2. Background

Following the October 17, 1989 Loma Prieta earthquake, the Commission adopted Resolution E-3238, dated July 24, 1991, which ordered that any utility, as defined by Pub. Util. Code § 216, was authorized to establish a "Catastrophic Event Memorandum Account (CEMA)." The resolution described the conditions for invoking CEMA and its general operation.

Resolution E-3238 described the purpose of CEMA as:

... to record costs of: (a) restoring utility service to its customers; (b) repairing, replacing or restoring damaged utility facilities; and (c) complying with government agency orders resulting from declared disasters. (Mimeo., p. 1.)

The resolution discussed the need for an established account which would ensure there was no issue of retroactive ratemaking - that an in-place mechanism would provide a legitimate vehicle to recover eligible costs.

In 1994, after the Commission first adopted CEMA tariffs for the energy utilities, the California Legislature enacted Senate Bill (SB) 1456 (1994 Legislative Session (Chapter 1156)), which added § 454.9 to the Pub. Util. Code:¹

(a) The commission shall authorize public utilities to establish catastrophic event memorandum accounts and to record in those accounts the costs of the following: (1) Restoring utility services to customers. (2) Repairing, replacing, or restoring damaged utility facilities. (3) Complying with governmental agency orders in connection with events declared disasters by competent state or federal authorities.

(b) The costs, including capital costs, recorded in the accounts set forth in subdivision (a) shall be recoverable in rates following a request by the affected utility, a commission finding of their reasonableness, and approval by the commission. The commission shall hold expedited proceedings in response to utility applications to recover costs associated with catastrophic events.

Decision (D.) 07-07-041 held that CEMA recovery is limited to costs incurred in jurisdictions declared disasters by competent state or federal authorities.

¹ All statutory references are to the Pub. Util. Code, unless otherwise stated.