BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA. Complainant, Defendant.

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1 BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA County of Orange vs. Complainant, C (Filed October 13, 2017) Southern California Edison Company (U338-E) Defendant. SOUTHERN CALIFORNIA EDISON COMPANY S (U 338-E) RESPONSE TO COMPLAINANT S APPEAL OF PRESIDING OFFICER S DECISION FADIA R. KHOURY RUSSELL A. ARCHER Attorneys for SOUTHERN CALIFORNIA EDISON COMPANY 2244 Walnut Grove Avenue Post Office Box 800 Rosemead, California Telephone: (626) Russell.Archer@sce.com Dated: October 23, 2018

2 BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA County of Orange vs. Complainant, C (Filed October 13, 2017) Southern California Edison Company (U338-E). Defendant SOUTHERN CALIFORNIA EDISON COMPANY S (U 338-E) RESPONSE TO COMPLAINANT S APPEAL OF PRESIDING OFFICER S DECISION Pursuant to California Public Utilities Commission (CPUC or Commission) Rule of Practice and Procedure 14.4(d), Southern California Edison Company (SCE) respectfully submits this Response to the County of Orange s Appeal of the Presiding Officer s Decision (POD) denying the County s Complaint (County s Appeal). The County s Appeal is devoid of merit. It should be denied because [t]he arguments set forth in the appeal [of the POD] are without merit and largely repeat the complainants prior arguments. 1 The POD correctly determined -- as a threshold issue and as a matter of law that under the relevant tariff in effect from (and which is now closed), SCE did not have an obligation to periodically assess whether the County s self-selected Standby demand level was too high. In addition, although the POD did not need to and did not reach this issue, over the course of this proceeding 1 D , p. 10. See also D , pp (denying an appeal of a POD based, in part, on the fact that the appellant raises many of the same arguments it made throughout the proceeding and raised new legal arguments that lacked merit). 1

3 SCE conclusively demonstrated that the County s Standby demand level was not -- as a matter of fact -- too high. The County s Appeal (consistent with its pleadings throughout this proceeding) fundamentally misconstrues the purpose and function of utility Standby service under the Relevant Tariff, because it conflates the customer demand levels regularly served by SCE (Supplemental capacity) with the amount of capacity regularly served by the customer (Standby capacity). It is this latter amount that the County contracted with SCE to stand by to provide if necessary. The County s designated standby level only appears too high if one is looking at the wrong number. I. BACKGROUND AND PROCEDURAL HISTORY Complainant County of Orange was the customer of record for the service address of 525 N. Flower Street, Santa Ana, CA, during the period May 2014 to October 2016 ( Relevant Period ). In its Complaint, the County claims that SCE overcharged it by approximately $700,000 for Standby Demand charges. Standby Demand is a capacity-based tariff charge that SCE applies to customer accounts that have their own generation facilities, but for whom SCE reserves capacity in a standby mode to serve the customer during time periods when the customer s generator is not operating. The standby demand level is the requirement of capacity that SCE must stand by to be able to instantaneously provide during those periods. The County owns and operates what it calls a Central Utility Facility ( CUF ), which utilizes SCE services for standby and supplemental load. During the Relevant Period, SCE provided standby electricity service to the County s CUF on rate schedule TOU-8-S; specifically Tariff Sheet No E, effective as of April 1, 2013 (the Relevant Tariff ). Under the Relevant Tariff, the level of standby demand was set by the customer at the lower of the nameplate capacity of the customer s generator or SCE s estimate of the customer s peak demand. 2

