 23

24

43 See, for example, decision 17-01-006 in R.15-12-012, January 19, 2017, Finding of Fact 1, p. 70:

“Setting higher TOU rates during peak periods provides customers an incentive to reduce energy use

by signaling that electricity is more costly at certain hours.” It is the higher rates that provide the price

signal to incentivize beneficial load shape changes. 44 SDG&E Advice Letter 2896-E, May 13, 2016, page 4.

18

Q. At the time that the District’s cruise terminal transfers from the 1

discounted rate proposal to a M/L C&I rate schedule, will it again face a 2

significant rate increase? 3

A. The answer to this question depends on the terminal’s load shapes. Using the 4

District’s projections of the cruise terminal’s load in 2022, SDG&E estimated 5

that the annual bill for the cruise terminal in 2022 would be $1.2 million under 6

SDG&E’s discount proposal and $2.7 million under Schedule A6-TOU, 7

which would be the lower cost of the two M/L C&I rate schedule options.45 8

Based on this assessment, it would be reasonable to expect that the cruise 9

terminal’s bill would more than double upon transition to a M/L C&I rate 10

schedule in 2024 unless the District had implemented changes to the 11

terminal’s net load that reduced the cost of service to the terminal by this time. 12

13

Q. Is it reasonable to expect that sufficient load changes will be implemented 14

to smooth the transition to a M/L C&I rate schedule? 15

A. It is certainly my hope that they will be, but to achieve this would require a 16

concerted effort to develop energy efficiency and energy technology solutions 17

to reduce the District’s cost of service. I anticipate the effort required may be 18

significant given the District’s determination that “[d]espite extensive work to 19

find creative solutions to reduce the District’s shore power costs…the options 20

SDG&E explored are not economically or commercially feasible for the 21

District at this time.”46 22

45 Fang Supplemental Testimony (Chapter 7), Attachment B. 46 SDG&E Response to UCAN Data Request 03, Question 6. (Attachment B)

19

1

Q. Does SDG&E’s rate proposal provide incentives to reduce the cruise 2

terminal’s cost of service during the discount period? 3

A. No. As noted above, under SDG&E’s discount proposal, the terminal’s bill 4

would be identical on a per-kWh basis regardless of load factor, time of use, 5

or peak demand throughout the discount period. Being informed via a shadow 6

bill that in five years’ time the District will be billed at a rate that provides a 7

price signal cannot be expected to provide meaningful cost-based incentives 8

for load shape changes during the discount period. SDG&E’s rate proposal 9

therefore provides zero incentive to make the necessary efforts and 10

investments to reduce the District’s cost of service. 11

12

Q. Does SDG&E’s EMP proposal include requirements for investments in 13

technology and practices to reduce the cruise terminal’s cost of service? 14

A. The EMP that is under consideration in this application does not include any 15

requirements for investments in new technologies or energy management 16

measures to reduce the District’s cost of service.47 17

18

47 SDG&E Response to UCAN Data Request 03, Question 6. (Attachment B)

20

Q. What would be the likely outcome if the cruise terminal’s cost of service 1

does not significantly decrease over the next five years? 2

A. Given that SDG&E’s rate and EMP proposals do not incentivize or require the 3

District to undertake the significant efforts and investments that may be 4

needed to meaningfully reduce the cruise terminal’s cost of service, I am 5

concerned that the Commission may find itself with another application in 6

five years’ time requesting another “interim solution” that requires to 7

ratepayers continue to provide a significant rate subsidy to the District. 8

9

D. SDG&E’s rate proposal could be used by the 10

District to gain competitive advantage over other 11

California ports 12

13

Q. Do you have any additional concerns about SDG&E’s proposal? 14

A. Yes. Under SDG&E’s proposal, the proposed rate discount would apply to the 15

cruise terminal’s entire load, including any new load at the terminal. In other 16

words, the District could use significantly discounted rates to attract new 17

business from other California ports. 18

19

Q. Why are you concerned that the discount could be used to attract new 20

business from other California ports rather than from ports outside the 21

state? 22

A. The District has acknowledged that “the shore power rate proposal, in 23

particular, is intended to retain cruise ship calls and potentially attract more 24

