8. Summary of the DRA/SCE Settlement Agreement and TURN/SCE Stipulations
On March 10, 2008, SCE and DRA filed a motion for adoption of a settlement agreement that they believe would resolve all issues related to SCE's application. DRA and SCE have proposed a settlement that they contend would allow approval of a project that is cost effective over the expected 20-year life of the system, providing approximately $9 million in total net benefits. The settlement agreement recommends approval of $1,633.5 million in ratepayer funding for AMI deployment activities, to be collected through a balancing account mechanism. According to DRA and SCE, the AMI plan recommended in the settlement is reasonably expected to generate $1,174 million in operational benefits and $816 million in energy conservation, load control, and demand response-related benefits. DRA and SCE estimate that "additional societal benefits" from the system, including benefits that had not been quantified in the past, could add approximately $295 million in net benefits over the expected life of the project benefits. The settlement would resolve DRA's initial concerns about pre-payment meters and certain assumptions used in SCE's business case, as well as other issues including the ratemaking mechanism for project costs. The DRA/SCE settlement would allow for cost-sharing between shareholders (10%) and ratepayers (90%) of project costs up to $100 million in excess of the proposed $1.63 billion funding, without further Commission review.
Appendix A contains the settlement agreement.22 In summary, the settlement agreement includes the following provisions and recommendations:
· SCE's proposed deployment activities (as revised in the settlement agreement) and estimated deployment period ratepayer funding of $1.6335 billion are reasonable. Approval of the settlement agreement would authorize SCE to deploy its proposed AMI system (Edison SmartConnectTM ) to all metered accounts in its service territory with demands less than 200 kW (approximately 5.3 million meters) over a five-year period beginning in 2008.
· With the revisions made in the settlement agreement, SCE's business case is reasonably expected to generate $1,174 million in operational benefits and $816 million in energy conservation, load control, and demand response related benefits. This results in net forecast benefits of approximately $9 million.
· The ex ante energy conservation participation goals and forecasted energy conservation benefits of $164 million included in the settlement agreement are reasonable.
· The Commission should authorize $3.5 million in funding for information display devices for residential customers who want to receive near real-time information on their personal computers through the Home Area Network included in Edison's SmartConnectTM .
· The cost and benefit assumptions associated with an energy prepayment service have been removed from the Settlement Agreement.
· SCE's plan for meter inspections and use of the SmartConnectTM system capabilities during the deployment and post deployment periods to minimize meter tampering and theft are reasonable.
· SCE's business case shall be revised to reflect the following changes:
o Estimated costs for meter panel repairs, billing, and project management, organization change and career planning, shall be reduced by amounts specified in the settlement agreement.
o Estimated benefits for increased accuracy of meter reads and working cash shall be increased as specified in the settlement agreement.
· A risk sharing mechanism under which ratepayers pay 90% and shareholders pay 10% of cost overruns up to $100 million without additional reasonableness review is reasonable.
· Under a force majeure provision, SCE may recover up to $100 million beyond the authorized $1,633.5 million in rates without additional reasonableness review, shareholder contribution or penalty, if the increased costs are due to events beyond SCE's control, as described in the settlement agreement.
· SCE will work with gas and water utilities in its service territory to explore the possible use of its AMI system for contract meter reading. SCE will hold and report to the Commission on at least four workshops that explore these issues.
· SCE will propose a two-tiered Peak Time Rebate program under which participants with enabling technology such as automated load reductions devices will be paid a higher incentives to than participants without such devices or displays.
· SCE will credit capital operational benefits of SmartConnectTM
to ratepayers, as described in the settlement agreement.· SCE will not recover SmartConnectTM costs in its 2009 General Rate Case (GRC), and if any are included in its 2012 GRC, SCE will ensure that there is no double-recovery of such costs and that any such recovery is consistent with the limits on recovery of such costs adopted in this proceeding.
· Potential costs and benefits from revenue protection and meter electricity usage and benefits from meter accuracy will not be included in the SCE business case, but will be reflected as societal benefits. The settlement agreement estimates the previously unquantified societal benefits at approximately $295 million.
