A.04-12-014, I.05-05-024 ALJ/DKF/avs DRAFT
ALJ/DKF/avs Mailed 5/17/2006
Decision 06-05-016 May 11, 2006
BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
Application of Southern California Edison Company (U 338-E) For Authority to, Among Other Things, Increase Its Authorized Revenues For Electric Service in 2006, And to Reflect That Increase in Rates. / Application 04-12-014(Filed December 21, 2004)
Investigation on the Commission’s Own Motion into the Rates, Operations, Practices, Service and Facilities of Southern California Edison Company. / Investigation 05-05-024
(Filed May 26, 2005)
(See Appendix A for a List of Appearances.)
OPINION ON SOUTHERN CALIFORNIA EDISON COMPANY’S
TEST YEAR 2006 GENERAL RATE INCREASE REQUEST
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A.04-12-014, I.05-05-024 ALJ/DKF/avs
TABLE OF CONTENTS
Title Page
OPINION ON SOUTHERN CALIFORNIA EDISON COMPANY’S TEST YEAR 2006 GENERAL RATE INCREASE REQUEST 2
1. Introduction 2
1.1 Summary of Decision 2
1.2 Procedural Background 4
2. Preliminary Matters 7
2.1 SCE’s Showing 7
2.2 SCE’s Financial Health 8
2.3 Forecasting Issues 10
2.3.1. Averaging and Trending 10
2.3.2. Increased Costs of Providing Service 11
2.4. Joint Comparison Exhibit 12
3. Differences in Expense Forecasts 13
4. Generation Expenses – Mohave Generating Station 14
4.1. SCE’s Proposal 14
4.2 DRA’s Proposal 15
4.3 TURN’s Proposal 16
4.4 Discussion 18
5. Mohave Sulfur Credits 20
5.1 Discussion 25
6. Generation Expenses – Four Corners Generating Station 27
6.1 Discussion 28
7. Generation Expenses - SONGS 29
7.1 Aging Workforce 29
7.2 Discussion 30
7.3 Account 532 – SONGS 2&3 Site Projects Estimating Methodology 31
7.4 Discussion 32
7.5 Account 517 – Nuclear Energy Institute Funding 33
7.6 Discussion 34
7.7 SONGS Refueling and Maintenance Outage Expense 35
7.7.1. Flexible Outage Schedule Mechanism 35
7.7.2. Refueling Outage – Core Costs 36
7.7.3. Discussion 36
7.7.4. Refueling Outage – One-Time Activities 38
7.7.5. Discussion 38
7.8 Allocation of SONGS 2 & 3 Costs to SDG&E 39
Title Page
7.9 Design Basis Threat Costs for SDG&E 41
8. Generation Expenses – Project Development Division 44
8.1 SCE’s Proposal 44
8.2. Positions and Other Parties 45
8.3 SCE’s Response 47
8.4 Discussion 50
9. Allocation of Generation Related Administrative & General Costs 52
9.1 Discussion 55
10. Transmission and Distribution Expenses 57
10.1. Stipulation on Priority 5 Maintenance 57
10.2 Discussion 60
10.3 Account 560.100 – Advanced Technologies for
Transmission System 61
10.4 Discussion 61
10.5 Account 562.100 – Aging Workforce 63
10.6 Discussion 64
10.7 Account 566.100 – Training and Safety Meetings 64
10.8 Discussion 65
10.9 Account 566.300 – Incremental NonLabor Expenses 66
10.10 Discussion 66
10.11 Account 570.400 – Maintenance of
Miscellaneous Station Equipment 68
10.11.1. O&M Related to Capital Spending 68
10.11.2. Substation Life Extension 69
10.12 Transmission Life Extension Program 70
10.12.1. Account 571.100 - Poles and Structures 71
10.12.2. Discussion 71
10.12.3. Account 571.200 – Insulators and Conductors 73
10.12.4. Discussion 74
10.13 Account 580.100 – Advanced Technologies
for Distribution System 74
10.14 Discussion 75
10.15 Forecast Methodology – Account 580.100z
Distribution Operations Supervision & Operations 75
10.16 Account 580.200 – Vehicle Fleet Expenses 75
10.17 Discussion 76
10.18 Account 580.500 – Research Development and Demonstration 77
10.19 Discussion 77
Title Page
10.20 Account 583.400 – Incremental Funding 78
10.20.1. Pole Inspections 78
10.20.2. SAM Inspections 79
10.21 Account 586.100 – Turn On and Off Service 80
10.22 Discussion 81
10.23 Account 586.400 - Aging Workforce/Forecast Methodology 82
10.24 Discussion 83
10.25 Account 588.300 - Training 84
10.26 Discussion 84
10.27 Account 588.800 – Miscellaneous Other 86
10.28 Discussion 86
