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Southern CA Edison Transmission Formula Rate Settlement

On September 16, 2019, in Docket ER18-169, Southern California Edison (SCE) filed a settlement that it offered to the intervenors that is intended to resolve all issues in this Docket as well as in EL18-44.  Below are some of the key provisions:

  1. The ROE is set at 12%, which includes the Base ROE, a 50 basis point adder associated with SCE’s membership in the CAISO and project-specific ROE adders awarded by FERC to SCE for certain of its transmission projects (including the Tehachapi transmission project – 1.25%, the Devers to Colorado River transmission project – 1.00%, and the Rancho Vista Substation project – 0.75%).  SCE shall not separately reflect in the Formula Rate either the RTO Adder or the ROE Project Adders.  If FERC determines, in an order not subject to rehearing or appeal, that SCE is not entitled to the RTO Adder, then SCE will reduce its ROE to 10.7%, retroactive to January 1, 2018 for the period that the Formula Rate is in effect.
  2. SCE shall use the gross method rather than net method calculation of long-term debt to calculate its capital structure. SCE will include all bonds in its calculation of long-term debt.
  3. SCE will use actual PBOP expense for each calendar year in the true-up of that same calendar year.
  4. The Unprotected-Property Related net Excess Deferred Income Tax amount of $60.5 M is to be amortized over the four-year period of 2018 through 2021.  
  5. SCE shall continue to maintain a subsidiary record for Account 108 (Accumulated Depreciation) that separately accounts for the depreciation accrual for plant less gross salvage and the depreciation accrual for removal cost, by FERC plant account. For the term of the Settlement, SCE will recognize the timing differences between electric network transmission facility removal cost depreciation for external financial reporting and ratemaking purposes as a regulatory liability, and SCE will record the accumulated depreciation amounts associated with removal costs in such subsidiary records as a regulatory liability, consistent with FERC Order No. 631. The accumulated depreciation amounts may only be reduced by the incurred costs associated with the removal and disposal of electric network transmission facilities. Any regulatory liability amounts for such depreciation accruals for removal costs associated with electric network transmission facilities remaining when the Formula Rate terminates shall be carried forward.  
  6. The CPUC will choose a consultant to participate in the CAISO Transmission Planning Process, the TMCR process, and the TO2019 Formula Rate Annual Update and settlement negotiations, as necessary, but not to be used for FERC litigation. SCE shall fund the CPUC’s expert. The cost of this work will not exceed $350,000 per year and will be fully recoverable through transmission rates.
  7. SCE shall not file any new petitions requesting transmission incentives, pursuant to either Commission Order No. 679 or the Commission’s general discretionary authority to grant policy-based incentive rate treatment, for the period the Formula Rate is in place, except as follows:
  8. There is no limitation on SCE’s ability to request the inclusion of 100% of construction work in progress (“CWIP”) in rate base for additional transmission projects, provided that, as to any such project for which the Commission grants the CWIP incentive, SCE agrees to reflect an allowance for funds used during construction (“AFUDC”), rather than 100% of CWIP, on project costs incurred prior to the date SCE obtains CAISO approval for the project. 
  9. As to new requests for pre-approval to recover 100% of prudently incurred abandoned plant costs on a transmission project, SCE may seek such treatment only on transmission projects that are included in the CAISO transmission plan or that are constructed pursuant to a FERC-approved interconnection process.
  10. The Joint Intervenors reserve all rights with respect to the CWIP and abandoned plant filings. 
  11. No Party shall be deemed to waive any right to challenge SCE’s recovery of costs from the Thomas Fire, the Montecito Mudslides, and the Woolsey Fire events as a result of not objecting to or opposing SCE’s creation of a wildfire reserve due to SCE having taken a $2.669 billion charge, net of insurance recoveries (the “Wildfire Reserve”). As part of SCE’s Annual Update process, any Party may challenge the prudence of expenses that SCE has paid that reduce the Unfunded Reserve associated with the Wildfire Reserve. At such time as the claims resulting from the 2017/2018 events are substantially resolved, SCE will return the portion of the Unfunded Reserve that is not needed to resolve the events to customers.  In addition, at any time, any Party may file a complaint with the Commission pursuant to Section 206 of the Federal Power Act alleging that the Wildfire Reserve is no longer necessary due to changed circumstances and thus is no longer part of a just and reasonable rate.  However, the Party must meet and confer with SCE 30 days prior to filing such a complaint in order to determine if there is a mutually agreeable resolution to the issue.
Paul Dumais's picture

Thank Paul for the Post!

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Matt Chester's picture
Matt Chester on Sep 17, 2019 10:05 pm GMT

Thanks as always for providing docket updates to the group, Paul-- it's appreciated

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