19. Rate Base - Other than Plant in Service

SCE proposes that its fuel inventories be split into permanent and temporary components with separate ratemaking for each. The permanent component would be included in rate base and treated as a long-term asset financed with a combination of debt, common equity and preferred equity. SCE's test year estimate for the permanent fuel inventory to be included in rate base is $88,107,000.

SCE recognizes that in its 1995 GRC, the Commission denied a similar request.108 However, SCE submits that circumstances have changed since that decision was issued that allow for the inclusion of permanent fuel inventories in rate base. In the 2003 GRC decision, the Commission found that a permanent level of customer deposits was available for working capital. The Commission now requires SCE to rely on customer deposits as a permanent source of financing for a portion of rate base. SCE argues that since the Commission has changed its policy regarding the use of customer deposits, it is only proper to now revisit the fuel inventory issue. It is SCE's position that, if customer deposits are to be considered a credit to rate base, it is reasonable and fair as a matter of policy to provide parallel treatment for the permanent portion of fuel inventories and permanently finance them by adding them to rate base.

In support of its position, SCE notes that the Commission continues to treat natural gas inventories held by gas distribution companies using the same method SCE proposed for it fuel inventories. Also, FERC policies include in rate base the fuel inventories at issue in this proceeding.

Currently all of SCE's fuel inventory costs are recovered annually through ERRA proceedings. According to DRA, SCE's current cost recovery method for fuel inventory through annual ERRA proceedings, results in a total cost of $7,000,000, while under SCE's proposed fuel inventory cost recovery method of permanently adding a portion of fuel inventories to rate base, the total cost would be $14,900,000. DRA opposes SCE's proposal to rate base a permanent portion of inventory given the historical treatment of the costs and that SCE's proposal increases cost with no benefit.

Regarding SCE's claim of changed circumstances, DRA states that there is no direct link, within the policy regarding customer deposits, to justify altering the handling of fuel inventories.

We are not persuaded to change the current ratemaking treatment for fuel inventory. There is a long history to this issue.109 Following are a few excerpts from relevant decisions.

In D.85-12-107, the Commission first addressed the question of proper rate treatment of fuel inventory for SCE.

Edison no longer shall be allowed to charge ratepayers the cost of carrying fuel oil in inventory at the authorized rate of return. There are several reasons for this. First, the authorized rate of return includes equity and long-term debt. The cost of using equity rather than debt is higher to the ratepayer because of the income tax that must be recovered with a return on equity. Second, the balancing account associated with the ECAC expense was not designed to reward the company with its rate of return on a non-rate base item but to shield the company from wide swings in fuel expenses. Finally, the low-risk nature of fuel oil inventories call for a different ratemaking approach.110

The Commission concluded:

Fuel oil inventory is low risk. Unlike rate base assets, fuel oil inventory is subject to balancing account treatment. In effect, Edison (SCE) has been guaranteed recovery of its rate of return on a low-risk asset. This result was never intended to occur through ECAC procedures.111

In D.87-12-066, the Commission extended the above holding to SCE's coal and nuclear fuel inventories. The Commission stated:

Although Edison (SCE) points out that the operating and life cycle characteristics of nuclear fuel are not the same as coal, gas, and oil, we believe that this is not enough to warrant a different ratemaking treatment. In fact Edison (SCE) proposes to finance nuclear fuel with a combination of short and intermediate-term debt. While this might indicate that there is a need to factor in the cost of intermediate debt in deriving the carrying cost associated with nuclear fuel, it does not justify rate base treatment.112

The Commission further stated it preferred the use of short-term debt instruments to determine carrying charges on fuel. Because fuel "is a commodity that can be used as collateral for financing and is distinguishable from fixed plant and land...fuel should not be afforded rate base treatment, regardless of its characteristics."113 The Commission directed SCE to calculate carrying costs on its unspent nuclear fuel and coal reserves using the cost of short-term debt, and continue to include these costs in its former ECAC (now ERRA) balancing account.