4 In 2009, at the commencement of SCE s services, and throughout the Relevant Period, the County operated a natural gas turbine generator with a nameplate capacity of 10,600 kw. The County s measured peak demand for the CUF was 8,192 kw, as of August 13, Accordingly, pursuant to the Relevant Tariff, the County chose and SCE accepted 2 a standby demand level of 8,192 kw for the County s CUF. Throughout the Relevant Period, the County did not request a change to that standby demand level, nor did SCE change it. On May 16, 2017, the County informed SCE for the first time that it believed the standby demand level of 8,192 kw in effect during the Relevant Period was too high during that historical period. SCE disagreed, and on October 13, 2017 the County filed this Complaint seeking a refund for Standby demand-related alleged overcharges during the Relevant Period. SCE submitted its Answer on December 1, 2017, which demonstrated why the Complaint was without merit. The parties reached a mutual agreement that [a]though resolution of this case will depend on an analysis of mixed questions of law and fact, the parties do not believe the underlying facts to be materially in dispute. 3 After the subsequent submission of extensive written evidence by both parties, 4 and two rounds of briefs, 5 on September 7, 2018, Assigned Administrative Law Judge (ALJ) Semcer issued a detailed and well-reasoned POD. The POD rejected the County s argument that SCE had a mandatory obligation to periodically review the County s self-chosen Standby demand level to evaluate whether that level was too high. The 2 See November 3, 2009 Application and Contract for Electric Service (attached to SCE s December 1, 2017 Answer as Exhibit B. 3 April 11, 2018 Joint Motion of Southern California Edison Company (U 338-E) and County of Orange Requesting Cancellation of Evidentiary Hearings and Proceeding to Briefing on the Record of Submitted Testimony at p See February 9, 2018 Prepared Testimony of Barbara Tidball on Behalf of County of Orange (and exhibits thereto); February 9, 2018 Prepared Testimony of Michael Kerkorian on Behalf of County of Orange (and exhibits thereto); March 8, 2018 Reply Testimony of Southern California Edison Company (Exhibit SCE-01, R. Thomas) (and exhibits thereto); April 5, 2018 Rebuttal Testimony of Michael Kerkorian on Behalf of County of Orange. 5 See May 15, 2018 Opening Briefs of SCE and County of Orange and June 15, 2018 Reply Briefs of SCE and County of Orange. 3

5 POD s analysis was based on the plain language of the tariff then in effect and a careful review of the rules of statutory interpretation, and is absolutely correct as a matter of law. Despite the County s inferences to the contrary, 6 the POD (because it did not need to) did not reach the second crucial issue of whether the County s self-chosen Standby demand level was, in fact, too high. SCE s evidence and briefs demonstrated that even if SCE had an obligation to monitor the County s Standby demand level (which it did not), it would not have changed it, because it was not too high. 7 The County s Appeal fails both as a matter of law and as a matter of fact, and the Commission should affirm the POD for both of these independent reasons. II. STANDARD OF REVIEW FOR AN APPEAL OF A POD The Commission can dismiss the appeal in deference to the sound reasoning of the POD. It can also resolve an evidentiary question not addressed by the POD provided that the final Commission decision is supported by findings of fact on all issues material and provided that the findings of fact [are] based on the record developed by the... administrative law judge. Public Utilities Code Section (e). 6 The County s Appeal states that [t]he POD does not disagree with County s contention that that standby demand was indeed too high and need[ed] to be adjusted. County Appeal at p. 1. Some 20 pages later, the County s Appeal acknowledges that the POD does not explicitly make sufficient findings and conclusions on this issue. In dicta, the POD did state that the actual needed reserve capacity for the CUF for period October 13, 2016 was significantly below the 8,192 kw initially elected by the Complainant, (POD at p. 9), but that hindsight-derived observation is in no way an endorsement of the County s theory that the Standby level at the time was too high. In fact, the POD did not consider that critical issue at all, because it did not need to reach it to dismiss the County s Complaint. 7 The County s repeated references in its Appeal to having set forth unconverted evidence that its self-selected standby demand level was too high are simply false. SCE has heavily disputed that evidence. 4

6 III. THE COUNTY S POSITION REGARDING THE RELEVANT TARIFF IS INCONSISTENT WITH ITS PLAIN LANGUAGE AND CANONS OF STATUTORY INTEPRETATION The POD correctly determined as a matter of law that the plain language of the Relevant Tariff, as supported by canons of statutory interpretation, cannot be reasonably read to impose a mandatory obligation on SCE to continuously monitor and potentially adjust a customer s selfselected Standby level. The County s Appeal urges the Commission to selectively focus on three sentences in the Relevant Tariff, in an attempt to cobble together an obligation for SCE to do something that the Relevant Tariff gave SCE the discretion to do if SCE determined it was necessary. The County s attempt to impose a mandatory obligation on SCE to take an action - - based on tariff language stating that SCE shall take an action if SCE determines that taking that action is necessary -- flies in the face of the tariff language and history, as well as basic rules of the English language. The Commission should as does the POD -- consider the Relevant Tariff in its entirety, as well as its purpose as illustrated by its legislative history. A. The POD is Supported by the Plain Language of the Relevant Tariff and Canons of Statutory Interpretation Under Special Condition 6 of the Relevant Tariff (which is the controlling provision in this proceeding), the customer selected a standby demand required for its facilities set at the lower of historical peak demand or the nameplate rating of its generator. The County argues, however, that SCE had an ongoing obligation to monitor the customer s usage, and adjust the standby level determination (which was made by the customer) to more closely align with actual demand. The language in the tariff simply does not support such an interpretation. Special Condition 6 states that once a customer has designated the required level of Standby Demand, it shall remain at such level... unless, in SCE s determination, the Standby Demand needs to be adjusted. The plain language of that tariff provision gave SCE the right but not 5

