executive summary · 2020. 6. 24. · 12 this exhibit presents the public advocates office’s...

Docket Exhibit Number Commissioner ALJ Witness

: : : : :

A.19-08-013 PAO-01 _________ Shiroma Wildgrube/Seybert Burns

PUBLIC ADVOCATES OFFICE CALIFORNIA PUBLIC UTILITIES COMMISSION

Report on the Results of Operations for

Southern California Edison Company General Rate Case

Test Year 2021

Executive Summary

San Francisco, California April 10, 2020

ii

TABLE OF CONTENTS

I. INTRODUCTION – THE PUBLIC ADVOCATES OFFICE

RECOMMENDS A REDUCTION IN SOUTHERN CALIFORNIA EDISON COMPANY’S PROPOSED REVENUE INCREASES FOR 2021 THRU 2023 ................................................................................................. 1

II. OVERVIEW / SUMMARY – THE COMMISSION SHOULD ADOPT THE PUBLIC ADVOCATES OFFICE’S TEST YEAR 2021 AND POST TEST YEARS 2022 - 2023 RECOMMENDATIONS IN THEIR ENTIRETY .............................................................................................. 3

A. SCE Requests $7.554 Billion in GRC Revenues for Test Year 2021 – an Increase of $1.109 Billion (17.2%) over 2021 Authorized Revenues ........................................................................................................... 3

B. SCE Requests Post Test Year Revenue Increases of $423 Million for 2022 and $514 Million for 2023 ................................................................. 5

C. The Public Advocates Office Recommends $6.937 Billion in GRC Revenues for Test Year 2021 – an Increase of $491 Million (7.6%) over SCE’s Requested 2021 Authorized Revenues .......................................... 5

D. The Public Advocates Office Recommends More Modest Post Test Year Revenue Increases for 2022 and 2023 ..................................................... 6

E. Cumulative Revenue Increases Over the 3-Year Period from 2021 thru 2023 ........................................................................................................... 7

F. Capital Expenditure Adjustment for 2020 ........................................................ 8

III. PROCEDURAL BACKGROUND AND SCHEDULE ....................................... 9

IV. THE PUBLIC ADVOCATES OFFICE’S PROJECT TEAM .............................. 9

V. ORGANIZATION OF THE PUBLIC ADVOCATES OFFICE’S SHOWING / SUMMARY OF DIFFERENCES ................................................ 10

A. Organization of the Public Advocates Office’s Exhibits ................................ 10

B. Summary of the Public Advocates Office’s Recommendations .................... 11

1

EXECUTIVE SUMMARY 1

I. INTRODUCTION – THE PUBLIC ADVOCATES OFFICE 2 RECOMMENDS A REDUCTION IN SOUTHERN CALIFORNIA EDISON 3 COMPANY’S PROPOSED REVENUE 4 INCREASES FOR 2021 THRU 2023 5

The Public Advocates Office submits its reports 6

and exhibits in response to Southern California Edison 7

Company’s (SCE or Edison) Application (A.) 19-08-8

003 for a Test Year (TY) 2021 General Rate Case 9

(GRC), which also includes proposed revenue increases 10

for the 2022 and 2023 Post Test Years. 11

This exhibit presents the Public Advocates Office’s executive summary regarding 12

SCE’s GRC revenue requirement requests for 2021 through 2023. 13

SCE requests that the California Public Utilities Commission (Commission or 14

CPUC) authorize a base revenue requirement (ABRR) increase effective January 1, 2021, 15

for the utility’s Electric Operations (Generation, Transmission and Distribution) which 16

fall within the CPUC’s ratemaking jurisdiction. SCE requests that its ABRR be increased 17

by $1.109 billion from a currently authorized level of $6.445 billion to $7.554 billion in 18

2021.1 19

Table 1-1 compares the Public Advocates Office’s and SCE’s estimates of Test 20

Year 2021 GRC revenues relative to the utility’s authorized level of 2021 revenues. The 21

Public Advocates Office recommends a revenue increase of $491 million from the 22

currently authorized $6.445 billion to $6.937 billion. 23 24

1 Ex. SCE-7, Vol. 1A2, p. 12, Table III-6. Figures are subject to rounding.

The Public Advocates Office recommends a $491 million (7.6%) GRC revenue increase in 2021, from $6.445 billion to $6.937 billion. The Public Advocates Office’s forecast is $618 million lower than SCE’s request for a $1.109 billion (17.2%) increase to $7.554 billion.

