Background .gov
?ALJ/BRC/jnfDate of Issuance 12/21/2020Decision 20-12-026 December 17, 2020BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIAApplication of SOUTHERN CALIFORNIA GAS COMPANY (U904G) for adoption of its 2020 Flex Alert Marketing Campaign.Application 19-11-018Decision DENYING SOUTHERN CALIFORNIA GAS COMPANY’S 2020 FLEX ALERT CAMPAIGN AND COST RECOVERY requestSummaryThis decision denies Southern California Gas Company’s request for rate recovery and approval of its proposed 2020 Flex Alert paid media campaign. This decision denies rate recovery for the costs Southern California Gas Company incurred associated with the 2018 and 2019 iterations of the Flex Alert paid media campaign. Both of these denials are being made on the basis of the merits of the requests. This decision also acknowledges, in light of the recommendations identified by California Public Utilities Commission, California Independent System Operator, and California Energy Commission staff in the Preliminary Root Cause Analysis of the rotating outages that occurred during the August 2020 heat storm, that funding and programmatic design of the paid media component of Flex Alert is scoped as an issue to be considered in Rulemaking 20-11-003. This decision will not impact any other Flex Alert activity beyond the narrowly scoped issue of the Southern California Gas Company paid media component.This proceeding is closed. BackgroundSouthern California Gas Company (SoCalGas) has been directed each summer beginning in 2016 through 2019 to implement a paid marketing campaign called the Flex Alert Campaign to support the California Independent System Operator (CAISO) in the event of a stressed electric grid. Ordering Paragraph 3 of Decision (D.)?1907010 stated that “Southern California Gas Company shall file an application by December?1,?2019, seeking authorization for a 2020 Flex Alert paid media marketing campaign focused on customers in the Los Angeles area.”In the instant Application filed on November 22, 2019, Southern California Gas Company (SoCalGas) is seeking to establish a 2020 Flex Alert paid media campaign. The SoCalGas 2020 Flex Alert Marketing Campaign is focused in the Los Angeles area and builds on actual experience with the 2016, 2017, 2018, and 2019 iterations of the campaign with a structure modeled after those prior campaigns. This Application also seeks cost recovery for costs associated with the implementation of Flex Alert Campaign for 2018 and 2019 iterations as well as the 2020 Flex Alert paid media campaign iteration. In total, SoCalGas requests recovery of the estimated revenue requirement of $8.9?million in 2021. The National Diversity Coalition (NDC) filed a protest in this proceeding on December?23,?2019. A prehearing conference was held on February 13, 2020, in San?Francisco,?California. Issues Before the CommissionThe issues to be determined are as follows:Whether the Flex Alert campaign as proposed by Southern California Gas Company has a significant impact on energy conservation.Whether the proposed cost estimates in the Application are justified.Whether the Flex Alert Campaign proposed by Southern California Gas Company is properly designed to educate and alert minority and low-income communities regarding calls for energy conservation.Whether the Flex Alert campaign proposed by Southern California Gas Company is consistent with Commission direction regarding Flex Alert. Whether the Commission should approve Southern California Gas Company’s Application.Impact on Energy ConservationFlex Alert is a voluntary call for consumers to conserve electricity when there is a predicted shortage of energy supply. The California Independent System Operator determines when a Flex Alert event should be called, often issuing the call when extremely hot weather increases electricity demand and threatens to create a situation where the demand for electricity exceeds supply. There are two components to the Flex Alert paid media campaign, an educational campaign and a trigger campaign. The educational component of the Flex Alert program provides information to community members about the Flex Alert program throughout the time of the campaign. The trigger component of Flex Alert campaigns occurs when energy supply and demand conditions necessitate conservation. SoCalGas notes that “[t]he impacts of Flex Alerts are difficult to measure and verify due to the nature of mass market campaigns.” SoCalGas also points to two studies that have measured the energy impacts of Flex Alerts in California. One study authored by Christensen Associates Energy Consulting conducted a load impact evaluation of California’s Flex Alert program for program year 2013. The primary finding from this study was that no statistically significant reduction in energy consumption could be attributed to Flex Alert. “The individual hourly load impact estimates range widely, from one value representing a 220?Megawatts (MW) (1.2?percent) load reduction to another representing a 600?MW load increase.” The study concluded that “that none of the estimates can be judged to be significantly different from zero, due to uncertainty around the estimated values.” Another study conducted by Opinion Dynamics evaluated SoCalGas’ Flex?Alert and Conserve Energy SoCal campaigns in 2016. The study concluded that there was a reduction electricity demand by 0.024?kilowatthour (kWh)/hr on average during Flex Alert events. The study caveated its results by indicating that it was unclear how much of this reduction was due to the Flex Alert brand equity and how much was due to the Conserve Energy SoCal Campaign. As NDC stated in its protest, “[i]t appears from SoCalGas’ own evaluation of the program as well as from prior third-party reports that reductions in customer usage of energy in response to Flex Alert