VI. SCE's Cost-Effectiveness Model

In its cost-effectiveness evaluation, SCE calculated the present value of the revenue requirement associated with the total benefits and costs resulting from the SGRP, excluding the SGRP costs, from 2004 through 2022.¹¹ This total net benefit, or cost, is divided by the present value of the revenue requirement associated with the SGRP costs to obtain the benefit-to-cost ratio. A ratio of one or greater means the SGRP is cost-effective. A ratio of less than one means that it is not cost-effective. Since no party has expressed particular concerns with SCE's model apart from the inputs, we will use SCE's model. However, instead of using the benefit-to-cost ratio, we will use SCE's model to calculate the net present value of the revenue requirement resulting from the total net costs and benefits of the SGRP including the SGRP costs (NPV). A negative NPV would indicate that the SGRP is not cost-effective.

We will now address the parties' concerns regarding various model inputs.

¹¹ The calculation involves determining the benefits and costs both with and without the SGRP.