BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA REPLY BRIEF OF SOUTHERN CALIFORNIA EDISON COMPANY (U 338-E)

Transcription

1 BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA Expedited Application of Southern California Edison Company (U338E) Regarding Energy Resource Recovery Account Trigger Mechanism. Application REPLY BRIEF OF SOUTHERN CALIFORNIA EDISON COMPANY (U 338-E) JANET S. COMBS RUSSELL A. ARCHER MARIO E. DOMINGUEZ Attorneys for SOUTHERN CALIFORNIA EDISON COMPANY 2244 Walnut Grove Avenue Post Office Box 800 Rosemead, California Telephone: (626) Dated: January 4, 2019

2 REPLY BRIEF OF SOUTHERN CALIFORNIA EDISON COMPANY (U 338-E) TABLE OF CONTENTS Section Title Page I. INTRODUCTION...1 II. III. IV. SCE S ERRA TRIGGER APPLICATION IS STATUTORILY MANDATED AND SHOULD BE APPROVED...2 A BROWN POWER TRUE-UP IS NOT APPLICABLE TO 2018 BUNDLED SERVICE CUSTOMERS...3 SCE S UNDERCOLLECTION PROPOSAL TREATS DEPARTING LOAD AND BUNDLED CUSTOMERS THE SAME, AND IS CONSISTENT WITH THAT PROPOSED IN A A. SCE S Proposal is Consistent with the Proposal Set Forth in SCE s ERRA Forecast Application...4 B. SCE s Proposed Rate Design Treats Departing Load and Bundled Customers the Same and is Unrelated to the Rate Design Discussed in D V. SCE S 2018 PROCUREMENT ACTIONS WERE IN FULL COMPLIANCE WITH ITS COMMISSION-APPROVED BUNDLED PROCUREMENT PLAN ( BPP )...8 A. SCE s 2018 Procurement Actions Are Per Se Reasonable...8 B. Comparing SCE s Procurement Activities to other Utilities is Misleading and Inaccurate...9 VI. CONCLUSION i-

3 BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA Expedited Application of Southern California Edison Company (U338E) Regarding Energy Resource Recovery Account Trigger Mechanism. Application REPLY BRIEF OF SOUTHERN CALIFORNIA EDISON COMPANY'S (U 338-E) Pursuant to Rule of the Rules of Practice and Procedure of the California Public Utilities Commission ( Commission or CPUC ), the schedule set forth in the December 12, 2018 Assigned Commissioner s Scoping Memo and Ruling ( Scoping Memo ), and the Administrative Law Judge s ( ALJ ) ruling on December 20, 2018, Southern California Edison Company ( SCE ) respectfully submits this Reply Brief in support of its Expedited Application Regarding Energy Resource Recovery Account ( ERRA ) Trigger Application ( ERRA Trigger Application ). I. INTRODUCTION The Clean Power Alliance of Southern California s ( CPA ) Opening Brief ( CPA Opening Brief ) makes numerous misleading and inaccurate statements that continue to mischaracterize SCE s proposal to recover its ERRA undercollection of approximately $972.5 million 1 ( Undercollection Amount ) from bundled service customers generation rates and from vintage departing load customers Power Charge Indifference Adjustment ( PCIA ) rates ( Undercollection Proposal ). 1 $983.8 million with Franchise Fees and Uncollectibles ( FF&U ). 1

