ALJ/PWI/mph PROPOSED DECISION Agenda ID #18932 Ratesetting

Decision ______

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF

Application of Pacific Gas and Electric Company to Recover Costs Recorded in the Catastrophic Event Memorandum Application 19-09-012 Account Pursuant to Public Utilities Code Section 454.9 (U 39 M).

DECISION APPROVING PACIFIC GAS AND ELECTRIC COMPANY’S RECOVERY OF CATASTROPHIC EVENT MEMORANDUM ACCOUNT COSTS PURSUANT TO THE PARTIES’ SETTLEMENT AGREEMENT

Summary In this decision, we grant the joint motions of applicant Pacific Gas and Electric Company (PG&E) and intervenors Public Advocates Office (Cal Advocates) and The Utility Reform Network (TURN) to approve and adopt their settlement agreement (Settlement Agreement) and for admission of their testimony into the record as evidence, and we approve PG&E’s application pursuant to Public Utilities (Pub. Util.) Code Section 454.9 to recover incremental costs recorded in its Catastrophic Event Memorandum Account (CEMA) regarding 13 catastrophic events (Events) in 2017 and 2018 in accordance with the provisions of the Settlement Agreement. The Settlement Agreement’s revenue requirement of $136.7 million for CEMA Events costs reflects a compromise between PG&E’s adjusted revenue requirement request of

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$157.1 million and the recommended respective revenue requirements of Cal Advocates and TURN of $118.5 million and $121.3 million. The parties’ settlement also reflects agreement regarding the mechanisms for recovery of PG&E’s expense revenue requirement and the revenue requirements associated with Electric Distribution and Gas Distribution capital costs. The admitted evidence establishes that the elements of Pub. Util. Code Section 454.9 for PG&E’s recovery of CEMA Events costs pursuant to the parties’ settlement have been satisfied and that the Settlement Agreement satisfies California Public Utilities Commission Rule of Practice and Procedure 12.1(d) because it is reasonable in light of the whole record, consistent with law, and in the public interest. This proceeding is closed. 1. Background On September 13, 2019, Pacific Gas and Electric Company (PG&E) filed with the California Public Utilities Commission (Commission) its application in this proceeding under Public Utilities (Pub. Util.) Code Section 454.9 to recover incremental costs recorded in its Catastrophic Event Memorandum Account (CEMA) for 13 events (Events),1 including 12 and one storm, that occurred in 2017 and 2018. The application requested recovery of $159.3 million in electric revenue requirements based upon $123.6 million of expense and $79.6 million of capital costs incurred by PG&E in responding to the Events. PG&E proposed to recover revenue requirements for Electric Distribution, Gas Distribution, and Gas Transmission expense costs over a 12-month period

1 The Events are commonly referred to as the 2017 , 2017 , 2017 , 2017 , 2017 , 2017 , 2017 Peak Fire, 2018 March Storms, 2018 , 2018 , 2018 , 2018 , and 2018 Steele Fire.

- 2 - A.19-09-012 ALJ/PWI/mph PROPOSED DECISION beginning January 1, 2021 or the next available rate change as part of its Annual Electric True-Up (AET) and Annual Gas True-Up (AGT) advice letter filings, with cost recovery through the Distribution Revenue Adjustment Mechanism, Core Fixed Cost Account, and Noncore Customer Class Charge Account rate mechanisms. PG&E proposed to recover its 2017-2021 capital-related revenue requirements over a 12-month period beginning January 1, 2021 or the next available rate change and to recover its 2022 capital-related revenue requirements in 2022 as part of its AET and AGT advice letter filings. PG&E also proposed to recover capital-related revenue requirements after December 21, 2022 in its General Rate Case (GRC) currently slated for a 2023 Test Year. PG&E submitted opening prepared testimony2 with its application that included the governor’s state of emergency proclamations for the CEMA Events.3 PG&E’s prepared testimony also describes in detail PG&E’s CEMA Events activities in restoring utility services to customers, repairing, replacing, or restoring damaged utility facilities, and complying with governmental agency orders in connection with the CEMA Events.4 In addition, PG&E asserted in its prepared testimony that the CEMA Events costs for which it sought recovery were incremental to costs already recovered through other recovery mechanisms or base rates.5

2 PG&E subsequently identified its opening prepared testimony as Exhibit PGE-01 in the parties’ August 31, 2020 joint motion for admission of the parties’ testimony into the record as evidence. 3 Exhibit PGE-01 Chapter 1, Attachment A. 4 Exhibit PGE-01 Chapters 1-3. 5 Exhibit PGE-01, Chapter 4.

