BEFORE THE PUBLIC UTILITIES COMMISSION

OF THE STATE OF CALIFORNIA

Application of Southern California Edison

Company (U338E) for Authority to Increase its

Authorized Revenues for Electric Service in

2018, among other things, and to Reflect that

increase in Rates.

Application No. 16-09-001

(Filed September 01, 2016)

Prepared Testimony of Faith Bautista on the

2018 General Rate Case Application of Southern California Edison

Faith Bautista

CEO, National Diversity Coalition

President and CEO, National Asian American

Coalition

15 Southgate Ave., Suite 200

Daly City, CA 94015

Telephone: (650) 952-0522

On behalf of

NATIONAL DIVERSITY COALITION

(NDC) and

NATIONAL ASIAN AMERICAN

COALITION (NAAC)

May 02, 2017

i

TABLE OF CONTENTS

I. BACKGROUND AND QUALIFICATIONS ............................................................................. 1

II. GENERAL CONCERNS ........................................................................................................... 4

A. The Commission and Utilities Should Focus On Affordability ............................................ 4

B. Expenditures to Increase Shareholder Profits Must Be Reasonable ...................................... 5

III. EXECUTIVE INCENTIVE COMPENSATION ..................................................................... 6

A. Financial Performance and Strategic Initiatives Goals Solely Benefit Shareholders ............ 7

1. Arguments of ratepayer benefits from financial performance goals are unreasonable and

go against prior commission decisions ............................................................................ 7

B. Operational and Service Excellence, People and Culture, and Safety Goals Must Be

Modified to Better Benefit Both Shareholders and Ratepayers ........................................... 10

1. The Operational and Service Excellence goal should not pay bonuses to executives for

doing their basic responsibilities.................................................................................... 10

2. The People and Culture goal must be given more weight to be effective ..................... 12

3. Safety incentive payout is insufficient to balance against the overwhelming reward for

Financial Performance ................................................................................................... 13

C. EIC Recommendations ........................................................................................................ 15

D. The Long-Term Incentives Program Does Not Benefit Ratepayers and Should Not Be

Ratepayer Funded ................................................................................................................ 19

IV. MARKETING, EDUCATION AND OUTREACH............................................................... 21

V. SUPPLIER DIVERSITY ......................................................................................................... 24

A. SCE Must Increase Their Supplier Diversity Spend Goal In Line With Their Increased

Funding Request and New Commission Requirements ...................................................... 24

B. A Specific Goal for Minority Business Enterprises Is Necessary to Maintain and Support

Continued Progress .............................................................................................................. 27

C. Capacity Building Programs Must Continue to Support Community-Based Organizations

That Serve Minority Communities and DBEs ..................................................................... 28

ii

SUMMARY OF RECOMMENDATIONS

The following is a summary of NDC recommendations discussed in this testimony:

General Concerns

• The Commission must consider the reasonableness of utility requests, with a focus on

keeping utility rates affordable for ratepayers.

• Infrastructure upgrades should be planned, budgeted, and implemented over time, to prevent

dramatic increases in utility rates, and to avoid investments in unnecessary technology that

may quickly become obsolete. Savings from increased operational efficiency should be used

toward upgrades, with shareholders contributing capital as well.

Executive Compensation

• The Commission must not approve any Executive Incentive Compensation (EIC) plan that

rewards decisions which place profit over safety. No ratepayer funding should be approved

unless SCE’s EIC plan is fundamentally revized to prioritize safety as follows:

- Safety goals must be by far the most significant component of EIC awards. Safety should

be weighted at least 50% of total target EIC award.

- Operational and Service Excellence (OSE) goals should be revized to reward excellent

performance, not meeting basic responsibilities. People and Culture goals should be

integrated into OSE goals. Total OSE should be weighted at 25% of target EIC award.

- Financial Performance should include Strategic Initiatives. Total Financial Performance

goals should no more than 25% of EIC, to create a proper focus on safety over profit.

• Ratepayers should only fund half the cost for Safety goals and Operational and Service

Excellence goals. Together, Safety and OSE make up 75% of NDC’s recommended EIC

plan, meaning ratepayers would fund only 37.5% of total EIC costs.

• Executive Labor and EIC costs should be forecast based on a 3-year average, not the 5-year

average SCE proposed, to factor out an anomalous high-cost year. This results in $16.084

million forecast instead of $17.222 million. EIC forecast costs based on the same 3-year

average methodology result in $4.977 million. Ratepayer should only fund 37.5% of this

total EIC forecast, resulting in a reduction of $3.111 million.

• No LTI costs should be funded by ratepayers.

Marketing, Education, and Outreach

• At least 40% of ME&O budgets for major campaigns must be dedicated toward minority

outreach through ethnic media and community based organizations. SCE should conduct and

report on demographic research to inform their ME&O strategy to minority communities.

iii

Supplier Diversity

• Approve requested funding increase for Supplier Diversity and Development conditioned

upon the following:

- SCE adopting increased diverse business enterprise spend goal of 42.9%.

- SCE adopting minority diverse business enterprise spend goal of 25.5%.

- SCE resumes a program of providing at least 5 annual capacity building workshops for

community based organizations that serve and support minority communities and DBEs.

1

I. BACKGROUND AND QUALIFICATIONS 1

My name is Faith Bautista. I am the President and CEO of the National Asian American 2

Coalition (NAAC), and I am also the CEO of the National Diversity Coalition (NDC), which is a 3

coalition of churches, minority business chambers, and non-profits that serve the minority 4

community. I am currently a member of the California Utilities Diversity Council and recently 5

held the position of Marketing and Outreach Chair on the California Public Utilities 6

Commission’s Low-Income Oversight Board. I am a former member of the SEMPRA 7

Community Advisory Council, the Federal Office of Thrift Supervision’s Minority Depository 8

Institution’s Advisory Committee, and am presently on the consumer advisory boards for Banc 9

of California, CIT, Royal Business Bank, the Consumer Action Board, and Charter. Much of my 10

time is spent working with utilities, banks, and corporations as a representative of dozens of non-11

profits, community-based, and faith-based organizations serving communities that could be 12

adversely affected by SCE’s $2.3 billion proposed rate increase. 13

I am presenting this testimony on behalf of the members and affiliates of the National 14

Diversity Coalition, including the African American Economic Justice Organization, Asian 15

Journal, Chinese American Institute for Empowerment, Christ Our Redeemer A.M.E. Church, 16

COR Community Development Corporation, Ecumenical Center for Black Church Studies, Jesse 17

Miranda Center for Hispanic Leadership, Latino Coalition for Community Leadership, Los 18

Angeles Latino Chamber of Commerce, Macedonia Community Development Corporation, 19

National Asian American Coalition, National Hispanic Christian Leadership Conference, Oasis 20

Center International, Orange County Interdenominational Alliance, and Templo Calvario CDC. 21

NDC represents the low-income minority communities served by its member organizations, 22

which include non-profits, minority business chambers, and the African Methodist Episcopal 23

