XI. Aglet and TURN Proposals for Guaranteed Savings

Aglet proposes that, in lieu of a reasonableness review, SCE should provide guaranteed ratepayer savings of half of the savings estimated by SCE over the remaining life of SONGS. Aglet states that its proposal would offset the uncertainty of whether the project would be cost-effective. Each year, under the proposal, the savings would be determined by subtracting the actual costs from an estimate of the costs that would have been incurred during the year if the SGRP had not been performed. The ratepayers would receive a payment of the difference if the savings are below the required level. In any year where the estimated savings exceed the required level, SCE could recapture a portion of any previous payments. Aglet recommends that implementation details should be determined in a workshop. Aglet states that it would accept a reasonable limit on gross benefits (roughly equal to replacement energy costs plus one half of the promised net benefits) that could be guaranteed to ratepayers. Aglet represents that a number tied to the net present value of SGRP costs should relieve SCE's concerns about unbounded shareholder risks resulting from Aglet's proposal.

TURN's proposal is similar to Aglet's. TURN recommends that the Commission could adopt the methodology it proposes, or conduct a separate phase of this proceeding to address implementation of its proposal.

SCE opposes Aglet's and TURN's proposals. It states that they are unfair in that SCE's shareholders could incur losses while ratepayers are receiving benefits. For example, if the benefits were less than half of the projected total benefits, SCE would be required to provide payments to ratepayers even though the SGRP is cost-effective. In addition, there would be uncertainty as to the amount SCE would have to provide, if any, until 2022. SCE asserts that this raises accounting issues, and could lead to concern in the investment community. In addition, SCE states that the benefit would have to be calculated each year based on an estimate of what would have happened if the SGRP had not been performed.

Aglet's and TURN's proposals guarantee ratepayers a specified level of savings. If the savings are less than the specified amount, but greater than zero, SCE would have to make payments to ratepayers even though the SGRP yields benefits to them. Therefore, Aglet's and TURN's proposals are inequitable in that they could require a payment to ratepayers even when the SGRP is cost-effective, without a corresponding potential benefit to SCE. The basis from which savings would be determined would be an estimate of the costs that would have resulted if the SGRP had not been performed. Therefore, the level of any achieved savings can only be estimated. For these reasons, we will not adopt Aglet's and TURN's proposals.