4 II. SCE S ERRA TRIGGER APPLICATION IS STATUTORILY MANDATED AND SHOULD BE APPROVED SCE s Undercollection Proposal is reasonable and ensures that bundled customers remain indifferent to the departure of customers for Community Choice Aggregation (CCA) or Direct Access (DA) in SCE is statutorily authorized to recover the Undercollection Amount from all customers on whose behalf the costs were incurred, i.e. all 2018 bundled service customers, even if a portion of those customers will become departing load customers in Regardless of whether SCE s Undercollection Proposal has precedent, 3 it is indisputable that all 2018 bundled service customers are pro-ratably responsible for the Undercollection Amount, and all 2018 bundled service customers should pay a pro-rata share of those 2018 costs regardless of whether the costs are collected in a subsequent year through bundled service generation rates or, if instead, through PCIA rates for those 2018 bundled service customers who depart for CCA or DA service in a subsequent year. 4 More importantly, California law specifically authorizes SCE s proposed ratemaking treatment: A retail end-use customer purchasing electricity from a community choice aggregator pursuant to this section shall reimburse the electrical corporation that previously served the customer for all of the following: (1) The electrical corporation s unrecovered past undercollections for electricity purchases, including any financing costs, attributable to that customer, that the commission lawfully determines may be recovered in rates. 5 Failure to adopt SCE s Undercollection Proposal will cause the unlawful cost shift CPA purports to oppose. 6 SCE s proposed allocation ensures that those customers on whose behalf the Undercollection Amount was incurred pay their equitable share and do not bypass their pro-rata 2 SCE Opening Brief, at pp. 9-10; See also, Section 366.1(f)(1). 3 CPA Opening Brief, at p Exhibit ( Ex. ) SCE-02, Supplemental ( Supp. ) Testimony, at p Section 366.2(f)(1) (emphasis added). 6 CPA Opening Brief, at pp

5 cost responsibility if they depart for CCA or DA service in In fact, 2018 bundled service customers who are scheduled to depart for CCA service in 2019 are responsible for 23% of the Undercollection Amount (i.e., $224M, or $226M with FF&U). 8 Failure to adopt SCE s Undercollection Proposal will enable those departing load customers to bypass their responsibility for the costs incurred to serve them in 2018 and shift those costs solely onto remaining bundled service customers. 9 Importantly, SCE is not seeking to recover the 2018 Undercollection Amount from customers that were receiving DA or CCA service in The only customers that should and must pay their pro-rata share of the Undercollection Amount are 2018 bundled service customers. 11 III. A BROWN POWER TRUE-UP IS NOT APPLICABLE TO 2018 BUNDLED SERVICE CUSTOMERS CPA continues to conflate SCE s Undercollection Proposal with an ill-conceived 2018 PCIA brown power true-up. 12 Specifically, CPA continues to claim that SCE s Undercollection Proposal represents cherry picking [that] will have an unfavorable impact on departing load customers and benefit bundled customers. 13 CPA s claim is not only misleading, but fails to make clear that their meritless PCIA brown power true-up proposal even if adopted by the Commission -- would not even apply to the same group of customers who would be subject to SCE s Undercollection Proposal because the latter group of customers were bundled service in 2018 and did not pay a PCIA in 2018 that can be trued-up. 14 In other words, the 7 Ex. SCE-02, Supp. Testimony, at p Id. at pp Id. 10 Id. 11 Id. 12 CPA Opening Brief, at pp Id. 14 Ex. SCE-02, Supp. Testimony, at pp

6 customers subject to SCE s Undercollection Proposal have already been trued-up for 2018 because as bundled service customers in 2018 they paid ERRA rates, not a PCIA, and the 2018 Undercollection Amount is a net number that already incorporates those 2018 market results. 15 The two proposals have zero logical connection to each other and are unrelated. Also, pending Proposed Decisions in both SCE s and PG&E s respective 2019 ERRA Forecast proceedings appropriately reject the entire concept of a 2018 PCIA brown power true-up. 16 IV. SCE S UNDERCOLLECTION PROPOSAL TREATS DEPARTING LOAD AND BUNDLED CUSTOMERS THE SAME, AND IS CONSISTENT WITH THAT PROPOSED IN A A. SCE S Proposal is Consistent with the Proposal Set Forth in SCE s ERRA Forecast Application CPA s assertion that SCE s proposed [revenue] 17 allocation methodology differs from the methodology SCE proposed in the Forecast ERRA 18 is false. SCE proposes to allocate the 2018 Undercollection Amount to rate classes using the then-effective bundled service, not system, generation revenue allocation factors 19 and divide the rate class revenues by the rate 15 Id. 16 SCE s 2019 ERRA Forecast Proposed Decision (in A ) at p. 34 and Finding of Fact 26; PG&E s 2019 ERRA Forecast Proposed Decision (in A ) at p SCE notes that CPA incorrectly refers to the allocation of customer revenues to various rate classes (e.g., residential, small commercial, large commercial, etc.) as cost allocation. This revenue allocation process, which is typically litigated in Phase 2 of General Rate Cases, should not be confused with cost allocation, which generally refers to the recovery of shared costs between bundled service and departing load customers (e.g., PCIA and the rates associated with the Cost Allocation Mechanism). For clarity, SCE uses the correct term revenue allocation throughout this Reply Brief. 18 CPA Opening Brief, at p See Ex. SCE-02, Supp. Testimony, at p. 14 (footnote 23) and Ex. SCE-04 in A , Update Testimony, at pp (footnote 104). 4