In D.96-01-011, the Commission denied SCE's previous proposal to split fuel costs into permanent and temporary portions and disagreed with the permanent inventory level concept, stating it did not believe the increased risk SCE was willing to assume was significant enough to justify a change in financing. The Commission also stated:

We believe it more efficient to include determinations of the reasonableness of fuel inventory levels in the ECAC proceedings. That proceeding engages fuel experts who review the utility's fuel purchasing policies as a whole. Taking out one piece of that puzzle for general rate case review may result in an incomplete analysis of fuel practices.114

SCE has not provided sufficient reason for us to change the current ratemaking policies for fuel inventory as described and justified above. SCE does state that the Commission's decision, in SCE's 2003 GRC, to include customer deposits as a rate base deduction is reason to reconsider the issue in this proceeding. We disagree. In D.04-07-022, we stated the following:

SCE contends that TURN's proposed treatment of customer deposits is inconsistent with the Commission's treatment of fuel inventory working capital. When SCE carried large amounts of fuel oil inventory, it requested that some minimum level of inventory be considered permanent. The Commission rejected this position, and SCE received only short-term interest rate recovery for its fuel oil inventory. However, in rejecting SCE's proposal to rate base a portion of fuel inventory, the Commission held that "the risk Edison is offering to assume [of a change in value of the inventory] is not significant enough to justify a change in financing of the carrying costs." (64 CPUC 2d 241, 382, Findings of Fact 110-111.) SCE has not demonstrated to our satisfaction that the circumstances that led the Commission to reject SCE's proposal to rate base fuel inventory are equivalent to the circumstances attendant to TURN's proposal for customer deposits.115

Nothing has changed. The reasons why we rejected rate base treatment for fuel inventory has nothing to do with the reasons why we included customer deposits in the operational cash requirement analysis. Fuel inventory was excluded from rate base because of the cost to ratepayers, the balancing account treatment for fuel expenses and the low risk nature of fuel inventories. Inclusion of customer deposits in the operational cash requirement is not new. Non-interest bearing customer deposits have always been included. SCE however pays interest on customer deposits, so prior to D.04-07-022, its customer deposits were excluded in developing the operational cash requirement. The Commission, in D.04-07-022, instead compensated SCE for the interest it pays on customer deposits and estimated a balance of funds that would be available to offset the operational cash requirement. The result was reduced overall costs to ratepayers, while SCE was fully compensated for the interest costs that it paid.

The Commission's determinations regarding fuel inventory and customer deposits are consistent, in one respect. That is, changes were made to existing practices, which resulted in reduced rates while still providing SCE a fair opportunity to recover its costs. These results are consistent with our responsibilities, in general, and we see no reason to alter the currently adopted ratemaking associated with either issue.

For Materials and Supplies (M&S), SCE used an inventory turnover method to forecast the balances for this GRC cycle. This methodology is based on the level of material-related expenditures flowing through the M&S inventory and the inventory turnover rate. SCE developed different turnover rates for T&D M&S and Generation and Base M&S. SCE indicated that the T&D M&S inventory turned over at a rate of about 4.4 times per year. SCE then applied this turnover rate to the annual M&S expenditures flowing through inventory to estimate test year 2006 M&S inventory level attributable to Transmission and Distribution projects. SCE determined that its generation related M&S inventory had lower turnover rates than T&D and the balances were expected to be more stable, with a slight annual decrease projected for the GRC period. SCE's resultant test year estimate of $146,677,000 also reflects its agreement with TURN's proposed adjustment to reflect sales tax deferrals associated with Edison Material Supply, LLC.

Because the Commission, in SCE's last GRC, determined that SCE could not establish any direct and proportional relationship historically between the M&S inventory level and plant additions, and because SCE's M&S inventory appeared to drop from $139,504,000 in 2003 to $131,419,000 in 2004, DRA recommends that the Commission reject inventory turnover as a appropriate method to estimate the test year 2006 M&S balance. DRA recognizes SCE's increasing efforts to optimize M&S inventory and increasing resources, such as the Material Management System, to do so. Because of this, DRA expects the M&S inventory level to decline in the future years as opposed to SCE's growth forecast. DRA computed a five-year (2000 - 2004) average of recorded weighted average M&S balances and used that as the foundation for its test year 2006 estimate. DRA states this is consistent with the methodology adopted in the last GRC in D.04-07-022. The DRA estimated test year 2006 Materials and Supplies Inventory is $129,511,000, which is $17,166,000 lower than the SCE's estimate.

SCE disagrees with DRA's assumption that the M&S balance decreased from 2003 to 2004. SCE asserts that DRA mistook the 2004 weighted average balance as the year-end balance. Also, in its rebuttal testimony, SCE provided corrected M&S balances to reflect sales tax deferrals associated with Edison Material Supply, LLC, which shows the M&S weighted average balance increased from $126,163,000 in 2003 to $131,419,000 in 2004.