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On October 17, 2019, the Public Advocates Office (Cal Advocates) and The Utility Reform Network (TURN) filed protests to the application. The Assigned Commissioner’s Scoping Memo and Ruling (Scoping Memo) filed on December 6, 2019 identified the following issues to be determined: 1. For each CEMA event in which PG&E requests cost recovery, was an official disaster declared by a competent state or federal authority; 2. Whether the CEMA costs that PG&E seeks cost recovery are for: (1) restoring utility service; (2) repairing, restoring, or replacing damaged utility facilities; and (3) complying with governmental agency orders in connection with the events declared disasters, both in terms of geography and the nature of impacts covered by the disaster declaration; 3. Are the recorded CEMA costs reasonable, prudently incurred, and incremental to costs already included or recoverable in other utility accounts; and 4. Is the ratemaking treatment for eligible CEMA costs reasonable? On June 3, 2020, Cal Advocates served its report6 regarding the CEMA Events recommending that the Commission reduce PG&E’s requested expense costs by $20.589 million and PG&E’s requested capital costs by $28.803 million, resulting in a recommended revenue requirement of $118.5 million. In the report, Cal Advocates recommended reductions of $5.449 million in expense and $4.421 million in capital for straight-time labor and $15.140 million in expense and $24.382 million in capital related to overheads, burdens, and paid time off

6 The report is dated June 4, 2020. Cal Advocates subsequently identified the report as Exhibit PAO-01 in the parties’ August 31, 2020 joint motion for admission of the parties’ testimony into the record as evidence.

- 4 - A.19-09-012 ALJ/PWI/mph PROPOSED DECISION because those costs were already built into PG&E’s current rates and PG&E had failed to show it had not already recovered those costs in rates.7 On June 4, 2020, TURN served its report8 regarding the CEMA Events recommending that the Commission reduce PG&E’s requested expense costs by $23.278 million and PG&E’s requested capital costs by $28.936 million, resulting in a recommended revenue requirement of $121.3 million. In the report, TURN recommended reductions of $5.417 million in expense and $4.323 million in capital for straight-time labor and $17.861 million in expense and $24.613 million in capital related to selected overheads because those costs were not incremental, were not justified, and were already included in PG&E’s GRC filing.9 In rebuttal testimony,10 PG&E again asserted the incrementality of its claimed costs to costs already included in rates through the GRC, stating that PG&E had reduced its GRC forecast to account for CEMA Events costs.11 After discussions with Cal Advocates and TURN, PG&E identified $1.9 million in expense costs and $0.3 million in capital costs related to the Mendocino Complex Fire that exceeded actual vendors’ billings. PG&E agreed to remove those costs from its requested revenue requirement, resulting in a reduction of PG&E’s requested revenue requirement from $159.3 million to $157.1 million.

7 Exhibit PAO-01 at 5-6. 8 TURN subsequently identified the report as Exhibit TURN-01 in the parties’ August 31, 2020 joint motion for admission of the parties’ testimony into the record as evidence. 9 Exhibit TURN-01 at 1-12. 10 PG&E subsequently identified its rebuttal testimony as Exhibit PGE-03 in the parties’ August 31, 2020 joint motion for admission of the parties’ testimony into the record as evidence. 11 Exhibit PGE-03 at 2.

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2. Settlement PG&E, Cal Advocates, and TURN negotiated to attempt to resolve the issues raised by the application. Those negotiations resulted in a settlement conference on August 25, 2020 noticed in accordance with Commission Rule of Practice and Procedure (Rule) 12.1(b). The three parties entered into a settlement agreement (Settlement Agreement) executed by PG&E on August 25, 2020 and by Cal Advocates and TURN on August 28, 2020 and attached to this decision as Appendix A. Paragraph 4.2 of the Settlement Agreement provides that PG&E’s total revenue requirement for the CEMA Events is $136.7 million reflecting $105.8 million of expense costs and $69 million of capital costs (Settlement Costs); with interest, the expense revenue requirement is $112 million and the capital revenue requirement for 2017 through 2022 is $24.7 million. Under Paragraph 4.3 of the Settlement Agreement, Settlement Costs will be recovered in the same manner as other electric distribution, gas distribution, and gas transmission costs are recovered in rates using existing methodologies for revenue allocation and rate design. Tracking PG&E’s application proposals, Paragraphs 4.4 and 4.5 of the Settlement Agreement provide for PG&E to recover (1) revenue requirements for Electric Distribution, Gas Distribution, and Gas Transmission expense costs over a 12-month period beginning January 1, 2021 or the next available rate change as part of its AET and AGT advice letter filings, with cost recovery through the Distribution Revenue Adjustment Mechanism, Core Fixed Cost Account, and Noncore Customer Class Charge Account rate mechanisms, (2) 2017-2021 capital-related revenue requirements associated with Electric Distribution and Gas Distribution capital costs over a 12-month period beginning January 1, 2021 or the next available rate change through AET and AGT advice letter filings, (3) 2022 capital-related revenue requirements