7 class-level sales of those responsible 20 to set the undercollection rate ( Undercollection Rate ). That Undercollection Rate will be collected through the PCIA rates charged to 2018 and 2019 vintage customers and, consistent with historical ERRA over- and under-collection amounts, through the generation rates charged to remaining bundled service customers. 21 SCE s proposal is exactly the same as that described in A and detailed in workpapers provided in that docket, and CPA s remarks that it has not had sufficient time to review SCE s proposal should be afforded no weight. B. SCE s Proposed Rate Design Treats Departing Load and Bundled Customers the Same and is Unrelated to the Rate Design Discussed in D CPA incorrectly characterizes the methodology of SCE s proposed rate design 22 in two ways. First, by conflating the process used to set PCIA rates pursuant to the D with the process SCE proposed for allocating the ERRA Undercollection Amount to the vintage customers and, second, through its complete misunderstanding of the difference between the System Average Percent Change (SAPC) rate setting methodology and functional revenue allocation factors. 23 First, CPA incorrectly states that SCE s proposed revenue allocation and rate design depart from D such argument is without merit and should be rejected. 24 D , which requires that SCE use system-level generation revenue allocation factors to allocate above-market costs to rate classes, does not address SCE s Undercollection Proposal because SCE s Undercollection Proposal has nothing to do with the methodological changes to the PCIA that D addressed. 25 Instead, SCE s Undercollection Proposal simply uses 20 Id. 21 Id. 22 Id. at p CPA Opening Brief, at p CPA Opening Brief, at p Ex. SCE-02, Supp. Testimony, at pp

8 the existing and long-standing PCIA rate component as the ratemaking implementation vehicle to effectuate the statutory prohibition against customer cost-shifting. 26 Specifically, SCE is proposing to add the Undercollection Rate to the PCIA, which is set in A and compliant with D , and use the PCIA rate as the implementation vehicle to collect the 2018 Undercollection Amount from those customers who depart bundled service in This approach is necessary and reasonable because the PCIA is the only vintage-differentiated departing load charge. 28 SCE s Undercollection Proposal applies only to 2018 bundled service customers and in no way affects customers who departed SCE s bundled service procurement before Therefore, CPA s argument that the Undercollection Proposal departs from the approved PCIA methodology in D is incorrect and meritless. Second, CPA reaches the erroneous conclusion that there are asymmetrical revenue allocation factors for bundled service and departing load customers because the two-step process CPA ascribes to SCE s proposed design of the Undercollection Rate is simply incorrect. 30 CPA asserts SCE will first use the capped bundled service generation revenue allocation factors 31 to allocate Undercollection Amounts to rate classes (both bundled and unbundled customers), which is accurate. CPA then asserts that there will be a second step, to reallocate the bundled service customers portion of the Undercollection Amount using the average percent system change allocator, resulting in a lower allocation for bundled service residential customers. 32 This description of the second step is incoherent and inaccurate. As a threshold matter, CPA incorrectly identifies the APS and Interruptible Surcharge allocators as the allocators that are used in the System Average Percent Change (SAPC) rate setting methodology 26 Id. 27 SCE Opening Brief, at p Ex. SCE-02, Supp. Testimony, at pp Id. 30 Id., at p CPA correctly refers to the bundled service generation revenue allocation factors as the Capped Bundled Generation Allocators. 32 CPA Opening Brief, at pp

