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NGVs -- Are Ratepayer Subsidies Appropriate?

Fortnightly Magazine - May 1 1995

at the expense of residential gas or electric customers.

The CPUC rejected a proposal by the state Division of Ratepayer Advocates to allocate 50 percent of the program costs to PG&E shareholders. It said the cost-sharing was inequitable because the program was instituted for the general welfare of the public:

"[T]here is no significant mismatch between the population which both bears partial responsibility for existing pollution problems and which will enjoy the environmental benefits of PG&E's NGV program and the population of ratepayers who will be asked to fund the program."

This conclusion also led the CPUC to strike down calls to exempt residential ratepayers from fixed infrastructure costs associated with the NGV program. It noted, however, that state law required a program review to ensure that residential customers are not subsidizing variable program costs, such as the commodity cost of gas delivered to NGV customers under the utility's new tariffs.

Despite the CPUC's clear decision to use ratepayer funds to help cure California's smog problem, the PG&E case does not provide a final answer to the overall political question of using utility rates to promote broad social goals. A short time later, the CPUC concluded a broad investigation of utility efforts to enter the LEV market. The primary question was how to define whether such programs were in the interest of ratepayers and, thus, qualified for funding. The CPUC authorized use of ratepayer funds to develop a refueling infrastructure for both natural gas and electric vehicles, but required evidence that programs promote the interests of ratepayers beyond the general public's interest in a cleaner environment. A utility should demonstrate that the programs address one or more of the following traditional utility responsibilities: 1) reliable and efficient utility service, 2) safe utility service, 3) environmentally and socially responsible utility service, and 4) reasonable rates. In addition, the CPUC issued a set of five guidelines for developing LEV programs that qualify for ratepayer funding (see box below). Re Utility Involvement in the Market for Low-emission Vehicles, 145 PUR4th 243 (Cal.P.U.C.1993).

The CPUC has yet to conclude its review of existing LEV programs run by utilities in the state under the new guidelines. Although a program using ratepayer funds to pay for acquisition of a fleet of NGVs for utility use would pass muster, it is not clear whether a broad program aimed at selling subsidized vehicles to the public in competition with existing vehicle dealerships would qualify. The new guidelines seem to back away from the CPUC's earlier broad view of ratepayer interests. The CPUC now agrees with the Division of Ratepayer Advocates:

"[N]either the Commission nor the utilities possess the jurisdiction of the primary social responsibility to initiate, underwrite, or guarantee the success of a vehicular solution to the state's air quality problems."

Nevertheless, the CPUC currently allows balancing-account funding for ongoing LEV activities. Yet it also set a limit on NGV activities for Southern California Gas Co. (SoCalGas), rejecting the LDC's proposal to build refueling stations and administer incentives outside of its own service territory. Under the proposal, SoCalGas would have