2

church congregations and Latino Evangelical church congregations throughout SCE’s service 1

territory. 2

Our leadership includes, for example, the Reverend Mark Whitlock, Chair of NDC, who also 3

serves as the Chair of corporate partnerships for our nation’s 5,000 African Methodist Episcopal 4

churches. The Treasurer of NDC is Gilbert Vasquez, Chairman of the Los Angeles Latino 5

Chamber of Commerce, which represents Latino owned and operated businesses throughout 6

Southern California. Member organizations of NDC have actively participated in numerous prior 7

CPUC proceedings, including prior general rate cases for PG&E, San Diego Gas & Electric, and 8

Southern California Edison, formerly under the title of Joint Minority Parties. On behalf of low-9

income minority ratepayers and a broad range of small minority-owned businesses, NDC 10

advocates before State and Federal regulatory and legislative agencies. Earlier in 2017, during an 11

NDC advocacy trip to Washington D.C., a delegation of 30 members and affiliates of NDC had 12

sixteen meetings with federal policy makers, included personal meetings with Secretary of the 13

Treasury Steven Mnuchin, Comptroller of the Currency Tom Curry, Chair of the FDIC Martin 14

Gruenberg, Federal Reserve Board Governor Lael Brainard, FHFA Director Mel Watt, and 15

Congresswomen Michelle Lujan Grisham, Maxine Waters, and Judy Chu. Other meetings 16

included the senior staff of the House and Senate Committees on banking and finance, as well as 17

the senior staff of Senator Elizabeth Warren and Congressman John Lewis. All these meetings 18

centered on the primary mission of NDC: promoting greater economic equality for underserved 19

people through support for corporate regulation, homeownership, small businesses, and financial 20

literacy. 21

The National Asian American Coalition provides homeownership education and assistance to 22

low-income minority communities and has counseled over 9,000 California homeowners in 23

3

distress. We educate ratepayers on cost saving, conservation, and safety programs available 1

through the utilities and other regulated entities. We have offices in both northern and southern 2

California. We also work through manned kiosks in the Island Pacific chain of supermarkets to 3

further reach minority communities throughout the western United States and in Southern 4

California Edison’s service territory, including in Cerritos, Fullerton, Long Beach, Rancho 5

Cucamonga, Santa Clarita, Walnut, and West Covina. Island Pacific supermarkets’ customer 6

base is primarily Asian American (over 60%) and Latino (20%). Additionally, NAAC produces a 7

weekly television program subsidized by Charter and Time Warner that airs in prime time, and 8

reaches 3.8 million Californians. The show highlights issues of importance to minority and low-9

income Californians, including topics relating to homeownership, clean energy, utility rate 10

increases, and wealth inequality. NAAC also provides microloans and conducts technical 11

assistance and capacity-building workshops targeted toward small, minority-owned businesses. 12

Many consider NAAC to be the leading Pan-Asian American marketing, education, and outreach 13

nonprofit assisting our state’s more than 6 million Asian Americans. Further, we work with other 14

NDC members and affiliates to serve the 16 million Latino and 3 million African Americans in 15

our state’s minority communities. 16

We bring the voice and concerns of minority ratepayers, who make up the majority of 17

California’s population, to the discussion in these proceedings, and look to the Commission to 18

protect them from unreasonable and excessive continual increases in the costs of essential 19

services. 20

/// 21

/// 22

4

II. GENERAL CONCERNS 1

A. The Commission and Utilities Should Focus On Affordability 2

Electric and gas services are basic necessities, and ratepayers have virtually no choice but to 3

pay the rates charged by the utility monopolies. The Commission has a duty to serve the public 4

interest and protect consumers by ensuring that these services are safe, reliable, and also 5

affordable for California ratepayers. This mission is at odds with the utility’s primary focus on 6

improving the financial strength of their organization and providing substantial returns for their 7

shareholders, which can come at the cost of safe, reliable, and especially affordable service. The 8

utility has every incentive to propose as many expenditures as possible, to add the costs to rate 9

base, and earn greater returns for their shareholders. The Commission must not simply consider 10

the reasonableness of these myriad proposals and reject ones that are not adequately justified. 11

The Commission must actively restrain the utility’s urge to spend more and more ratepayer 12

dollars, and protect ratepayers’ ability to afford essential services, by limiting the continual 13

increases to utility rates. 14

It is essential that any approved rate increase take into account the economic conditions 15

within SCE’s service territory, and the stagnant wages, rising costs of living, and unemployment 16

rates affecting their ratepayers. This is particularly true in the case of minority communities, 17

where unemployment rates are higher, and median income levels are lower than the average. 18

NDC urges the Commission to carefully weigh the necessity of the utility’s substantial rate 19

increase request, along with cumulative increases from numerous other utility proposals, against 20

the impact such increases will have upon all ratepayers, especially low-income communities, 21

which are predominantly made up of minority groups. 22

23

5

B. Expenditures to Increase Shareholder Profits Must Be Reasonable 1

NDC acknowledges the need for the utility to collect adequate funds in order to provide safe 2

and reliable service to ratepayers. Operating, maintaining, replacing and upgrading 3

infrastructure is an essential part of fulfilling this responsibility. It is also NDC’s position that 4

the utility should take reasonable steps to prepare their systems and the grid to better integrate 5

advanced technology, such as renewable energy sources that are distributed across the state and 6

throughout residential and commercial sectors. 7

However, we are greatly concerned by the substantial cost and scope of the upgrades that 8

SCE has requested funding for in this GRC. Given that distributed energy generation markets 9

and technology are still developing, it would be more appropriate for measured, incremental 10

upgrades to be made over time, to ensure that utility infrastructure is properly equipped with the 11

necessary components at the appropriate times. This will also avoid dramatic increases in utility 12

bills that exceed ratepayers’ ability to afford. 13

It should not be assumed that increasing utility rates are inevitable, necessary, or automatic. 14

With greater implementation of renewable energy sources, automated metering and monitoring 15

technology, and self-service customer systems, utility costs could decrease over time. Along 16

with proper management of resources and more efficient technology, the utility should be able to 17

realize reduced operational costs, resulting in downward pressure on utility bills. 18

A financially healthy organization would take the cost savings from improved operational 19

efficiency and invest that amount toward infrastructure upgrades. They would not spend more 20

money than they have and simply assume they can force customers to cover the expense through 21

increased prices. It would be appropriate for the utility to demonstrate how much they have 22

reduced costs for ratepayers through efficiency improvements that do not compromise safety and 23

6

reliability, and use only a corresponding amount for infrastructure investments. Shareholders, 1

who will benefit from a guaranteed return on such investments, can provide additional funding to 2

expand the scope of these projects. Shareholders should also shoulder their fair share of the 3

utility’s overall forecasted funding requirements, particularly for those expenses that will directly 4

benefit them. 5

III. EXECUTIVE INCENTIVE COMPENSATION 6

NDC supports the development of a reasonable Executive Incentive Compensation (EIC) 7

plan for SCE, one that will prioritize safety, meaningfully encourage executives to act in the 8

public interest, and is appropriately funded by the groups that will benefit. EIC awards should be 9

used to provide extra motivation for executives to give additional effort beyond basic 10

performance levels in furtherance of public safety and ratepayer interests, or shareholder goals. 11