9 to modify bundled service customer generation rates. 33 APS, which stands for Automatic Power Shift (i.e., Demand Response) and not Average Percent System, and Interruptible Surcharge allocators are system-level generation revenue allocation factors that have historically been used to allocate Demand Response revenues to customer classes, and are now also being used to allocate PCIA above-market costs to customer classes. 34 These system-level generation revenue allocation factors are not used in SCE s Undercollection Proposal at all, as explained above. Next, it is apparent that CPA has an incorrect understanding of the SAPC rate setting methodology. 35 The SAPC rate setting methodology is used to set rates in GRC attrition years, and allows for revenue requirement-related adjustments to rates while maintaining the functional revenues allocations agreed to in the governing revenue allocation proceedings. 36 Thus, for Generation-related revenue adjustments like the Undercollection Amount, the SAPC methodology results in the adjustment being allocated on the basis of bundled service generation revenue allocation factors, the very same allocators used in the first step summarized by CPA. 37 In other words, the Undercollection Amount is allocated to bundled service and departing load customer classes in the exact same manner. 38 CPA s argument on this subject demonstrates a fundamental lack of understanding on the proposed method and should be rejected. Last, CPA also suggests that it is appropriate to use the 2015 GRC revenue allocation factors, and not the then-effective revenue allocation factors, to set the Undercollection Rate, but fails to justify why such a deviation from standard rate-setting practice is warranted. 39 It is standard practice to use the most current revenue allocation factors to set rates, regardless of 33 Id. 34 Id. 35 Id. 36 Ex. SCE-02, Supp. Testimony, at pp Id. 38 Id. 39 CPA Opening Brief, at p

10 when the costs [that are being collected] were incurred. For example, pursuant to D , SCE collected the net San Onofre Nuclear Generation Station (SONGS) costs, which were incurred in the calendar year 2013, from both bundled service and departing load customers in 2016, and implemented the 2015 GRC revenue allocation factors on June 1, It is thus reasonable and consistent with historical precedent to use the then-effective bundled service generation revenue allocation factors to set the Undercollection Rate, and CPA s suggestion should be rejected. V. SCE S 2018 PROCUREMENT ACTIONS WERE IN FULL COMPLIANCE WITH ITS COMMISSION-APPROVED BUNDLED PROCUREMENT PLAN ( BPP ) A. SCE s 2018 Procurement Actions Are Per Se Reasonable CPA continues to make inaccurate sweeping allegations regarding SCE s 2018 procurement activities and requests that the Commission provide for a broad investigation of the actions underlying the undercollection in SCE s compliance ERRA[,] 41 without providing any evidence to indicate that SCE s procurement activities were not in compliance with its BPP. As stated in SCE s Opening Brief, the Scoping Memo correctly excludes from the scope of this proceeding reasonableness review or compliance with SCE s bundled procurement plan[;] 42 yet CPA continues to ignore this simple and unambiguous directive from the Scoping Memo. Ironically, CPA s Opening Brief correctly recognizes that the Scoping Memo clarified that the Commission s process for review and approval of recorded utility procurement costs occurs through quarterly compliance report (QCR) advice letter filings and through the ERRA compliance proceedings. 43 All of the costs SCE incurred that led to the Undercollection 40 See Advice 3401-E and D CPA Opening Brief, at pp See December 12, 2018 Assigned Commissioner s Scoping Memo and Ruling, p CPA Opening Brief, at p. 13, quoting Scoping Memo, at p. 2. 8

11 Amount were incurred in conformance with SCE s Commission-approved BPP, are per se reasonable and recoverable from customers pursuant to California law, and will be reviewed in the appropriate context at the appropriate time. 44 B. Comparing SCE s Procurement Activities to other Utilities is Misleading and Inaccurate CPA continues to incorrectly compare SCE s procurement activities to San Diego Gas & Electric Company ( SDG&E ) and fails to recognize the litany of market factors that determine the price of electricity in Southern California. 45 As set forth in SCE s Supplemental Testimony, higher-than-anticipated wholesale power and natural gas prices, caused in part by Southern California Gas Company ( SoCalGas ) gas storage system and pipeline transmission restraints, materially contributed to the undercollection. 46 And, significantly higher-than-expected SoCalGas citygate gas prices led to increased power price bidding from natural gas-fired resources in the SCE portfolio in the CAISO s organized market. 47 Therefore, the sharp spikes in SoCalGas citygate gas prices that materially contributed to SCE s Undercollection Amount were largely due to SoCalGas system constraints; 48 not because of SCE s gross incompetence, fraud, abuse or similar grounds as CPA implies. 49, See Section 454.5(d)(2), providing that the BPP eliminates the need for after the fact reviews of an electrical corporation s actions in compliance with an approved procurement plan, including resulting electricity procurement contracts, practices, and related expenses. 45 CPA Opening Brief, at pp Ex. SCE-02, Supp. Testimony, at pp Id. 48 See Exhibit SCE-02, Supp. Testimony, p. 11 at fn.20, citing to August 15, 2018, Joint Petition for Modification of Decisions and , as Modified by D of Southern California Edison Company (U338-E) and Southern California Generation Coalition, submitted in A (Consolidated), seeking prompt action by the Commission to mitigate the sharp spikes in SoCalGas citygate gas prices caused by SoCalGas transmission constraints. 49 CCA Opening Brief, at p On December 24, 2018, the Energy Division issued notice of a Joint Agency Workshop to be held on January 11, 2019, to discuss the topic of recently high natural gas prices in Southern California and potential solutions to reduce the spread between SoCal Border and SoCal Citygate prices. 9