- 6 - A.19-09-012 ALJ/PWI/mph PROPOSED DECISION associated with Electric Distribution and Gas Distribution capital costs through its AET and AGT advice letter filings in 2022, and (4) Electric Distribution and Gas Distribution capital-related revenue requirements after December 31, 2022 in its GRC currently slated for a 2023 Test Year. Paragraph 5.12 of the Settlement Agreement states in relevant part that the parties’ settlement “fully and finally settles any and all disputes among and between the Settling Parties in this proceeding.” 3. Motions On August 31, 2020, PG&E, Cal Advocates, and TURN filed their All-Party Motion for Admission of the Parties’ Testimonies into the Record as Evidence (All-Party Motion to Admit Exhibits into Evidence) to admit into evidence the following exhibits consisting of prepared testimony and workpapers: (a) PG&E’s 2019 Catastrophic Event Memorandum Account Prepared Testimony sponsored by Deanna C. Toy, Angie M. Gibson, Andrew Wells, Kevin Wetzel, Isaac Tam, and Liz Chan (Exhibit PGE-01); (b) PG&E’s 2019 Catastrophic Event Memorandum Account Workpapers Supporting Chapters 2, 3, 5, and 6 sponsored by Angie M. Gibson, Andrew Wells, Isaac Tam, and Liz Chan (Exhibit PGE-02); (c) PG&E’s 2019 Catastrophic Event Memorandum Account Rebuttal Testimony sponsored by Kevin Wetzel (Exhibit PGE-03); (d) Cal Advocates’ Report on the Results of Examination for Pacific Gas and Electric Company’s Catastrophic Event Memorandum Account Regarding Wildfires and Storm Events Occurring from 2017 to 2018 sponsored by Mark Waterworth and Amgad Basilios (Exhibit PAO-01); (e) TURN’s Prepared Testimony and Report on PG&E’s Catastrophic Event Memorandum Account Application sponsored by John E. Sugar (Exhibit TURN-01); and (f) TURN’s Attachments to Prepared Testimony and Report on PG&E’s Catastrophic Event Memorandum Account

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Application sponsored by John E. Sugar (Exhibit TURN-02). As all parties joined in the motion, no objections were filed, and good cause was established, the Motion to Admit Exhibits into Evidence is granted. On August 31, 2020, PG&E, Cal Advocates, and TURN filed a Joint Motion for Approval and Adoption of the Attached Settlement Agreement (Motion to Adopt Settlement Agreement), with the Settlement Agreement as an attachment. 4. Discussion Under Rule 12.1(d), the Commission will not approve a settlement unless it is reasonable in light of the whole record, consistent with law, and in the public interest. California has a strong public policy favoring settlements because they reduce litigation expenses, conserve scarce resources of parties and the Commission, and allow parties to reduce the risk that litigation will produce unacceptable results.12 4.1. The Settlement Is Reasonable in Light of the Whole Record The Settlement Agreement executed by all parties to this proceeding reflects a reasonable compromise of the CEMA Events costs claimed by PG&E in its application and the costs recommended by Cal Advocates and TURN in their reports admitted into evidence. After adjustment for $2.2 million in costs that PG&E agreed to remove from its application, PG&E sought a total revenue requirement of $157.1 million. Cal Advocates and TURN recommended revenue requirements of $118.5 million and $121.3 million, respectively. The revenue requirement of $136.7 million agreed to by all parties in the Settlement Agreement is near the mid-point between PG&E’s revenue requirement and the two recommended revenue requirements of Cal Advocates and TURN and

12 Decision (D.) 05-11-005 at 16.

- 8 - A.19-09-012 ALJ/PWI/mph PROPOSED DECISION therefore reflects a reasonable resolution of the parties’ positions. As set forth above, the parties disagreed about whether some of PG&E’s claimed costs were incremental and already reflected in rates, and the exhibits admitted into evidence reflect that each party had a reasonable basis for its assertions. On balance, the evidence supports the conclusion that the revenue requirement amount in the Settlement Agreement is reasonable in light of the whole record. 4.2. The Settlement Is Consistent with Law PG&E sought recovery of CEMA Events costs pursuant to Pub. Util. Code Section 454.9, which provides: (a) The commission shall authorize public utilities to establish catastrophic event memorandum accounts and to record in those accounts the costs of the following: (1) Restoring utility services to customers. (2) Repairing, replacing, or restoring damaged utility facilities. (3) Complying with governmental agency orders in connection with events declared disasters by competent state or federal authorities. (b) The costs, including capital costs, recorded in the accounts set forth in subdivision (a) shall be recoverable in rates following a request by the affected utility, a commission finding of their reasonableness, and approval by the commission. The commission shall hold expedited proceedings in response to utility applications to recover costs associated with catastrophic events. In determining whether the parties’ settlement is consistent with applicable law under Pub. Util. Code Section 454.9, we first address whether the evidence supports favorable findings regarding each of the issues identified in the Scoping Memo. The Scoping Memo’s first issue was whether an official disaster had been declared for each CEMA Event by a competent state or federal