· SCE will recover costs consistent with the SmartConnectTM Balancing Account tariff contained in the settlement agreement.
· Allocation of Edison SmartConnectTM revenue requirement among customer groups should be litigated in Phase 2 of SCE's GRC; pending the outcomes of this issue in the GRC, allocation will be made using the distribution allocators in place when the costs are recovered in rates.
· SCE's proposals that were not contested are reasonable and should be adopted.
In its cost benefit analysis, the settlement agreement does not consider benefits associated with additional programs and services that may be made possible by AMI in the future; for example, the settlement agreement removes from the business case the costs and benefits of the prepayment meter program SCE described in its initial application. It is appropriate that this program and others that depend on future Commission policy decisions are not included in the settlement agreement analysis and business case at this time. These and other new programs may be the source of additional benefits in the future, however.
8.1. SCE /TURN Stipulations
TURN does not support the settlement agreement. However, SCE and TURN filed a motion for adoption of a set of stipulations that comprise a subset of the complete settlement agreement.23 Many of the stipulations echo specific language included in the settlement agreement; others reflect either TURN's agreement to a provision previously contested by TURN and reflected in the full settlement agreement, or SCE's explicit agreement to a modification that is reflected in the settlement agreement business case but not specifically enumerated in the settlement. In addition to provisions specifically enumerated in the settlement agreement, the stipulations include the following provisions:
· SCE shall remove $2.17 million (nominal) in estimated costs for power purchases from SCE's Deployment Period costs.
· The Parties agree that SCE shall remove $5.7 million (nominal) in estimated costs for increased field supervisors and analysts from SCE's Post-Deployment costs.
· SCE shall be limited to recording the actual Results Sharing costs in the Edison SmartConnect Balancing Account, but capped at the target level amounts included in the forecast Edison SmartConnect revenue requirement; and
· SCE shall reduce the GRC memorandum account authorized Results Sharing level by the amount of Results Sharing benefits included in the forecast Edison SmartConnect revenue requirement.
· If SCE's 2009 GRC proposal to eliminate the Results Sharing memorandum account is adopted, SCE will file a supplemental advice letter to update the $1.4246 of average operations and maintenance (O&M) benefits per meter per month to include results sharing benefits.
· SCE's estimated costs for meter panel repairs during the Deployment Period of $29.7 million shall be reduced by $11.1 million.
· SCE's tariffs on service connection and disconnection do not require revision as a result of Edison SmartConnect deployment. To the extent future changes are required to SCE's tariffs on service connection and disconnection, such changes shall be presented in SCE's 2012 GRC, or through other appropriate regulatory proceedings.
· SCE's proposal for crediting to ratepayers the capital operational benefits of Edison SmartConnectTM as described in the proposed SmartConnect Balancing Account tariff is reasonable.
· For each Edison SmartConnectTM meter purchased during the Deployment Period, SCE shall credit the $1.4246 of O&M operational benefit per month during the Deployment Period to ratepayers via the Edison SmartConnect Balancing Account beginning eight months after reflecting such meter in rate base, consistent with the operation of the proposed SmartConnect Balancing Account tariff attached to the settlement agreement.
· The Parties reserve the right to dispute costs in the 2009 and 2012 GRC if the included costs amount to double recovery of Deployment Period costs.
· The Parties agree that separate accounting in SCE's GRCs for Edison SmartConnectTM costs and benefits is not necessary.
The Commission's Rules of Practice and Procedure do not explicitly allow for stipulations, nor do they define a process for adoption of stipulations. In this case, because the stipulations are a subset of the settlement, the stipulations are essentially a partial settlement of the issues; in our consideration of the settlement agreement as a whole, we consider the provisions in the stipulation to be unopposed, and focus the majority of our detailed analysis on the disputed issues that are not contained in the stipulations.
22 The settlement agreement was filed as an attachment to "Motion of Southern California Edison Company and the Division of Ratepayer Advocates for Adoption of Settlement Agreement," filed March 10, 2008.
23 RT, pp. 4-5.
