Edison's Application

In its February 2001 application in this matter, Edison asked for two forms of relief. First, as noted above, it asked that the balance recorded in the TRRRMA account be transferred as a debit to the TCBA revenue account. Second, Edison requested that it be allowed to collect the $24 million recorded annually in TRRRMA in the PBR distribution rates authorized in D.96-09-092. The authorization to collect this $24 million would continue until Edison's next GRC.

Edison in its application points out that the costs at issue in the TRRRMA have already been determined to be reasonable by this Commission. On page 7 of its application, Edison summarizes the history of these A&G and G&I costs. Specifically, Edison states that:

"In the Ratesetting Decision [D.97-08-056], the Commission unbundled SCE's currently effective base rate revenue requirement into generation and nongeneration components. The starting point for this unbundling was the 1995 GRC authorized level of base rate revenues by the Commission for retail rate recovery. To this starting point, SCE applied its cost separation methodology based on cost causation to assign A&G and G&I plant to the generation and nongeneration revenue requirement to be reflected in rates effective January 1, 1998. The authorized nongeneration revenue requirement includes a portion of A&G and G&I plant costs that the Commission found reasonable for recovery based on the application of the Commission-approved cost separation methodology applied to the authorized 1995 GRC revenue requirement." (Application, pp. 7-8; footnotes omitted, emphasis added)

Edison then notes that in ER97-2355-000, Edison included these reasonable, nongeneration overhead costs in its transmission revenue requirement request at FERC, based on the Edison-proposed and Commission-adopted cost separation methodology. Edison argues that since the Commission adopted Edison's cost separation methodology, the Commission therefore assumed that some of the nongeneration overhead costs - the level of which is not in dispute - would be recovered through FERC-jurisdictional transmission rates. The FERC, however, has now ruled that approximately $24 million of A&G and G&I plant costs are not "transmission-related," based solely on the fact that FERC uses a different overhead methodology than the Commission.

Thus, Edison in its application argues in strong terms that the requested relief should be granted because "The revenue requirement reflected in the TRRRMA meets all of the requirements of the TRRRMA tariff as authorized by Resolution E-3544:

1. The costs were categorized by FERC to be non-transmission;

2. The costs were not disallowed by FERC or the Commission;

3. The costs are eligible for recovery in the Performance Based Ratemaking proceedings; and

4. Any costs included as a part of the authorized distribution revenue requirement by the Commission but later deemed to be transmission-related by the FERC should be credited to the TRRRMA." (Application at p. 2)

In addition, Edison shows that the sole reason these costs were not accepted by FERC was because of a difference in allocation methodologies. Edison states that "FERC did not disallow these costs. Instead, it declined to include them in transmission rates due solely to FERC's use of an overhead allocation methodology different from the Commission-adopted methodology, and relied on representations by this Commission that these costs could be recovered in Commission-jurisdictional rates." (Application, pp. 2-3) Edison provides more detail concerning the disallowance made by the FERC when it states:

"However, as a result of FERC's Opinion No. 445, SCE has been denied recovery of approximately $24 million annually in legitimately incurred costs simply because of: a) the shift in jurisdiction over transmission rates from state to federal authorities; and b) a methodological difference in the allocation of overhead costs between those two agencies." (Application p. 11)

Edison also contends:

"the FERC, relying upon statements made by the Commission in the FERC proceeding, has suggested that SCE come back to the Commission to seek recovery of these costs as distribution costs. A key part of the FERC's decision was its assumption, based on statements made by the Commission in the FERC proceeding, that such an under-recovery would not occur; that is, the Commission had established a forum to address recovery of the overhead costs excluded by FERC from transmission rates in state jurisdictional distribution rates." (Application p.11)

Edison makes the argument that the Commission's representations at FERC demonstrated that the Commission intended to allow recovery of these costs through the TRRRMA.

The application also sets forth a detailed description of how Edison proposes to transfer the TRRRMA balance into distribution rates. A key point is that the A&G and G&I amounts Edison claims it should recover under TRRRMA would "net out" the refunds owed to transmission customers because of FERC's reduction of the $211 million revenue requirement that Edison had requested in Docket No. ER97-2355-000 et al.:

"In this application, SCE is proposing [Transition Cost Balancing Account, or TCBA] treatment for both the TRRRMA balance (as a debit to the Revenue Account of the TCBA) and transmission revenue-related refunds (as a credit to the Revenue Account of the TCBA). This ratemaking treatment will result in a net credit to the TCBA by the amount related to the various updates, stipulations and FERC orders discussed in previous sections of this Application (i.e., approximately $14 million in annual revenue requirement). The remaining amount of the transmission revenue-related refunds will effectively net out the balance in the TRRRMA." (Id. at 27.)⁷

The application concludes with a plea that the requested relief be granted ex parte, because Edison "has attached to this application, or incorporated by reference, all of the data needed to support this application." (Id. at 6, 34.)

". . . SCE's transmission revenue requirement request, reflected in [FERC] rates subject to refund on April 1, 1998, of $211 million, was lowered to $173 million, for an annualized revenue requirement difference of $38 million. SCE's requested TRRRMA cost recovery is based on an annualized revenue requirement of $24 million, for a net annualized credit of $14 million to the TCBA. (Note that this analysis ignores the impact of sales growth on the $38 million annualized transmission revenue requirement refund and interest.)" (Id. at 28, n. 39.)