12 VI. CONCLUSION For the reasons set forth above, Southern California Edison Company respectfully requests that the Commission issue a decision by no later than January 31, 2019 approving SCE s ERRA Trigger Application. Respectfully submitted, JANET S. COMBS RUSSELL A. ARCHER MARIO E. DOMINGUEZ /s/ Mario E. Dominguez By: Mario E. Dominguez Attorneys for SOUTHERN CALIFORNIA EDISON COMPANY 2244 Walnut Grove Avenue Post Office Box 800 Rosemead, California Telephone: (626) Mario.E.Dominguez@sce.com January 4,

13 BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA Expedited Application of Southern California Edison Company (U338E) Regarding Energy Resource Recovery Account Trigger Mechanism. Application CERTIFICATE OF SERVICE I hereby certify that, pursuant to the Commission s Rules of Practice and Procedure, I have this day served a true copy of REPLY BRIEF OF SOUTHERN CALIFORNIA EDISON COMPANY (U 338-E) on all parties identified on the attached service list for A Service was effected by transmitting copies via to ALJ Zita Kline and all parties who have provided an address and by placing copies in properly addressed sealed envelopes and depositing such copies in the United States mail with first-class postage prepaid to the offices of the assigned ALJ or other addressees. Executed on January 4, 2019, at Rosemead, California. /s/ Karen Abarca Karen Abarca SOUTHERN CALIFORNIA EDISON COMPANY 2244 Walnut Grove Avenue Post Office Box 800 Rosemead, California 91770

14 CPUC - Service Lists - A Page 1 of 3 1/4/2019 CPUC Home CALIFORNIA PUBLIC UTILITIES COMMISSION Service Lists PROCEEDING: A EDISON - EXPEDITED A FILER: SOUTHERN CALIFORNIA EDISON COMPANY LIST NAME: LIST LAST CHANGED: DECEMBER 26, 2018 Download the Comma-delimited File About Comma-delimited Files Back to Service Lists Index Parties DANIEL DOUGLASS MARIO E. DOMINQUEZ ATTORNEY ATTORNEY, LAW DEPARTMENT DOUGLASS & LIDDELL SOUTHERN CALIFORNIA EDISON COMPANY 4766 PARK GRANADA, SUITE WALNUT GROVE AVENUE, PO BOX 800 CALABASAS, CA ROSEMEAD, CA FOR: DIRECT ACCESS CUSTOMER COALITION FOR: SOUTHERN CALIFORNIA EDISON COMPANY CHRISTOPHER CLAY MICHAEL ALCANTAR CALIF PUBLIC UTILITIES COMMISSION ATTORNEY AT LAW LEGAL DIVISION BUCHALTER, A PROFESSIONAL CORPORATION ROOM SECOND STREET, SUITE VAN NESS AVENUE SAN FRANCISCO, CA SAN FRANCISCO, CA FOR: ENERGY PRODUCERS AND USERS FOR: PUBLIC ADVOCATES OFFICE COALITION NORA SHERIFF EVELYN KAHL ATTORNEY ATTORNEY BUCHALTER, A PROFESSIONAL CORPORATION BUCHALTER, A PROFESSIONAL CORPORATION 55 SECOND STREET, SUITE SECOND STREET, SUITE 1700 SAN FRANCISCO, CA SAN FRANCISCO, CA FOR: CALIFORNIA LARGE ENERGY CONSUMERS FOR: CLEAN POWER ALLIANCE OF SOUTHERN ASSOCIATION CALIFORNIA SCOTT BLAISING ATTORNEY BRAUN BLAISING SMITH WYNNE, PC 915 L STREET, STE SACRAMENTO, CA 95814