2

Table 1-1 1 SCE Requests a $1.109 Billion Base Revenue Requirement Increase in 2021, 2

While the Public Advocates Office Recommends a $491 Million Increase 3 (in Millions of Dollars) 4

Description (a)

SCE 2021 Authorized Revenues

(b)

SCE 2021 Proposed Revenues

(c)

SCE Forecast Increase over

2021 Authorized Revenues (d=c-b)

Public Advocates Office 2021

Recommended Revenues

(e)

Public Advocates Office

Recommended Increase over

2021 Authorized Revenues

(f=e-b)

Total Base Revenues

$6,445

$7,554

$1,109

$6,937

$491

Table 1-2 compares the Public Advocates Office’s and SCE’s forecasts of Post 5

Test Year (PTY) 2022 and 2023 revenue increases. 6

Table 1-2 7 SCE Requests Post Test Year Revenue Increases of $423 Million in 2022 8

and $514 Million in 2023, While the Public Advocates Office Recommends More 9 Modest Increases of $243 Million and $251 Million, Respectively 10

(in Millions of Dollars) 11

Description (a)

SCE Requested 2022

Revenue Increase

(b)

SCE Requested 2023

Revenue Increase

(c)


Recommended 2022 Revenue

Increase (d)


Recommended 2023 Revenue

Increase (d)

Attrition Revenue Increase

$423

$514

$243

$251

Figure 1-1 below presents a graphical depiction of the Public Advocates Office’s 12

recommended revenue requirement level for 2021 through 2023, compared to SCE’s 13

request. For TY 2021, the difference between the Public Advocates Office’s 14

recommendation and SCE’s request is $617 million. 15

16

3

Figure 1-1 1 SCE v. Public Advocates Office, 2021 – 2023 GRC Revenues ($ Millions) 2

3

4

II. OVERVIEW / SUMMARY – THE COMMISSION SHOULD ADOPT 5 THE PUBLIC ADVOCATES OFFICE’S TEST YEAR 2021 AND POST 6 TEST YEARS 2022 - 2023 RECOMMENDATIONS IN THEIR 7 ENTIRETY 8

This section provides an overview and summary of SCE’s requests and the Public 9

Advocates Office’s recommendations regarding the TY 2021 revenue requirement and 10

Post Test Year 2022 and 2023 revenue increases. 11

A. SCE Requests $7.554 Billion in GRC Revenues for Test Year 2021 12 – an Increase of $1.109 Billion (17.2%) over 2021 Authorized 13 Revenues 14

On August 30, 2019, SCE filed an application requesting that the Commission 15

authorize a CPUC-jurisdictional base revenue requirement of $7.554 billion for the 16

utility’s electric distribution, transmission and generation operations, to be effective 17

January 1, 2021. 18

4

SCE requests additional revenues in 2021 to cover higher forecast costs associated 1

with, among other things: operating and maintaining its electric system, customer-related 2

expenses (e.g., meter installation, customer records and collection, and responding to 3

customer inquiries), administrative and general expenses (e.g., employee salaries, 4

benefits, insurance and outside contractors), and rate base (e.g., net infrastructure 5

investment). 6

The following table replicates, in part, one which appears in SCE’s testimony 7

showing SCE’s proposed ABRR for 2021 through 2023 relative to its estimated present 8

revenue requirement for each of those years.2 9

Table 1-3 10 SCE’s 2021 thru 2023 Revenue Requirement Request 11

(in Thousands of Nominal Dollars) 12 Line (a)

Description (b)

2021 (c)

2022 (d)

2023 (e)

1 Proposed GRC Base Revenue Requirement $7,554,448 $7,977,769 $8,491,336

2 Estimated Present Revenue Requirement $6,445,433 $7,554,448 $7,977,769

3 GRC ABRR Change (line 1 - line 2) $1,109,015 $423,321 $513,567

4 GRC Revenue Growth (GWhs sales reductions) $(53,141) $(53,141) $(3,258)

5 Balancing/Memo Account Activity $902 $(902) 0

6 GRC Revenue Change (line 3 - line 4 + line 5) $1,163,057 $475,560 $516,825

7 Percent Revenue Increase (line 6 / line 2) 18.0% 6.3% 6.5%

SCE’s requested GRC base rate revenue increases are $1.109 billion (17.2%) in 13

2021, $423 million (5.6%) in 2022 and $514 million (6.4%) in 2023. SCE’s application 14

also identifies other factors beyond the GRC base rate increase, resulting in a GRC 15

revenue change of $1.163 billion (18.0%) for TY 2021. The other large utilities (e.g., 16

PG&E and Sempra) do not typically include the factors related to GRC Revenue Growth 17

in their rate increase calculations. 18

2 Ex. SCE-7, Vol. 1A2, p. 12, Table III-6.

5

SCE’s proposed change in GRC base revenues from the present level of $6.445 1

billion in 2021 to the proposed level of $7.554 billion in 2021 represents a 17.2% 2

increase over currently authorized levels.3 The Test Year increase combined with the 3

increases in 2022 and 2023 result in a 3-year cumulative increase of $4.7 billion.4 4

