Discussion

On February 7, 2005, The Utility Reform Network (TURN) filed its response to the Ruling which challenges it on various grounds. SCE supports the recommendations made in the Ruling and recommends that TURN's arguments be rejected.

TURN contends that the Ruling recommends modification of Resolution E-3824 so to backdate the effective date of Edison's CEMA from April 3, 2003 to March 12, 2002. TURN's contention is incorrect. The Ruling only changes the effective date used for determining eligibility for reimbursement from April 3, 2003 to March 12, 2002. The Ruling does not modify the April 3, 2003 effective date for the bark beetle CEMA.

TURN contends that the period for reimbursement to property owners for tree removal cannot be changed without an evidentiary hearing because the cost consequences of this modification to Res. E-3824 could be substantial. However, as SCE points out, we established the current reimbursement period by AL 1730-E without holding any evidentiary hearing, and any change to that period is a policy and legal issue the Commission can resolve on the basis of pleadings without evidentiary hearing.⁴ TURN has not identified any material factual issue that the Commission must decide in order to rule on the Petition to Modify.

The Ruling reclassifies the adjudicative complaint filed by Schattinger for $4,450 into a Petition to Modify Res. E-3824, pursuant to Rule 42 and 47 (Rules). SCE agrees with TURN that it is not clear whether Rule 47 permits reclassification of a complaint into a Petition to Modify, but it believes the presiding ALJ has applied the Rules to this proceeding with flexibility to efficiently resolve the issue presented by the complaint. In addition, Rule 87 states that "[t]hese rules shall be liberally construed to secure just, speedy, and inexpensive determination of the issues presented. In special cases and for good cause show, the Commission may permit deviations from the rules." To hold the complaint in abeyance while Schattinger filed a Petition to Modify, citing the same facts as in his complaint would exalt form over substance and delay, rather than speed up, "an inexpense determination of the issues." Certainly, TURN is not prejudiced. Its objections would be the same no matter what the title of the document.

Both Section 454.9(a) of the Public Utilities Code and Res. E-3238 allow utilities to establish a CEMA and record their costs of: (a) restoring utility service to customers; (b) repairing, replacing or restoring damaged utility facilities; and (c) complying with governmental agency orders in connection with events declared disasters by competent state or federal authority. TURN claims that the Ruling violates Section 454.9 by allowing a local, rather than a competent state authority, to declare a disaster. SCE contends that the ALJ's Ruling does no such thing. Rather, the Ruling is using the date of a local declaration of a disaster as a possible date for commencement of the tree removal period for purposes of reimbursement to property owners who proactively removed dead and dying trees that SCE would have otherwise had to remove. A competent state authority did declare the bark beetle infestation a disaster on March 7, 2003 when the Governor issued his Proclamation declaring a State of Emergency. However, the date that the competent state or federal authority declared a disaster is immaterial as to the commencement of the event, particularly where there is no clear-cut date when the disaster commenced. Here, it is clear that the bark beetle infestation commenced prior to March 12, 2002 and that the "competent state or federal authority" requirement found in both Section 454.9 and Res. E-3238 was met. The Ruling does not delegate the declaration of emergencies to local agencies or expand the scope of declared disasters; it merely looks to find an appropriate commencement date for reimbursements to property owners.

TURN argues that the Ruling constitutes retroactive ratemaking to the extent that the Ruling creates a requirement for ratepayers to pay now for past activities in 2002-2003. This argument is wrong. TURN brushes aside SCE's position that retroactive ratemaking is avoided because SCE will not incur any costs prior to the April 3, 2003 effective date of its CEMA. TURN claims that SCE's position conflicts with general accrual accounting methods and that SCE records other credits and debits when they are incurred, not when they are paid. SCE says TURN conveniently ignores the fact that the costs associated with property owner tree removals prior to April 3, 2003 have not accrued to SCE because SCE does not have any current obligation to pay such costs nor did it have any obligation at the time those costs were incurred by the property owners. The costs associated with property owner tree removals only become an SCE cost when SCE pays the property owner the reimbursement amount. Until that time, SCE has not incurred any costs. Permitting SCE to now incur costs to reimburse property owners for costs associated with the removal of dead or dying trees prior to the date that SCE's CEMA became effective (April 3, 2003) is not retroactive ratemaking since SCE will not incur these costs until sometime in 2005 or beyond, well after the April 3, 2003 effective date of its bark beetle CEMA.

Further, the prohibition against retroactive ratemaking only applies to general rates of the utility. (See, e.g. D.01-11-031, page 10.) A pass-through reimbursement of costs by property owners would not constitute a general rate case. In D.95-10-018, we reviewed our disposition of a utility's post-retirement benefits other than pensions (PBOP) costs against a challenge that we were involved in retroactive ratemaking. In denying the challenge we said:

Our review of the narrow category of PBOP costs does not constitute general ratemaking and, under Southern California Gas Co. [23 Cal.3d 470], Southern California Edison [20 Cal.3d 823], and California Manufacturers Association [24 Cal.3d 251], is not restricted by the rule against retroactive ratemaking. Southern California Edison described general ratemaking as a comprehensive review of utility's rate base, revenues, expenses, and earnings, as distinguished from other Commission actions of a more limited nature. That decision found that while general ratemaking is governed by the rule against retroactive ratemaking, other proceedings are not. California Manufacturers Association explained further that the rule against retroactive ratemaking does not apply to limited issue proceedings, even though they may involve major policy determinations. (See 24 Cal.3d at 258-261.) (61 CPUC.2d 687 at 690.)