21

calls in San Diego to the benefit of the regional economy.”48 While “the Port 1

District is unable to state with specificity which ports would be expected to 2

benefit most from a reduction in cruise ship visits to San Diego [if the 3

discount is not provided]”49 and could not identify how much of the projected 4

loss in economic benefit to the San Diego region would be shifted to other 5

ports and coastal regions in California,50 the District cites the Ports of Long 6

Beach, Los Angeles, and Catalina Island as potential alternatives to the Port of 7

San Diego.51 Furthermore, the District acknowledges that, to its knowledge, 8

SDG&E’s rate discount proposal would not “require the Port specifically to 9

retain or attract new business within the State of California.”52 Thus, 10

SDG&E’s proposed rate discount is intended to provide regional benefits to 11

the San Diego region, possibly at the expense of other California regions and 12

without a guarantee of net benefits to the California economy as a whole. 13

14

Q. Why would it be problematic for the District to leverage the rate discount 15

to attract new business from other California ports? 16

A. While UCAN supports economic development in the San Diego region, 17

UCAN is concerned about the Commission establishing a precedent for 18

supporting one region at the expense of another. As a statewide institution, it 19

48 SDUPD Response to UCAN-SPUPD Data Request 01, Question 4. (Attachment B) 49 SDUPD Response to UCAN-SPUPD Data Request 01, Question 6. (Attachment B) 50 SDUPD Response to UCAN-SPUPD Data Request 01, Question 6. (Attachment B) 51 The District also cited Mexican ports and other global ports more generally as potential alternatives

to San Diego. SDUPD Response to UCAN-SPUPD Data Request 01, Question 6. (Attachment B) 52 SDUPD Response to UCAN-SPUPD Data Request 01, Question 4. (Attachment B)

22

would be inappropriate for the Commission to favor one California port over 1

others by providing the District’s port with an outsized rate subsidy. 2

3

Q. Do other California ports receive discounted rates? 4

A. While other California ports may also have special rates, to my knowledge, no 5

other port has been awarded a discount anywhere near as great as the 6

discounts being considered in this application. For example, the Commission 7

authorized a special rate for the Port of Long Beach as part of a settlement 8

agreement, but this rate is fundamentally different from SDG&E’s proposal in 9

that the Commission found that it would “provide ratepayers with a positive 10

CTM even at the 50% of CTM discounted rate. Little or no cost shifting will 11

likely occur due to the discounts and infrastructure cost reduction incentives 12

included in the Settlement,” and the settlement agreement would provide for 13

positive CTM for serving existing loads.53 14

15

Q. How should the Commission address your concern that a rate discount 16

for the District could provide an inappropriate competitive advantage? 17

A. Any discount that is offered should be applicable only for existing load at the 18

terminal so that the discount could not be used to attract new load.54 Since the 19

terminal’s load varies from year to year, it would be reasonable to use the 20

53 D.14-03-007, page 26. 54 While the District may have attracted new business away from other California ports using its highly

discounted rates in previous years, the District was then taking service under a tariffed rate for which it

was eligible at that time. Now, with the subsidy having been brought to light, the situation has

changed, and it would not be appropriate to continue to allow the District to attract new business away

from other California ports using a discount authorized specifically for the District by the Commission.

23

maximum annual energy usage from 2015 through 2018 as a proxy for the 1

“existing load” at the terminal that would be eligible for the discount and to 2

require any incremental load to be billed at the full rate under a standard M/L 3

C&I rate schedule.55 4

5

III. UCAN’s Rate Proposal for the District 6

A. Structure of UCAN’s Rate Proposal 7

8

Q. How should the rate discount for the District be structured? 9

A. The cruise terminal should be placed on a rate under which the District would 10

provide a positive CTM and would receive price signals that would indicate 11

the most cost-effective investments for reducing the terminal’s cost of service. 12

An appropriate discount off of the Schedule A6-TOU rate that provides for a 13

positive CTM contribution would fulfill these requirements. Based on a CTM 14

floor of $0.61 per kWh56 and the District’s projected load for 2018,57 the 15

District would need to pay approximately $1.8 million per year in order to 16

contribute positive CTM. Reducing the District’s Schedule A6-TOU bill to 17

this amount would require a discount of approximately 36% off of the 18

District’s full Schedule A6-TOU bill.58 19

55 The period of 2015-2018 was chosen because in response to a request for five years of load data for

the cruise terminal, SDG&E provided data only back to 2015, indicating that these were the readily

available data. SDG&E response to UCAN Data Request 02 Question 2. (Attachment B) 56 SDG&E Response to ORA Data Request 07, Question 1. (Attachment B) 57 Fang Supplemental Testimony, Attachment B workpaper, provided in response to UCAN Data

Request 02 Question 1. (Attachment B) 58 -36% = $1.8 million CTM floor / $2.8 million under Schedule A6-TOU - 1. Fang Supplemental

Testimony, Attachment B workpaper, provided in response to UCAN Data Request 02 Question 1.