7 the obligation to adjust a customer s Standby Demand if need[ed]. When a tariff provision imposes a mandatory obligation on SCE, as opposed to a discretionary right, the tariff language makes that distinction clear. In fact, the very next provision in the tariff (Special Condition 7) is an example of such a provision. It states: On an ongoing basis, SCE will determine a revised [Supplemental Contract Capacity] based on the difference between the customer s Maximum Demand during the previous 12 months and the established Standby Demand. 8 Under the County s interpretation of the tariff, Special Condition 6 would similarly read: On an ongoing basis, SCE will determine a revised Standby Demand based on the customer s Maximum Demand during the previous 12 months. Special Condition 6 does not include such language. The Commission has previously examined the difference between mandatory obligations and discretionary decision-making in utility tariffs. Tariffs, when published and filed, are binding and have the force and effect of a statute. 9 Accordingly, tariffs are interpreted using traditional statutory-construction principals. 10 The Commission has adopted the California Supreme Court s three-step approach to statutory construction in order to interpret tariffs: The first step in statutory interpretation is to examine the actual language of the statute, giving the words their ordinary, everyday meaning. If the meaning is without ambiguity, doubt, or uncertainty, the language controls. If the language is ambiguous or susceptible to more than one reasonable interpretation, the next step is to refer to the legislative history. If legislative history fails to provide clear meaning, the final step is to apply reason, practicality, common sense, and extrinsic aids. 11 First, the Commission will look to the plain language of the tariff and give the words their ordinary meaning. 12 Words should be interpreted in context, in a reasonable, commonsense way, and should avoid making any language surplus. 13 If the words are given their plain 8 Special Condition 7 of TOU-8-S, Tariff Sheet No E, effective as of April 1, 2013 (emphasis added). 9 See Dyke Water Co. v. Pub. Util. Comm n, 56 Cal. 2d 105, 123 (1961). 10 See, e.g., D at p D at p. 4 (citations omitted). 12 D at p D at p. 6. 6

8 meaning, and the plain reading makes the tariff clear, the analysis ends. 14 In this case, this is where the analysis should end. The plain language of the tariff clearly states that the customerselected standby demand shall remain at that level unless, in SCE s determination, [it] needs to be adjusted. Leaving potential needed adjustments to SCE s determination cannot be reasonably interpreted as imposing a mandatory duty to make such adjustments, especially if SCE believes they were not needed (which, as explained below, they were not). Second, an ambiguity only exists where language in a tariff may reasonably be interpreted in more than one way. 15 Claims of ambiguity must be reasonable and must have substantial basis in fact. 16 Where an ambiguity exists, the Commission may rely on sources beyond the plain language of the tariff, such as regulatory history and principles of statutory construction, to interpret the tariff. 17 Where more than one interpretation is possible, the Commission s policy is to favor the construction that leads to the more reasonable result. 18 Here, SCE s position leads to the more reasonable result. As explained below, the level of standby demand that a customer needs is not generally linked to the amount of electricity regularly supplied by the utility (which is the figure the County repeatedly states in its Complaint) rather, it is the amount of capacity that the utility must be ready to serve if the customer s own generation facilities are unavailable (which was the 8,192 kw level selected by the County). In other words, just because the County did not (in hindsight) use SCE s standby services up to its pre-selected level, that does not mean they were not needed. Third, different provisions relating to the same subject matter must be harmonized to the extent possible. 19 The Commission will often look to its older decisions and documents filed 14 D at p D at pp D at p D at p D at p. 11; see also D at p. 4 (citing cases). 19 D at p. 5. 7