B. SCE Requests Post Test Year Revenue Increases of $423 Million 5 for 2022 and $514 Million for 2023 6

SCE proposes to extend its current Post-Test Year Ratemaking (PTYR) 7

mechanism to account for: (1) escalation of operating expenses and (2) capital-related 8

cost increases. SCE also requests that its existing Z-Factor mechanism, which allows 9

revenue adjustments for exogenous events, be continued.5 Referring to Table 1-2, SCE is 10

seeking revenue requirement increases of $423 million in 2022 and $514 million in 2023. 11

C. The Public Advocates Office Recommends $6.937 Billion in GRC 12 Revenues for Test Year 2021 – an Increase of $491 Million (7.6%) 13 over SCE’s Requested 2021 Authorized Revenues 14

The Public Advocates Office recommends that the Commission authorize $6.937 15

billion in 2021 GRC base revenues for SCE, compared to the utility’s request for $7.554 16

billion. The Public Advocates Office recommends a 2021 GRC revenue requirement 17

increase of $491 million which is $618 million lower than SCE’s request. 18

19

3 1,109 divided by 6,455 equals 17.2 percent. 4 Cumulative ABBR increase: $1.109 billion for each year 2021-2023, $423 million for 2022 and 2023 and $514 million for 2023 totals $4.687 billion. 5 Ex. SCE-7, Vol. 4A, pp. 20-38.

6

Table 1-4 1 Public Advocates Office Recommends a $491 Million (7.6%) Increase in GRC 2

Revenues 3 Effective January 1, 2021 for CPUC-Jurisdictional Operations 4


Description (a)

Authorized Revenues

(b)

Public Advocates Office 2021

Recommended Revenues

(c)


Recommended $ Increase over

2021 Authorized Revenues (d=c-b)


Recommended % Increase over 2021

Authorized Revenues (e=d/b)

Total Base Revenues $6,445

$6,937

$491

7.6%

D. The Public Advocates Office Recommends More Modest Post Test 6 Year Revenue Increases for 2022 and 2023 7

The Public Advocates Office recommends revenue increases of $243 million 8

(3.5%) in 2022 and $251 million (3.5%) in 2023, as shown in Tables 1-5 and Table 1-6. 9

Table 1-5 10 Public Advocates Office’s Recommended vs. SCE’s Proposed 11

Post Test Year Revenue Increases for 2022 12 (in Thousands of Dollars) 13

Description

(a)

Public Advocates Office Recommended

(b)

SCE

Proposed6 (c)

2022 Base Rev. Req. $7,179,512 $7,977,769 2021 Base Rev. Req. $6,936,727 $7,554,448 Proposed Rev. Change ($) $242,785 $423,321 Proposed Rev. Change (%) 3.5% 5.6%

14 15

6 Ex. SCE-7, Vol. 1A2, p. 12, Table III-6.

7

Table 1-6 1 Public Advocates Office’s Recommended vs. SCE’s Proposed 2

Post Test Year Revenue Increases for 2023 3 (in Thousands of Dollars) 4

Description

(a)


Recommended (b)

SCE

Proposed7 (c)

2023 Base Rev. Req. $7,430,95 $8,491,336 2012 Base Rev. Req. $7,179,512 $7,977,769 Proposed Rev. Change ($) $251,283 $513,567 Proposed Rev. Change (%) 3.5% 6.4%

5

E. Cumulative Revenue Increases Over the 3-Year Period from 2021 6 thru 2023 7

Table 1-7 shows the impact of SCE’s requested revenue increases during TY 2021 8

and the 2022-2023 post-test years. If the Commission adopts SCE’s proposals, customers 9

would experience a $2.046 billion increase in revenue requirement levels by the end of 10

the 3-year rate case cycle, over currently authorized 2021 levels.8 The cumulative 11

increase (2021-2023) would be $4.7 billion.9 12

Adopting the Public Advocates Office’s recommendations would result in a lower, 13

more reasonable, $2.210 billion increase in cumulative revenue requirement during that 14

same period.10 15

16

7 Id. 8 $1.109 billion plus $423 million plus $514 million totals $2.046 billion. 9 See footnote 4. 10 $491 million for each year 2021-2023, $243 million for 2022 and 2023 and $251 million for 2023 totals $2.210 billion.