EIC payouts should not be tied to meeting minimum levels of competent management or 12

fundamental responsibilities – such activities are compensated through base salary amounts, 13

which for SCE executives, are already quite generous in themselves. To the degree that the EIC 14

plan properly incentivizes efforts to provide benefits for ratepayers or shareholders, each group 15

should be responsible for funding their fair share of EIC payments. 16

For 2015 and 2016, the goals that SCE tracked under their EIC plan, along with the percent 17

of total target EIC payout that each goal comprised were as follows: 18

EIC Goal Target Percent of

Total Payout

Financial Performance 40%

Strategic Initiatives 20%

Operational and Service Excellence 20%

People and Culture 10%

Safety 10%

Source: SCE-15 at A-1 and B-1 19

7

NDC’s testimony addresses the EIC plan for executive officers1, which is separate from the EIC 1

plan for non-officer executives described as part of the company wide Short-Term Incentive 2

Program (STIP).2 3

A. Financial Performance and Strategic Initiatives Goals Solely Benefit Shareholders 4

1. Arguments of ratepayer benefits from financial performance goals are 5 unreasonable and go against prior commission decisions 6

The 40 percent Financial Performance goal is entirely measured by a single metric – 7

achieving a core earnings target3. SCE claims that core earnings are “essential to maintain SCE’s 8

financial health and to provide a lower cost of capital to finance the capital projects and other 9

essential programs that benefit our customers and support delivery of safe and reliable service.”4 10

Even though a financially strong utility could provide some benefits to ratepayers through access 11

to equity capital markets, this is an incidental benefit to ratepayers, and shareholders benefit in 12

the same way. Yet improved earnings and stock performance directly and substantially benefits 13

shareholders with no parallel benefit to ratepayers. Any utility request for ratepayer funding 14

could be said to improve the utility’s financial strength in that it would provide the utility with 15

more funds. But that in itself is not a meaningful enough benefit to justify ratepayer funding. 16

Similarly, any incidental ratepayer benefit that may come from greater utility financial strength 17

motivated by the Financial Performance goal does not therefore justify ratepayer funding. 18

In SCE’s last GRC, the Commission found similar utility comments about shared ratepayer 19

and shareholder benefits from financial performance goals to be “very limited examples”.5 The 20

Commission further stated that “the ratepayer benefit is much less direct than the shareholder 21

1 SCE-06 V02 at 29. 2 Id. at 22. 3 SCE-15 at A-1 and B-1. 4 SCE-06 V02 at 31. 5 D.15-11-021, Decision On Test Year 2015 General Rate Case For Southern California Edison Company, (11/05/2015) (“D.15-11-0021”) at 261.

8

benefit”, adopted only 40 percent of SCE’s EIC total forecast costs, and required that “If SCE 1

seeks rate recover of higher portions of the EIC in its next GRC, it should provide substantially 2

more evidence that the EIC awards incent executives to achieve ratepayer benefits.”6 By only 3

providing the same arguments as before, SCE has failed to justify ratepayer funding for greater 4

than 40 percent of their total EIC request. 5

Overall, SCE’s proposed EIC plan is heavily weighted toward incentivizing actions that 6

improve the financial strength of SCE to the benefit of shareholders. The disproportionately high 7

allocation of EIC target payout for Financial Performance reveals that SCE’s true priority is 8

investor returns, not safety, customer service, or other stated ideals. As a matter of policy this 9

must not be endorsed by the Commission, demonstrated by approval of the 100 percent funding 10

requested for this plan. Preliminarily, no ratepayer funding should be authorized for the 11

Financial Performance goal, as it does not provide ratepayer benefits. But beyond that, no 12

ratepayer funding should be approved for the EIC plan at all, unless the overall plan is shown to 13

be in the interest of ratepayers. This would require that financial and other metrics primarily 14

benefitting shareholders, regardless of what EIC goals they are tracked under, count toward only 15

a minority of target award payments. As discussed below, in the context of an overall balanced 16

EIC plan, Financial Performance should only count for 25 percent or less of total EIC targets. 17

2. Strategic initiatives goals directly benefit shareholders, but may actually harm 18 ratepayers 19

The Strategic Initiatives goal for 2016 claims to support “customer choice” and “customer 20

rates”7. However, the specified metrics consist of (1) building projects and (2) achieving utility-21

desired outcomes in regulatory proceedings. Building projects such as microgrids and EV 22

6 D.15-11-021 at 261. 7 SCE-15 at B-2.

9

charging stations can provide “choices” only to a limited number of ratepayers who live in 1

eligible areas and who can afford to participate, but they will increase rates for all ratepayers. 2

While on the other hand, shareholders will reap direct benefits from the guaranteed rate of return 3

on these capital expenditures. Additionally, the Strategic Initiative metric of “filing the 2018 4

GRC by September 1, 2016”8 does not necessarily support customer rates, as NDC and other 5

protesting parties have concerns that SCE’s request is not reasonable and is not in ratepayers’ 6

interests. Nor do actions and expenses to “Defend SONGS settlement”9 necessarily lead to 7

ratepayer benefits, especially given the controversial surroundings of the settlement and the 8

ongoing investigations10. Incentive payments to push executives to defend the SONGS 9

settlement work against ratepayer interests to the extent that the settlement actually harms 10

ratepayers. Even if the settlement is ultimately found to be reasonable, expenses and efforts to 11

defend the settlement are only necessary in the first place because the illegal activities of SCE 12

called the propriety of the agreement into question. 13

Ratepayers will already bear the costs for the activities that underlie the Strategic Initiative 14

metrics. Having ratepayers also pay for executive incentive awards to encourage them to 15

implement these projects and participate in the proceedings is an unreasonable double-charge. 16

Strategic Initiative goals are measured so as to provide direct and guaranteed benefits to 17

shareholders, and only indirect speculative benefits to ratepayers. Further, it should be part of 18

executives’ basic responsibilities to see that Commission approved projects are completed, and 19

to engage in Commission proceedings – such behavior need not be incentivized. Finally, these 20

activities may actually harm ratepayers, to the extent that they increase rates and do not provide 21

8 SCE-15 at B-2. 9 Id. 10 D.15-12-106; I.12-10-013, A.13-01-016, A.13-03-005, A.13-03-013, A.13-03-014 (consolidated); A.15-01-014, A.15-02-006, A.16-03-004 (consolidated).