9 with the Commission to give the tariff context. 20 Where a term is ambiguous, the Commission may look for similar terms in other tariffs or regulations to assist in interpretation. 21 As discussed above, the very next provision in the Relevant Tariff (i.e., Special Condition 7), illustrates what language the Commission uses for mandatory tariffs. That type of language does not appear in the Relevant Tariff. Fourth, in D , the Commission discussed rate design policies in the context of distributed generation, including rates for standby demand. One of the topics the Commission addressed was how customers should identify how much reservation capacity they would need. Customer advocate groups expressed concern that utilities would overestimate the amount of backup reservation capacity standby customers needed. 22 To alleviate this concern the Commission delegated this task to the customer, stating that ultimately the customer is in the best position to determine how much backup reservation capacity they are likely to need. 23 That determination is entirely consistent with the language in the Relevant Tariff, which not only states that the customer initially selects its required standby demand, but also makes clear that the customer remains responsible for notifying SCE of permanent or material changes in their generation facilities (size, type and operations) for future adjustments of the Standby Demand. 24 In the end, the Relevant Tariff, which says an amount shall remain at a customerselected pre-set level unless, in SCE s determination, [it] needs to be adjusted, cannot be reasonably interpreted to impose a mandatory obligation on SCE to continuously monitor and potentially adjust that pre-set level. 20 See, e.g., D at pp (reviewing former Commission decisions and historical context). 21 D at p D at Id. 24 Special Condition 6. 8

10 B. The POD is Supported by the History of the Relevant Tariff The plain language of the tariff, in concert with accepted rules of statutory construction, shows that the County s invention of a monitor-and-adjust requirement in the Relevant Tariff is incorrect. In addition, a close examination of the legislative history, i.e., how the relevant language in the Relevant Tariff changed over time, further supports SCE s position Version In 2003, all standby service customers, regardless of size, received standby service under SCE s Schedule S, Standby Service. Special Condition 3 26 of Schedule S described how SCE determined a customer s level of standby demand: The level of standby demand shall be set forth in the generation interconnection agreement or Contract for Electric Service. The level of standby demand shall be determined by SCE and shall be the lower of (a) the nameplate capacity of the customer s generating facility; or (b) SCE s estimate of the customer s peak demand. The highest recorded demand shall be used to determine the customer s level of standby demand Version Schedule S was revised in The revision added two new requirements to Special Condition 5, Standby Demand. The first revision put the burden on the customer to designate the appropriate level of standby demand. This was a change from the 2003 language which put the burden of determining the level of standby demand on SCE. The second revision reserved to SCE the power to adjust the customer designated level of demand if SCE determined the demand was too low: 25 Throughout this analysis, new tariff language is indicated in underline, and removed tariff language is indicated in strikethrough. 26 Cal. PUC Sheet No E, Sheet Cal. PUC Sheet No E, Sheet 9. 9

11 Standby Demand represents the entire reserved capacity needed for SCE to serve the customer s loads regularly served by the customer s generating facility when such facility experiences an outage. The level of Standby Demand which shall not exceed the nameplate capacity of the customer s generating facility is designated by the customer and is set forth in the generation interconnection agreement or Contract for Electric Service. The level of standby demand shall be determined by SCE and shall be the lower of (a) the nameplate capacity of the customer's generating facility; or (b) SCE s estimate of the customer's peak demand. SCE reserves the right to install, at the customer's expense, a demand meter to measure the customer s demand. The highest recorded demand shall be used to determine the customer s level of standby demand. If, in any billing period, SCE determines the Standby Demand is too low, SCE shall increase the Standby Demand to reflect the actual needed reserved capacity. When the Standby Demand is increased by SCE as provided above, a qualified reduction in the Standby Demand shall not be made for 12 months from the last increase Version The tariff rule was updated again the following year. The new revisions were made with the intent to remove[] any ambiguity as to how often a customer can adjust its designated Standby Demand. 28 The revised language 29 stated that the level of Standby Demand, once set by the customer, could not be revised for at least 12 months, unless SCE determined that the level of Standby Demand set by the customer was too low. In that case, SCE could increase the level Standby Demand to reflect the customer s actual needed reserved capacity. The revised language said nothing about whether SCE was required to monitor or review the level of standby demand established by the customer: Standby Demand represents the entire reserved capacity needed for SCE to serve the customer s loads regularly served by the customer s generating facility when such facility experiences an outage. The level of Standby Demand which shall not exceed the nameplate capacity of the customer s generating facility is designated by the customer and is set forth in the generation interconnection agreement or the Contract for Electric Service. Once a customer s designated Standby Demand has been set, it shall remain at such level for a minimum of 12 months unless, in SCE s determination, the Standby Demand is too low. Upon SCE s determination that the customer s designated Standby Demand is too low, whereby demand imposed on 28 A.L E, p Cal. PUC Sheet No E, Sheet