8

Table 1-7 1 The Public Advocates Office Recommends Significantly Lower GRC Revenue 2

Increases 3 For 2021-2023 Compared to SCE’s Requests 4


Year Present

Revenues SCE’s Proposals for 2021-2023 Revenue

Requirement Public Advocates Office’s

Recommendations for 2021-2023 Revenue Requirement

Current Year Change

Current Year Total

Percent Change

Current Year Change

Current Year Total

Percent Change

2021 $6,445 $1,109 $7,554 17.2% $491 $6,937 7.6% 2022 $423 $7,978 5.6% $243 $7,180 3.5% 2023 $514 $8,491 6.4% $251 $7,431 3.5%

6

F. Capital Expenditure Adjustment for 2020 7 The Public Advocates Offices proposes to make an adjustment of $125 million to 8

SCE’s estimated 2020 capital expenditure budget. This adjustment is based upon the 9

recent economic downturn associated with the COVID-19 pandemic. In its exhibits, the 10

Public Advocates Office has developed its forecasts with a business-as-usual approach. 11

However, in recent weeks the short-term economic landscape dramatically changed 12

relative to business-as-usual. 13

The Public Advocates Office’s proposed capital adjustment of $125 million to the 14

traditional business-as-usual 2020 forecast is a relatively modest and conservative 15

proposal. The figure of $125 million is based upon a currently estimated 25% reduction 16

in capital expenditures in the Functional Area of New Service Connections & Customer 17

Requested. This functional area is the most likely to be impacted by the abrupt change in 18

current and ongoing economic conditions. The forecast of the Public Advocates Office in 19

this Functional Area is $498 million and the 25% adjustment to that figure is $125 20

million. The Public Advocates Office has integrated this adjustment into its Results of 21

Operations (RO) Model. 22

The Public Advocates Office recommends SCE provide additional information on 23

how the current and evolving economic climate is likely to impact its business and the 24

resulting impacts on its 2020 and 2021 capital expenditure forecasts. 25

9

III. PROCEDURAL BACKGROUND AND SCHEDULE 1

On August 30, 2019, SCE filed its GRC Application, A.19-08-013, with the 2

Commission. The Public Advocates Office filed a timely Protest on October 3, 2019. 3

A Prehearing Conference (PHC) was held on October 30, 2019. An Assigned 4

Commissioner’s Scoping Memo and Ruling (Memo/Ruling) was issued on November 25, 5

2019. Public Participation Hearings (PPHs) have been postponed. The Memo/Ruling 6

established a Track 1 procedural schedule as shown in Table 1-8.11 7

Table 1-8 8 Track 1 Procedural Schedule for SCE 2021 GRC 9

Description Date Public Advocates Office Testimony served April 10, 2020 Intervenors Testimony May 5, 2020 Public Participation Hearings postponed Concurrent Rebuttal Testimony June 12, 2020 Evidentiary Hearings scheduled to begin (San Francisco) July 6, 2020 Evidentiary Hearings end July 24, 2020 SCE Update Testimony July 24, 2020 Opening Briefs September 11, 2020 Reply Briefs October 2, 2020

The procedural schedule requires the Public Advocates Office to serve its 10

testimony by April 10, 2020. The Public Advocates Office fulfills the requirement by 11

serving its testimony today. 12

IV. THE PUBLIC ADVOCATES OFFICE’S PROJECT TEAM 13

The Public Advocates Office is responding to SCE’s TY 2021 GRC Application, 14

A.19-08-013, with the issuance of its reports and exhibits. 15

The Public Advocates Office’s team for this case consists of approximately 23 16

staff responsible for the project coordination, legal support, financial review and 17

analytical responsibilities needed to process SCE’s GRC application. The Public 18

11 The Memo/Ruling also discusses concurrent Track 2 and Track 3 schedules at pp. 9-10.

10

Advocates Office’s “Qualifications of Witnesses” are attached to individual exhibits and 1

provide details on the Public Advocates Office’s multi-disciplinary team with 2

backgrounds in engineering, accounting, economics, finance and policy. The Public 3

Advocates Office submitted over 180 data request sets to SCE. 4

V. ORGANIZATION OF THE PUBLIC ADVOCATES OFFICE’S 5 SHOWING / SUMMARY OF DIFFERENCES 6

This section: (1) indicates how the Public Advocates Office’s exhibits are 7

organized; and (2) briefly highlights the major differences between the Public Advocates 8

Office and SCE with respect to the various elements of revenues, operating expenses and 9

capital expenditures. 10

A. Organization of the Public Advocates Office’s Exhibits 11

Table 1-9 shows the specific exhibit(s) and subject matter(s) for which each Public 12

Advocates Office witness is responsible. 13

14

11

Table 1-9 1 Public Advocates Office Exhibits with Corresponding Subject Matter and Witnesses 2

Exhibit No.