SCE has provided sufficient evidence to show that the M&S balance increased from 2003 to 2004. The corrected historic weighted average balances are as follows:

1999 $111,955,000

2000 $113,956,000

2001 $116,652,000

2002 $119,339,000

2003 $126,163,000

2004 $131,419,000

The average annual percent change is 3.3%. It appears the M&S inventory is continuing to grow as SCE increases its capital and project expenditures in the TDBU. However, in revising it M&S forecast to reflect the corrected historic information, SCE forecasts a 2004 weighted average balance of $137,317,000 which is 8.8% above the recorded 2003 balance and 4.5% above the recorded 2004 balance. This indicates there may be a problem with SCE's inventory turnover method. It is possible that increasing efforts and resources to optimize M&S inventory have not been fully factored into SCE's forecast.

To forecast the test year M&S balance, we will instead use the 2004 recorded balance of $131,419,000 and increase that amount by 3.3% per year, the average annual increase from 1999 to 2004. This results in an adopted test year balance of $140,236,000.

SCE forecasts customer advances for construction (CAC) based upon the recorded 2003 amount and a five-year average incremental change through 2004 and construction cost inflation to project 2005-2008 balances. TURN recommends that CAC be calculated by using the 2004 year-end balance and applying construction cost inflation to project 2005-2008 balances. SCE estimates the test year 2006 weighted average CAC balance to be $66,051,000, while TURN estimates the amount to be $72,864,000.

The difference between the SCE and TURN methodologies is in the determination of the 2004 amount upon which the cost inflation is applied. SCE forecasts the 2004 balance by applying a five-year average incremental annual change in CAC to the 2003 recorded balance. Since the recorded annual incremental CAC changes have increased in the more recent years,116 SCE's methodology for determining the 2004 balance appears to be deficient. SCE's end-of-year forecasts of $63,052,000 for 2004 and $67,007,000 for test year 2006 are both less than the 2004 recorded amount of $69,555,000. TURN's use of the recorded 2004 balance provides a more reasonable forecast for the test period, and its methodology will be adopted. We note however that the use of cost escalation from 2004 forward, to estimate CAC balances, may be insufficient to properly reflect the more recent recorded incremental changes to CAC balances. If appropriate, modifications to this aspect of the methodology should be explored in future rate cases.

19.7 Customer Deposits

SCE uses a five-year average of the recorded years 1999-2003 balances to estimate the permanent level of customer deposits. The estimated amount for test year 2006 is $114,919,000. SCE's methodology is consistent with that adopted in its last GRC. The use of the calculated average in light of the increasing trend in the recorded balances was a proxy to reflect the permanent level, as opposed to total level, of CAC available for financing rate base. Aglet calculated customer deposits as a percentage of average revenues for the prior two years, a proxy for deposits as a function of bills sent 12 to 24 months earlier. Aglet recommends a test year 2006 level of customer deposits equal to 1.94% of average revenues for 2004 (recorded) and 2005 (estimated), or $139,979,000. TURN supports Aglet's recommendation; but, if it is not adopted, TURN and Aglet alternatively propose that the five-year average be updated to include 2004 recorded information, resulting in a test year estimate of $127,443,000.

Aglet's methodology is an alternative to that adopted in SCE's last GRC. In D.04-07-022, we stated that the full balance of customer deposits was unavailable as permanent capital to offset rate base. We adopted a five-year historical average as a reasonable determination of the permanent level.117 In D.04-07-022 we explained that "permanent" amounts of customer deposits were the amounts that could be relied upon to offset rate base. SCE has characterized this to mean that the inclusion of customer deposits as an offset to rate base should represent the average base level available to SCE to utilize for permanent long term financing purposes until remitting the deposits to customers.118

In reconsidering the proper level of customer deposits that should be used to offset rate base, we now see no reason to exclude any of the forecasted total weighted average customer deposit amounts. Regarding such deductions from the operational requirement, Commission Standard Practice U-16, Determination of Working Cash Allowance, states:

    "As indicated on the lower portion of Table 3-A, there is deducted from the amount of current assets certain current liabilities which represent monies provided from sources other than the investors for the operation of the utility. These accounts may include monies already derived through rates to offset a future liability which the company has not incurred, monies received from customers for the procurement of services, and amounts withheld from employees. These amounts are intermingled in the cash balances or invested in the plant accounts. Therefore, if these amounts are not excluded, the investors in effect would be compensated for funds which they have not supplied. The following current liabilities accounts should be considered as deductions from the operational requirement."119