12 SCE s electrical grid exceeds the customer s designated Standby Demand, as determined over any 15-minute period, If, in any billing period, SCE determines the Standby Demand is too low SCE shall increase the Standby Demand to reflect the actual needed reserved capacity. When the Standby Demand is increased by SCE as provided above, a qualified reduction in the Standby Demand shall not be made for 12 months from the last increase Version In 2009, the tariff rule was updated again 30 and added a provision to address Standby Demand that was too high as well as too low. The new language described what characteristics made Standby Demand too low or too high. The revisions gave SCE the authority to use on-site verification to test whether a customer s standby demand was incorrect. The revisions did not change any language related to SCE s requirements: Standby Demand represents the entire reserved capacity needed for SCE to serve the customer s loads regularly served by the customer s generating facility when such facility experiences an outage. The level of Standby Demand, which shall not exceed the nameplate capacity of the customer s generating facility, is designated by the customer and is set forth in the generation interconnection agreement or the Contract for Electric Service. Once a customer s designated Standby Demand has been set, it shall remain at such level for a minimum of 12 months unless, in SCE s determination, the Standby Demand is too low. needs to be adjusted to more accurately represent the installed name plate capacity. Upon SCE s determination that the customer s designated Standby Demand is too low does not reflect the actual level of installed capacity, whereby (demand imposed on SCE s electrical grid when the generating unit is down exceeds the customer s designated Standby Demand) as determined over any 15- minute period or through on-site verification, SCE shall increase the Standby Demand to reflect the actual needed reserved capacity. Similarly, upon SCE s determination that the customer s designated Standby Demand is too high, (demand imposed on SCE s electrical grid when the generating unit is down never reaches the customer s designated Standby Demand) over any 15-minute period or through on-site verification, SCE shall decrease the Standby Demand to reflect the actual needed reserved capacity. When the Standby Demand is increased adjusted by SCE as provided above, a qualified reduction change in the Standby Demand shall not be made for 12 months from the last increase adjustment. The difference between the Maximum Demand and the Standby Demand shall be billed the Facilities Related Demand Charge of the customer s OAT. 30 Cal. PUC Sheet No E, Sheet 7. 11

13 Version (the Relevant Tariff) As a result of a 2013 settlement agreement 31 SCE entered into with intervening parties regarding medium and large commercial rate design, the relevant tariff language was changed to require the standby customer to notify SCE of any permanent or material changes in the customer s generation facilities (size, type and operations) for future adjustments to the Standby Demand. The settlement agreement clarified that the initial level of standby demand is designated by the customer, and that SCE shall have the right 32 to verify that the customer s designated Standby Demand accurately represents the actual demand the customer made on SCE s system. The settlement made clear that SCE had the ability to make adjustments to the customer s level of Standby Demand if SCE determines that adjustments are warranted : 33 Standby Demand in kw represents the entire reserved capacity needed for SCE to serve the customer s load regularly served by the customer s generating facility when such facility experiences a partial or complete outage. The level of Standby Demand, which shall not exceed the nameplate capacity of the customer s generating facility, is initially designated by the customer and is set forth in the generation interconnection agreement or the Contract for Electric Service. Once a customer s designated Standby Demand has been set, it shall remain at such level for a minimum of 12 months unless, in SCE s determination, the Standby Demand needs to be adjusted to more accurately represent the installed name plate capacity customer s actual reserve capacity needs. Upon SCE s determination that the customer s designated Standby Demand is too low and does not reflect the actual level of installed capacity needed reserve capacity (demand imposed on SCE s electrical grid when the generating unit is down exceeds the customer s designated Standby Demand) over any 15-minute period or through on-site verification, SCE shall increase the Standby Demand to reflect the actual needed reserve capacity. Similarly, upon SCE s determination that the customer s designated Standby Demand is too high, (demand imposed on SCE s electrical grid when the generating unit is down never reaches the customer s designated Standby Demand) over any 15-minute period or through onsite verification, SCE shall decrease the Standby Demand to reflect the actual needed reserve capacity. When the Standby Demand is adjusted by SCE as provided above, a qualified change in the Standby Demand 31 D D , Attachment D, Medium and Large Commercial Customer Rate Design Settlement Agreement, p Id. 12