- 9 - A.19-09-012 ALJ/PWI/mph PROPOSED DECISION authority. Attachment A to Chapter 1 of PG&E’s opening testimony reflects the governor’s state of emergency proclamations for the CEMA Events. The Scoping Memo’s second issue was whether the CEMA Events costs fell within the three allowable categories set forth in Pub. Util. Code Section 454.9(a). Chapters 1-3 of PG&E’s opening prepared testimony provides extensive documentation describing PG&E’s CEMA Events activities that establish that PG&E’s requested costs were for restoring utility services to customers, repairing, replacing, or restoring damaged utility facilities, or complying with governmental agency orders in connection with the CEMA Events. Regarding the Scoping Memo’s third issue of whether PG&E’s costs were reasonable, prudently incurred, and incremental, the exhibits admitted into evidence include extensive documentation of those matters, and the Settlement Agreement shows that all parties ultimately agreed that the Settlement Costs satisfy those criteria. The Settlement Agreement’s provision in Paragraph 4.4 for cost recovery through the established Distribution Revenue Adjustment Mechanism, Core Fixed Account and Noncore Customer Class Charge Account rate mechanisms reflects reasonable ratemaking treatment for the CEMA Events Costs, and therefore the Scoping Memo’s fourth issue was satisfied. In addition, all parties agreed in the Settlement Agreement that they had fully settled all proceeding disputes, thereby providing additional support for the determination that all identified issues have been resolved.13 The record establishes that the provisions of Pub. Util. Code Section 454.9 as distilled in the Scoping Memo have been satisfied, and therefore the parties’ settlement is consistent with law.

13 Settlement Agreement Paragraph 5.12.

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4.3. The Settlement Is in the Public Interest The parties’ settlement benefits the Commission, the public at large, and the parties. Commission time and resources that would otherwise have been expended in evidentiary hearings can now be utilized for the benefit of the public in other matters. Settlement can serve as a model for earlier resolution of other proceedings by demonstrating the tangible benefits of effective communication and a practical mindset. The parties also benefit because proceeding expenses, the distractions of litigation to normal operations, and outcome uncertainty all stop. Therefore, the parties’ settlement is in the public interest. 5. Conclusion The parties settled this proceeding by agreeing to a total revenue requirement for the CEMA Events of $136.7 million consisting of an expense revenue requirement of $112 million and a capital revenue requirement for 2017 through 2022 of $24.7 million. The parties’ Settlement Agreement is reasonable in light of the whole record, consistent with law, and in the public interest. Therefore, we grant the parties’ joint motion to approve their Settlement Agreement, and we approve PG&E’s application in accordance with the provisions of the Settlement Agreement. 6. Comments on Proposed Decision Based upon the Settlement Agreement, this proceeding is now an uncontested matter in which the decision grants the relief requested by all parties. Accordingly, pursuant to Pub. Util. Code Section 311(g)(2) and Rule 14.6(c)(2), the otherwise applicable 30-day period for public review and comment is waived.

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7. Assignment of Proceeding Liane M. Randolph is the assigned Commissioner and Peter Wercinski is the assigned Administrative Law Judge in this proceeding. Findings of Fact 1. The governor of California issued written proclamations of a state of emergency for the CEMA Events. 2. The Settlement Costs were for (a) restoring utility services to customers, (b) repairing, replacing, or restoring damaged utility facilities, or (c) complying with governmental agency orders in connection with CEMA Events. Conclusions of Law 1. The Settlement Costs were reasonable, prudently incurred, and incremental to costs already included or recoverable in other utility accounts. 2. The ratemaking treatment for Settlement Costs is reasonable. 3. The Settlement Agreement is reasonable in light of the whole record, consistent with law, and in the public interest. ORDER IT IS ORDERED that: 1. The All-Party Motion of Pacific Gas and Electric Company, The Utility Reform Network and the Public Advocates Office at the California Public Utilities Commission for Admission of the Parties’ Testimonies into the Record as Evidence is granted. 2. The Joint Motion of Pacific Gas and Electric Company, The Utility Reform Network and the Public Advocates Office at the California Public Utilities Commission for Approval and Adoption of the Attached Settlement Agreement is granted.

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3. Pacific Gas and Electric Company’s application to recover incremental costs recorded in its Catastrophic Event Memorandum Account pursuant to Public Utilities Code Section 454.9 and in accordance with the terms of the Settlement Agreement between Pacific Gas and Electric Company, The Utility Reform Network and the Public Advocates Office at the California Public Utilities Commission attached to this decision as Appendix A is granted. 4. Application A.19-09-012 is closed. This Order is effective today.

Dated , at San Francisco, California.

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