10

benefits. For all these reasons, NDC recommends that the Commission deny ratepayer funding 1

for Strategic Initiative goals under the EIC plan. 2

B. Operational and Service Excellence, People and Culture, and Safety Goals Must Be 3 Modified to Better Benefit Both Shareholders and Ratepayers 4 5

1. The Operational and Service Excellence goal should not pay bonuses to 6 executives for doing their basic responsibilities 7 8

The metrics of the Operational and Service Excellence (OSE) EIC goal contain components 9

that are tied to customer satisfaction, which could possibility induce executive performance that 10

benefits ratepayers. However, some of the components are simply basic operational 11

responsibilities, and do not set a standard that requires extra effort by executives beyond normal 12

job performance in furtherance of ratepayer benefits. For example, having “no significant non-13

compliance events”11 is a basic requirement of competent management, compensated by base 14

pay, not an achievement to be rewarded with bonus payouts. Executives could fail their basic 15

responsibilities by allowing non-compliance events, and yet still fulfill this metric, as long as the 16

non-compliance events are deemed to be not significant. Company policy should instead 17

establish the expectation that executives will prevent all significant non-compliance events as a 18

matter of basic responsibility, but that if they work hard to achieve minimal or no non-19

compliance events at all, they will receive a bonus reward. This would be an appropriate use of 20

the EIC program. 21

The same problem is found with the OSE metric dealing with protecting critical 22

infrastructure by “preventing significant data breeches, control system compromises and IT 23

infections…[and] significant intrusions that adversely impact critical infrastructure.”12 24

11 SCE-15 at B-1. 12 Id. at B-2.

11

Preventing significant problems is a basic responsibility, not a stretch goal that must be 1

incentivized. Again, even non-significant problems could occur and this metric would be 2

fulfilled. Executives should be expected to protect infrastructure from all significant problems, 3

and be given a bonus only if they take extra steps to prevent or minimize any problems. 4

Finally, it is also a basic responsibility of executives to “Achieve SCE’s capital spending 5

targets”13, especially for projects already approved as reasonable by the CPUC. Capital spending 6

expenditures are added to rate base, which provides shareholders with a guaranteed rate of 7

return. However, if these capital projects were completed safely and underbudget, both 8

ratepayers and shareholders would benefit from the financial savings. A component measuring 9

efficiency and economy in achieving capital spending targets would better incentivize executives 10

to act for the benefit of ratepayers and shareholders. 11

The OSE metric also gives a bonus for achieving DBE spend of 40% or greater. As discussed 12

further in the Supplier Diversity section, this level has been met every year since 2013. 13

Increasing the target incrementally will encourage additional effort appropriate for an incentive 14

compensation plan, and is in line with SCE’s stated diversity policy, Commission policy, and 15

consistent with requests for increased funding. A DBE target spend of 42.9% is reasonable and 16

achievable based on historic levels, comparisons to other IOU performance, and considering 17

SCE’s additional funding requests and new requirements of GO 156. Please see the section on 18

Supplier Diversity for further discussion. 19

With modifications to the OSE metrics that induce executive behavior beyond basic 20

responsibilities and that will benefit ratepayers as well as shareholders, it would be appropriate 21

for ratepayers to fund 50 percent of the costs for these payments. 22

13 SCE-15 at B-2.

12

2. The People and Culture goal must be given more weight to be effective 1

Starting in 2012, SCE has included a People and Culture goal in their EIC plan. The People 2

and Culture goal encourages diversity in the leadership pipeline, and employee engagement in 3

decision making14. The diversity component of this metric is based on improvement in the 4

representation of ethnic minorities and women across the executive population, as well as in 5

leadership pools (since 2014)15. Executive activities that actually support these criteria will 6

benefit shareholders and ratepayers equally, through enhancing leadership and decision making, 7

which would justify funding from shareholders and ratepayers equally. However, this metric has 8

not historically proven to be effective in motivating executive action. 9

The diversity metric of the People and Culture (P&C) goal has been unmet every year, except 10

2013.16 Revealingly, 2013 was also the only year the P&C goal was given its highest weight in 11

the overall EIC plan of 20 percent. When the metric was introduced in 2012, the percentage of 12

ethnic minorities among the executive population decreased to a recorded low of 26.4 percent.17 13

Since then, this percentage has fluctuated back and forth each year between 29.5 percent and 14

30.0 percent, making no sustained progress at all. The ethnic composition in leadership pools has 15

also fluctuated minimally since being added in 2014 between 41.4% and 42.1%.18 Before and 16

after 2013 (the only year the diversity metric was met) SCE experimented with lower weightings 17

for the P&C goal of 5, 10, and 15 percent.19 These levels have consistently shown to be 18

insufficient to motivate executives to meet the diversity metric. The same unmet 10 percent 19

14 SCE-15 at B-3. 15 A1609001, Prepared Testimony of Faith Bautista on the 2018 General Rate Case Application of Southern California Edison - Attachments to Testimony (“Attachment”) (05/02/2017) at 1-3. 16 Id. at 2-3. 17 Id. at 2. 18 Id. at 2-3. 19 Id. at 5-6.

13

weighted P&C goal of 2015 is unchanged in SCE’s 2016 EIC plan20, and will likely continue to 1

be unmet.21 2

For the P&C goal to meaningful incentivize Executive action on diversity, historical results 3

show that it must have a weight of at least 20 percent of the total EIC plan. If the P&C goal is 4

given 20 percent weight, or combined with another goal such as Operation and Service 5

Excellence and given a combined weight of at least 20 percent, it is likely that the P&C criteria 6

will be achieved, and benefits will flow to ratepayers and shareholders accordingly. With such a 7

plan, shared ratepayer funding of up to 50 percent of the P&C payout is appropriate. 8

3. Safety incentive payout is insufficient to balance against the overwhelming 9 reward for Financial Performance 10

Safety should be the key principle behind all executive decision making, not only as a matter 11

of required performance, but also in incentivized efforts beyond minimum expectations. There 12

are statutory requirements that mandate a basic level of safe utility operation, but executives 13

should be encouraged and rewarded for taking proactive initiative and responsibility to identify 14

and prevent harm to the public. The 2015 Long Beach power outages currently being 15

investigated by the CPUC22, which involved underground fires and explosions that blew 16

manhole covers up into the air and left up to 30,000 SCE ratepayers without power for days23, 17

indicates that current safety efforts and incentives are insufficient at SCE. Furthermore, 18

according to historic data on SCE’s EIC categories, in years prior to 2015, specific Safety goals 19

20 SCE-15 at B-1. 21 A subsequent updated response from SCE with 2016 EIC information indicates that the 10% People and Culture goal was also unmet in 2016. (see Attachment at 30). 22 I.16-07-007, Order Instituting investigation on the Commission’s Own Motion into the Operations and Practices of Southern California Edison Company; Notice of Opportunity for Hearing; and Order to Show Cause Why the Commission Should not Impose Fines and Sanctions for Major Power Outages in the City of Long Beach on July 15, 2015 to July 20, 2015, and on July 30 to August 3, 2015, (07/14/2016) (“I.16-07-007”). 23 I.16-07-007, Scoping Memo and Ruling of Assigned Commissioner (9/21/2016) at 1-2.

