Comments and Replies on Proposed Decision
The proposed decision of ALJ Sullivan in this matter was mailed to the parties in accordance with Pub. Util. Code § 311(d) and Rule 77.1 of the Rules of Practice and Procedure. All parties to the proceeding have stipulated to a reduced comment period with comments due on February 1, 2002. No reply comments were accepted.
The Commission received timely comments from Edison, ORA, TURN and NRDC. Edison's comments sought clarification of several points and reargued its major positions seeking increases in the adopted distribution revenue requirements. ORA and TURN reargued their major points, seeking a reduction in the adopted revenue requirements to reflect Edison's 2001 temporary deferral of capital investments. NRDC, in contrast, urges adoption of the proposed decision as "consistent with state law, public policy, and the priorities set forth by the Commission."
We have clarified the decision as requested, but have declined to modify the major findings.
1. On June 14, 2001, the Commission adopted D. 01-06-038 which extended Edison's PBR mechanism until superseded by Edison's next GRC.
2. Edison's current PBR mechanism applies to the rates that Edison charges for electric distribution services.
3. On April 12, 2001, California enacted ABX1-29, which added Pub. Util. Code § 739.10.
4. Under Edison's current PBR, variations in sales translate into variations in revenues. In addition, errors in the forecast of electricity sales may result in material under- or overcollections.
5. The establishment of a revenue requirement for distribution costs and a balancing account to assure cost recovery can prevent material under-or over-collections that can arise from variations in electricity sales.
6. Without revisions to the PBR mechanism for the period from June 14, 2001 to December 31, 2001, Edison will suffer material undercollections in distribution revenues.
7. We will establish a revenue requirement for Edison's distribution costs for 2001 that considers changes in the CPI, a productivity adjustment, an adjustment to reflect expansion of the distribution network, and an adjustment to reflect one-time reduction in expenses.
8. We will establish a 2002 revenue requirement for Edison's distribution costs based on changes in the CPI, adjustments to reflect productivity gains, and adjustments to reflect the costs of extending the distribution network.
9. The PBR mechanisms adopted in D.96-09-092 should be revised to include the mechanism for setting a revenue requirement and balancing account for Edison's distribution system for the period following June 14, 2001 as described herein.
10. It is reasonable for Edison to use a productivity offset-factor for 2002 of 1.6%.
11. It is reasonable for Edison to use a productivity offset-factor for 2003 of 1.6%.
12. The financial trigger mechanism in Edison's PBR mechanism was developed using 20 years of financial data and information on Commission action. The resulting trigger mechanism linked changes in Moody's Aa utility bonds to Commission-authorized returns on investment.
13. There is no factual basis for changing the current trigger mechanism.
14. Performance data concerning worker safety indicates that Edison's performance currently exceeds the current safety benchmark by a wide margin.
15. Commission policy and law promote worker safety.
16. The PBR mechanism adopted in D.96-09-092 should be revised to require an updating of the benchmark for the safety incentive program for 2002. This updating should use recorded data for the seven years 1994-2000.
17. The PBR mechanism adopted in D.96-09-092 should be revised to require an updating of the benchmark for the consumer satisfaction incentive program for 2002. This updating should use recorded data for the years 1992-2000.
18. The PBR mechanism adopted in D.96-09-092 should be revised to require an updating of the benchmark for the incentive program to reduce the frequency of outages. This updating should use recorded data for the years 1991-2000.
19. There is no basis for changing the outage duration incentive program.
20. Edison's revenue requirement should not be modified to increase resources devoted to conservation programs in this proceeding.
1. Pub. Util. Code §739.10 states that "The commission shall ensure that errors in estimates of demand elasticity or sales do not result in material over or under collection of electric corporations."
2. It is reasonable to revise the benchmark for Edison's worker safety incentive program based on the last seven years of injury data (1994-2000).
3. The PBR mechanism adopted in D.96-09-092 should be revised to require an updating of benchmark for the consumer satisfaction incentive program. This updating should use recorded data for the years 1992-2000.
4. It is reasonable to revise the consumer satisfaction benchmark for 2002 based on the historic experience from 1992-2000.
5. It is reasonable to revise the frequency of outages benchmark for 2002 based on the historic experience from 1991-2000.