(Attachment B)

24

1

This 36% discount amount is only an illustrative estimate since it applies 2

SDG&E’s CTM calculation, which was based on the District’s historic load, 3

to the District’s projected 2018 load without any adjustment for load changes. 4

If UCAN’s proposed rate discount structure is adopted, SDG&E should 5

update the CTM calculation prior to implementation based on the District’s 6

load from the prior 12-month period and then recalculate the maximum 7

discount that would be allowable under Schedule A6-TOU while still allowing 8

the District to meet the positive CTM requirement. SDG&E should then 9

maintain the discount at no more than this amount for a transition period from 10

2019 through 2023. 11

12

Q. How should the rate discount be applied to the District’s bill? 13

A. As explained previously, the discount should be made available only to the 14

District’s existing load in order to ensure that this special rate cannot be used 15

to gain competitive advantage over other California ports during the discount 16

period. The discount should therefore be calculated as a percentage discount 17

applied to the District’s total bill for electric service for existing load at the 18

cruise terminal, with the original bill calculated under SDG&E’s Schedule 19

A6-TOU rates. Unlike SDG&E’s proposed rate discount, under UCAN’s 20

approach the price signals provided by A6-TOU rate components would still 21

apply, and the overall bill impact to the District would still be mitigated. 22

23

25

Q. If the Commission determines that such a discount would still result in 1

excessive rate shock for the District, what alternative do you recommend? 2

A. If the Commission determines that, due to the unusually large rate increase 3

faced by the District, a rate discount that provides for positive CTM would 4

result in rate shock, the Commission could allow the District to take service 5

for a transition period under a rate that does not provide for positive CTM 6

(i.e., under which other ratepayers must subsidize each kWh of energy usage). 7

If the Commission makes such a determination, SDG&E should offer the 8

District a rate that reduces the District’s immediate bill impact and transitions 9

the District to a rate structure that provides cost-based price signals and non-10

subsidized rates. 11

12

Q. How do you recommend that a non-positive CTM rate for the District be 13

structured? 14

A. One option would be to provide a steeper discount off of Schedule A6-TOU in 15

the first year, to whatever level the Commission determines is needed in order 16

to mitigate rate shock, with a declining discount level in each year so that the 17

District is contributing positive CTM by the end of the discount period. It is 18

important that any such discount be applied to the District’s total cruise 19

terminal A6-TOU bill for existing load as described in my primary proposal 20

so as to maintain the applicability of SDG&E’s underlying rate components. 21

Another option that may work better for the District would be to place the 22

cruise terminal on Schedule DG-R. 23

26

1

Q. Is the cruise terminal currently eligible to take service under Schedule 2

DG-R? 3

A. Not currently. Schedule DG-R is available at present only to non-residential 4

customers who have operational distributed generation with a capacity of at 5

least 10% of their peak annual load and whose peak annual load is no more 6

than 2 MW.59 However, the Commission could consider temporarily 7

expanding eligibility of Schedule DG-R during the discount period to the 8

existing load of the District’s cruise ship terminal account, with no demand 9

limitations for this load. This would allow the District to take service under 10

Schedule DG-R for a transition period while its EMP is being developed and 11

implemented. 12

13

Q. Why might it be reasonable to expand eligibility of Schedule DG-R to 14

existing load of the District for an interim period? 15

A. The energy efficiency, distributed generation, and other environmental and 16

energy management goals addressed by the Port’s EMP60 overlap with the 17

Commission’s overarching policy goals and also with the distributed 18

generation goals that are specifically supported through Schedule DG-R. It 19

may, therefore, be reasonable to expand eligibility of Schedule DG-R to the 20

District’s cruise terminal for an interim period during which the District is 21

engaged in the EMP processes. 22

59 SDG&E Electric Schedule DG-R, April 2018, Sheet 1. 60 SDG&E Application, Appendix G, Exhibit A (Port of San Diego Energy Management Plan), pages

6-7.