10.29 Account 590.980 – Division Overheads 87
10.30 Discussion 88
10.31 Account 593.300 – Supply Expense 89
10.32 Discussion 89
10.33 Account 597.400 – Repair Billing Meters 90
10.34 Discussion 90
10.35 Account 456.900 – Added Facilities 91
10.36 Discussion 91
10.37 Audit of Other Operating Revenues 92
11. Customer Accounts Expenses 92
11.1. Accounts 902 and 903 – Non-Labor Forecast Methodology 92
11.2 Discussion 93
11.2.1. Account – 902 – Meter Reading 94
11.2.2. Account 903.200 - Credit 94
11.2.3. Account 903.500 - Billing 95
11.2.4. 903.800 – Call Center 95
11.3 Account 903.100 - Postage 96
11.4 Account 903.900 – Information Technology Application Services 96
11.5 Discussion 96
11.6 Account 904 – Uncollectible Expense 99
11.7 Discussion 99
11.8 Account 905.900 – Market Research & Communication 101
11.8.1. Residential Services and Outreach 102
11.8.2. Customer Process Based Satisfaction Survey 102
11.8.3. Internet Improvements 103
11.9 Accounts 901, 902 and 903 – Direct Access Cost Growth 104
Title Page
11.10 Discussion 105
11.11 Account 456 – Direct Access Fees 105
11.12 Discussion 106
12. Customer Service and Information 106
12.1. Account 908 – Program Management 106
12.1.1. Government and Mid-Size Business Services Program 107
12.1.2. Billing and Payment 108
12.2 Account 908 – Economic and Business Development 108
12.3 Discussion 109
12.4 Account 908 – Energy Centers 111
12.5 Discussion 112
13. Customer Service Charges 112
13.1 Discussion 114
14. Service Guarantee Program 114
14.1 Discussion 117
15. A&G Expenses 118
15.1. Results Sharing 118
15.1.1. SCE’s Request 118
15.1.2. DRA’s Recommendation 119
15.1.3. SCE’s Response 121
15.1.4 Discussion 122
15.2. Spot Bonuses 127
15.2.1. DRA’s Recommendation 127
15.2.2. SCE’s Response 129
15.2.3. Discussion 130
15.3 Account 920/921 – Talent Management 132
15.4 Discussion 134
15.5 Account 920/921 – Human Resources Client Services 135
15.6 Discussion 135
15.7 Account 920/921 – Executive Compensation 136
15.8 Discussion 137
15.9 Account 920/921 – Equal Opportunity Expenses 139
15.10 Discussion 139
15.11 Account 920/921 – In-House Legal Resources 140
15.12 Discussion 140
15.13 Account 920/921 – Tracking In House Legal Expenses 141
15.14 Discussion 143
15.15 Accounts 920/921 – Regulatory Policy and Affairs Labor 143
Title Page
15.16 Discussion 144
15.17 Account 920/921 – Environmental Health
and Safety, Non-Labor 145
15.18 Discussion 145
15.19 Account 920/921 – Public Affairs 145
15.20 Discussion 146
15.21 Account 920/921 – ES&M Labor Expense 148
15.22 Discussion 149
15.23 Account 920/921 – Qualifying Facilities
Resources, Labor Expense 149
15.24 Discussion 150
15.25 Account 920/921 – Reimbursable Expenses 150
15.26 Discussion 151
15.27 Account 920/921 – Expenses for
Compliance with Affiliate Rules 153
15.28 Account 923 – HR Consulting Expenses –
Executive Compensation 154
15.29 Discussion 154
15.30 Account 923 and 928 - Law & Regulatory 154
15.31 Discussion 155
15.32 Account 923 – Environmental Health and Safety, Non-Labor 156
15.33 Discussion 157
15.34 Account – ES&M Consultant Expense Forecast 157
15.35 Discussion 158
15.36 Account – 923 – QF Resources, Consultant Expense 159
15.37 Discussion 159
15.38 Account 925 – Worker’s Compensation Staff 160
15.39 Discussion 160
15.40 Account 925 – Workers’ Compensation Reserve 161
15.41 Discussion 161
15.42 Account 925 – Environmental Health
and Safety, Corporate Safety 163
15.43 Discussion 164
15.44 Account 926 – Pension Costs 165
15.45 Discussion 165
15.46 Account 926 – 401(k) Savings Plan Design 167
15.47 Account 926 – Executive Benefits 168
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15.48 Discussion 168
15.49 Account 927 – Franchise Fees 169
15.50 Discussion 169
15.51 Supplier Diversity, Workforce Diversity,
Corporate Transparency and Executive Compensation 170
15.51.1. Greenlining’s Proposal 170
15.51.2. SCE’s Response 172