14 shall not be made for 12 months from the last adjustment. The difference between the Maximum Demand and the Standby Demand shall be is billed the Facilities Related Demand Charge of the customer s OAT, described above in RATES. The customer is responsible for notifying SCE of permanent or material changes in their generation facilities (size, type and operations) for future adjustments to the Standby Demand. 6. Legislative History Analysis Looking carefully at how the relevant tariff language changed in its various iterations demonstrates that over time the tariff gave more and more discretion to SCE about how and when it could change a customer s designated level of standby demand, while simultaneously imposing more and more responsibility on the customer for making sure the standby demand was initially and continued to be correct. In 2003, the standby demand level was chosen by SCE and had no provision for adjustment. In 2005, the tariff was revised to require the customer to determine the initial level of standby demand, and gave SCE the right (but no obligation) to increase the level of standby demand after 12 months. In 2006, SCE was given additional discretion to make more frequent changes to the chosen level, if in SCE s determination, it determined that the customer had chosen a standby demand that was too low. In 2009, the tariff was again revised to give SCE additional discretion to make changes to a customer s standby level (up or down), and also added on-site verification as a means to test whether a customer s standby demand was incorrect. Finally, in 2013, the tariff was again changed to impose additional obligations on the customer to inform SCE of permanent or material changes in their generation facilities, in order to help enforce SCE s right 34 to verify that the customer s designated standby demand continued to be accurate. 34 D , Attachment D, Medium and Large Commercial Customer Rate Design Settlement Agreement, p

15 C. The County s Statements About Post-2015 Tariffs Are Irrelevant To buttress its arguments that the Standby level was too high under the Relevant Tariff, the County resorts to analogies to subsequent changes to the Standby tariff that have no bearing on this proceeding. While it is true that SCE s current Standby tariff has an algorithmic approach to periodically adjust Standby levels, it is also undisputed that the Relevant Tariff (long since closed) did not. SCE initiated the algorithm changes to the Standby tariff in the 2015 GRC Phase 2 in recognition that new solar generation facilities taking service had fundamentally different operating profiles than the Combined Heat & Power systems that traditionally took standby service in the past. 35 That is in no way a recognition that SCE previously had some mandatory obligation to monitor and adjust Standby demand levels under the Relevant Tariff. IV. THE COUNTY S POSITION IS BASED ON A FUNDAMENTAL MISUNDERSTANDING OF STANDBY SERVICE The County s Testimony correctly cites Special Condition 6 s definition of standby demand: the load regularly served by the customer s generating facility. 36 Even so, the County s Appeal continues to argue that because its actual average peak demand served by SCE for the Relevant Period was 3,813 kw, that therefore the 8,192 kw standby level was somehow too high. The 3,813 kw amount represents the average load served by SCE, not by the customer s generating facility. The County s Testimony claims that 3,813 kw, which is the annual average peak demand (AAPD), should be used as the adjusted standby demand in calculating its alleged damages. But the AAPD represents the average demand served by SCE, 35 See January 23, 2015 Supplemental Testimony of Robert A. Thomas re: Standby Rate Design at p. 5 in A Although the revised Standby tariff is not relevant to the analysis here, the County has put at it in issue in its Appeal (at pages 6-7; 13), and cites to Mr. Thomas s testimony from that proceeding. 36 See Sections II.A and III of February 9, 2018 Prepared Testimony of Michael Kerkorian on Behalf of County of Orange County. 14

16 not the load regularly served by the customer s generating facility as defined in Special Condition 6. The AAPD represents the supplemental load (also referred to as Supplemental Contract Capacity or SCC), not the Standby demand level, and is covered by an entirely different rate. Simply put, the AAPD is totally irrelevant and unconnected to the customer s standby demand under the Relevant Tariff. The standby level is the amount of capacity necessary to serve the customer if the customer s generating facility goes down, not the level of peak demand served by SCE during the normal course of a month. The 8,192 kw customer-selected standby level was not too high; SCE was standing by to serve that entire amount of potential load, should the customer s generating facility experience an outage. That is the entire purpose of standby service. The County s Appeal goes on at length to accuse SCE of not having an articulable standard or practice or policy 37 to monitor and adjust the customer-selected standby demand. SCE explained that although it did not have a specific mathematical formula in place to determine if a customer s self-selected standby levels were set incorrectly, SCE did (at its own discretion pursuant to the Relevant Tariff) investigate anomalous results that were not consistent with the tariff definition of standby demand. That is entirely unsurprising. Based on the standards and tariffs then in effect, it would make no sense for SCE to automatically adjust downward a customer s selected standby level just because the amount of peak load regularly served by SCE was lower than that level. The fact that the County s peak monthly load served by SCE was lower than its selected Standby demand is in no way anomalous for a reliable, baseloaded generation facility, which the customer s CUF generating facility apparently was during the Relevant Period. Absent a customer request to reduce its self-selected Standby level, SCE was obligated to (and did) stand by to serve the entire 8,192 kw need should the County s CUF facility have experienced an outage. 37 County Appeal at p

