ALJ/CEK/mph PROPOSED DECISION Agenda ID #17083 (Rev 1) Ratesetting 1/10/2019 Item 14

Decision

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF

Application of Southern California Edison Company (U338E) for Authorization to Recover Costs Related to 2015-2016 Drought and 2016 Firestorms and Recorded In the Application 18-03-004 Catastrophic Event Memorandum Account.

DECISION AUTHORIZING SOUTHERN CALIFORNIA EDISON RECOVERY OF COSTS RELATED TO 2015-2016 DROUGHT AND 2016 FIRESTORMS

Summary This decision grants Southern California Edison Company the authority it requests to recover the incremental expenses and capital expenditures it incurred in 2015-2016 for a catastrophic Drought and in 2016 for catastrophic Firestorms (Erskine, Sand, and Blue Cut). This proceeding is closed.

1. Background Due to significantly low amounts of rainfall and snowpack during the past few years, California has been in a severe drought. As a result of these severe conditions, on January 17, 2014, Governor Brown proclaimed a State of Emergency and “directed state official to take all necessary actions to prepare of

256491327 - 1 - A.18-03-004 ALJ CEK/mph PROPOSED DECISION (Rev 1)

drought conditions.”1 At the time of the announcement, snowpack in the mountains of California was estimated to be 20 percent of normal average for that period. According to the Governor’s Proclamation, “... dry conditions and lack of precipitation present urgent problems: drinking water supplies are at risk in many California communities; fewer crops can be cultivated and farmer’s long-term investments are at risk; low-income communities heavily dependent on agricultural employment will suffer heightened unemployment and economic hardship; animals and plants that rely on California’s rivers, including many species in danger of extinction, will be threatened; and the risk of wildfires across the state is greatly increased.”2 On April 1, 2015, Governor Brown issued Executive Order B-29-15 that proclaimed a Continued State of Emergency and ordered significant water conservation measures, and directed the California Department of Forestry and Fire Protection to launch a public information campaign to educate the public on actions they can take to prevent wildfires, including the proper treatment of dead and dying trees.3 On June 12, 2014, the California Public Utilities Commission (CPUC or Commission) approved Resolution ESRB-4 that ordered California Investor-Owned Utilities (IOUs) to “take practicable measures to reduce the likelihood of fires associated with their facilities” and stated that incremental cost recovery through Catastrophic Event Memorandum Accounts (CEMAs) may be sought.

1 SCE Application at 3 quoting Governor Brown’s State of Emergency Proclamation. 2 SCE-01 at 8-9 quoting the Governor’s Proclamation, January 17, 2014. 3 SCE-01 at 46.

A.18-03-004 ALJ CEK/mph PROPOSED DECISION (Rev 1)

Similarly, beginning on June 23, 2016, Southern California experienced a series of intense wildfires. As a result of those wildfires, the Governor issued three State of Emergency Proclamations for Southern California:4  On June 24, 2016, Governor Brown issued an Emergency Proclamation for Kern County due to the effects of the ;  On July 26, 2016, Acting Governor Tom Torlakson issued an Emergency Proclamation for and Monterey Counties due to the effects of the Sand and Soberanes wildfires; and  On August 16, 2016, Governor Brown issued an Emergency Proclamation for San Bernadino County due to the effects of the Blue Cut Fire. Between June and August 2016, these fires burned 125,725 acres in Southern California Edison Company’s (SCE) territory and disrupted service to over 52,450 customers. (See below for a more detailed summary.) Summary of Erskine, Sand, and Blue Cut Fires Included in CEMA Fire Start Containment Acreage Date Date Burned Erskine Kern 6/23/2016 7/11/2016 48,019 Sand Los Angeles 7/22/2016 10/10/2016 41,432 Blue San 8/16/2016 8/23/2016 36,274 Cut Bernardino

4 Application at 4.

A.18-03-004 ALJ CEK/mph PROPOSED DECISION (Rev 1)