14

did not make up even the minimal 10 percent amount of the current EIC goal. Rather Safety was 1

treated only as a subcategory of Operational and Service Excellence.24 2

Data responses also reveals that SCE failed to meet their Safety goals in four of the five years 3

for which EIC achievement results were provided.25 The Actual Scores recorded for 4

Safety/Operational & Service Excellence from 2011-2015 are below the Target Score in every 5

year except 2013.26 And for each year when safety was part of the metrics for Operational & 6

Service Excellence (2011-2014), the Days Away from work, Restricted duty and Transfer 7

(DART) Injury Rate metric was unmet, including 2013.27 This indicates that even when the 8

Operational & Service Excellence goal was met or close to being met, safety performance was 9

still lacking. 10

And yet, in every year that SCE failed to achieve their safety goal, total EIC payouts still 11

exceeded the target amount, in some cases by 40-50% above target. For example, in 2014 SCE 12

failed to achieve their target score for Operational & Service Excellence (including safety) and 13

also failed to meet their target for People and Culture. Yet their choices led to reaching double 14

their target score for Financial Performance, and as a result, the actual EIC payout was $5.515 15

million, over 150% of the target $3.673 million, even though two of their EIC goals were unmet. 16

SCE executives consistently receive above-target incentive payments, even though they fail 17

to meet their safety goals. Under such a system where the weighing of EIC components heavily 18

favors financial performance over other goals such as safety, decisions which result in better 19

financial performance but lower safety will be rewarded. To the extent that resources diverted 20

24 Attachment at 6, Footnote “+”. 25 Id. at 5-6. A subsequent updated response from SCE with 2016 EIC information indicates that the 10% safety goal for 2016 was also unmet, and actual score was zero. (Attachment at 30). 26 Id. at 5-6. 27 Id. at 7.

15

from safety can boost financial performance, the makeup of the EIC plan actually incentivize 1

executives to choose profit over safety. The Commission cannot allow such a system to remain 2

in place. 3

The EIC plan must give substantially more weight to Safety in order to properly prioritize 4

and achieve safety goals. 10 percent is inadequate to motivate executive action, as demonstrated 5

by the consistent failure to meet Safety goals, and unmet diversity metrics under the People and 6

Culture goal. A proper focus on safety and balancing against decisions that benefit bottom line 7

financial decisions would weigh Safety at 50 percent minimum of total EIC awards. 8

C. EIC Recommendations 9

SCE is seeking to recover 100% of EIC costs from ratepayers.28 The EIC plan encourages 10

and measures performance that substantially benefits shareholders, and in many cases benefits 11

shareholders exclusively, yet SCE would have ratepayers bear all the financial burden. This is 12

unreasonable, and goes against the reasoning set in prior Commission decisions on the same 13

issue. In the SCE 2015 GRC decision, the Commission stated that, “In recent GRCs, we have 14

adopted reductions to short term incentives to account for payouts that are driven by shareholder 15

benefits rather than ratepayer benefits.”29 The Commission reduced ratepayer liability for such 16

incentive payouts, including those related to achieving certain outcomes in CPUC proceedings 17

and public policy objectives “that may or may not provide secondary benefits to ratepayers”30. 18

The metrics for SCE EIC plan as presented in testimony have not changed from what was 19

28 SCE-06 V01 at 25. 29 D.15-11-021 at 264. 30 Id.

16

approved for 201531, where the Commission limited ratepayer funding to only 40% of EIC 1

costs.32 2

If the Commission finds the current makeup and historic results of SCE’s EIC plan to be 3

reasonable, NDC recommends the following: Shareholders should fully fund payouts for the 4

40% Financial Performance goal and the 20% Strategic Initiatives goal, given that these 5

primarily benefit shareholders. Shareholders and ratepayers should equally share the cost burden 6

for the 20% Operational and Service Excellence, 10% People and Culture, and 10% Safety 7

metrics, since these can provide benefits to both groups. This results in an overall responsibility 8

for EIC funding of 80% on shareholders and 20% on ratepayers. This funding structure should 9

be approved conditionally upon SCE adopting reforms to their EIC metrics that will motivate 10

efforts by executives beyond their basic responsibilities, in the interest of ratepayers as discussed 11

above. 12

However, NDC strongly urges that the Commission withhold all ratepayer funding of the 13

EIC plan, unless it is fundamentally revised to make safety the top priority. This is necessary 14

and appropriate, because under the current EIC plan that weighs Financial Performance four 15

times greater than Safety, executives are actually incentivized to make choices that will result in 16

lower safety, if such decision increase company profit. The Commission is responsibile to 17

ensure safe and reliable utility service for ratepayers, and must not allow SCE executives to be 18

encouraged to act against public safety in this manner. 19

If the EIC plan is reworked to properly prioritize safety overall, NDC supports shared 20

ratepayer funding for each specific EIC goal that appropriately incentivizes additional effort by 21

executives on behalf of ratepayers. NDC does not support any ratepayer funding for Financial 22

31 SCE-15 at B-1. 32 D.15-11-021 at 514.

17

Performance and other shareholder-benefit components that do not benefit ratepayers. A more 1

appropriate EIC plan could be based on what Pacific Gas & Electric (PGE) has adopted as part 2

of their efforts to focus on safety, in the wake of tragic and preventable safety lapses such as the 3

2010 San Bruno explosion. It should not take consequences as severe as the San Bruno tragedy, 4

or even the Long Beach power outages, before a utility will commit to making safety a priority in 5

their EIC plan. In PGE’s 2017 GRC case, the proposed decision of the Administrative Law 6

Judge and the alternate proposed decision of the presiding Commissioner both include approval 7

of an executive incentive plan that is comprised of 50 percent safety focused metrics.33 Financial 8

performance metrics and Customer Service metrics each make up 25 percent of the incentive 9

plan34, and PGE did not request any ratepayer funding for the executive incentive plan, or for the 10

long-term incentive plan for any employees35. This provides a good basis upon which to 11

construct a more reasonable EIC plan for SCE. 12

NDC Recommended EIC Plan 13

Goal Proposed Weight of Total EIC Proposed Ratepayer Funding

SCE NDC SCE NDC

Safety 10% 50% 100% 50%

(25% of total EIC)

Operational and Service

Excellence (+ People

and Culture)

20% (+10%) 25% 100% 50%

(12.5% of total

EIC)

Financial Performance

(+ Strategic Initiatives)

40% (+20%) 25% 100% 0%

14

SCE should weigh safety components at least 50 percent of total payout, and limit the 15

financial performance goal to no more than 25 percent. This will remove the perverse incentive 16

33 A.15-09-001, Exhibit PG&E-43, Late Filed Exhibit on Executive Compensation and Safety (“PGE GRC- Exhibit 43”), Attachments A and D. 34 Id. at Attachments C and D. 35 Id. at 2. PGE’s Long-Term Incentive Plan is based on performance-based shares and restricted stock units (see PGE GRC- Exhibit 43 at 7).