27

1

Q. Should the District’s cruise terminal be allowed to remain on Schedule 2

DG-R for the long-term? 3

A. The District’s cruise terminal should not be allowed to remain on Schedule 4

DG-R for the long-term unless its annual peak demand is reduced to below the 5

maximum allowed under this rate schedule (currently at 2 MW) and 6

distributed generation capacity to meet at least 10% of this peak demand is 7

added, as required for other Schedule DG-R customers. The District could use 8

the EMP to work towards this goal, allowing rate continuity and potential rate 9

savings going forward. If, however, the District is unable to or decides not to 10

meet the standard eligibility requirements for Schedule DG-R, the District’s 11

cruise terminal should be allowed to remain on this rate schedule for no longer 12

than the five-year period of the EMP contract, from 2019 through 2023.61 To 13

prevent use of this special rate to gain competitive advantage over other 14

California ports during this discount period, only existing load at the terminal 15

should be eligible for this rate. 16

17

B. Bill and Cost Recovery Impacts of UCAN’s Rate 18

Proposal 19

20

Q. How would the District’s bills under Schedule DG-R compare to the 21

District’s bills under the discounted Schedule A6-TOU and other rate 22

options? 23

61 Cahill Testimony, page TC-18.

28

A. The table on the following page is an expanded version of the table provided 1

in Attachment B of the Supplemental Testimony of Ms. Fang, showing 2

projected bills for the District’s cruise terminal over several rate options using 3

load projections provided by the District.62 4

5

The 36% discount applied to Schedule A6-TOU in the blue highlighted rows 6

represents an estimate of the maximum discount that could be provided under 7

Schedule A6-TOU without falling below the positive CTM floor. As shown in 8

the table, the total bill for the cruise terminal account over a five-year period63 9

is projected to be $9.0 million under these discounted A6-TOU rates. This is 10

$4.3 million more than it would be under TOU-A64 and $5.1 million less than 11

it would be under Schedule A6-TOU,65 which is the lowest cost of the other 12

M/L C&I rate schedules. Under Schedule DG-R, the five-year bill is projected 13

to be $8.6, which is $4 million more than it would be under TOU-A66 and $5.5 14

million less than it would be under Schedule A6-TOU.67 Both rate options 15

therefore provide movement towards the M/L C&I rate schedules that the 16

62 Load data to calculate the bill impacts under Schedule DG-R was provided by SDG&E in response

to UCAN Data Request 02 Question 1, attachment “A.17-09-005 Ch 7 Supplemental Testimony

Workpaper.xlsx.” (Attachment B) 63 The five-year period of 2018-2022 shown in the table is a reasonable proxy for the 2019-2023

discount period proposed by SDG&E. 64 $4,403,656 $4,343,634 = $9,073,946 $9,013,924 under discounted Schedule A6-TOU - $4,670,290

under Schedule TOU-A 65 -$5,086,608 = $9,013,924 under discounted Schedule A6-TOU - $14,100,532 under Schedule A6-

TOU 66 $3,967,811 = $8,638,102 under Schedule DG-R - $4,670,290 under Schedule TOU-A 67 -$5,462,431 = $8,638,102 under Schedule DG-R - $14,100,532 under Schedule A6-TOU -

29

cruise terminal is eligible for, while reducing the projected $9.4 million five-1

year increase from switching to A6-TOU68 down to around $4 million.69 2

3

68 $9,430,242 = $14,100,532 under Schedule A6-TOU - $4,670,290 under Schedule TOU-A 69 $4,343,634 = $9,013,924 under discounted Schedule A6-TOU - $4,670,290 under Schedule TOU-A

and $3,967,811 = $8,638,102 under Schedule DG-R - $4,670,290 under Schedule TOU-A

30

Table 1: District Cruise Terminal Account: Annual Bill Comparison Across Multiple Rate Options 1

Rate Scenario 2018 2019 2020 2021 2022 5-Year Total

Schedule TOU-A (P) $715,052 $838,802 $975,833 $1,070,279 $1,070,324 $4,670,290

Schedule AL-TOU (P) $3,838,605 $3,866,616 $3,931,844 $4,103,366 $4,106,862 $19,847,293

Schedule A6-TOU (P) $2,800,915 $2,641,817 $2,683,425 $3,250,452 $2,723,924 $14,100,532