15.51.3. Discussion 173
16. Depreciation 178
16.1. SCE’s Request 178
16.2. DRA’s Recommendation 178
16.3. TURN’s Recommendation 180
16.3.1. Explicit Recognition of SCE’s Non-ARO Liability 181
16.3.2. Reporting Requirements 183
16.3.3. TURN’s Analysis of SCE’s Cost of Removal Proposal 183
16.3.4. TURN’s Cost of Removal Proposal 185
16.4. SCE’s Response 186
16.4.1. SCE Response to DRA 186
16.4.2. SCE Response to TURN 189
16.4.2.1. Recognition of the Non-ARO Liability 189
16.4.2.2. Separate Identification of Removal Cost Depreciation 191
16.4.2.3. TURN’s Analysis of SCE’s Cost of Removal Proposal 192
16.4.2.4. TURN’s Cost of Removal Proposal 193
16.5. SDG&E’s Response to TURN 194
16.6. PG&E’s Response to TURN 195
16.7. Discussion 195
16.7.1. Recognition of a Regulatory Liability 195
16.7.2. Reporting Requirements 197
16.7.3. Cost of Removal 197
17. Differences in Rate Base Forecasts 202
18. Rate Base – Plant in Service 203
18.1. Recorded 2004 Plant Service 203
18.2 Discussion 203
18.3 Plant Weighting Percentage 207
18.4 Allowance for Funds Used During Construction 208
18.5 Discussion 209
18.6 Allowance for Costs Transferred from CAC to CIAC 210
18.7 Discussion 210
Title Page
18.8 SONGS Used Fuel Storage and
Marine Mitigation Expenditures 211
18.9 Discussion 212
18.10 Mohave Capital Additions 213
18.11 Florence Dam Repairs 213
18.12 Discussion 215
18.13 Transmission & Distribution Meter Set Costs 217
18.14 Discussion 217
18.15 Line Extensions 218
18.16 Discussion 221
18.17 Leased Meters 221
18.18 Load Growth Projects 222
18.19 Discussion 222
18.20 Distribution Capital Replacement Program 223
18.20.1. Wood Pole Replacement Program 225
18.20.2. Discussion 227
18.20.3. Underground Distribution Switches 228
18.20.4 Discussion 229
18.20.5. Underground Primary Cable 230
18.20.6. Discussion 231
18.20.7. Automatic Reclosers 232
18.20.8. Discussion 232
18.20.9. Capacitor Banks 233
18.20.10. Discussion 233
18.20.11. Underground Structures 233
18.20.12. Discussion 234
18.20.13. Annual Circuit Review Program 234
18.20.14. Discussion 235
18.20.15. Wood Pole Repairs 236
18.20.16. Discussion 236
18.20.17. Bark Beetle Pole Replacement 237
18.20.18. Discussion 238
18.20.19. Sub Transmission Wood Pole Replacement 238
18.20.20. Discussion 238
18.21 Distribution Automation 239
18.22 Discussion 240
18.23 Replacement of Substation Capital Equipment 241
18.24 Discussion 242
Title Page
18.24.1. Distribution Circuit Breaker Replacement Program 243
18.24.2. Discussion 243
18.24.3. Transformer Replacement Program A-Banks 245
18.24.4. Discussion 245
18.24.5. Transformer Replacement Program B-Banks 246
18.24.6. Discussion 247
18.24.7. Distribution Protection and
Control Replacement Program 248
18.24.8. Discussion 249
18.24.9. A/AA Control Room Upgrade 250
18.24.10. Discussion 250
18.24.11. Substation Equipment Reactive Replacement Program 251
18.24.12. Discussion 252
18.24.13. Rule 20B Circuit Breaker Replacement 255
18.24.14. Discussion 255
18.24.15. Overhead Line Additions and Replacements 256
18.24.16. Tools, Spare Parts, and Equipment 256
18.24.17. Discussion 257
18.24.18. Furniture, Equipment and Facilities 258
18.24.19. Discussion 258
18.24.20. Fee Simple and Rights-of-Ways 259
18.24.21. Discussion 260
19. Rate Base – Other than Plant in Service 260
19.1. Ratemaking Treatment for Fuel Inventories 260
19.2 Discussion 262
19.3 Materials and Supplies 265
19.4 Discussion 267
19.5 Customer Advances for Construction 267
19.6. Discussion 268
19.7 Customer Deposits 269
19.8 Discussion 269
19.9 Reserves for Worker’s Compensation and Injuries and Damages 272
19.10 Discussion 274
19.11 Working Cash – Other Accounts Receivable –
Uncollectibles Other than Claims 279
20. Other Differences 279
21. Post-test year Ratemaking 279
Title Page
21.1 SCE’s Request 279
21.2 DRA’s Recommendation 281
21.3 Aglet’s Recommendation 284
