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LIMS-253-11820

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 2015, and to Reflect That Increase in Rates.

A.13-11-003

Filed November 12, 2013

NOTICE OF EX PARTE COMMUNICATIONS OF SOUTHERN CALIFORNIA EDISON

COMPANY (U 338-E)

KRIS G. VYAS GLORIA M. ING

Attorneys for SOUTHERN CALIFORNIA EDISON COMPANY

2244 Walnut Grove Avenue Post Office Box 800 Rosemead, California 91770 Telephone: (626) 302-1999 Facsimile: (626) 302-3990 E-mail: [email protected]

Dated: October 14, 2015

1


STATE OF CALIFORNIA


A.13-11-003

Filed November 12, 2013

NOTICE OF EX PARTE COMMUNICATIONS OF SOUTHERN CALIFORNIA EDISON

COMPANY (U 338-E)

Pursuant to Rule 8.4 of the Rules of Practice and Procedure of the California Public

Utilities Commission (CPUC or Commission), Southern California Edison Company (SCE)

hereby gives notice of the following two ex parte communications relating to the above-

referenced proceeding.

On October 9, 2015, at approximately 1:30 p.m., Laura Genao (SCE’s Director, CPUC

Regulatory Affairs) and Mike Marelli (Edison International’s Director, Strategic Planning, and

former SCE Director, 2015 General Rate Case) met with Ehren Seybert (advisor to

Commissioner Carla J. Peterman) and Julie Fitch (chief of staff to Commissioner Carla J.

Peterman) to discuss the Proposed Decision (PD) in SCE’s 2015 General Rate Case proceeding.

The meeting took place at the CPUC’s offices, located at 505 Van Ness Avenue, San Francisco,

California. The meeting lasted approximately 45 minutes. The attached handout was provided,

and is included here as Attachment A.

In the meeting, Ms. Genao and Mr. Marelli informed Mr. Seybart and Ms. Fitch of the

company’s recommended changes to the PD, namely that the PD should:

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(1) Restore funding for SCE’s safety and reliability programs. Namely, the PD should

restore the 20% cut in joint pole replacement and adopt SCE’s proposal for a two-way

balancing account for pole loading without capping the account.

(2) Restore funding for employee compensation and allow SCE to recover market based

compensation in rates.

(3) Eliminate the rate base adjustment related to repair deduction tax treatment. The PD

violates the prohibition against retroactive ratemaking and SCE would seek an IRS

ruling that it violates normalization.

(4) Eliminate the rate base adjustment for customer deposits so that SCE is treated

consistently like other IOUs on this issue.

(5) Approve the $10 million termination payment made to SunPower, which resulted in

significant ratepayer benefits.

(6) Eliminate $3 million from the 2015 OOR forecast because including the opt-out

related OOR in the revenue requirement and the balancing account double counts the

same OOR that will be recorded in the opt-out balancing account and contradicts

Decision No. 14-12-078.

On October 9, 2015, at approximately 3:30 pm, Laura Genao (SCE’s Director, CPUC

Regulatory Affairs) and Mike Marelli (Edison International’s Director, Strategic Planning, and

former SCE Director, 2015 General Rate Case) met with Rachel Peterson (Chief of Staff,

Commissioner Liane M. Randolph), along with Leuwam Tesfai and Lester Wong (Advisors,

Commissioner Liane M. Randolph) to discuss the PD in SCE’s 2015 General Rate Case

proceeding. SCE initiated the meeting. The meeting took place at the CPUC’s offices, located

at 505 Van Ness Avenue, San Francisco, California. The meeting lasted approximately 45

minutes. The attached handout was provided, and is included here as Attachment A.

3

In the meeting, Ms. Genao and Mr. Marelli shared SCE’s recommendations on the PD,

which are set forth above and in the attachment.

Respectfully submitted, KRIS G. VYAS GLORIA M. ING

/s/ Gloria M. Ing By: Gloria M. Ing

Attorneys for SOUTHERN CALIFORNIA EDISON COMPANY

2244 Walnut Grove Avenue Post Office Box 800 Rosemead, California 91770 Telephone: (626) 302-1999 Facsimile: (626) 302-3990 E-mail: [email protected]

October 14, 2015

Attachment A

SCE 2015 GRC Proposed DecisionSummary of Recommended ChangesOctober 8, 2015

2015 General Rate Case – Proposed Decision

Overview

• The Proposed Decision (PD) largely supports SCE’s highest priorities including:

– Safety of our customers, our workers, and the communities we serve

– Reliable service for our customers, who depend on us to keep the lights on

– Compliance with applicable laws and regulations– Reasonable rates

• The PD contains a few critical factual, legal or technical errors or public policy concerns. To address these the CPUC must:

– Restore funding for SCE’s safety and reliability programs– Restore funding for employee compensation– Prevent legal error by removing rate base adjustment related to

repair deduction tax treatment

2


Authorized Revenue Requirement vs. Adopted Revenue Requirement($ Millions)