Schedule A6-TOU (P) with 36% Discount $1,790,516 $1,688,812 $1,715,410 $2,077,888 $1,741,299 $9,013,924

Schedule DG-R (P) $1,583,719 $1,598,753 $1,766,059 $1,864,528 $1,825,043 $8,638,102

Shore Power Rate Proposal at M/L C&I Class Avg $631,888 $741,534 $864,028 $954,172 $942,822 $4,134,444

Shore Power Rate Proposal at Small Comm. Avg $775,403 $909,953 $1,060,268 $1,170,885 $1,156,957 $5,073,467

Small Commercial Discount compared to TOU-A $60,351 $71,151 $84,435 $100,606 $86,634 $403,176

M/L Discount compared to AL-TOU $(3,206,717) $(3,125,082) $(3,067,816) $(3,149,194) $(3,164,040) $(15,712,849)

M/L Discount compared to A6-TOU $(2,169,027) $(1,900,283) $(1,819,397) $(2,296,280) $(1,781,102) $(9,966,088)

M/L Discount compared to A6-TOU w 36% Disc. $(1,158,628) $(947,277) $(851,381) $(1,123,716) $(798,477) $(4,879,480)

M/L Discount compared to DG-R $(951,831) $(857,219) $(902,030) $(910,356) $(882,222) $(4,503,657)

2

3

31

Q. How does the subsidy level under the discounted Schedule A6-TOU and 1

Schedule DG-R compare to EDR rate discounts? 2

A. The annual subsidy under the discounted Schedule A6-TOU is estimated at 3

36% per year, and the five-year subsidy under Schedule DG-R (compared to 4

Schedule A6-TOU) is projected to be 39%.70 These subsidy levels still exceed 5

the Enhanced EDR discount of 30% (though they are closer to this discount 6

level than the 71% discount proposed by SDG&E71). Given these high levels 7

of subsidy, it is important that these rates be offered on a transitional basis 8

only and be made available only to the District’s existing load. 9

10

Q. Would these rates provide for positive CTM? 11

A. The Schedule DG-R rate may be too low, overall, to provide for a positive 12

CTM,72 and based on SDG&E’s CTM calculations from the cruise terminal’s 13

historic load shapes,73 any discount above the 36% Schedule A6-TOU 14

discount may also result in rates that are too low to provide for a positive 15

CTM.74 Rates that do not provide for positive CTM should be offered only if 16

the Commission determines that contributing positive CTM would result in an 17

70 -39% = $8,638,102 under Schedule DG-R / $14,100,532 under Schedule A6-TOU - 1 71 -71% = 4,134,444 under M/L C&I Class Average rate / $14,100,532 under Schedule A6-TOU rates -

1. SDG&E Testimony Ch. 7 (Fang Supplemental Testimony), Attachment B workpapers, provided in

response to UCAN Data Request 02 Question 1. (Attachment B) 72 The 2018 projected average rate for the cruise terminal under Schedule DG-R is $0.54 per kWh.

SDG&E calculated that $0.61 per kWh would be needed to provide neutral CTM, given the cruise

terminal’s historic load shape (SDG&E Response to ORA Data Request 07, Question 1 (Attachment

B)). 73 SDG&E Response to ORA Data Request 07, Question 1. (Attachment B) 74 These calculations should be updated to the District’s projected load shape prior to finalizing rates.

32

unreasonable level of rate shock for the customer and should be limited to a 1

specific transition period as the customer moves to more cost-based rates. 2

3

Q. How do the Schedule A6-TOU and Schedule DG-R rate structures 4

compare to SDG&E’s proposed rate structure for the discount period? 5

A. Schedule A6-TOU and Schedule DG-R both include a monthly service fee, a 6

non-coincident demand charge, summer and winter maximum on-peak 7

demand charges, and time-differentiated volumetric energy charges. Both rate 8

options therefore provide better prices signals and cost recovery than the flat 9

volumetric rate proposed by SDG&E. For example, the time-differentiated 10

energy charges under Schedule DG-R provide incentives for energy 11

reductions during the summer on-peak period, when costs are 150% higher 12

than they are during the summer off-peak period under current rates.75 The 13

demand charges also provide incentive to reduce overall demand as well as 14

demand during the on-peak periods. 15

16

Q. Why do you suggest that the Schedule DG-R option may work better for 17

the District than the Schedule A6-TOU option? 18

A. Under Schedule A6-TOU, the non-coincident demand charge is calculated 19

based on the higher of the non-coincident demand in that month or 50% of the 20

maximum annual non-coincident demand.76 This demand ratchet requires 21

75 146% = $0.54/kWh summer on-peak rate / $0.22/kWh summer off-peak rate - 1. SDG&E Rate

Schedules DG-R, EECC, and DWR-BC, April 2018. 76 SDG&E Schedule A6-TOU, Sheet 4, April 2018.

33

customers to contribute meaningfully to the cost of the customer’s demand on 1

the system in each month of the year regardless of how low demand falls in 2

any particular month. Schedule DG-R does not have a demand ratchet, 3

meaning that the cruise ship terminal’s electric bill would not include demand 4

charges during off-season months when the terminal does not have electrical 5

load. 6

7

Q. Would it be appropriate to allow the cruise terminal to avoid paying 8

demand charges in months in which it has zero demand? 9

A. As a transition rate, this lack of demand ratchet may be appropriate because it 10

would provide the District additional time to determine how to bill customers 11

under demand-based rates, which is a problem that the District has identified 12

as a top concern that would be heightened by having to pay significant 13

demand charges in months without any cruise ship dockings.77 Over the long-14

run, however, it is important to ensure that the cruise terminal pays 15

unsubsidized and cost-based rates, which, depending on rate design, may 16

include a demand ratchet. 17

77 “Second, non-coincident demand charges are calculated monthly, based on the greater of the highest

demand on the account over the previous 11 months or the maximum monthly demand. For

illustration, this means that demand charges assessed against the cruise ship terminal account on its

February 2018 bill could be the result of a cruise ship that used shore power in April 2017. This also

means that charges will be assessed to the cruise ship terminal account even in the offseason when no

cruise ships call at the District’s berths. The District currently has no mechanism to divide the costs of

non-coincident demand charges among the District’s cruise line customers, especially in months with

no cruise visits. This is further complicated by the problem of assessing charges to a cruise ship

associated with another cruise ship’s usage. The pass-through nature of shore power coupled with the

seasonality and high peak demand of cruise ship visits make demand charges very difficult to manage,

and create serious cost uncertainty for the District’s cruise-line business.” SDG&E Application, pages

6-7.

34

1

Q. How would the discounted Schedule A6-TOU or Schedule DG-R rate 2

transition the cruise terminal account to a cost-based rate? 3

A. Both these rate schedules provide immediate price incentives to reduce the 4

cruise terminal’s cost of service through reductions to overall demand and to 5

demand and energy during the highest-cost time periods. These price signals 6

should encourage the District to make investments in energy efficiency, 7

distributed generation, and energy technologies throughout the discount 8

period to reduce the cruise terminal’s cost of service. With a lower cost of 9

service, transferring the terminal to a cost-based rate should have a lower bill 10

impact on the District. 11

12

Q. Please summarize UCAN’s recommendations regarding the cruise 13

terminal’s rate discount. 14

A. The cruise terminal should be placed on a rate under which the District would 15

contribute a positive CTM and would receive price signals that would indicate 16

the most cost-effective investments for reducing the terminal’s cost of service. 17

An appropriate discount off of the Schedule A6-TOU rate that provides for a 18

positive CTM contribution would fulfill these requirements when applied to 19

the cruise terminal’s total A6-TOU bill and limited to existing load only. 20

21

However, if the Commission determines, due to the unusually large rate 22

increase faced by the District, to allow the District to take service for a 23

35

transition period under a rate that does not provide for positive CTM (i.e., 1

under which other ratepayers must subsidize each kWh of energy usage), 2

SDG&E should offer the District a rate that reduces the District’s immediate 3

bill impact and provides cost-based price signals consistent with those 4

provided to other M/L C&I customers. One option to achieve this would be to 5

make the District’s cruise ship terminal eligible for Schedule DG-R for a 6

limited period of time. Another option would be to offer a steeper version of 7

the Schedule A6-TOU discount with a declining level of discount so that 8

positive CTM is achieved by the end of the discount period. Any discounted 9

rate option should be limited to a transition period of no more than five years 10

and to the cruise terminal’s existing load. 11

12

IV. SDG&E’s Cost Recovery Proposals 13

A. SDG&E’s proposed allocation of revenue shortfalls 14

from the District’s rate discount should be rejected 15

16

Q. How does SDG&E propose to recover the cost of the District’s rate 17

discount? 18

A. SDG&E proposes to recover the cost of the rate discount through PPP 19

charges.78 20

21

78 Cahill Testimony, page TC-18.

36

Q. What is SDG&E’s rationale for recovering the cost of the rate discount 1

through PPP charges? 2

A. SDG&E’s rationale is that the rate discount proposal “is designed to meet the 3

policy objectives of AB 628.”79 4

5

Q. Please summarize AB 628. 6

A. AB 628 authorizes port and harbor districts to develop EMPs, establishes 7

criteria for these EMPs, and directs districts that make EMPs to “leverage 8

opportunities for achieving energy efficiency and sustainable energy 9

production, while not overburdening impacted businesses.”80 AB 628 criteria 10

for EMPs include: assessments of energy consumption and energy efficiency 11

and management issues, a set of measurable energy performance and 12

management goals, recommendations for the enhanced use of energy 13

efficiency and demand-side management, and a discussion regarding the 14

development of projects that provide greater certainty of energy costs over a 15

period of up to 15 years.81 16

17

79 Cahill Testimony, page TC-18. 80 State of California Public Resources Code, Section 25990 (b) (9), added by Stats. 2013, Ch 741, Sec.

2 (AB 628), effective January 1, 2014. 81 State of California Public Resources Code, Section 25990.

37

Q. Do you agree with SDG&E that the rate discount proposal “is designed to 1

meet the policy objectives of AB 628”?82 2

A. No. The rate discount proposed by SDG&E does not further the 3

environmental, energy efficiency, and energy management goals addressed by 4

AB 628. 5

6

Q. Does AB 628 include provisions for ratepayer funding of AB 628 7

activities? 8

A. AB 628 does identify ratepayer-funded programs as one potential source of 9

funding for activities included in the EMP.83 However, this would appear to 10

refer to ratepayer-funded programs for energy efficiency, energy management 11

technologies, and distributed generation, such as the ratepayer funding for 12

energy efficiency incentives that is requested in the District’s EMP.84 It would 13

be quite a stretch to see any basis in this language for a ratepayer-funded rate 14

subsidy that does not further the use of energy efficiency or sustainable energy 15

or otherwise support the environmental and energy management goals 16

addressed by AB 628. 17

18

82 SDG&E Testimony, Chapter 1, page TC-18. 83 State of California Public Resources Code, Section 25990 (b) (8). 84 SDG&E Application, Exhibit A (Port of San Diego Energy Management Plan), pages 26-27.

38

Q. Would it be appropriate to recover the cost of the rate discount through 1

PPP charges? 2

A. No. The rate discount does not provide energy efficiency, greenhouse gas, or 3

renewable energy benefits or support other public policy goals and it would 4

therefore be inappropriate to recover the discount through PPP charges. 5

6

Q. How is the District’s current rate discount being recovered? 7

A. The District’s current rate discount is the difference between the District’s 8

payments under Schedule TOU-A and the District’s cost of service. I expect 9

that small commercial customers are currently paying for this discount since 10

the cruise ship terminal has been receiving service under small commercial 11

rates and has therefore been included in the load profiles used to establish 12

revenue responsibility for the small commercial class. Given that the District 13

has not been paying the full revenue responsibility of the cruise ship terminal, 14

other small commercial customers have likely been making up the difference 15

via higher rates. This is reflected in the concern raised by the Division of 16

Ratepayer Advocates in SDG&E’s 2012 GRC Phase II proceeding that current 17

Schedule TOU-A eligibility rules allow “customers with large demands to 18

create an upward bias in the marginal customer costs and a small commercial 19

rate that was not reflective of the small customer class.”85 20

21

85 CPUC Resolution E-4812, August 10, 2017, page 2.

39

Q. How should the cost of the proposed discount be recovered from 1

customers? 2

A. In the same way that small commercial customers have been making up the 3

difference between the District’s cost of service and the District’s payments 4

on small commercial rates, once the cruise ship terminal is properly classified 5