Non-interest bearing customer deposits is listed as one of the accounts that should be considered as deductions from the operational requirement. As noted above, Standard Practice U-16 does not limit the use of these monies to long term permanent financing but indicates the offset amounts are intermingled in the cash balances or invested in the plant accounts. The largest portion of the cash balances would include monies on hand to pay expenses prior to the receipt of payment from customers. Other amounts of cash may be on hand to pay dividends, debt interest or costs for construction purposes.120 Despite the fact that the length of time SCE holds on to specific customer deposits may be limited, those deposits can be used to offset cash requirements. For this reason, we will not exclude any of the weighted average customer deposit balance from the amount used to offset rate base.

The weighted average balances of customer deposits from 1999 to 2004 are as follows:121

1999 $97,027,000

2000 $89,218,000

2001 $104,332,000

2002 $135,703,000

2003 $148,325,000

2004 $159,650,000

The recorded data shows a generally increasing trend from 1999 to 2004. We note that both SCE and Aglet estimate customer deposit balances for 2006 that are below that recorded for 2003 and 2004. Based on our discussion above, it would be reasonable to instead base the adopted customer deposit balance to be deducted from rate base on the 2004 recorded amount of $159,650,000.

TURN recommends that the reserve for workers' compensation claims and the reserve for injuries and damages other than workers' compensation claims be included as offsets to rate base, thus reducing rate base by $142,790,000 ($109,968,000 for workers' compensation ands $32,822,000 for injuries and damages). TURN explains that these reserves constitute capital not supplied by investors, as they are funds paid as expenses, through rates, in advance of when SCE makes payments to workers. Therefore, the reserves should be removed from rate base, consistent with the direction supplied by Standard Practice U-16, which allows for accounts held by SCE that do not earn interest to be counted as an offset to rate base.

TURN states that, if the Commission does not adopt TURN's recommendation, then to be consistent, the Commission should also recognize that these costs are largely not cash expenses for SCE, but are provisions to a reserve account on which ratepayers would be earning no return and therefore do not belong in the lead-lag study at all. TURN's alternative recommendation would increase lag days by 0.553 days and reduce rate base by about $8,395,000.122

SCE states that TURN wrongly assumes that SCE's total recorded reserve balance represents ratepayer contributions. Consistent with prior GRCs, SCE has requested annual provisions for workers' compensation that represents accruals set aside for anticipated future obligations. This annual provision accumulates in SCE's reserve for workers' compensation as a liability to the company, until such time as the payments are made. SCE states that, to the extent that actual liability payments exceed the authorized annual provisions accumulated to the workers' compensation reserve, additional accrual provisions above and beyond the authorized levels are recorded to the reserve at shareholder expense. SCE indicates that significant increases in workers' compensation liabilities have resulted in SCE making payments that have far outstripped the currently authorized levels.123 For this reason, the recorded accumulated workers' compensation reserve represents amounts that have been funded by shareholders, not ratepayers, and SCE argues that TURN's recommendation to offset rate base should be rejected.

On the other hand, SCE agrees with TURN's alternative proposal to remove the injuries and damages and workers' compensation accruals from the lead-lag determination component of working cash. Under current accounting for workers' compensation accruals, SCE believes that ratepayers should not be required to pay for the timing lag between when shareholders bear the costs of funding the future obligations to when revenues are received. SCE states it will reduce the 2006 working cash request by $8,395,000 to account for this.

For the reasons discussed below, we will not adopt TURN's primary recommendation in this GRC.

For liability accounts that are traditionally deducted from rate base, the ratemaking concept is clear. For instance, accrued vacation represents monies collected through operating expenses for future liabilities which the utility has available until payments to employees for vacation are made. In the GRC, the forecast of the amounts of accrued vacation to be recorded in the test year are deducted from the test year rate base. Similarly, customer deposits represent monies advanced by the customer as security for the payment of utility bills. The utility has use of those funds until refunds to customers are made. Again, in the GRC, the forecast of the amounts to be recorded in the test year are appropriately deducted from the test year rate base.