Under the Commission’s existing practices, the above named proclamations allowed SCE to invoke the CEMA in accordance with the Commission’s Public Utilities Code § 454.9(b) 5 and Resolution E-3238 that allows a regulated utility an opportunity to recover any reasonable costs to address the event provided that the costs are incremental to existing allowances in rates. Section 454.9 (b) allows for recovery in rates of the costs, including capital costs, incurred in response to a catastrophic event. Resolution E-3238, dated July 24, 1991, authorized SCE to establish CEMA accounts and to record in those accounts the costs of the following: (1) restoring utility service to customers; (2) repairing, replacing, or restoring damaged utility facilities; and (3) complying with governmental agency orders resulting from declared disasters. Resolution E-3238 also authorized utilities to record capital-related costs such as depreciation and return on capitalized plant additions. Among other things, recovery of costs may be limited by consideration of the extent to which losses are covered by insurance, the level of loss already built into existing rates, and possibly other factors relevant to the particular utility and event.6

2. Procedural Background On March 1, 2018, SCE filed an application requesting that the Commission authorize SCE to recover costs recorded in SCE’s CEMA associated with the following four catastrophic events (CEMA Events):  2015-2016 Drought (Drought);  2016 Erskine Firestorm;  2016 Sand Firestorm; and

5 All references to Rules are to the Commission’s Rules of Practice and Procedure. 6 ORA-1 at 1 quoting SCE Workpapers at 49-50.

A.18-03-004 ALJ CEK/mph PROPOSED DECISION (Rev 1)

 2016 Blue Cut Firestorm. Pursuant to § 454.9, SCE requested that it recover the costs it incurred to: 1) restore service to customers, 2) repair, replace, or restore damaged facilities, and 3) comply with governmental agency orders in connection with events declared disasters by competent state or federal authorities. Specifically, SCE requested that the Commission:7 1) Find reasonable $46.7 million in incremental Operation and Maintenance (O&M) expenses related to 2015-2016 Drought mitigation efforts; 2) Authorize SCE to transfer the recorded balance in the CEMA Drought subaccount (including interest) currently estimated to be $46.7 million, to the distribution sub-account of the Base Revenue Requirement Balancing Account (BRRBA) for recovery in distribution rates, upon the effective date of a final Commission decision in this proceeding; 3) Find reasonable $17.6 million of incremental capital expenditures used as the basis for the revenue requirement recorded in SCE’s 2016 CEMA Firestorm capital costs subaccounts; and 4) Authorize SCE to transfer the recorded balance in the CEMA Firestorm capital costs subaccounts (including interest), currently estimated to be $2.8 million, to the distribution sub-account of the BRRBA for recovery in distribution rates, upon the effective date of a final Commission decision in this proceeding. Protests to the application were filed by the Office of Ratepayer Advocates8 on April 6, 2018. A Reply was filed by SCE on April 16, 2018.

7 See Application at 1-2.

A.18-03-004 ALJ CEK/mph PROPOSED DECISION (Rev 1)

On May 8, 2018, a pre-hearing conference took place in San Francisco to establish the service list to the proceeding, discuss the scope of the proceeding, and develop a procedural timetable for the management of the proceeding. On June 1, 2018, the Assigned Commissioner issued a Scoping Memo and Ruling addressing the scope of the proceeding and other procedural matters, and establishing a procedural schedule. On August 30, 2018, Cal Advocates served its Report and Testimony (Testimony). On September 5, 2018, SCE and Cal Advocates jointly submitted an e-mail to the Administrative Law Judge (ALJ) stating that in light of Cal Advocates’ testimony, SCE did not intend to serve any rebuttal testimony. The parties requested that evidentiary hearings and post-hearing briefs should be taken off calendar and that the record should be submitted. On September 13, 2018 the ALJ granted SCE and Cal Advocates’ September 5, 2015 request to take evidentiary hearings and post-hearing briefs off calendar and submit the proceeding to the Commission.

3. Issues Before the Commission The scope of this proceeding encompasses all factual, policy, and legal issues necessary to determine whether SCE has met its burden of proving that it is entitled to rate recovery pursuant to § 454.9 for costs properly recorded in its CEMA as a result of the CEMA events mentioned above.

8 Senate Bill 854 (Stats. 2018, ch. 51) amended Pub. Util. Code Section 309.5(a) so that the Office of Ratepayer Advocates is now named the Public Advocates Office of the Public Utilities Commission. We will refer to this party as Cal Advocates.

