FRIDAY AGGREGATE: PG&E Looks to Bypass CPCN Review; SDG&E Hydrogen Project Faces Opposition
CRI's Friday roundup compiles activity involving:
- BAJA PATH GAS TRANSMISSION: PG&E's motion to withdraw its pending CPCN application for the $75 million + S-238 Hinkley Compressor Station Electrical Upgrades Project;
- PG&E BILLING INFRASTRUCTURE: The second joint case-management statement in PG&E's Billing Modernization Initiative, which confirms that PG&E’s billing environment relies on multiple aging legacy systems that limit flexibility, data visibility, and timely integration;
- BIOMETHANE COST ALLOCATION: A ruling in R.22-12-011 directing utilities to submit supplemental comments on unresolved questions related to biomethane procurement cost allocation; and
- DECARBONIZATION: Protests to SDG&E's application for approval of its Palomar Decarbonization Demonstration Project (and associated cost recovery).
PG&E HINKLEY COMPRESSOR STATION
PG&E filed a motion to withdraw its pending Certificate for Public Convenience and Necessity application for the $75 million + S-238 Hinkley Compressor Station Electrical Upgrades Project after determining that the work qualifies for an emergency exemption under General Order 177.
WHO SHOULD CARE: Gas shippers, large end-use customers, and Community Choice Aggregators should pay attention here because this move, if granted, would shift debate from whether the project proceeds to how much ratepayers ultimately bear. Additionally, parties would lose the CPCN forum as a leverage point and are left to challenge costs only after capital has been deployed.
- Intervenors and consumer advocates should also care because this is a live test of how broadly GO 177 can be used to sidestep prospective review for major gas infrastructure. A permissive outcome here lowers the practical bar for emergency exemptions when reliability risk is asserted.
- Commission staff should also care because an eventual decision would set precedent around procedural discipline. Accepting the withdrawal without conditions reinforces a pattern where emergency authority compresses or bypasses Commission timing, with consequences for how future backbone projects are reviewed.
ADDITIONAL DETAILS
The application, which PG&E filed last year, sought CPUC authorization to replace aging and obsolete electrical distribution equipment at the Hinkley compressor station, a critical facility on PG&E’s Baja Path gas transmission backbone that supports gas deliveries to Central and Northern California. (See CRI's coverage here.)
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Since then, PG&E reports that component failures (which emerged in late summer 2025, after the initial CPCN filing) and accelerating obsolescence created an imminent risk of station outages that could compromise system capacity and force Emergency Flow Orders. The utility emphasizes that much of the equipment is obsolete, with spare or replacement parts difficult or impossible to obtain, and that without station operation, the PG&E gas system may not have enough capacity to meet demand even on non-peak days, potentially requiring curtailments affecting the entire gas system.
Accordingly, PG&E began construction on January 20, 2026 under GO 177's emergency project exemption, which allows utilities to proceed without a CPCN when work is necessary to prevent a potential emergency affecting safe and reliable gas service. The project is expected to be completed in January 2028.
PG&E formally notified the Commission of its decision on February 4 through an advice letter (and accompanying notices of exemption). Because the project is now proceeding outside the CPCN framework, PG&E argues the application is no longer necessary and that the underlying proceeding serves no remaining purpose.
Cost recovery for the project will instead be addressed in PG&E's General Rate Cases (the utility received a revenue requirement for 2023-2026 in its 2023 General Rate Case, requested updated costs for 2027-2030 in its 2027 GRC, and will seek ongoing recovery in the 2031 GRC and beyond).
INSTANT ANALYSIS: PG&E is seeking to withdraw its application after initiating construction under the General Order 177 emergency exemption. If the Commission grants the motion, the CPCN proceeding would end without a determination on project necessity, and oversight would shift to cost review in future General Rate Cases, meaning ratepayers will face retrospective cost review after the two-year construction timeline is complete, rather than prospective scrutiny before capital deployment.
Until the motion is acted on, the application technically remains pending. However, PG&E’s filing frames the CPCN as functionally moot, arguing that emergency conditions and active construction remove the need for prospective authorization. The key inflection point now is whether the Commission concurs that General Order 177 fully displaces the CPCN process for this project.