Subject Witness

PAO-1 Executive Summary Truman Burns PAO-2 Summary of Earnings, Jurisdictional Allocation and Income Taxes Jerry Oh PAO-3 Transmission & Distribution Capital Expenditures Part 1 Yakov Lasko PAO-4 Transmission & Distribution Capital Expenditures Part 2 Greg Wilson PAO-5 Transmission & Distribution Capital Expenditures Part 3 Tom Roberts PAO-6 Transmission and Distribution Part 1 & Wildfire Management

Expenses Tamera Godfrey

PAO-7 Transmission and Distribution Expenses Part 2 & Resiliency Monica Weaver PAO-8 Transmission and Distribution Expenses Part 3 & Customer

Interactions Dao Phan

PAO-9 Generation, Energy Procurement & Wildfire Management Capital Scott Logan PAO-10 Enterprise Support Part 1 Mark Waterworth PAO-11 Employee Benefits, Training & Support Stacey Hunter PAO-12 Enterprise Support Part 2 Lindsay Loethen PAO-13 Sales, Customers and New Meter Connections Marek Kanter PAO-14 Safety & Risk-Informed Decision Making Pui-Wa Li PAO-15 Rate Base and Cash Working Capital Fidel Leon Diaz PAO-16 Depreciation Jerry Lin PAO-17 Post-Test Year Ratemaking Truman Burns PAO-18 Financial Examination Sophie Chia, Fransiska

Hadiprodjo & Fauzia Nawaz

3 B. Summary of the Public Advocates Office’s Recommendations 4

The following briefly summarizes the recommendations contained within each of 5

the Public Advocates Office’s exhibits that address SCE’s application. 6

Exhibit PAO-1 Executive Summary

This exhibit provides a brief overview of SCE’s request; presents the overall organization of the Public Advocates Office’s exhibits; and summarizes the differences between the Public Advocates Office’s and SCE’s estimates for Test Year 2021 and Post Test Years 2022-2023. 7

12

Exhibit PAO-2 Summary of Earnings, Jurisdictional Allocation and Income Taxes

This exhibit compares the Public Advocates Office’s and SCE’s Summary of Earnings for TY 2021 and post-test years 2022 and 2023. • The Public Advocates Office does not oppose SCE's proposed jurisdictional

allocation factors used to allocate costs and revenue requirements between the Federal Energy Regulatory Commission (FERC) and CPUC jurisdictions.

• The Public Advocates Office does not oppose the method by which SCE calculated state and federal income taxes and payroll and other taxes for TY 2021.

• The Public Advocates Office recommends that SCE continue using the five-year trend method for calculating Ad Valorem Taxes, and establish a memorandum account to record differences between actual and forecasted property taxes.

1

Exhibit PAO-3 Transmission & Distribution Capital Expenditures Part 1

This exhibit addresses a portion of SCE’s proposed 2019-2021 Transmission and Distribution (T&D) capital expenditures regarding Distribution Infrastructure Replacement, Meter Activities, Transmission Grid and Substations.

• The Public Advocates Office recommends the Commission approve $15 million for Transmission Aerial Inspection Maintenance for 2021 instead of $27.315 million as requested by SCE. A memorandum account for aerial inspection maintenance should be established to record costs above $15 million.

2 Exhibit PAO-4

Transmission & Distribution Capital Expenditures Part 2 This exhibit addresses a portion of SCE’s proposed 2019-2021 T&D capital expenditures regarding Distribution Inspections & Maintenance and Capital-Related Expense, New Service Connections and Customer Requested Programs and Poles.

• The Public Advocates Office’s 2019 forecast is $46.914 million higher than SCE’s forecast because the Public Advocates Office uses actual recorded 2019 capital expenditures.

• The Public Advocates Office’s forecast expenditures for Distribution Inspections & Maintenance and Capital-Related Expense are $488.029 million in 2020 and $510.881 million in 2021 compared to SCE’s forecasts of $487.474 million in 2020 and $509.933 million in 2021.

• The Public Advocates Office’s forecast expenditures for New Service

13

Connections & Customer Requested are $497.711 million in 2020 and $490.301 million in 2021 compared to SCE’s forecasts of $ 512.777 million in 2020 and $505.899 million in 2021.

• The Public Advocates Office’s forecast expenditures for Distribution Pole Replacements are $358.524 million in 2020 and $437.408 million in 2021. These forecasts are lower than SCE’s by $30.145 million in 2020 and $32.143 million in 2021.

• The Public Advocates Office’s forecast expenditures for Transmission Pole Replacements are $102.491 million in 2020 and $143.378 million in 2021. These forecasts are higher than SCE’s by $3.708 million in 2020 and $3.356 million in 2021.

• The Public Advocates Office’s forecast expenditures for Joint Pole Capital Credits are $113.129 million in 2020 and $137.701 million in 2021. These forecasts are larger (i.e., more negative, meaning a larger credit) than SCE’s by $10.354 million in 2020 and $15.348 million in 2021.

1 Exhibit PAO-5

Transmission & Distribution Capital Expenditures Part 3 This exhibit addresses a portion of SCE’s proposed 2019-2021 T&D capital expenditures regarding Grid Modernization, Grid Technology, Energy Storage, Load Growth, Transmission Projects and Engineering.