A.18-03-004 ALJ CEK/mph PROPOSED DECISION (Rev 1)

Issues to be determined are:9 1) Whether the 2015-2016 drought-related costs and the 2016 firestorm related costs were associated with government agency orders resulting from declared disasters; 2) Whether SCE’s proposed revenue requirement of $49.5 million is incremental, reasonable, and recoverable; 3) Whether SCE’s requested $64.3 million in CEMA costs is associated with: 1) restoring utility services to customers; 2) repairing, restoring, or replacing damaged utility facilities; and 3) complying with governmental agency orders; 4) Whether the accounting method(s) used for booking the costs regarding the CEMA events is reasonable, justified, and consistent with the law; and 5) Whether SCE’s proposal to transfer the $49.5 million revenue requirement to the distribution sub-account of the BRRBA (Base Revenue Requirement Balancing Account) for recovery in distribution rates, upon the effective date of a final Commission decision in this proceeding is reasonable, justified, and consistent with the law.

4. Admittance of Testimony and Exhibits into Record Since evidentiary hearings were not held in A.18-03-004, there was no opportunity to enter prepared testimony and exhibits into the record. In order to fairly access the record, it is necessary to include all testimony and exhibits served by SCE and Cal Advocates. On September 19, 2018, Cal Advocates filed a motion for admission of its testimony (Exhibit ORA-1) 10 into evidence following

10 Exhibit ORA-1, Report on the Results of Examination for Southern California Edison Company’s Catastrophic Event Memorandum Account Related to the 2015-2016 Drought and 2016 Firestorms, August 30, 2018.

A.18-03-004 ALJ CEK/mph PROPOSED DECISION (Rev 1)

its review of the application of SCE for authority to recover certain costs recorded in its CEMA. On September 25, 2018, SCE filed a similar motion for admission of its prepared testimony (Exhibit SCE-1) and supplemental testimony (Exhibit SCE-2).11 In this decision, we grant Cal Advocates’ and SCE’s motions and admit into evidence Exhibits ORA-1, SCE-1, and SCE-2.

5. Discussion and Analysis We have reviewed the evidence in the record, considered the scope and thoroughness of the review by the only other active party, Cal Advocates, and find that the outcome is reasonable based on the record before us. Exhibit ORA-1 “Report on the Results of Examination for Southern California Edison Company’s Catastrophic Memorandum Account Related to 2015-2016 Drought and 2016 Firestorms,” dated August 30, 2018, informs us of Cal Advocates’ review and conclusions for this proceeding.12 Based on ORA’s [Cal Advocates’] examination, ORA [Cal Advocates] does not propose any adjustments to SCE’s CEMA request for recovery of incremental O&M expenses in the amount of $46.7 million for the 2015 Drought mitigation efforts and of incremental capital expenditures in the amount of $17.6 million for the 2016 Firestorms (Erskine Fire, , and Blue Cut Fire). The O&M expenses and capital expenditures in SCE’s CEMA as detailed in Application (A.)18-03-004 appear incremental within the scope of Section 454.9(b) Code and Resolution E-3238.

11 Exhibit SCE-01, Catastrophic Event Memorandum Account Testimony 2015-2016 Drought and Catastrophic Event Memorandum Account Supplemental Testimony 2015-2016 2016 Firestorms, March 1, 2018; and Exhibit SCE-02, Drought & 2016 Firestorms, May 25, 2018. 12 ORA-1 at 3.

A.18-03-004 ALJ CEK/mph PROPOSED DECISION (Rev 1)

This statement, whereby Cal Advocates stipulates that it believes SCE’s costs are reasonable, in conjunction with our own review of SCE’s application, allow us to find that SCE has met its burden of proof and therefore, its 2015 costs for the Drought and 2015-2016 Firestorms are reasonable and prudent. The 2015-2016 Catastrophic Drought and 2016 Firestorms (Erskine, Sand, and Blue Cut) were highly destructive events. Therefore, any reasonable actions by SCE to safely and promptly restore service and take practical measures to reduce likelihood of fires benefit the ratepayers. Cal Advocates’ examination found SCE’s action to be acceptable and therefore did not propose any ratemaking adjustments. We also find that Cal Advocates had the necessary sound and thorough understanding of the application. Therefore we find recovery of the 2015-2016 Drought and 2016 Firestorms is reasonable.

6. Categorization and Need for Hearing In Resolution ALJ 176-3414 issued March 22, 2018, the Commission preliminarily categorized this Application as Ratesetting, and preliminarily determined that hearings were necessary. Although Cal Advocates initially protested the Application, Cal Advocates withdrew its protest. Given this development, a public hearing is not necessary.