as a M/L C&I customer, other M/L C&I customers should be responsible to 6

make up the revenue shortfall associated with the cruise ship terminal. 7

Recovery of this revenue shortfall should be incorporated into M/L C&I 8

distribution rates for recovery from all M/L C&I customers. 9

10

B. SDG&E’s proposed Port District EMP balancing 11

account should be rejected 12

13

Q. Please describe SDG&E’s proposed Port Energy Management Plan 14

Balancing Account (PEMPBA). 15

A. SDG&E has requested authority to establish a two-way PEMPBA to record 16

revenue and costs associate with the rate discount, energy efficiency, and EPP 17

proposals set forth in SDG&E’s application.86 18

19

Q. Why do you oppose SDG&E’s proposal? 20

A. Under SDG&E’s proposal, ratepayers would be charged for all costs 21

associated with these proposals with no spending limit, subject only to 22

Commission approval of a Tier 2 advice letter filing.87 23

86 Prepared Direct Testimony of Jenny Phan on behalf of SDG&E (“Phan Testimony”), A.17-09-005,

September 13, 2017, page JP-1. 87 Phan Testimony, page JP-2.

40

1

Q. Is there a need for a two-way balancing account for the rate discount? 2

A. No. As discussed above, any discount offered to the District should apply only 3

to existing load so that the District cannot use a highly discounted rate to 4

attract business away from other California ports. As such, SDG&E should be 5

able to provide a reasonable high-level estimate for the discount amount over 6

the next five years based on the maximum allowable load under the discount, 7

the cruise terminal’s current load shape, and current M/L C&I electric rates. 8

As an example, under the Schedule DG-R rates, the discount relative to 9

Schedule A6-TOU rates would be $1.2 million using the cruise terminal’s 10

projected 2018 load shape and January 2018 Schedule DG-R rates. Allowing 11

for a 2% annual rate increase, this would provide for a 2019 through 2023 12

discount cost of $6.5 million. Recognizing that the cruise terminal’s load 13

shape should be improving over the five-year period so as to reduce the 14

annual discount amount required, the Commission should set this amount (or 15

the equivalent amount per the adopted rate discount) as a hard cap for rate 16

recovery. Any rate discount revenue collected from ratepayers and not used 17

should be returned to ratepayers via a one-way balancing account. 18

19

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Q. Is there a need for a two-way balancing account for the EPP? 1

A. No. The EPP budget includes separate budgets for the District and SDG&E 2

for their EPP activities.88 The District’s budget is not itemized, while 3

SDG&E’s budget covers a program manager, a program assistant, project 4

management support, consultant fees to RMI, plus a small amount of costs for 5

travel and office expenses.89 These administrative and project management 6

costs are costs that SDG&E should be able to--and required to--manage. The 7

District, too, should be required to stick to an authorized budget for its EPP 8

activities. Providing SDG&E a two-way balancing account reduces the 9

incentive for SDG&E and the District to control spending and manage the 10

project efficiently. Instead, SDG&E and the District should be provided fixed 11

budgets along with one-way balancing accounts to return unused funds to 12

ratepayers. 13

14

Q. Is there a need for a two-way balancing account for SDG&E’s energy 15

efficiency proposals? 16

A. No. SDG&E is presenting two sets of energy efficient proposals: standard 17

energy efficiency measures that will be funded through SDG&E’s existing 18

energy efficiency proposal and specialized energy efficiency measures for 19

which an additional $2.6 million in funding is being requested.90 SDG&E is 20

requesting that all ratepayers fund this incremental $2.6 million in energy 21

88 Prepared Direct Testimony of Julia Mendoza on behalf of SDG&E (“Mendoza Testimony”), A.17-

09-005, September 13, 2017, Table JM-1 on page JM-9. 89 Mendoza Testimony, page JM-9 and Table JM-2 on page JM-10. 90 Cahill Testimony, page TC-17.

42

efficiency spending above the utility’s already-authorized energy efficiency 1

spending. While UCAN supports cost-effective energy efficiency spending, 2

UCAN is concerned about writing a blank check to authorize significant 3

expenditures for a single entity (in addition to an unknown amount of 4

spending under the standard energy efficiency budget) for projects that have 5

not received the vetting that is conducted during the standard energy 6

efficiency proceedings. If the Commission approves this incremental 7

spending, UCAN encourages the Commission to set a strict budget along with 8

a one-way balancing account to return any unused funds to ratepayers. 9

10

V. Conclusion 11

Q. Does this conclude your testimony? 12

A. Yes. 13