XI. Commission Legal Authority to Approve Rate Recovery of SGRP Costs

Pub. Util. Code § 463 provides that, for the purpose of establishing rates, the Commission shall disallow unreasonable expenditures relating to the planning, construction or operation of utility plant costing more than $50 million.²⁹ The SGRP costs are related to operation of Diablo.

Section 463.5 provides that the Commission is not required to undertake a reasonableness review of recorded costs of an item of utility plant costing more than $50 million where the Commission has established an estimate of the reasonable costs. However, establishment of an estimate of the reasonable costs does not limit or restrict the Commission's discretion in determining the reasonableness of actual costs in subsequent proceedings.

Pursuant to the § 463.5, the Commission will not be required to conduct a reasonableness review of recorded SGRP costs if it establishes an estimate of the reasonable costs of the SGRP herein. However, it may conduct an after-the-fact reasonableness review if it chooses to do so.