7. Reduced Comment Period This is an uncontested matter in which the decision grants the relief requested. Accordingly, pursuant to Pub. Util. Code § 311(g)(2) and Rule 14.6(c)(2) of the Commission’s Rules of Practice and Procedure, the otherwise applicable 30-day period for public review and comment is reduced to 15 days. Comments were filed on December 27, 2018 by SCE. Reply comments were not received.

A.18-03-004 ALJ CEK/mph PROPOSED DECISION (Rev 1)

The comments support the decision and do not require a separate discussion.

8. Assignment of Proceeding Liane M. Randolph is the assigned Commissioner and Colette E. Kersten is the assigned ALJ in this proceeding.

Findings of Fact 1. The SCE application is uncontested because Cal Advocates has stipulated that SCE’s CEMA practices and its 2015-2016 Drought and 2016 Firestorm activities were reasonable. There was no other active party. 2. SCE incurred the 2015-2016 Drought and 2016 Firestorm costs in response to declared state of emergency proclamations to restore utility services to customers and repair, replace, or restore damaged utility facilities. 3. Cal Advocates performed a sufficient review to have an informed basis for its opinion. 4. SCE’s 2015-2016 Drought and 2016 Firestorm costs were reasonable. 5. On September 19, 2018, Cal Advocates filed a motion for admission of its testimony (Exhibit ORA-1) into evidence. 6. On September 25, 2018, SCE filed a motion for admission of its prepared and supplemental testimony (Exhibits SCE-1 and SCE-2).

Conclusions of Law 1. The disaster declarations issued by Governor Brown constitute events declared to be a disaster by competent state or federal authorities for purposes of § 454.9 and Resolution E-3238. 2. Use of the CEMA for recording and recovering the costs incurred by SCE to address 2015-2016 Drought and 2016 Firestorms is appropriate under § 454.9 and Resolution E-3238.

A.18-03-004 ALJ CEK/mph PROPOSED DECISION (Rev 1)

3. Incremental O&M expenses of $46.7 million recorded in SCE’s 2015-2016 Drought CEMA O&M subaccount for the period January 1, 2015 - December 31, 2016, justified in testimony, are reasonable. 4. Incremental capital expenditures of $17.6 million associated with the revenue requirements recorded in SCE’s 2016 Firestorm CEMAs (Erskine, Sand, and Blue Cut Fires), justified in testimony, are reasonable. 5. Recovery of the CEMA costs provides a benefit to ratepayers. 6. We should change our preliminary and Scoping Memo determination regarding hearings to no hearings necessary. 7. SCE’s Exhibits SCE-1 and SCE-2 and Cal Advocates’ Exhibit ORA-1 should be received into evidence. 8. The proceeding should be closed. ORDER

IT IS ORDERED that: 1. Southern California Edison (SCE) is authorized to recover revenue requirements associated with SCE’s reasonably incurred incremental Operations and Maintenance (O&M) expenses and capital expenditures associated with the 2015-2016 Drought and 2016 Firestorms in Southern California: a) Incremental O&M expenses of $46.7 million recorded in SCE’s 2015- 2016 Drought Catastrophic Event Memorandum Account (CEMA) O&M subaccount for the period January 1, 2015-December 31, 2016; and b) Incremental capital expenditures of $17.6 million associated with revenue requirements recorded in SCE’s 2016 Firestorm CEMAs (Erskine, Sand, and Blue Cut Fires). 2. Southern California Edison is authorized to transfer the recorded balance in the Catastrophic Event Memorandum Account Drought subaccount, including interest, to the distribution sub-account of the Base Revenue Requirement

A.18-03-004 ALJ CEK/mph PROPOSED DECISION (Rev 1)

Balancing Account for recovery in distribution rates, upon the effective date of a final Commission decision in this proceeding. 3. Southern California Edison is authorized to transfer the recorded balances in the Catastrophic Event Memorandum Account Firestorm capital costs subaccounts, including interest, to the distribution sub-account of the Base Revenue Requirement Balancing Account for recovery in distribution rates, upon the effective date of a final Commission decision in this proceeding. 4. The prepared Testimony of Southern California Edison Company (SCE) and the Public Advocates Office of the Public Utilities Commission, consisting of Exhibits SCE-1, SCE-2, and ORA-1, is received into evidence. 5. No hearings are required for this proceeding. 6. Application 18-03-004 is closed. This order is effective today. Dated , at San Francisco, California.