PG&E BILLING MODERNIZATION
PG&E filed a second joint case management statement in its application for a Billing Modernization Initiative. The filing confirms that PG&E’s billing environment relies on multiple aging legacy systems that limit flexibility, data visibility, and timely integration.
WHO SHOULD CARE: Community Choice Aggregators should care because the outcome affects their ability to communicate with customers, access timely billing data, and avoid being allocated IT costs that do not improve CCA-facing functionality. This case goes directly to competitive parity and cost exposure.
Large bundled and unbundled customers should care because billing modernization costs are proposed as common costs, meaning they can flow into rates even if customer-facing benefits are limited or uneven. Small businesses, in particular, face downside risk if execution issues translate into higher bills without clearer or more usable billing information.
Regulatory counsel and policy teams should care because the proceeding tests how strictly the Commission will scrutinize large IT programs justified as foundational upgrades, especially when prior GRC representations, scope control, and contingency levels are under dispute.
ADDITIONAL DETAILS
Settlement discussions among PG&E, Cal Advocates, TURN, the Small Business Utility Advocates, CCAs, and Leapfrog have not produced agreement, and the parties expect roughly three days of evidentiary hearings. The CCAs seek hearings on whether proposed upgrades will actually improve bill presentment, customer communications, data quality, and competitive neutrality, and on whether PG&E’s cost allocation approach and interim upgrade decisions are justified.
TURN disputes PG&E’s characterization of its prior General Rate Case representations, questions whether the promised benefits could have been achieved at lower cost, and challenges PG&E’s claim that the current proposal avoids cost increases that would have occurred anyway.
The Small Business Utility Advocates raise concerns about cost-overrun risk, contingency levels, integration of affected edge systems, and whether small business billing needs were adequately considered.
INSTANT ANALYSIS: This filing confirms the Billing Modernization Initiative is moving into a contested evidentiary phase rather than toward settlement. CCAs, TURN, and the Small Business Utility Advocates are converging on a shared concern that PG&E may be spreading significant IT costs across customers without delivering proportional gains in billing functionality, data quality, or customer communication.
The key concern is whether the Billing Modernization Initiative will actually change outcomes or simply preserve PG&E’s control over billing and data (while reallocating costs more broadly). TURN’s focus on PG&E’s prior General Rate Case representations raises credibility risk, while the Small Business Utility Advocates' testimony highlights execution and cost-overrun concerns that could flow through to rates with uncertain customer benefit.
BIOMETHANE
ALJ Sotero issued a ruling in R.22-12-011 directing utilities (and authorizing other parties) to submit supplemental comments on unresolved questions related to biomethane procurement cost allocation.
WHO SHOULD CARE: This ruling affects anyone with exposure to natural gas rates, biomethane procurement costs, or environmental attribute counting, with the most direct impacts on gas utilities, noncore customers, and electric generators.
It focuses on three areas:
- Whether "Renewable Thermal Certificates" are an appropriate and sufficient mechanism for valuing biomethane’s environmental attributes and how any value should accrue to ratepayers;
- What principles and methodologies should govern the allocation of above-market biomethane costs across customer classes, including treatment of electrification goals, Public Purpose Program surcharge precedents, benchmarks for natural gas commodity costs, and potential caps or mitigations for energy-intensive trade-exposed customers; and
- How any resulting surcharges should be implemented for noncore customers, including whether costs should be embedded in transportation rates, recovered through new non-bypassable charges, or subject to exemptions.
Gas utilities are required to respond to detailed questions on existing noncore charges and exemptions, while other parties may also comment. Comments are due March 7.
INSTANT ANALYSIS: This ruling reopens significant issues the Commission left unsettled in the biomethane framework, especially whether Renewable Thermal Certificates are merely a compliance tool or a rate-relevant asset with monetizable value for customers.
By questioning Renewable Thermal Certificate ownership, sale restrictions, and risk allocation, the ALJ is testing assumptions that directly affect how above-market biomethane costs are defined and recovered.
On cost allocation, the ruling is inviting alternatives to standard Equal Cents Per Therm and Equal Percent Change approaches and probing whether existing exemptions for electric generators and potential mitigations for Emissions-Intensive Trade-Exposed customers still hold as costs grow. The detailed focus on non-core surcharge mechanics signals that implementation and rate design, not just policy theory, are now central to the proceeding.
