San Diego Gas & Electric Performance-Based Ratemaking

This assignment consisted of two separate projects evaluating the Performance-Based Ratemaking (PBR) mechanism and a mid-point evaluation of SDG&E's targets and performance.

In the first project, Vantage was selected by the Commission Advisory and Compliance Division (CACD) of the California Public Utility Commission (Commission) and San Diego Gas & Electric (SDG&E) to evaluate the two-year experimental performance-based ratemaking mechanism (PBR) at SDG&E for Generation and Dispatch and Gas Procurement. This PBR includes a monitoring and evaluation (M&E) component which ensures that the PBR improves SDG&E’s operating efficiency, without compromising the delivery of safe, reliable, and environmentally sensitive services at reasonable rates. The objective of the report was to analyze the results and effectiveness of the experiment to-date and to preview what can be expected in the final report. Vantage’s report addresses the analytical results of the first year and provides important feedback on the technical merits of many aspects of the calculations. Vantage's emphasis was on the success of the process and the impact it has on SDG&E, its ratepayers, stockholders, suppliers, and other affected participants.

In the second project, SDG&E selected Vantage to perform a CPUC-required independent mid-term review of the Base Rates PBR to identify any issues, problems, or potential changes necessary to the mechanism. The mechanism consisted of a monitoring plan, which required a gathering of information over the period of the experiment to perform analytical validation and determine the success of implementation, and an evaluation plan, which employed the information collected and presented observations based on the results of the monitoring process. The areas which were evaluated included:

Rate of Return
Sharing Mechanisms
Performance Incentive Systems
Price Performance Indicator
Customer Satisfaction Indicator
Employee Safety Indicator
System Reliability Indicator


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