Harm to the Regulatory Process: A high level of severity will be accorded to violations of statutory or Commission directives, including violations of reporting or compliance requirements.

We have set forth above the statutes, decisions, and rules that SCE has violated. In addition, however, this investigation raises particular concern because it involves the abuse of an incentive mechanism. Incentive mechanisms, such as the PBR, require a great deal of trust between the Commission and the utility's entire management. In turn, the utility's management must communicate through its practices, rules, and corporate culture that the data submitted to the Commission that impacts the incentive mechanisms must be completely accurate and timely. Increasingly, this Commission is turning to incentive mechanisms in order to align the interests of ratepayers and shareholders and to achieve desirable policy outcomes in the most cost effective and least burdensome manner. If the Commission is to continue to rely on and potentially create new incentive mechanisms, we must be able to trust the utilities to be accurate, timely, and completely honest about their reporting, and further, we must be vigilant against abuse and appropriately penalize violations in order to safeguard the integrity of incentive mechanisms going forward for all utilities.