A catastrophic earthquake event was the subject of D.92-02-037 where a retroactive ratemaking challenge was rejected in regard to insurance proceeds. The headnote reads:

No retroactive ratemaking was involved in an electric and gas utility's allocation of earthquake-related insurance proceeds back to the date of the earthquake, rather than to the date its earthquake recovery account was established, since the insurance proceeds were related to casualty losses occasioned by property damages, not losses attributable to a past incorrect rate, and since past rates included no allowances for earthquake-related costs. (43 CPUC.2d 274, digest.)

In Schattinger's case, the casualty losses were occasioned by property damage, not a past rate. And the losses relate back to the date the emergency was declared rather than to the date the CEMA account was established. We reiterate, any costs incurred by SCE were incurred after the CEMA account was activated.

Nor does TURN's argument consider the chronology of the CEMA account. The Governor issued his proclamation on March 7, 2003, Res. E-3824 was issued April 3, 2003, and AL 1730-E was approved on August 29, 2003 "effective April 3, 2003." Certainly an approval on August 29 effective April 3 has not been challenged as retroactive ratemaking. In fact, SCE suggested the following dates in AL 1730-E:

"(1) a date specified by the CDF or another state agency with the expertise to determine when the combination of the drought and bark beetle infestation combined to create the extraordinary situation; (2) March 7, 2003, which is the date of the Governor's Proclamation; (3) April 3, 2003, which is the effective date of Resolution E-3824 and the date SCE activated its CEMA; or (4) the effective date of the Commission's resolution on this advice letter."

Clearly, the first date suggested by SCE is a date which would, by definition, be before March 7, 2003 - the extraordinary situation occurs, then it is declared a disaster. SCE's AL 1730-E proposal suggested that the beginning of the bark beetle infestation would be an appropriate date for the commencement of the tree removal period for reimbursement purposes.

A comparable situation occurred in D.02-01-054 where we considered a petition to modify Res. E-3707. Certain customers of SCE had subscribed to an economic development rate (EDR) which was lower than the customers' otherwise applicable tariff (OAT). At that time, EDR customer bills were subject to a minimum charge which, because of the spike in electric prices in 2000, resulted in charges under the EDR exceeding charges under the OAT. Res. E-3707, dated December 7, 2000, modified the minimum charge effective December 7, 2000, but declined to limit the minimum charge to the amount that would result under the OAT. Based on events after December 7, 2000, the petitioner sought modification of Res. E-3707 to permit EDR customers to opt-out of EDR agreements effective December 7, 2000.

We granted the petition, citing, among other reasons, that on January 17, 2001, Governor Davis proclaimed a State of Emergency. The proclamation was based on the electricity market experiencing shortages, blackout, and dramatic price increases, thereby creating a condition of extreme peril to the safety of persons and property within the state. We said:

"We grant the application based on developments after December 7, 2000, the continuing State of Emergency, similar treatment for interruptible rate customers, and our commitment to re-examine special rate discounts and ratemaking when needed as restructuring unfolds." (D.02-01-054, mimeo., 6.)

We then considered a customer who prematurely terminated its EDR agreement and paid liquidated damages prior to December 7, 2000. Additional pleadings had suggested that other EDR customers may have terminated their EDR agreement and paid liquidated damages. We said:

"In fairness to all similarly situated customers, we apply this relief to all EDR customers from July 1, 2000, or mid-2000, when wholesale prices began to increase unreasonably." (Mimeo., 7.)

The result was that on January 23, 2002, we adopted Res. E-3707-A, effective December 7, 2000, which we applied to EDR customers who opted-out of EDR tariffs on or after July 1, 2000. Modifying resolutions to reach back to expand the universe of persons entitled to relief is a function of our authority to regulate utilities and our commitment to re-examine special rate discounts and ratemaking when needed.

Res. E-3824 did not prescribe a start date for incurring tree removal costs which would be reimbursed. SCE, in its AL 1730-E compliance filing noted this omission stating "it is not clear (1) whether reimbursements should be made by SCE to property owners for the removal of trees which SCE would eventually have removed...." SCE then recommended cost reimbursement for tree removals on or after April 3, 2003. SCE's AL 1730-E recommendation was approved by the Energy Division on August 29, 2003. The facts of this complaint persuade us that AL 1730-E should be superseded. However, rather than modifying Res. E-3824, we believe the most efficient procedure to reimburse this expanded universe of persons is to order SCE to supplement AL 1730-E with an advice letter requesting authorization to record in its bark beetle CEMA reimbursements to property owners for removal of trees, on or after March 12, 2002, that could have impacted SCE's electric lines.