15 CPUC - Service Lists - A Page 2 of 3 1/4/2019 FOR: CCEA - CALIFORNIA CHOICE ENERGY AUTHORITY Information Only BARBARA BARKOVICH PAUL NELSON CONSULTANT BARKOVICH & YAP BARKOVICH & YAP ONLY ONLY ONLY, CA ONLY, CA CAMERON-DANIEL, P.C. MRW & ASSOCIATES, LLC ONLY ONLY ONLY, CA ONLY, CA GREG HEALY JOSEPH MOCK SOUTHERN CALIFORNIA GAS COMPANY REGULATORY CASE MGR. 555 W. FIFTH ST., GT14D6 SOUTHERN CALIFORNIA GAS COMPANY LOS ANGELES, CA WEST 5TH ST., STE 1400, GT14D6 LOS ANGELES, CA CASE ADMINISTRATION BRIAN LUI SOUTHERN CALIFORNIA EDISON COMPANY CALIF PUBLIC UTILITIES COMMISSION 8631 RUSH STREET, GO4, 2ND FL. ELECTRICITY PLANNING & POLICY BRANCH ROSEMEAD, CA AREA 505 VAN NESS AVENUE SAN FRANCISCO, CA DAVID ZIZMOR MITCHELL SHAPSON CALIF PUBLIC UTILITIES COMMISSION CALIF PUBLIC UTILITIES COMMISSION MARKET STRUCTURE, COSTS AND NATURAL GAS LEGAL DIVISION AREA ROOM VAN NESS AVENUE 505 VAN NESS AVENUE SAN FRANCISCO, CA SAN FRANCISCO, CA RADU CIUPAGEA YULIYA SHMIDT CALIF PUBLIC UTILITIES COMMISSION CALIF PUBLIC UTILITIES COMMISSION ELECTRICITY PLANNING & POLICY BRANCH COMMISSIONER RECHTSCHAFFEN ROOM 4104 ROOM VAN NESS AVENUE 505 VAN NESS AVENUE SAN FRANCISCO, CA SAN FRANCISCO, CA ZITA KLINE KATY MORSONY CALIF PUBLIC UTILITIES COMMISSION STAFF ATTORNEY DIVISION OF ADMINISTRATIVE LAW JUDGES THE UTILITY REFORM NETWORK ROOM MARKET STREET, SUITE VAN NESS AVENUE SAN FRANCISCO, CA SAN FRANCISCO, CA KARI CAMERON LISA M. RAYMOND LEGAL ADMINISTRATOR BUCHALTER BUCHALTER 55 SECOND STREET, SUITE ONLY SAN FRANCISCO, CA 94105

16 CPUC - Service Lists - A Page 3 of 3 1/4/2019 ONLY, CA LILLIAN RAFII CASE COORDINATION ATTORNEY PACIFIC GAS AND ELECTRIC COMPANY BUCHALTER, A PROFESSIONAL CORPORATION PO BOX ; MC B23A 55 SECOND STREET, STE SAN FRANCISCO, CA SAN FRANCISCO, CA FOR: ENERGY PRODUCERS AND USERS COALITION (EPUC) CAROLYN M. KEHREIN REGULATORY CLERK PRINCIPAL BRAUN BLAISING SMITH WYNNE, PC ENERGY MANAGEMENT SERVICES 915 L STREET, STE CELEBRATION WAY SACRAMENTO, CA WOODLAND, CA FOR: ENERGY MANAGEMENT SERVICES KAREN MILLS CALIFORNIA FARM BUREAU FEDERATION 2300 RIVER PLAZA DRIVE SACRAMENTO, CA TOP OF PAGE BACK TO INDEX OF SERVICE LISTS