• The Public Advocates Office recommendation for Grid Management System (GMS), Ex. SCE-2, Vol. 4, Part. 1, is $106.244 million for 2019-2021, compared to SCE’s $116.399 million request.

• The Public Advocates Office recommends that SCE revise its GMS deployment schedule to accelerate the control and monitoring of Distributed Energy Resources (DERs) with smart inverters.

• The Public Advocates Office recommendation for Engineering and Planning (E&P) Software Tools, Ex. SCE-2, Vol. 4, Part. 1, is $1.634 million for 2019-2021, compared to SCE’s $88.710 million request.

• The Public Advocates Office recommends that the Commission order that the funding adopted in this GRC for GMS and E&P Tools constitute full funding to deploy these software tools, and that the only future costs that will be authorized will be based on “refresh” costs.

• The Public Advocates Office recommends memorandum account treatment for all DER-driven Grid Reinforcement programs in Ex. SCE-2, Vol. 4, Part 2. This results in a forecast of $0.0 for 2019-2021, compared to SCE’s $43.035 million request, but provides the potential for cost recovery in future rate cases.

14

• The Public Advocates Office recommends that SCE clarify the date by which SCE will be able to monitor and control DERs, assuming it is directed to do so by the Commission.

• SCE should provide requested information that defines the functionality of GMS and E&P Software Tools.

1

Exhibit PAO-6 Transmission & Distribution Part 1 & Wildfire Management Expenses

This exhibit addresses a portion of SCE’s 2021 Transmission and Distribution (T&D) expenses regarding Distribution Inspections & Maintenance and Capital-Related expenses, Meter Activities, Transmission Grid, Vegetation Management and Wildfire Management expenses.

• The Public Advocates Office’s recommends $6.551 million for SCE’s Distribution Overhead Detailed Inspections O&M expenses. The Public Advocates Office’s recommendation of $6.551 million is $1.606 million higher than SCE’s Test Year forecast of $4.945 million, but corresponds to SCE’s alternate request.

• The Public Advocates Office’s recommends $98.724 million for SCE’s Distribution Preventive and Breakdown O&M Maintenance expenses compared to SCE’s forecast of $106.665 million.

• The Public Advocates Office’s recommends $5.330 million for SCE’s Transmission Line Patrols O&M expenses compared to SCE’s forecast of $7.233 million.

• The Public Advocates Office’s recommends $12.208 million for SCE’s Transmission O&M Maintenance expenses compared to SCE’s forecast of $21.064 million.

• The Public Advocates Office’s recommends $2.419 million for SCE’s Telecommunication Inspection and Maintenance O&M expenses compared to SCE’s forecast of $4.874 million.

• The Public Advocates Office’s recommends $176.134 million for SCE’s Vegetation Management O&M expenses, compared to SCE’s Test Year forecast of $216.935 million. The Public Advocates Office’s agrees with the SCE recommendation to establish a two-way Vegetation Management Balancing Account. The two-way Vegetation Management Balancing Account will track for recovery of all costs above or below the Public Advocates Office’s forecast of $176.134 million up to SCE’s forecast of $216.935 million. Any costs recorded above SCE’s forecast of $216.935 million would be subject to a reasonableness review.

• SCE’s request for changes to the Safety and Reliability Investment Incentive

15

Mechanism adopted by the Commission in SCE’s 2018 GRC should be denied. • The Public Advocates Office’s forecast of Wildfire Management O&M expenses

is $52.8 million in 2021 compared to the 2018 recorded figure of $11.3 million. 1

Exhibit PAO-7 Transmission and Distribution Expenses Part 2 and Resiliency

This exhibit addresses a portion of SCE’s 2021 T&D expenses regarding Substations, Grid Modernization, Grid Technology, Energy Storage, Load Growth, Transmission Projects and Poles expenses, and Resiliency expenses and capital expenditures. • For Substations, the Public Advocates Office recommends $111.728 million,

compared to SCE’s request of $121.539 million.

• For Grid Modernization, Grid Technology and Energy Storage, the Public Advocates Office recommends $19.243 million, compared to SCE’s request of $22.071 million.

• For Cybersecurity, the Public Advocates Office recommends $27.278 million, compared to SCE’s $38.582 million request.

The following summarizes the Public Advocates Office’s recommendations for Resiliency capital expenditures for 2019 through 2021: • For Business Continuation, the Public Advocates Office recommends $43.900

million, $51.100 million and $39.223 million for 2019, 2020 and 2021, respectively, compared to SCE’s request of $43.900 million, $51.100 million and $44.860 million for 2019, 2020 and 2021.

• For Emergency Management, the Public Advocates Office does not oppose SCE’s forecasts.