17 This common-sense explanation of how standby service actually works is also completely consistent with the language in the tariff, which reads that [o]nce a customer s designated Standby Demand has been set, it shall remain at such level for a minimum of 12 months unless, in SCE s determination, the Standby Demand needs to be adjusted to more accurately represent the customer s actual reserve capacity needs. 38 Under the Relevant Tariff, a customer s actual reserve capacity needs are unrelated to its average monthly peak demands regularly served by SCE. Absent a permanent or material change[] in their generation facilities (which the County has repeatedly represented did not happen here), customers actual reserve capacity needs are not likely to change. Such was the case here. V. THE COUNTY S APPEAL MISSTATES SCE S MOTIVATION AND INCENTIVES The County s Appeal incorrectly insinuates that SCE deliberately allowed the County s Standby demand to remain too high in order to make more money. The County states that SCE meted out abuse on the County, in line with what any for-profit, monopoly utility would do, and that the POD reflects a regulatory approach that appears bent on protecting the financial interests of the regulated public utility at the expense of ratepayers. 39 Setting aside that the County cites no evidence to support those inflammatory positions because there is none the County s statements in its Appeal confirm it is just as uninformed about utility ratemaking as it is about the purpose of Standby service. Standby service is a mixed generation and distribution charge on which SCE earns no profit revenues are simply tracked in balancing accounts, 40 and over- and under-collections are returned to or collected from all customers. SCE has no financial incentive to overstate any customer s Standby demand. 38 Special Condition 6 (emphasis added). 39 County Appeal at pp. 3; Specifically, SCE s Energy Resource Recovery Account (ERRA) and SCE s Base Revenue Requirement Balancing Account (BRRBA). See SCE Preliminary Statements ZZ and YY. 16

18 Moreover, SCE did not break any promise it made as the County puts it to monitor and adjust the County s chosen Standby demand level. The evidence demonstrates that when the County chose the 8,192 kw level, the County was concerned that it might subsequently prove to be too low, not too high. That is logical: Under the Relevant Tariff, when contracting for Standby capacity a customer should logically be concerned about choosing a level that is sufficient to meet its maximum potential needs in case of an outage, because exceeding that demand would expose the customer to (higher) Facilities-Related Demand charges for any excess demand. Accordingly, at the County s explicit request, the only promise SCE ever made was to adjust the County s self-selected Standby level if the County s maximum demand ever exceeded 8,192 kw, not if it ever fell below that amount. It is undisputed that the County s maximum demand was always below that demand level. The County presumably knew this, as it received a monthly bill that clearly displayed (immediately adjacent to each other) both the Countyselected standby amount (which never changed, as is normal), and its actual monthly peak usage (which varied on a month-to-month basis, as is normal). 41 In light of that, it is puzzling that the County believes it was SCE s obligation (and not the County s) to monitor the County s actual monthly peak demands served by SCE (which as discussed above, are irrelevant to the customerselected standby level). In no way did SCE break any promise it made to the County. In fact, if any party broke a promise it was the County, not SCE. The Relevant Tariff unambiguously obligated the customer to notify[] SCE of permanent or material changes in their generation facilities (size, type and operations) for future adjustments of the Standby Demand. 42 Although the County s Appeal mirrors its written testimony claim that its obligation was never triggered because there have never been changes to the CUF generating facility, 43 it is important to keep 41 See March 8, 2018 SCE Reply Testimony at p Relevant Tariff, Special Condition 6 (emphasis added). 43 County Appeal at p