DECARBONIZATION/HYDROGEN
On February 5, multiple parties protested SDG&E's recent application seeking CPUC approval and cost recovery for its Palomar Decarbonization Demonstration Project.
The project is an integrated renewable hydrogen system installed at the Palomar Energy Center, a 588-megawatt combined-cycle natural gas plant in Escondido. (See CRI's coverage here.)
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WHO SHOULD CARE: Large energy users and gas-exposed customers should pay attention, particularly those sensitive to upstream rate pressure and cost-allocation outcomes. If approved, the project would test how far the Commission will allow speculative decarbonization costs to flow into base rates.
- Community Choice Aggregators should care because the proceeding raises early markers on vintaging, re-vintaging, and improper cost shifting. The outcome could shape how future upgrades to legacy utility-owned generation are treated for Power Charge Indifference Adjustment and indifference purposes.
- Investor-owned utilities should care because this case probes the limits of what can be advanced as “demonstration” spending without a defined policy framework. A denial would reinforce that hydrogen pilots must clear a high bar on cost discipline and learning value.
- Regulatory counsel and intervenors should care because the record may become a reference point for future hydrogen and RD&D applications.
The Commission’s handling of scope, hearings, and dismissal standards here will matter well beyond Palomar.
PARTIES' PROTESTS
Across filings, parties argue the project would impose tens of millions of dollars in ratepayer costs for minimal benefits. They state the claimed greenhouse gas reductions are trivial and driven by very small volumes of hydrogen use.
The Utility Consumer Action Network argues the project may actually increase emissions when full lifecycle impacts are considered. Several parties emphasize that low-percentage hydrogen blending at Palomar cannot meaningfully decarbonize the facility.
- Parties also argue the project offers no unique or scalable learning. They note the electrolyzer and blending approach relies on off-the-shelf technology and duplicates or overlaps with other pending hydrogen pilots. In their view, SDG&E has not shown why similar insights could not be obtained through industry research efforts at far lower cost.
- Some filings also stress that the Commission has not yet defined the proper role of investor-owned utilities or ratepayers in the hydrogen sector. They point to unresolved jurisdictional, policy, and eligibility questions around hydrogen-fueled generation. Given that uncertainty, they argue it is premature to require ratepayers to fund hydrogen infrastructure.
- Consumer and public-interest groups further argue the project would worsen affordability pressures during a period of rapidly rising rates. They also criticize the diversion of limited green hydrogen to inefficient uses such as vehicle fueling and minimal turbine blending.
- CCAs and others raise separate concerns about cost allocation and cost shifting.
They argue the project constitutes a major modification to an existing utility-owned generation asset that could trigger re-vintaging issues. Absent clarity, they warn that costs could be improperly shifted to departed load customers through distribution or non-bypassable charges.
Below are direct links to the protests.
- Air Products and Chemicals
- Cal Advocates
- San Diego Community Power/Clean Energy Alliance
- TURN
- Utility Consumers Action Network
INSTANT ANALYSIS: The Palomar application is facing opposition that frames it as a re-filed version of the hydrogen pilot already rejected in SDG&E’s 2024 GRC. Across parties, a recurring claim is that the project still delivers negligible emissions benefits at high ratepayer cost, with no credible path to scale or distinct learning value.
TURN goes further, requesting outright dismissal on procedural grounds. TURN argues SDG&E failed to satisfy the five specific requirements from the Commission's 2024 SoCalGas/SDG&E GRC decision (D.24-12-074):
- Leveraging new public funding;
- Establishing public-private partnerships;
- Lowering ratepayer costs;
- Demonstrating scalability; and
- Showing the project is more effective than participating in collaborative research efforts like the Electric Power Research Institute's $500,000/year hydrogen initiative.
Cal Advocates proposes expanding the scope to require SDG&E to quantify GHG reductions across all four claimed use cases (generator cooling, power generation, vehicle fueling, and RD&D), demonstrate scalability with associated costs, and prove consistency with state RD&D policies.
Ultimately, the application lands amid unresolved policy questions about the utility's role in hydrogen and eligibility of hydrogen blending under clean procurement programs. Approving cost recovery now would force the Commission to decide those issues indirectly.