6. The mechanism for setting a 2001 distribution revenue requirement for Edison described herein is reasonable and prevents material under- or overcollections by Edison.
7. The two-step procedure for setting a 2002 revenue requirement for Edison's distribution costs described herein produces reasonable rates and prevents material under- or overcollections by Edison.
8. The PBR updating procedure described herein should be extended into 2003, until superseded by the adoption of a GRC decision for Edison by the Commission.
9. Using the PBR procedure to set a 2003 revenue requirement for Edison's distribution costs produces reasonable rates and prevents material under- or overcollections by Edison.
10. This proceeding should be closed.
IT IS ORDERED that:
1. We grant the Southern California Edison Company's (Edison) Expedited Petition for Modification of Decision (D.) 96-09-092 to the extent described herein, and denied in all other respects.
2. Because we have modified D.96-09-062, Edison shall take the following actions:
a. Edison shall establish a revenue requirement for the period from June 14, 2001 to December 31 including the following items:
· A base revenue requirement that equals the year 2000 historic revenues escalated by the CPI-X formula and prorated to cover only the period from June 14, 2001 to the end of 2001.
· A customer growth element that equals $657 times the number of new customers added in 2001, but prorated to cover only the period from June 14, 2001 to the end of the year.
· A reduction to reflect Edison's decrease in operations and maintenance expenditures. In particular, since Edison reduced its operations and maintenance spending by $28 million over the year 2001, we will reduce the post-June 14 revenue requirement by $15.17 million using the standard prorating approach to reflect the expenditures avoided from June 14 to the end of the year.
b. The revenue requirement for 2002 should be calculated using the two-step procedure that follows:
· Step 1 - Calculate a 2001 "annualized revenue requirement ":
$Annualized Rev. Req.2001=(1+(_CPI2001-X2001)) x ($ Revenues2000) + $657 x (Number of New
Customers2001)
Where _CPI = change in CPI
· Step 2 - Calculate a 2002 Revenue Requirement:
$Revenue Requirement2002=(1+(_CPI2002-X2002)) x ($Annualized Rev. Req.2001) +$669 x (Number of \
New Customers2002)
Where _CPI = change in CPI
c. The revenue requirement for 2003 should be calculated by applying the (1+(_CPI2003-X2003)) factor to the 2002 revenue requirement and adding a revenue requirement adjustment to account for the number of new customers. The productivity offset factor, X2003, shall remain at 1.6% and _CPI = change in CPI. The resulting distribution revenue requirement will remain in effect during 2003 until replaced by the regulatory program adopted by the Commission in Edison's General Rate Case proceeding.
3. Edison shall convert the memorandum account created pursuant to D.01-06-038 into a balancing account. The account should operate pursuant to the terms adopted herein.
4. Edison is authorized to establish by advice letter filing the Electric Distribution Revenue Adjustment Balancing Account applicable to service on or after June 14, 2001 as described in its testimony and as modified by the adopted Operations and Maintenance adjustment of $15.17 million for 2001 and as updated by more recent data consistent with this decision.
5. Edison shall file a new or amended advice letter no later than 15 days following the effective date of this decision consistent with the provisions of this decision. In particular, the tariffs should implement the changes in worker safety, customer satisfaction and outage frequency programs adopted in this decision. Those tariff changes shall be subject to confirmation by the Energy Division and shall be effective 30 days after filing unless the Energy Division believes modifications to Edison's proposed tariffs are necessary and so notifies Edison within the review period. Edison and the Energy Division shall attempt to resolve any differences to make the revised tariffs effective within the 45-day period following Edison's advice letter filing. If such differences cannot be resolved, the Commission will issue a resolution to ensure the terms of SCE's tariff comply with this decision. If needed, a similar procedure should be followed at the end of 2002 to set a revenue requirement for 2003 and to update the incentive programs consistent with the averaging procedures adopted in this decision.
6. This proceeding is closed.
This order is effective today.
Dated April 22, 2002, at San Francisco, California.
LORETTA M. LYNCH
President
HENRY M. DUQUE
CARL W. WOOD
GEOFFREY F. BROWN
MICHAEL R. PEEVEY
Commissioners
************ APPEARANCES ************ Peter Miller |
Patrick G. Golden Marcel Hawiger |
Robert Finkelstein |
(END OF APPENDIX A)