• For Cybersecurity, the Public Advocates Office recommends $61.702 million, $64.949 million and $68.100 million for 2019, 2020 and 2021, respectively, compared to SCE’s request of $61.702 million, $64.949 million and $107.530 million for 2019, 2020 and 2021.

• For Physical Security, the Public Advocates Office recommends $55.899 million, $42.293 million and $40.842 million for 2019, 2020 and 2021, respectively, compared to SCE’s request of $66.151 million, $64.454 million and $51.735 million for 2019, 2020 and 2021.

2 Exhibit PAO-8

Transmission and Distribution Expenses Part 3 & Customer Interactions

This exhibit addresses SCE’s 2021 Customer Interaction expenses and a portion of T&D expenses for Other Costs and Other Operating Revenue. The Public Advocates

16

Office recommends: • $60.501 million for Billing and Payments, which is $5.033 million lower than

SCE’s $65.534 million request.

• $16.609 million for Communications, Education & Outreach, which is $5.200 million lower than SCE’s request.

• $63.381 million for Customer Contacts, which is $5.542 million lower than SCE’s request.

• $25.088 million for Customer Care Services, which is $4.717 million lower than SCE’s request.

• SCE shareholders to continue paying for Service Guarantees credits. 1

Exhibit PAO-9 Generation, Energy Procurement & Wildfire Management Capital

This exhibit addresses SCE’s 2021 Generation and Energy Procurement expense and capital expenditures and Wildfire Management capital expenditures.

• The Public Advocates Office recommends that SCE’s forecast of generation-related capital expenditures be reduced by $10.4 million for 2020 and $6.0 million in 2021 related to SCE’s proposed diesel generator installations at Catalina Island.

• The Public Advocates Office recommends that SCE’s forecast of wildfire management-related capital expenditures for 2019 and 2020 be adopted.

• The Public Advocates Office recommends that SCE’s forecast of wildfire management-related capital expenditures for 2021 be adjusted by $237.3 million resulting in a $625.8 million forecast compared to SCE’s forecast of $863.1 million.

2

Exhibit PAO-10 Enterprise Support Part 1

This exhibit addresses SCE’s 2021 Enterprise Technology and Enterprise Planning and Governance expense and capital. • SCE forecasts $76.632 million in Fixed Price Technology and Maintenance

Non-Labor expense while the Public Advocates Office recommends $68.754 million.

• SCE forecasts $97.245 million in Software Maintenance and Replacement expense while the Public Advocates Office recommends an adjustment of $11.427 million.

17

• The Public Advocates Office recommends a forecast of $22.164 million compared to SCE’s forecast of $24.247 million in Financial Oversight and Transactional Processing (Accounting, Financial Compliance and Financial Reporting) expense.

• SCE forecasts $(11.212) million in Financial Oversight and Transactional Processing (Vendor Discount and Other Miscellaneous Payments) expense while the Public Advocates Office recommends $(13.089) million.

• SCE forecasts $22.754 million in Financial Oversight and Transactional Processing (Participant Charges and Other Miscellaneous Payments Credits) Other expense while the Public Advocates Office recommends $19.953 million.

• SCE forecasts $623.804 million in Insurance – Wildfire expense. The Public Advocates Office recommends $467.853 million based on a 75%/25% Ratepayer/Shareholder allocation of the expense resulting in a $155.951 million adjustment.

• SCE proposes a Risk Management Balancing Account (RMBA). The Public Advocates Office does not oppose the establishment of the account as proposed in its testimony.

• SCE forecasts $35.851 million in Insurance – Non-Wildfire expense. The Public Advocates Office recommends $32.266 million.

• SCE forecasts $20.462 million in Insurance – Property expense. The Public Advocates Office recommends $19.234 million.

• SCE proposes to accelerate the recovery of $95 million in Unrecovered Premiums. The Public Advocates Office opposes SCE’s proposal.

• The Public Advocates Office does not oppose SCE’s 2019-2021 forecasts for Enterprise Support capital expenditures.

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Exhibit PAO-11 Employee Benefits, Training & Support

This exhibit addresses SCE’s 2021 employee benefits, training and support expenses. • The Public Advocates Office recommends that ratepayers fund $63.3 million of

SCE's Short-Term Incentive Plan (STIP) compared to the SCE request of $180.9 million. The Public Advocates Office recommends that ratepayers not fund the portion of STIP related to SCE's financial goals. The remaining portion of STIP should be shared equally between ratepayers and shareholders.

• The Public Advocates Office recommends ratepayer funding of $7.771 million for Executive Benefits compared to SCE’s request of $15.5 million. Executive Benefits should be shared equally between ratepayers and shareholders consistent with past Commission precedent.

• Ratepayers should not fund SCE's Long-Term Incentives.

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• Recognition programs should be shared equally between ratepayers and shareholders.