19 in mind that the 8,192 kw Standby demand level was based on actual historical peak demand from the County s CUF. The fact that the CUF never experienced demand even close to that level of capacity in any month during the Relevant Period calls into serious doubt the County s claim that it did not subsequently change the operations of the CUF after it selected its Standby demand level. 44 VI. SCE DID NOT COMMIT A BILLING ERROR The County s Appeal claims that SCE committed a billing error as that term is defined in SCE s Rule 17.D. Rule 17.D allows SCE to collect undercharges or refund overcharges for billing errors such as incorrect meter reads or clerical errors by an SCE representative such as applying the wrong rate, wrong billing factor, or an incorrect calculation. 45 The County does not contend nor could it that SCE made a clerical error that was inconsistent with its tariff. Instead, the County complains that if the County s self-designated standby level could be changed in hindsight, it would have resulted in lower bills. Maybe so, but as discussed throughout this Response and in SCE s testimony and briefs, SCE had no such obligation. Converting this hindsight review into a Rule 17.D error is unfair to the balance of SCE s customers who would effectively fund the unorthodox bill credit that would result from it. In any event, Rule 17.D is clear on its face that SCE is not obligated to provide relief for the failure of the customer to take advantage of a rate or condition of service for which the customer is eligible SCE s statement in its Opening Brief that the County did not change its operations was based on representations made by the County in its written testimony and data request responses. See, e.g., February 9, 2018 Prepared Testimony of Barbara Tidball on Behalf of County of Orange at p SCE Rule 17.D. 46 Id. 18

20 VII. CONCLUSION For all the reasons stated herein, and in SCE s written testimony and briefs, the Commission should reject the County s Appeal and issue a final decision affirming the POD. Respectfully submitted, /s/ Russell A. Archer By: Russell A. Archer Attorney for SOUTHERN CALIFORNIA EDISON COMPANY Dated: October 23, Walnut Grove Avenue Post Office Box 800 Rosemead, California Telephone: (626) Russell.Archer@sce.com 19

21 BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA County of Orange vs. Complainant C (Filed October 13, 2017) Southern California Edison Company (U 338-E) Defendant 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 SOUTHERN CALIFORNIA EDISON COMPANY S (U 338-E) RESPONSE TO COMPLAINANT S APPEAL OF PRESIDING OFFICER S DECISION on all parties identified on the attached service list(s) C Service was effected by one or more means indicated below: Transmitting the copies via to specified parties who have provided an address. 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 Commissioner(s) or other addressee(s). ALJ Melissa K. Semcer California Public Utilities Commission 505 Van Ness Avenue San Francisco, CA Executed on October 23, 2018, at Rosemead, California. /s/ Edith Leon Edith Leon Legal Administrative Assistant SOUTHERN CALIFORNIA EDISON COMPANY 2244 Walnut Grove Avenue Post Office Box 800 Rosemead, California 91770

22 CPUC - Service Lists - C Page 1 of 2 10/23/2018 CPUC Home CALIFORNIA PUBLIC UTILITIES COMMISSION Service Lists PROCEEDING: C COUNTY OF ORANGE VS FILER: COUNTY OF ORANGE LIST NAME: LIST LAST CHANGED: OCTOBER 11, 2018 Download the Comma-delimited File About Comma-delimited Files Back to Service Lists Index Parties RUSSELL A. ARCHER MICHAEL KERKORIAN SR. ATTORNEY UTILITY COST MANAGEMENT LLC SOUTHERN CALIFORNIA EDISON COMPANY 1100 W. SHAW AVENUE, SUITE WALNUT GROVE AVE. / PO BOX 800 FRESNO, CA ROSEMEAD, CA FOR: COUNTY OF ORANGE FOR: SOUTHERN CALIFORNIA EDISON COMPANY Information Only CASE ADMINISTRATION DONALD C. LIDDELL SOUTHERN CALIFORNIA EDISON COMPANY ATTORNEY 8631 RUSH STREET, GO4, 2ND FL. DOUGLASS & LIDDELL ROSEMEAD, CA ND AVENUE SAN DIEGO, CA KRISTINE MARISCAL SCOTT BLAISING COUNTY OF ORANGE ATTORNEY 300 N. FLOWER STREET BRAUN BLAISING SMITH WYNNE P.C. SANTA ANA, CA L STREET, STE SACRAMENTO, CA State Service MELISSA K. SEMCER CALIF PUBLIC UTILITIES COMMISSION

23 CPUC - Service Lists - C Page 2 of 2 10/23/2018 DIVISION OF ADMINISTRATIVE LAW JUDGES ROOM VAN NESS AVENUE SAN FRANCISCO, CA TOP OF PAGE BACK TO INDEX OF SERVICE LISTS