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ALJ/PWI/mph PROPOSED DECISION Agenda ID #18932 Ratesetting Decision __________ BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA 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 349918780 - 1 - A.19-09-012 ALJ/PWI/mph PROPOSED DECISION $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 wildfires 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 Wall Fire, 2017 Alamo Fire, 2017 Whittier Fire, 2017 Detwiler Fire, 2017 Ponderosa Fire, 2017 Mission Fire, 2017 Peak Fire, 2018 March Storms, 2018 Pawnee Fire, 2018 Carr Fire, 2018 Ferguson Fire, 2018 Mendocino Complex Fire, 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. - 3 - A.19-09-012 ALJ/PWI/mph PROPOSED DECISION 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. - 5 - A.19-09-012 ALJ/PWI/mph PROPOSED DECISION 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,
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