notifications has been extremely low.”From the record in this proceeding, it appears that there is insufficient evidence to show that the SoCalGas designed and managed program at its previously implemented scale provides adequate benefits to the public. Cost EstimatesThe proposed cost recovery for the 2020 Flex Alert paid media campaign is $3.33?million. SoCalGas is requesting to also recover $5.58?million for the costs incurred from the 2018 and 2019 iterations of its Flex Alert paid media campaign. SoCalGas proposes to include the costs in the public purpose program surcharge and allocate to customer classes using the equal percent (%) of margin method. Using this methodology, the rate increase for 2021 due to approval of this Application is estimated to be 4% for core California Alternate Rates for Energy (CARE) residential customers, 3% for core non-CARE residential customers, and 1% for core and non-core commercial and industrial customers. In its request, SoCalGas proposes to establish a new balancing account associated with the 2020 iteration of its Flex Alert proposal called the Summer Flex Alert Campaign Balancing Account. The purpose for the balancing account is to record the actual costs incurred by the implementation and execution of the program and to have a comparison relative to forecasted costs. SoCalGas proposes that any potential over-expenditures at the end of the campaign will not be recovered from ratepayers, and any potential under spend would be returned to customers. Is the Proposed Flex Alert Paid Media Campaign Designed to Educate and Alert Minority and Low-Income Communities Regarding Calls for Energy ConservationConsistent with direction in D.1604039, SoCalGas indicated it will continue to administer an Advisory Group that consists of representatives from the Commission, Southern California Edison Company, the (CAISO), local utilities, city representatives and others to align the messaging and communication with the region. SoCalGas noted that the educational campaign will be in English and Spanish, targeting the Los Angeles Designated Market Area with multiple channels, including radio, out of home visual advertising, digital search, social media, online video, online radio, and programmatic displays. Beyond this information, there is no indication that the proposed 2020 program design would have a specific focus on educating and alerting minority and low-income communities. Consistency with Commission Policy and Consideration for Application Review2020 SoCalGas Flex Alert CampaignThe record of the Application and protest of the NDC both strongly suggest, as discussed in section 3, that the benefits of the Flex Alert paid media campaigns that SoCalGas has designed do not provide clear impact of energy conservation, especially for the ratepayers of this natural gas utility. Absent evidence of an effective conservation program for SoCalGas, the 2020 iteration of the Flex Alert paid media campaign as designed and proposed, including program implementation and cost recovery, is denied. Cost recovery for 2018 and 2019 Iterations of the SoCalGas Flex Alert Paid Media CampaignSoCalGas is requesting cost recovery for the costs associated with the implementation of the SoCalGas Flex Alert paid media campaign for the 2018 and 2019 iterations. SoCalGas notes in its Application that for each summer beginning with 2016 through 2019, it has been directed to implement a paid marketing Flex Alert campaign. In D.1807008, in response to the Aliso Canyon outage, the Commission ordered SoCalGas to provide up to $5?million to the CAISO to support the Flex?Alert program for the Los Angeles area. The Commission continued this direction in D.1907010. SoCalGas points out that the Commission in D.1907010 indicated that the Commission “shall determine at a later time whether the balance in the [Marketing Education and Outreach Memorandum Account] (MEOMA) should be incorporated into the rates of SoCalGas customers.” SoCalGas indicates that is what it is doing in this Application. Its specific request for cost recovery from ratepayers is $2.75?million associated with 2018 costs and $2.83?million estimated associated with 2019 costs for a total of $5.58?million for the two?years. The Commission has previously spoken about the appropriate time and conditions for which the Commission will consider whether cost recovery from ratepayers is appropriate. The Commission stated in D.1604039, We clarify that although one aspect of SoCalGas’ proposal is that it “will establish and manage a ratepayer-funded memorandum account,” we are not approving ratepayer funding at this time for either?(1) the $5?million in Flex Alert spending or?(2) the separate $6?million authorized for SoCalGas’ implementation of its proposed marketing, education, and engagement campaign, and we make no determination today regarding whether these costs will ultimately be determined to be the responsibility of SoCalGas ratepayers or shareholders. As noted by several parties in comments, the Governor directed this Commission?to ensure that SoCalGas covers costs related to the natural gas leak and its response while protecting ratepayers. Because these costs are not yet known, at this time it is appropriate to track the?costs of the actions we direct SoCalGas to undertake today,?and defer determination of responsibility for those costs until a future proceeding that can examine all aspects of the Aliso Canyon leak and its aftermath at one time.?At the moment, the issue of whether rate recovery for the 2018 and 2019 iterations of the SoCalGas Flex Alert paid media campaign is not ripe for consideration. It is more appropriate for this to be considered once the Commission makes final findings in Investigation?1906016 that can be considered in conjunction with the direction the Commission