3

2,7413,416

4,334

5,399

5,633

2,814

3,749

4,829

5,671

5,159

$2,000

$4,000

$6,000

$8,000

2003 GRC 2006 GRC 2009 GRC 2012 GRC 2015 GRC

SCE

Present Rate Revenues Adopted Rev Req

1,201

1,6101,361

1,733

$1,000

$1,500

$2,000

$2,500

2008 GRC 2012 GRC

SDG&E


4,712

5,714

6,634

4,927

6,181

7,094

$2,000

$4,000

$6,000

$8,000

2007 GRC 2011 GRC 2014 GRC

PG&E


1,655

1,8731,685

1,959

$1,000

$1,500

$2,000

$2,500

2008 GRC 2012 GRC

So Cal Gas


Proposed Decision

SCE’s 2015 GRC request is $5.512 billion

2015 General Rate Case – Proposed Decision 4

SCE Request vs. PD Revenue Requirement

5,512 5,748

6,067

5,159

5,429

5,704

2015 2016 2017

$ m

illio

ns

SCE Request Proposed Decision

-3.0%

-1.4%

-9.2%

-4.2%

BASE RATES TOTAL RATES

SCE Request Proposed Decision

2015 Revenue Requirement ChangeTotal GRC Revenue Requirement

Major Reductions Driven By:• ~45% from depreciation adjustments• ~20% from incentive compensation reductions• ~10% repair deduction rate base adjustment

• ~10% other rate base adjustments (customer deposits, etc.)

• ~15% other misc. adjustments


T&D Reductions

• Pole programs ($100 M capital reduction)– Significant reductions to quantity and unit costs not in the record

• 3% unit cost reduction arbitrary• 20% reduction in joint pole replacements not supported anywhere in record

or tied to any tangible proposal– Balancing account cap does not align actions with stated safety goals

• This cap will incent SCE to limit replacement of poles already identified as having an increased risk of failure versus improving the system integrity

• PD obligates SCE in the Reliability Investment Incentive Mechanism to spend substantially in areas that affect safety and reliability, and maintain the reliability-related workforce levels

– But the PD simultaneously cuts SCE’s request in safety-related training for our T&D employees ($2M or 10% Expense reduction)

5


Compensation at Market

• SCE Should be authorized to recover market based compensation in rates ($80 M Expense)

– ORA/SCE jointly managed Total Compensation Study (TCS) demonstrated SCE total compensation 5% below market

• Despite results, 40% reduction to short term incentives proposed• Impacts 99% of the company employees – front line through managers• Below historic spending levels and below previously authorized amounts

• 20% reduction related “… such as lobbying…” is not supported by the record and is arbitrary

• Reference to lobbying is not relevant – lobbying labor and incentives are excluded from the forecast

6

2012 Recorded 2015 GRC Request 2015 GRC PD$174 $143 $87

2012 $ Million


Tax Issues• Rate base adjustment ($344 M) is retroactive ratemaking, an illegal taking,

and subject to review by the IRS as a normalization violation– The safe harbor election was the right decision and has resulted in the

reduction of $580 million in ratepayer tax costs in this GRC– It is undisputed that SCE did nothing wrong in making the safe

harbor election– The safe harbor election was not eligible for Z-factor treatment– The PD’s adjustment may require SCE to write off the regulatory asset

associated with the incremental 2012-2014 deductions

• The Commission should consider moving to a full normalization method for tax ratemaking

– Mitigates impacts in tax forecasts, such as repair deductions– Potentially more financially beneficial to customers over the asset life

• Proposed policy considerations would be unworkable– Provisions are too broad and mechanism is unclear– SCE proposes a two-way memorandum account (zero threshold) for

tax method changes

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Other Issues

• Customer deposits ($180 M rate base adjustment)– SCE is treated differently than the other IOUs and inconsistent

with Commission Standard Practice U-16• Solar Photovoltaic Program termination payment ($10 M Expense)

– Supply contract required to support the program– Supplier change and program reduction resulted in $200+ million

in customer benefits• Realizing the benefits was only possible by terminating the

supply contract• Other Operating Revenue (OOR) ($3 million)

– PD removes expense forecast related to opt-out program, but leaves the associated revenue in the forecast

– Commission decision (D.14-12-078) required both to be removed from this GRC

8


STATE OF CALIFORNIA


A.13-11-003 Filed November 12, 2013

CERTIFICATE OF SERVICE

I hereby certify that I have this day served a copy of NOTICE OF EX PARTE COMMUNICATIONS OF SOUTHERN CALIFORNIA EDISON COMPANY (U 338-E) on all known parties to A.13-11-003 to each person named in the official service list by:

[X] Transmitting the copies via e-mail to all parties who have provided an e-mail address

[X] Placing the copies in sealed envelopes and causing such envelopes to be delivered by hand or by overnight courier to the offices of the Assigned ALJ(s) or other addressee(s).

ALJ Kevin R. Dudney CPUC 505 Van Ness Avenue San Francisco, CA 94102

ALJ Melanie Darling CPUC 505 Van Ness Avenue San Francisco, CA 94102

Executed this Wednesday, October 14, 2015 at Rosemead, CA.

/s/ Alejandra Arzola Alejandra Arzola, Project Analyst SOUTHERN CALIFORNIA EDISON COMPANY

2244 Walnut Grove Avenue Post Office Box 800 Rosemead, California 91770

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BEFORE THE PUBLIC UTILITIES COMMISSION OF …733 $1,000 $1,500 $2,000 ... BEFORE THE PUBLIC UTILITIES COMMISSION OF THE ... Ntc Ex Parte Communications of SCE 10-9-15.docx Author: