California PUC Issues Decision Approving Application for Authorization to Recover Costs on Southern California Edison

SACRAMENTO, California, Aug. 22 -- The California Public Utilities Commission issued the following decision approving application for authorization to recover costs (No. 19-07-020):

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Application of Southern California Edison Company (U338E) for Authorization to Recover Costs Related to 2018-2020 Wildfire Insurance Premiums Recorded in its Wildfire Expense Memorandum Account.

DECISION APPROVING SOUTHERN CALIFORNIA EDISON COMPANY'S APPLICATION FOR AUTHORIZATION TO RECOVER COSTS RELATED TO WILDFIRE INSURANCE PREMIUMS RECORDED IN ITS WILDFIRE EXPENSE MEMORANDUM ACCOUNT

Summary

This decision authorizes as reasonable Southern California Edison's (SCE's) proposed revenue requirement of $505 million for incremental wildfire insurance premiums recorded in SCE's Commission-approved Wildfire Expense Memorandum Account (WEMA) for the 2018-2020 policy years. Consistent with the Commission's long-standing "reasonable manager" standard, SCE acted reasonably and prudently in procuring the WEMA wildfire liability policies based on the facts and circumstances that SCE knew or should have known at the time. This decision also authorizes as reasonable a two-year amortization for placing these costs in rates. Wildfire liability insurance serves as an important protection for customers against third-party legal claims invoking the inverse condemnation doctrine and allegations of negligence.

This proceeding is closed.

1. Background

On July 31, 2019, SCE filed an application seeking authority to recover in rates certain costs tracked in SCE's WEMA related to wildfire insurance premiums that are incremental to amounts authorized in the 2018 General Rate Case (GRC) and which provided coverage for the period between April 3, 2018 and July 1, 2020. These costs have been recorded in SCE's WEMA, which was approved in Decision (D.) 18-11-051 (Insurance WEMA)./1

SCE seeks a revenue requirement of approximately $505millionfor incremental wildfire insurance costs ($478 million for insurance premium expense, $12 million for forecast financing costs (at a commercial paper rate), $10 million for forecast memorandum account interest, and $5 million for franchise fees and uncollectibles), obtained as of the date of the Application for the subject coverage./2

The $505 million represents the final payment toward the $825 million for wildfire liability insurance covering different periods within the 2018-2020 time frame for which SCE has requested recovery to date./3

Upon receiving a final decision in this proceeding, SCE proposes to include in customer rates the remainder of the amount authorized in this proceeding (i.e., amount authorized in this proceeding less the amount transferred from the Insurance WEMA to the Base Revenue Requirement Balancing Account) and amortize it over 12 months following the Commission's issuance of a final decision in this proceeding.

On September 3, 2019, the Commission's Public Advocates Office (Cal Advocates) and The Utility Reform Network (TURN) filed protests to the Application. On September 13, 2019, SCE filed a reply to protests.

A prehearing conference (PHC) was held on October 29, 2019 to discuss the issues of law and fact and determine the need for hearing and schedule for resolving the matter and a Scoping Memo was issued on December 6, 2019.

On March 31, 2020, in response to Scoping Memo directives, TURN and SCE (Parties)/4 emailed the Assigned Administrative Law Judge (ALJ) recommending that conducting in-person evidentiary hearings on April 15-17, 2020, as originally scheduled, was not practical or feasible due to the COVID-19 pandemic disruption. However, Parties did not develop a consensus regarding the need for evidentiary hearings or revised schedule.

On April 2, 2020, the ALJ issued an email ruling suspending the evidentiary hearings scheduled for April 15-17, 2020 and setting a telephonic conference on April 8, 2020 to discuss scheduling options moving forward. On April 7, 2020, the ALJ emailed a list of questions to Parties to help guide the discussion. Following the status conference on April 8, 2020, SCE and TURN summarized their views via separate emails between April 8, 2020 and April 14, 2020 (with copies to the service list).

On April 23, 2020, the ALJ issued an email ruling confirming the modification of the schedule due to the pandemic disruption and establishing next steps. In lieu of Parties' proposed telephonic status conference in late April or mid-May 2020, among other things, Parties were directed to meet and confer via telephone by May 1, 2020 and determine if they could narrow contested facts and reach stipulations that would reduce or eliminate the need for hearings and file a status report by May 8, 2020. On May 7, 2020, Parties responded via email and confirmed that they were engaging in a productive meet and confer process but needed more time to conclude this effort. Accordingly, they requested an extension to file the status report no later than May 15, 2020, and the ALJ granted this request via email ruling on May 7, 2020.

On May 15, 2020, Parties filed a Joint Status Report and stated that they reached a preliminary agreement on a set of stipulated facts that, along with the admission into the evidentiary record of certain written materials, would eliminate the need for evidentiary hearings. In this Joint Status Report, Parties stated their intentions to file motions by May 22, 2020 to formally waive evidentiary hearings, propose a revised briefing schedule, and enter into the record stipulated facts, direct, intervenor, and rebuttal testimony and accompanying exhibits, and other written materials that Parties believed should go into evidence.

On May 22, 2020, pursuant to the April 23, 2020 ALJ Ruling, and in accordance with the Joint Status Report submitted on May 15, 2020, SCE and TURN simultaneously submitted the following Motions:1) Joint Motion of Southern California Edison Company and The Utility Reform Network to Waive Evidentiary Hearings and to Set Briefing Schedule; 2)Joint Motion of Southern California Edison Company and The Utility Reform Network to Enter Evidence into the Record and to Set Briefing Schedule (Pursuant to the Commission's Rules of Practice and Procedures (Rules) and 13.8(c) and 1.8 (d));/5 and 3) Motion of Southern California Edison Company and The Utility Reform Network to Seal A Portion of the Evidentiary Record (Pursuant to Rule 11.5).

On June 1, 2020, consistent with Rule 11.1(g), the three Parties' motions were granted on an expedited basis. Evidentiary hearings in this proceeding were waived and Parties were directed to file opening briefs on June 30, 2020 and concurrent Reply Briefs on July 21, 2020. As referred to in SCE-TURN's Joint Motion, Exhibits 01 (SCE), 01C (SCE), 02 (TURN), 03 [C](TURN), 04 (SCE), 05 (SCE-TURN), 06 (SCE-TURN), 07 (SCE-TURN), 08 (SCE-TURN), 09 (SCE-TURN), 10 (SCE-TURN), 11 (SCE-TURN), and 12 (SCE-TURN) were entered into the record of this proceeding. Confidential treatment of the following two Exhibits was granted: Exhibit-01C (SCE), titled "Direct Testimony in Support of Southern California Edison Company's Request for Authorization to Recover Costs Related to 2018-2020 Wildfire Insurance Premiums Recorded in its Wildfire Expense Memorandum Account;" and Exhibit-03 (TURN), "Attachments to Prepared Testimony of Robert Finkelstein." Confidential versions of these Exhibits shall remain protected under the Commission's applicable confidentiality restrictions and shall not be made accessible or disclosed to anyone other than Commission staff except upon further order of the Commission.

On July 1, 2020, TURN filed a motion to identify and admit into the record an Exhibit-02A "Attachments to Prepared Testimony of Robert Finkelstein (Public)" that was inadvertently omitted from its May 22, 2020 motion referred to above. On August 20, 2020, the ALJ granted this motion.

On June 30, 2020, SCE and TURN filed opening briefs.

On July 31, 2020, SCE and TURN filed reply briefs. On this same date, this proceeding was submitted.

The complete text of the decision is available at https://docs.cpuc.ca.gov/PublishedDocs/Efile/G000/M345/K388/345388821.PDF

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Footnotes:

1/ See D.18-11-051 Decision Authorizing Southern California Edison Company to Establish a Wildfire Expense Memorandum Account, issued December 3, 2018.

2/ SCE anticipates that it will incur and track additional costs in the Insurance WEMA for July 2020 to December 31, 2020 coverage, and will file another application for recovery of those costs in 2020 or 2021.

3/ SCE's total wildfire expenses include $ 719.2 million already incurred expenses purchased at the date of the Application and the $107 million approved in Resolution E-4994. (See Exhibit SCE-01 at 1-2 and TURN Opening Brief at 17.)

4/ In this informal communication, Parties indicated that Cal Advocates, the only other formerly active party to the proceeding, did not intend to actively participate in the proceeding.

5/ Exhibit-05 (SCE-TURN) refers to "Stipulated Facts." (See Appendix A to this decision.) The parties emphasize that through the submission of stipulated facts, neither SCE nor TURN concedes that any particular fact or set of facts should be viewed as dispositive or relevant. (See "Joint Motion of Southern California Edison Company and The Utility Reform Network To Waive Evidentiary Hearings and to Set Briefing Schedule" at 2.)