18

to sacrifice safety for profit. The Strategic Initiatives metric, which is already shareholder-benefit 1

focused, can be integrated into the Financial Performance metric. People and Culture, which is 2

intended to improve decision making and reflect customer base diversity, can be integrated into 3

the related Operational and Service Excellence metric, and be weighted the remaining 25 percent 4

or more. Ratepayers can share half the costs of the Safety payouts (25 percent of total EIC) and 5

half of Operational and Service Excellence payouts (12.5 percent of total EIC), but should not 6

have to fund any of the Financial Performance costs. This would make ratepayers responsible for 7

37.5 percent of total EIC payouts. 8

Costs for EIC awards are combined with Executive Officer annual salaries and Executive 9

Assistant annual salaries in FERC 920.36 SCE provides a 2018 forecast of $17.222 million for 10

these total labor and EIC costs combined, but does not provide details or calculations on forecast 11

cost of EIC alone.37 Instead, SCE uses a five-year average forecast methodology for the 12

combined salary and EIC costs, which SCE claims is most representative of future needs.38 This 13

is not reasonable, given that their forecast of $17.222 million is higher than recorded costs for 4 14

of the 5 years included in their calculations.39 2012 was an anomalous year with an unusually 15

high recorded cost of $21.338 million. Taking a three-year average of 2013-2015 recorded costs 16

avoids incorporating this anomalous year, uses the most recent data, and yields a more 17

reasonable $16.084 million forecast. The average recorded costs for EIC awards from 2013-18

2015 was $4.977 million. Starting with this forecast estimate, then reducing ratepayer liability to 19

37.5 percent as discussed above, yields a reduction of $3.111 million. 20

36 SCE-06 V01 at 36 Figure III-10. 37 Id. at 35 Figure III-9. 38 Id. at 36-37. 39 Id. at 35 Figure III-9.

19

If the Commission applies NDC recommendations to calculate Executive Labor and EIC 1

costs based on a 3-year average, then reduce ratepayer liability to 37.5 percent of EIC costs, the 2

overall result will be reduction from SCE estimates of $4.249 million. 3

Comparison of NDC and SCE Recommendations for 4

Executive Labor and EIC Costs and Ratepayer Funding 5

SCE

Recommendation

NDC

Recommendation

Difference

FERC 920/921

labor forecast40

$17.222 Million -

5-year average

$16.084 million -

3-year average

($1.138 million)

EIC component

forecast

No EIC specific

forecast provided

$4.977 million -

3-year average41

N/A

Ratepayer funding

for EIC

100% 37.5% x $4.977m =

$1.866 million

($3.111 million) based

on NDC 3-year average

recommendation

($4.249m) total NDC

recommended reduction

Additionally, NDC recommends requiring SCE to file more detailed testimony on executive 6

compensation in their next GRC, in line with what the Commission has already ordered in this 7

proceeding42 and has included in proposed decisions for PGE43. This testimony should include 8

how incentive compensation metrics are determined and measured, how actual performance was 9

calculated, and how much was paid out on an annual basis. Analysis should also be provided of 10

how the EIC metrics actually increase safety, reliability, and cost effective operations. 11

D. The Long-Term Incentives Program Does Not Benefit Ratepayers and Should Not 12 Be Ratepayer Funded 13

Under SCE’s Long-Term Incentives (LTI) program, fifty percent of the award is based upon 14

achieving Total Shareholder Return (TSR) for Edison International (EIX44), and the other fifty 15

40 SCE-06 V01 at 35 Figure III-9. 41 Id. at 36 Figure III-10. 42 A.16-09-001, Scoping Memo And Joint Ruling Of Assigned Commissioner And Administrative Law Judges (12/02/2016) at 11-12. 43 A.15-09-001, Proposed Decision of ALJ Roscow (02/27/2017) at 175-176. A.15-09-001, Alternate Proposed Decision of President Picker (04/04/2017) at 174-175. 44 Edison International’s primary operating subsidiary is SCE. See SCE-06, Vol. 2 at 36.

20

percent is based upon EIX’s core earnings per share measured against target levels approved by 1

the Compensation Committee45. This complete emphasis of LTI on financial performance 2

primarily benefits shareholders, who receive increased value on their shares as the utility 3

improves its financial strength. While a financially strong utility could provide some benefit to 4

ratepayers, insofar as the utility has “access to the equity capital markets [which] helps reduce 5

the cost of debt financing for operations and capital projects”46, this ratepayer benefit is 6

incidental, indirect, and minimal compared to the primary, direct, and substantial benefit to 7

shareholders. Shareholders also benefit from the reduced cost of debt financing, but ratepayers 8

receive no comparable financial benefit to shareholder returns or earnings per share that are 9

directly encouraged through the LTI program. Any utility request for ratepayer funding could be 10

said to improve the utility’s financial strength in that it would provide the utility with more 11

funds. But that in itself is not a meaningful enough benefit to justify ratepayer funding. 12

Similarly, any incidental ratepayer benefit that may come from greater utility financial strength 13

motivated by the LTI program does not therefore justify ratepayer funding. 14

SCE is seeking 100% costs recovery from ratepayers for the LTI program. LTI encourages 15

and measures performance that exclusively benefit shareholders, yet SCE would have ratepayers 16

bear all the financial burden. This is unreasonable, and goes against the reasoning set in prior 17

Commission decisions on the same issue. Both SCE’s previously and currently proposed LTI 18

plans “describe two criteria for granting LTI stock options; both are solely based on EIX 19

financial performance.” 47 SCE has consistently argued that “LTI helps to retain employees and 20

motivate them to take actions in the long-term best interest of customers.”48 Yet in the last 2015 21

45 Attachment at 8. 46 SCE-06, Vol. 2 at 35. 47 D.15-11-021 at 265. 48 Id.

21

SCE GRC decision, the Commission noted that, “In recent decisions, we have held that LTI is 1

not recoverable from ratepayers because LTI does not align executives’ interests with ratepayer 2

interests… We continue our consistent practice and reject rate recovery of SCE’s LTI 3

program.”49 Ultimately, the Commission found that “SCE has not demonstrated that LTI 4

furthers the provision of safe and reliable service at just and reasonable rates”50, and ruled that 5

“No rate recovery of LTI should be approved.”51 SCE has forecasted $13.73 million for LTI 6

costs in test year 2018.52 NDC recommends that the Commission continue to apply the 7

reasonable ratepayer benefit standard, and deny rate recovery of all LTI costs. 8

IV. MARKETING, EDUCATION AND OUTREACH 9

NDC is very concerned with the inadequate amount and ineffectiveness of SCE’s marketing, 10

education and outreach (MEO) specifically to the minority and low-income communities. While 11

SCE may make substantial efforts to communicate to their customers in general, minority and 12

low-income communities in particular are more difficult to reach, generally due to lower levels 13

of English proficiency and education, less access to information through technology, and 14

stronger preferences for ethnic media. 15

Regarding the effectiveness of SCE’s outreach and marketing “that specifically or primarily 16

targets minority and low-income ratepayers”, SCE only provided criteria and metrics that 17

evaluate the “general effectiveness of marketing and outreach campaigns”53. Some of these 18

metrics provide limited insight into the effectiveness of minority ME&O, such as the number of 19

“impressions” for ethnic media buys, while others such as enrollment and survey results are not 20

49 Id. at 266. 50 Id. at 515, Finding of Fact 345. 51 Id. at 544, Conclusion of Law 97. 52 SCE-06 V02 at 37. 53 Attachment at 9 (emphasis added).