The appropriate ratemaking for the workers' compensation and injuries and damages (other than workers' compensation) reserves is not as clear as that for accrued vacation or customer deposits. Whether ratepayers have provided the funds for these reserves is questionable. SCE explains the reserves for workers' compensation and claims as follows:

The instructions of FERC Account 925 states that the utility shall "reserve accruals to protect the utility against injuries and damages claims of employees or others, losses of such character not covered by insurance, and expenses incurred in settlement of injuries and damages claims." Based on these instructions and because the Company is self-insured for workers' compensation claims, the State of California requires that we reserve for all anticipated workers' compensation-related claims and contingent liabilities. This accounting methodology is also consistent with matching principle of GAAP, which requires that revenues be matched with expenses in the period incurred. The reserves established on behalf of the Claims Division are similar to the procedures used for the Workers' Compensation Division. In the Claims area, we establish reserves up to our self-insured limit of $2 million per incident.

On a monthly basis, the reserve is credited for payments made on behalf of workers' compensation and other claim-related matters to medical providers, employees, third parties and for negotiated settlements. The total paid in any given month is determined by the actual payments recorded in various accounting functions, which are totaled and offset to an insurance reserve account and debited to function 0162 - Provision for Injuries and Damages Reserve. For example, if an employee suffers from an ankle sprain that requires therapy, the actual cost of therapy is debited on a monthly basis to function 0162 of Account 925.

The overall increase in reserves is associated with several factors: (1) the audit by Self-Insurance Plans in 2001 for injuries reported between 1996 and 1998; (2) the increase in medical reserves for all life time medical awards, estimated for the life time of injured workers in accordance with the new life expectancy table; (3) adjustments in reserves in compliance with the increase of indemnity benefits passed by the legislature in AB 749; and (4) the quarterly certification requirement as a result of Sarbanes-Oxley Act 2002.

Reforms such as AB 749 will continue to increase our reserves and claim payments. However, we are hopeful that other reforms, such as AB 227, SB 228, SB 899, will reduce costs.124

The reserve is a summation of recorded reserve expenses less actual payments. The reserve expense is reflected in rates on a forecasted basis.

Regarding the authorized and recorded accruals SCE stated:

The factual record developed during the evidentiary hearings established that there is no nexus between the recorded accruals and any request made in this general rate case. Based upon authorized reserve accruals, instead of recorded, the workers compensation reserve would be more than eliminated.125

In response to SCE's claim, TURN argues:

A cardinal principle of ratemaking is that any cost included in rates should be deemed to be funded by ratepayers, without a microscopic examination of specific accounts. The purpose of a rate case is not to set a budget for specific accounts but to establish an overall utility revenue requirement that gives the utility management, using reasonable discretion, an opportunity to earn its authorized rate of return. Therefore, the Commission should not look at so-called "authorized reserve accrual" to account 925 when evaluating the source of the reserve for injuries an damages in isolation from other ratepayer dollars received by the utility.

The issue appears to be whether ratepayers or shareholders have funded the recorded reserve expense. TURN's argues that ratepayers, in principle, are responsible for the reserve expense. Therefore, it should be assumed that ratepayers have funded the recorded reserve expenses. SCE, on the other hand, argues that recorded reserve expenses have far exceeded authorized expenses and provides some reasons for the overall increases in reserves. Therefore, shareholders have funded the recorded reserve expenses.

In principle, if a cost is assumed to be in rates, the recorded amount should be assumed to be paid by ratepayers. For instance for accrued vacation, since vacation is an element of costs included in rates, the recorded deferred amount is used to reduce rate base. Whether authorized vacation, or the associated labor cost, is more or less than the recorded amount is not an issue. However, there appears to be a difference between the accrued vacation balance and the workers' compensation reserve. The recorded accrued vacation balance is just that -- a recorded amount that is based on actual vacation earned and taken. On the other hand, the recorded workers compensation reserve appears to be based on the accumulation of recorded reserve expenses which may include recorded payments for that year but which will likely also include a calculation of certain obligation for a time period beyond that specific recorded year. Calculations of future obligations can be a significant part of the reserve expense for any particular year.126

Assuming ratepayers fund a forecast of workers' compensation payments for a specific year plus certain future obligations beyond that year, we can make some comparisons with the ratemaking for other reserves such as that for vacation accruals. Workers' compensation payments for a specific year are similar to the deferred vacation accrual. One could reasonably argue that ratepayers have funded any recorded workers' compensation payments. Just because the amount actually paid does not directly relate to what was assumed in the reserve expense does not matter. In principle, the ratepayers funded the recorded payment. However, in the case of the future obligations beyond the specific year, the recorded payments will not be known until they are actually made. Again those actually incurred expenses would be assumed to be paid by ratepayers. In the meantime the calculation of those future obligations may differ from what is ultimately paid, if assumptions such as level of indemnity benefits differ from what is used when the actual payment is made. It is reasonable to assume that, ratepayers are paying for those forecasted costs that are used to develop rates. However, it is not clear that, if a calculation of future obligations used in developing the authorized reserve expense differs from that is used in calculating the recorded expense, the ratepayers have necessarily funded the resultant change in the reserve. Therefore, we decline to adopt TURN's primary recommendation, which assumes ratepayers have funded the entire reserve just because the authorized reserve expense is included in rates.