• The Public Advocates Office proposes no adjustments to SCE's TY forecasts for the remaining Benefits Programs: Executive Compensation, Pension, 401(k) Savings, PBOP, Medical, Dental, Vision, Disability, Group Life, Severance and Miscellaneous Benefits.

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Exhibit PAO-12 Enterprise Support Part 2

This exhibit addresses a portion of SCE’s Enterprise Support expenses and capital expenditures. • For Audits, the Public Advocates Office recommends $8.9 million, which is

$784,000 less than SCE’s request of $9.7 million. • For Policy and External Engagement, the Public Advocates Office recommends

$23.1 million, which is $1.9 million less than SCE’s request of $24.9 million. • The Public Advocates Office does not oppose SCE’s Capital forecasts in Ex.

SCE-6, Volumes 4, 5 and 6 for years 2019, 2020 and 2021. 2

Exhibit PAO-13 Sales, Customers and New Meter Connections

This exhibit addresses SCE’s 2021 sales, customers and new meter connections forecasts. • The Public Advocates Office accepts SCE’s recommendations regarding its

forecasts of new meters for SCE’s residential, agricultural and non-residential class of service.

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Exhibit PAO-14 Safety & Risk-Informed Decision Making

This exhibit addresses SCE’s Risk-Informed Strategy and Business Plan testimony.

• SCE should clearly identity and quantify the key constraints associated with the selection of its risk programs; and

• SCE should identify and evaluate a realistic set of risk mitigation plans during the Risk Assessment and Mitigation Phase (RAMP) of its risk-informed decision-making process.

4 5

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1

Exhibit PAO-15 Rate Base and Cash Working Capital

This exhibit addresses SCE's 2021 rate base and cash working capital requests. • For SCE’s Lead-Lag Working Cash Requirement, Public Advocates

recommends adjustments to SCE’s updated Fall 2019 fuel and purchased power forecast, Federal Income Tax and California State Corporation Franchise Tax, and Wildfire Insurance Premiums, Fuel, and Purchased Power.

• The Commission should treat Customer Deposits as a source of debt, resulting in an $8.46 million revenue reduction. This recommendation is consistent with precedent established for Pacific Gas and Electric Company in Decision (D.)14-08-032.

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Exhibit PAO-16 Depreciation

This exhibit addresses SCE’s 2021 depreciation expense requests.

• SCE requests $2.131 billion as its TY 2021 depreciation expense, as opposed to the Public Advocates Office’s recommendation of $1.907 billion, pursuant to the Public Advocates Office’s version of the Results of Operations model.

• The Commission should adopt a net salvage rate of -130% for FERC Account 365, in contrast to SCE’s proposed -190%.




• The Commission should adopt an annual small hydro decommissioning accrual of $6.7 million, in contrast to SCE’s proposed $29.6 million.

3 Exhibit PAO-17

Post-Test Year Ratemaking

This exhibit addresses SCE’s 2022 and 2023 post-test year ratemaking proposals. • The Public Advocates Office recommends post-test year increases for SCE of

3.5% for 2022 and 3.5% for 2023. • The Commission should not adopt SCE’s budget-based plant addition estimates

for 2022 and 2023.

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Exhibit PAO-18 Financial Examination

The following summarizes the Public Advocates Office’s findings and recommendations associated with its financial examination of SCE: • The Public Advocates Office recommends the removal of $177,411 in 2016,

$130,432 in 2017, and $781,708 in 2018 from SCE’s Audits labor expenses to conduct 23 internal audit reports, because the costs could not be independently verified due to SCE’s assertion of legal privilege.

• The Public Advocates Office recommends an adjustment of $181,524 to 2018 recorded Administrative & General (A&G) non-labor expenses for the GRC activity Develop and Manage Policy and Initiatives, because the costs were identified as one-time costs or could not be independently verified due to SCE’s assertion of legal privilege.

• The Public Advocates Office recommends the removal of $30,823,607 from the 2018 Operations & Maintenance (O&M) expenses and moving them to the Fire Hazard Prevention Memorandum Account (FHPMA). According to SCE, the costs will be requested and recovered separately.

• The Public Advocates Office recommends an adjustment of $567,159.06 to 2018 recorded O&M non-labor expenses for Grid Modernization – Transmission and Distribution (T&D) Deployment Readiness, because the costs were identified as a one-time cost.

• The Public Advocates Office recommends the removal of $31,150.00 in costs from 2018 recorded O&M non-labor expenses Technology Assessment, because SCE has identified the amount as a capital cost but incorrectly recorded it to the 2018 O&M expenses.

• The Public Advocates Office does not have any recommended adjustments to recorded capital expenditures.

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executive summary · 2020. 6. 24. · 12 this exhibit presents the public advocates office’s...

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