21.4 TURN’s Recommendation 285
21.5 SCE’s Rebuttal Testimony 286
21.6 Discussion 289
22. Performance Incentives for SONGS 298
22.1 The Need for Incentive Ratemaking for SONGS 300
22.2 SDG&E’s Proposed CCIM 303
22.3 SCE’s Response 307
22.4 Discussion 312
23. Distribution Reliability Incentive Mechanisms 316
23.1 Reliability Investment Incentive Mechanism 318
23.1.1. Background 318
23.1.2. Terms of Stipulation 319
23.1.3. Discussion 320
23.2 Reliable Distribution Accountability Mechanism 326
23.3 Discussion 327
24. Employee Safety Incentive Mechanism 328
24.1 Discussion 329
25. Bill Calculation Services for Mobile Home Parks 330
25.1 Background 330
25.2 SCE’s Proposal 333
25.3 TURN’s Response 334
25.4 Rebuttal 335
25.5 The Settlement 336
25.6 Discussion 337
26. Comments on Proposed Decision 338
27. Assignment of Proceeding 339
Findings of Fact 339
Conclusions of Law 363
ORDER 369
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A.04-12-014, I.05-05-024 ALJ/DKF/avs
OPINION ON SOUTHERN CALIFORNIA EDISON COMPANY’S
TEST YEAR 2006 GENERAL RATE INCREASE REQUEST
1. Introduction
1.1 Summary of Decision
This decision addresses the general rate increase request of the Southern California Edison Company (SCE). For test year 2006, SCE is authorized a revenue requirement of $3,749,292,000, which reflects an increase of $333,115,000 or 9.75% over the previously authorized level of $3,416,177,000. The adopted methodology for calculating post-test year revenue requirements results in additional revenue requirement increases of $143,350,000 (3.82%) for post-test year 2007 and $192,573,000 (4.95%) for post-test year 2008. On a general rate case (GRC) revenue basis, when reflecting the effect of increased sales for the test year and post-test years, the revenue increases amount to $273,455,000 (7.87%) for 2006, $73,541,000 (1.93%) for 2007 and $104,055,000 (2.61%) for 2008. On a total system revenue basis, the revenue increases amount to 2.74% for 2006, 0.72% for 2007 and 1.00% for 2008. For test year 2006, this decision also reflects a one-time $139,559,000 reduction for an overcollection in post-retirement benefits other than pensions (PBOPs).[1]
In brief summary, the decision also:
· Assumes a temporary shutdown of the Mohave Generating Station (Mohave) and reflects costs for this scenario, as forecasted by SCE. All costs will be booked to a twoway balancing account and will be subject to reasonableness review.
· Orders SCE to establish a Mohave Sulfur Credit SubAccount to accumulate revenues from the sale of any sulfur credits created by the December 31, 2005 Mohave closure. Funds should not be disbursed from this sub-account without specific Commission authorization to do so. The issue of the distribution of revenues accumulated in the Mohave Sulfur Credit Sub-Account will be addressed in a separate proceeding when more information on the future operating status of Mohave is known.
· Excludes costs for SCE’s proposed Project Development Division in rates, but allows SCE to establish a memorandum account to track those costs that support new generation and are not associated with proposed projects. SCE can then seek to include those supportive costs in future rates.
· Approves a stipulation regarding Priority 5 maintenance activities. Such activities will continue to be performed on an opportunity basis, while SCE and the Commission’s Consumer Protection and Safety Division work out the details to implement a new maintenance program.
· Modifies SCE’s Results Sharing request by requiring SCE to credit ratepayers for any difference between the authorized level for Results Sharing and the Recorded level.
· Adopts The Utility Reform Network’s (TURN) recommendation to recognize, for ratemaking purposes, the regulatory liability associated with plant removal costs that do not meet the definition of an Asset Retirement Obligation.