22

tracked by target audience at all, so their efficacy in reaching minority groups is completely 1

unknown. SCE must make greater efforts to understand the diverse make up of their customer 2

base, and appropriately target and track the effectiveness of their outreach efforts to each 3

minority communities. 4

For example, in the Rate Options and Energy Management Marketing and Outreach 5

campaign, data was gathered on traffic generated by in-language banner ads in Spanish, Korean, 6

Vietnamese and Chinese.54 Half of the metrics (10 out of 20) show zero or only one visitor. 7

8 Source: NDC-SCE-003 Q.11 (Attachment at 12) 9

10 As clarified by SCE, these indicate that “SCE did not have a banner ad in that ethnic-market for 11

that campaign”55. For three out of the five campaigns under the Rate Options and Energy 12

54 Attachment at 12. 55 Id. at 23.

23

Management campaigns, SCE did not have any banner ads in Korean, Vietnamese, or Chinese, 1

three of the main languages spoken in SCE’s service territory. While there may have been other 2

methods for reaching minority groups, the only data provided on the effectiveness of ethnic 3

ME&O efforts shows that SCE did not even attempt to reach the majority of their main ethnic 4

communities in a majority of their campaigns. 5

In SCE’s report on the effectiveness of the Rate Reform/TOU Transition ME&O Tracking 6

Survey56, data is not broken down by ethnic group. However, in the Executive Summary, key 7

sub-group differences are noted57, and repeatedly show a discrepancy in effectiveness between 8

Super Users (SUE) and customers in Tier 1 or 2, as well as between Non-CARE and CARE 9

customers. Minority customers are disproportionately represented among lower income 10

customer groups, and tend to have smaller homes with fewer electronics and appliances, and 11

therefore predominantly comprise the lower tier/CARE customer segments. With regard to 12

metrics measuring customer awareness of rate plans (Aware of Tiered Rate Plan; Aware of TOU 13

Rate Plan; Have Tiered Rate Plan), and actual knowledge of billing structures (Rate plans are 14

available that could help you save money; Electricity is currently billed using a 4-tiered rate 15

plan; Each customer is given a monthly “baseline”; In the future, the number of tiers… will be 16

reduced) SUE are consistently better informed than Tier 1 or 2, and Non-CARE customers are 17

better informed than CARE customers58. This is despite the fact that lower tier/CARE customers 18

more than other customers believe that they have “received bill impact information”, that the 19

“Information was useful”, and that they are aware that “lowering or shifting electricity use will: 20

reduce bill & save money…”.59 This demonstrates that SCE’s ME&O efforts may reach lower 21

56 Attachment at 13. 57 Id. at 20-22. 58 Id. at 20. 59 Id. at 21.

24

income customers, perhaps even more than higher income customers, but the actual 1

communication of the messages, conveying knowledge and understanding to lower income 2

customers regarding bills and rate structures, is not effective. 3

NDC sees this problem of inefficient and insufficient communication to low-income 4

customers acutely among ethnic minority groups, where English proficiency is lower. NDC 5

recommends that the Commission require SCE to dedicate a more meaningful amount, at least 6

40 percent, of the ME&O budget for each major campaign specifically toward targeting minority 7

groups. This amount is reasonable given that minorities make up the majority of SCE’s customer 8

base. Also, more ME&O should be conducted through community based organizations (CBOs) 9

that have a strong reputation in and relationship with the ethnic communities they serve, in order 10

to educate minority communities more effectively. Even for CBOs that may not have the ability 11

to generate the same number of “impressions” as a conventional marketing firm, the quality and 12

impact of the CBO interaction with individual customers will yield more meaningful results. 13

Finally, SCE should report on the research they do to analyze the demographics of their service 14

territory. SCE should provide testimony on how they develop their marketing strategy, 15

specifically how they make decisions on which ethnic groups they will target in each campaign, 16

and how much of their ME&O budget they will commit to ethnic outreach. This testimony 17

should include the metrics used to measure the effectiveness of their ethnic outreach and results. 18

V. SUPPLIER DIVERSITY 19

A. SCE Must Increase Their Supplier Diversity Spend Goal In Line With Their 20 Increased Funding Request and New Commission Requirements 21

In testimony, SCE acknowledges that GO 156 requires utilities like SCE “to increase 22

procurement opportunities with DBEs.”60 Throughout their 2015 GO 156 Annual Report, SCE 23

60 SCE-07 V06 at 2 (emphasis added).

25

repeats their understanding that “having a supplier base that reflects our customer base enhances 1

our ability to remain competitive while contributing to healthier and more vibrant local 2

economies”61, and affirms their “commitment to continuous improvement and the importance of 3

expanding” their Supplier Diversity Program in order to achieve “new heights”62. Yet in their 4

forecast, SCE has not set supplier diversity goals that push beyond their current and historical 5

efforts, or that show any intention to reach toward levels that reflect the diversity of their 6

customer base. 7

Since 2014, SCE has continually set their short-, mid-, and long-term goals for spending with 8

diverse business enterprises (DBEs) at 40 percent of total spend.63 2015 marked the third straight 9

year that SCE exceeded 40 percent DBE spend.64 For the 2018-2020 GRC period, SCE has 10

requested increased funding for their Supplier Diversity and Development (SDD) department 11

above 2015 levels65 because of requirements that “extend GO 156 to LGBT business enterprises 12

and due to SCE’s efforts to continually improve opportunities for DBEs”.66 However, SCE has 13

still kept their short-, mid-, and long-term supplier diversity goals at 40 percent, all the way 14

through 2020, the same level they have attained since 201367, even with the addition of the new 15

LGBT category to increase their pool of diverse suppliers. 16

SCE argues that their SDD funding request should be based on the 2013-2015 three-year 17

average recorded costs, and not the costs of the last year recorded (2015) alone, because 18

accounting changes and new requirements make 2013-2015 more representative of conditions 19

61 WPSCE-07 V06 at 29 (emphasis added). 62 Id. (emphasis added). 63 Southern California Edison Supplier Diversity 2013 Annual Report / 2014 Annual Plan at 28. http://www.cpuc.ca.gov/uploadedFiles/CPUC_Public_Website/Content/About_Us/Supplier_Diversity/GO_156_Reports/2013/SCE_REVISED_2013SupplierDiversityAnnualReport2014AnnualPlan_03252015.pdf#page=30. 64 SCE07 V06 at 6. 65 Id. at 8-13. 66 Id. at 8. 67 Southern California Edison Supplier Diversity 2015 Annual Report / 2016 Annual Plan, WPSCE07 V06 at 45.

