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

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ALJ/CEK/Mph PROPOSED DECISION Agenda ID #17083 (Rev 1) Ratesetting 1/10/2019 Item 14 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 CALIFORNIA 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 Erskine Fire; On July 26, 2016, Acting Governor Tom Torlakson issued an Emergency Proclamation for Los Angeles 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 County 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.
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