For this GRC, in order to determine the ratepayer or shareholder funding responsibility for the reserves, we will consider the relevant reserve accruals. In this case, the evidence indicates that recorded workers' compensation reserve accruals have exceeded authorized accruals by approximately $111,000,000 since 1995. Also, for the period 1995 to 2002, the actual payments have been larger than the authorized accruals. Lacking any better evidence, it is reasonable to assume that shareholders, not ratepayers, have funded the workers compensation reserve. For injuries and damages other than workers' compensation, there is no evidence showing that shareholders have funded that reserve, and we will adopt TURN's recommendation. In declining to adopt TURN's primary recommendation for workers' compensation, we believe that the weight of the evidence favors SCE, but it is not overwhelming. In its next GRC, SCE would do well to provide a clear record on this issue. Finally, for workers' compensation, we will adopt TURN's alternative proposal to remove the related accrual from the lead-lag determination component of working cash.

TURN recommends the inclusion of uncollectible reserves for other accounts receivable aside from claims, which would result in a $2,600,000 reduction to working cash. SCE indicates that it has not requested recovery of the "atypical" uncollectible accounts receivable for non-claims in its test year request and has not included it in its lead-lag study. Since this particular uncollectible amount is not funded in rates, it should not be included as an offset to working cash. We will not adopt TURN's recommendation to do so.

108 See D.96-01-011, mimeo., p. 226.

109 D.96-01-011, 64 CPUC 2d 241, 356, provides a detailed history of the ratemaking treatment of SCE's fuel inventory carrying costs.

110 D.85-12-107, 20 CPUC 2d 111,112, as modified in D.86-05-095, slip op. at p. 2.

111 Id., at p. 3.

112 D.87-12-066, 26 CPUC 2d 392.

113 Id.

114 D.96-01-011, 64 CPUC 2d 241.

115 D.04-07-022, mimeo., pp. 254-255.

116 From 1997 to 2001, the year end balances for CAC increased from $31,619,000 to $41,270,000, or $2,413,000/year. From 2001 to 2004, the year end balances increased from $41,270,000 to $69,555,000, or $9,428,000/year. (See D.04-07-022, mimeo., p. 241 and Exhibit 899, p. 434.)

117 In that decision, we stated "We agree with TURN's proposal in part, but do not agree with its proposal to apply an estimated $117.174 million customer deposit balance as an offset to rate base. We accept TURN's proposal that customer deposits are a source of working capital to the utility, but not to the extent TURN would like to see earmarked as permanent. Instead, we will adopt the average amount of customer deposits over the years 1996 - 2001, as the amount that can be relied upon to offset rate base. The amount of $80 million is reasonable and should be adopted. We note that the amount of customer deposits that are available to offset rate base has the potential to change from GRC to GRC. Because we have used an average in this GRC, we expect SCE to keep the Commission informed as to the historical average of its customer deposits in the next GRC. In doing so, we will remain open to increasing or decreasing this amount based on the historical trend..." (D.04-07-033, mimeo., p. 255).

118 SCE Opening Brief, p. 188.

119 Standard Practice U-16, pp. 3-7.

120 See Standard Practice U-16, p. 3-4.

121 See Exhibit 80, p. 60 and Exhibit 409, p. 1.

122 See, Comparison Exhibit, p. 52.

123 SCE indicates that recorded accruals have exceeded authorized accruals by $111,000,000 more than the entire workers' compensation reserve since 1995. Also, for the period 1995 to 2002, the actual payments have been larger than the authorized accruals. (SCE, Transcript V. 21, pp. 2087-2088.)

124 SCE, Exhibit 71, pp. 60-61.

125 SCE, Opening Brief, p. 194.

126 For example the recorded workers' compensation reserve expense for 2003 was close to $60,000,000 while the recorded payments were approximately $20,000,000. See Exhibit 356, p. 50.

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