issued in D.1604039.Considering the state of the issue, the request of the Applicant for cost recovery for the 2018 and 2019 iterations of the SoCalGas Flex Alert paid media campaign is denied without prejudice.March?03,?2020 Motion of National Diversity CoalitionOn March?3,?2020, NDC filed a motion requesting the opportunity to provide comments on the record prior to the issuance of a proposed decision. During the prehearing conference, NDC indicated that it did not want the opportunity to present testimony nor legal briefs and solely indicated that it wanted the opportunity to provide comments on the record. Rule?14.3 of the Commission’s rules of practice and procedure outlines the process for providing comments on a proposed decision after the issuance of the proposed decision. Further, the protest period serves as a mechanism for a party to provide comments on an Application prior to the development of an evidentiary record or proposed decision. In a rate setting proceeding, it is appropriate to develop an evidentiary record and allow for cross examination on the evidence presented. Further, the issues that NDC raised in its protest to the Application either argue for a denial of the Application or would only be applicable if the Application was being approved. In this circumstance, the Application is being denied, and thus additional comments would be unnecessary. On the basis of judicial efficiency and given that NDC’s motion is made moot by the denial of the Application, the March?03,?2020 motion of the National Diversity Coalition is denied.Future Issues Pertaining to Flex AlertOn October?06,?2020, the CAISO, California Public Utilities Commission (CPUC), and California Energy Commission (CEC) issued a Preliminary Root Cause Analysis of the August?2020 heat wave and rotating outages, finding that resource planning targets have not evolved to keep pace with climate changeinduced extreme weather events, and that energy market practices did not perform as intended during stressed conditions. Included among the recommendations in the report is that “[t]he CEC, CAISO and CPUC should coordinate to add funding from all [load serving entities] to better target conservation messaging and utilize automated devices.“The Commission may evaluate the funding and programmatic design of the paid media campaign component of Flex Alert in Rulemaking 20-11-003. A more appropriately designed and scaled program may achieve the intended load reduction goals. Comments on Proposed DecisionThe proposed decision of the Commissioner in this matter was mailed to the parties in accordance with Pub. Util. Code section 311 and comments were allowed under Rule 14.3 of the Commission’s Rules of Practice and Procedure. Comments were filed by NDC on December 02, 2020. Reply comments were filed by NDC on December 07, 2020. We considered the comments, and minor modifications were made to clarify the intent of the decision. Assignment of ProceedingLiane Randolph is the assigned Commissioner and Brian Stevens is the assigned Administrative Law Judge in this proceeding.Findings of FactFlex Alert is a voluntary call by the CAISO for consumers to conserve electricity when there is a predicted shortage of energy supply. SoCalGas has been administering a Flex Alert paid media campaign for the summers of 2016 through 2019. The Commission directed SoCalGas to apply for program approval for a 2020 iteration of its Flex Alert paid media campaign. The Commission has not granted rate recovery from customers to SoCalGas for the costs incurred in the 20162019 iterations of its Flex Alert paid media campaign. The proposed cost recovery for the 2020 SoCalGas Flex Alert campaign is $3.33?million. SoCalGas is requesting to recover $5.58?million for the recovery of costs incurred from the 2018 and 2019 iterations of the Flex Alert paid media campaign.The energy conservation impacts of Flex Alerts are difficult to measure and verify due to the nature of mass market campaigns.The Commission directed SoCalGas to implement the 20162019 iterations of its Flex Alert paid media campaign in response to the leak at the Aliso Canyon storage facility. It is not reasonable to determine the responsibility for the costs incurred in the 20162019 iterations of the SoCalGas Flex Alert paid media campaign until a future proceeding that can examine all aspects of the Aliso Canyon leak and its aftermath.NDC declined the opportunity to serve testimony or serve and file briefs in this proceeding at the prehearing conference, and the issues it raised in its protest to the Application either argued for a denial of the Application or would only be applicable if the Application was being approved.Conclusions of LawCost recovery for the 2018 and 2019 iterations of the SoCalGas Flex Alert paid media campaign should be denied without prejudice. The request for approval for program design, implementation, and cost recovery for the 2020 iteration of the SoCalGas Flex Alert paid media campaign should be denied. The March?03,?2020 motion of the NDC should be denied. Application 1911018 should be closed.ORDERIT IS ORDERED that:Cost recovery for the 2018 and 2019 iterations of the Southern California Gas Company Flex Alert paid media campaign is denied without prejudice. The request for approval for program design, implementation, and cost recovery for the 2020 iteration of the Southern California Gas Company Flex Alert paid media campaign is denied. The March 03, 2020 motion of the National Diversity Coalition is denied. Application 19-11-018 is closed.This order is effective today.Dated December 17, 2020, at San Francisco, California.MARYBEL BATJER PresidentLIANE M. RANDOLPHMARTHA GUZMAN ACEVESCLIFFORD RECHTSCHAFFENGENEVIEVE SHIROMA Commissioners ................
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