26

going forward68. The average funding for SDD activities during 2013-2015 would similarly 1

support an average level of supplier diversity performance achieved during the same period of 2

time. Averaging the 41 percent achieved in 2013, 45 percent in 2014, and 42.9 percent in 201569 3

yields a 42.9 percent average level that should serve as a new aspirational goal. With the 4

additional funding to expand SDD capacity and the addition of a new LGBT category, this level 5

should be even more achievable than in previous years. Given that SCE states that they already 6

aim for 50 percent diverse supplier participation in all competitive bids70, and have long been 7

striving to reflect the levels of diversity of their customer base in their supplier diversity71, this 8

incremental step should be completely in line with their current efforts and future plans. 9

A 42.9 percent aspiration goal is also reasonable based on comparisons SCE has made to the 10

supplier diversity performance of other IOUs72 (reproduced below). Over the 2013-2015 period, 11

SDG&E averaged 44% diverse spending, PG&E averaged 42.3%, and SoCalGas averaged 12

46.2%. SoCalGas works within a similar supplier community and serves a similar customer base 13

as SCE. In these circumstances, not only has SoCalGas achieved the highest average level of 14

supplier diversity among all the major IOUs, but they have consistently outperformed SCE’s 15

supplier diversity levels every year since at least 2011. 16

/// 17

/// 18

/// 19

/// 20

68 SCE07 V06 at 10. 69 WPSCE07 V06 at 32. 70 WPSCE07 V06 at 33. 71 Id. at 29. 72 SCE07 V06 at 4.

27

Figure I-2 1

California Investor Owned Utilities (IOUs) DBE Spend Comparison (2011-2015) 2

3 Source: SCE07 V06 at 4. 4

5 If the Commission finds SCE’s forecast costs for SDD reasonable, they should condition 6

approval of funding subject to an incremental increase in SCE’s DBE spending goal to 42.9 7

percent, reflecting SDD performance over the same period. The Commission should also modify 8

the component of executive incentive compensation under Operational and Service Excellences 9

which is tied to achieving a DBE spend of 40 percent, to 42.9 percent. Please refer to the section 10

of this testimony on Executive Incentive Compensation for further discussion. 11

B. A Specific Goal for Minority Business Enterprises Is Necessary to Maintain and 12 Support Continued Progress 13

While NDC acknowledges the laudable job the Commission has done to address the 14

economic inequality faced by diverse businesses through GO 156, we continue to have a 15

particular concern for the marginalized minority community. Although we are optimistic that 16

28

new requirements and DBE categories will encourage regulated utilities to achieve DBE 1

spending levels that better reflect their customer base (as discussed above), we see a danger that 2

efforts to engage minority businesses may be neglected, or not see appropriate growth, amid the 3

utility’s focus on reaching other DBE businesses under new requirements. Since 2013-2015, the 4

spend with minority businesses has fluctuated without meaningful growth.73 The three-year 5

average is 25.5 percent, the same as was achieved in 2013.74 Given that minorities make up the 6

majority population of SCE’s service territory, considerable growth is necessary to attain levels 7

that reflect SCE’s customer base. As SCE has requested increased funding to expand SDD 8

efforts based on 2013-2015 average costs, a specific minority business enterprise spend goal of 9

25.5 percent based on 2013-2015 average performance will help maintain the progress they have 10

already made, and support growth as the DBE program continues to expand. 11

C. Capacity Building Programs Must Continue to Support Community-Based 12 Organizations That Serve Minority Communities and DBEs 13

Among other things, GO 156 requires SCE to provide technical assistance and capacity 14

building programs for diverse businesses enterprises.75 Such workshops help CBOs and non-15

profits better serve the low-income and minority communities within SCE’s service territory. By 16

strengthening the organizations that support underserved communities, the labor pool in 17

Southern California becomes better educated and the customer base becomes financially 18

stronger, which benefits SCE and its ratepayers. Capacity building and technical assistance also 19

help provide SCE with stronger organizations to contract with for utility needs, including 20

marketing, education, and outreach to hard-to-reach minority communities. 21

73 SCE07 V06 at 2, WPSCE07 V06 at 32. 74 Id. 75 SCE07 V06 at 11.

29

SCE’s Local Public Affairs (LPA) organization works with government agencies and local 1

community stakeholders to provide, among other things, “electric safety education, emergency 2

response communications… and education on state-mandated policy initiatives such as energy 3

efficiency, renewables, distributed generation, and other programs.”76 Community-based 4

organizations (CBOs) are used as “trusted partners to deliver important educational information 5

to hard-to-reach, ethnic and underserved communities.”77 Historically, LPA has provided 6

capacity building workshops for CBOs to increase their effectiveness both in supporting 7

disadvantaged communities with their primary services, and also in communicating important 8

utility messages.78 However, since at least 2013, SCE has been decreasing the number of 9

capacity building workshops they have hosted, the total amount spent on these workshops, and 10

the total number of workshop attendees served through LPA79. As the number of workshops was 11

decreased, average attendance continued to rise: 70 attendees on average for nine workshops in 12

2013, 120 average for five workshops in 2014, and 165 average for three workshops in 2015. 13

The significant growth in average attendees per workshop indicates that the demand and need for 14

these workshops remained strong. Yet SCE continued to reduce the workshops offered, 15

ultimately discontinuing them altogether in 2016, stating that “Similar work continues to be 16

performed in other Organizational Units.”80 However, the only similar work identified by SCE is 17

the annual Faith-Based Business Summit by the Business Customer Division81. This singular 18

workshop hosted 88 attendees, but 12 follow-up interactions about SCE programs were 19

76 SCE08 V02 at 53. 77 Id. at 62. 78Attachment at 24. These LPA workshops are separate from Supplier Diversity and Development “Contract Readiness” workshops that help develop suppliers as part of the EDGE program (see SCE07 V06 at 7). 79 Attachment at 24. 80 Attachment at 24-25. 81 Attachment at 26.

30

documented afterward, showing that there is still strong interest in these programs. SCE spent 1

$1,955 to put on the Faith-Based Business Summit, which is in line with the average cost for 2

each of the 3-9 workshops formerly put on by LPA annually.82 3

SCE indicates that the LPA went through a reorganization in late 201583. NDC supports 4

SCE’s efforts to reduce costs and increase operational efficiencies. However, we are concerned 5

that in the reorganization process, the important work of hosting these capacity-building 6

workshops may have been overlooked. If as SCE states, LPA “discontinued the capacity 7

building workshops it previously did because they were not core to LPA’s function in the 8

company”84, these workshops should still be continued by an appropriate department. The 9

Business Customer Division as the “business customer-facing organization in the company” may 10

be the appropriate department, but it appears that the only workshop they have planned is the one 11

annual Faith-Based Business Summit.85 NDC urges the Commission to require SCE to host at 12

least five similar capacity building workshops for CBOs annually, the average number conducted 13

from 2013-2015, when average attendance evidenced strong demand for this service. 14

Incremental cost for four more workshops in addition to the Faith-Based Business Summit (for a 15

total of five) would be minimal, between $4,000 - $10,000.86 The impact of these incremental 16

costs would be even less if workshops were organized by multiple departments, such as LPA, 17

Business Customer Division, and Supplier Diversity and Development.18

82 Id. at 24. 83 SCE08 V02 at 67-68. 84 Attachment at 26. 85 Id. at 27. 86 (Average cost per workshop: $1,000-$2,500) x (4 workshops). See Attachment at 24.

This Page Intentionally Left Blank