May 17, 2002 PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA ENERGY DIVISION

Transcription

1

2 Akbar Jazayeri Director of Revenue and Tariffs May 17, 2002 ADVICE 1622-E (U 338-E) PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA ENERGY DIVISION SUBJECT: Implementation of the Capital Additions Provision of the Settlement Agreement In compliance with Resolution E-3765, Southern California Edison Company (SCE) hereby submits for filing the following changes to its tariff schedules. The revised tariff sheets are listed on Attachment A and are attached hereto. PURPOSE In compliance with Resolution E-3765, SCE submits its proposal to implement the Capital Additions Provision (Section 2.6) of the Settlement Agreement between SCE and the California Public Utilities Commission (Commission). In addition, this advice filing, in accordance with this proposal, revises SCE s Capital Additions Tracking Account to track the recorded amount of capital expenditures (up to $900 million in a calendar year) that exceeds the level of capital expenditures reflected in the rates currently authorized by the Commission. BACKGROUND On January 23, 2002, the Commission issued Resolution E-3765, which ordered (Ordering Paragraph 34) SCE to work with the Office of Ratepayer Advocates (ORA), The Utility Reform Network (TURN), and Aglet Consumer Alliance (Aglet) to determine the appropriate process to comply with the Capital Additions Provision P.O. Box Walnut Grove Ave. Rosemead, California (626) Fax (626)

3 ADVICE 1622-E (U 338-E) May 17, 2002 of the Settlement Agreement. 1 In addition, Resolution E-3765 requires that SCE make its proposal either through an application or advice letter and that no amounts be included in the tracking account until the Commission determines the authorized capital embedded in current rates. Section 2.6 of the Settlement Agreement provides that SCE may make capital expenditures above the level contained in current rate levels and recover the revenue requirement on such amount through the Settlement Rates Balancing Account (SRBA) as a Recoverable Cost. Section 2.6 limits SCE s total capital expenditures to $900 million in a calendar year. Determination of Capital Expenditures in Current Rates In order to implement Section 2.6 of the Settlement Agreement, the amount of capital expenditures contained in current rate levels must be determined for generation, transmission, and distribution assets. For purposes of this determination, SCE assumes that its capital expenditures are equal to its capital additions and that the capital additions tracking mechanism would begin on January 1, 2002 for administrative ease. Below is a summary of the determination of capital expenditures included in current rate levels for generation, transmission and distribution assets. 1. Generation For generation, the amount of capital expenditures, with the exception of SONGS 2&3 capital additions, contained in current rate levels is the 2002 generation-related capital additions adopted in Decision (D.) Since D requires that SCE s revenue requirement be based on recorded capital additions, except for SONGS 2&3 capital additions, amounts actually recorded will be the amounts assumed to be in current rate levels. For SONGS 2&3, SCE uses the capital additions forecast that was used in the 1995 GRC. 2. Transmission For transmission, SCE will use the test year capital additions from SCE s most recent FERC-approved rate case. Thus, until SCE s 2002 FERC rate case is 1 On March 13, 2002, SCE received an extension to June 1, 2002 to comply with Ordering Paragraph 34 of Resolution E On March 19, 2002, SCE submitted its proposal to ORA, TURN, and Aglet for review. To date, SCE has not received any response to this proposal from these Parties. On May 10, 2002, SCE informed them that due to the approaching deadline it will file this advice letter.

4 ADVICE 1622-E (U 338-E) May 17, 2002 approved and implemented in September 2002, SCE will continue to use the capital additions from SCE s test year 1998 FERC rate case Distribution For distribution, consistent with D , SCE will use the recorded 2000 capital additions as a starting point. The 2000-recorded capital additions will be escalated to year 2002 authorized capital additions by using the Performance Based Ratemaking (PBR)Update Rule (CPI X). The detailed proposal is provided as Appendix A. The table below shows the amount of capital expenditures included in current rates and Appendix B shows the detailed calculations. Asset Capital Expenditures in Rates (Millions) Generation $ Transmission Distribution Less Reimburseable amounts (97.059) Total $ Modification of Capital Additions Tracking Account and SRBA SCE will modify the Capital Additions Tracking Account and SRBA to: (1) include the $ million of capital expenditures determined to be contained in current rates; (2) compare the authorized amount with the recorded capital expenditures including corporate overheads capped at $900 million; and (3) convert the difference, to the extent that recorded capital expenditures exceed the authorized amount of $ million, to a revenue requirement to be recorded as a Recoverable Cost in the Settlement Rates Balancing Account (SRBA). No cost information is required for this advice filing. This advice filing will not increase any rate or charge, cause the withdrawal of service, or conflict with any other schedule or rule. 2 To calculate the authorized transmission capital expenditures the amount will be prorated using the 1998 FERC rate case amount for eight months and the 2002 FERC rate case amount for four months.

5 ADVICE 1622-E (U 338-E) May 17, 2002 EFFECTIVE DATE This advice filing will become effective on the 40 th calendar day after the date filed, which is June 26, NOTICE Anyone wishing to protest this advice filing may do so by letter via U.S. Mail, facsimile, or electronically, any of which must be received by the Energy Division and SCE no later than 20 days after the date of this advice filing. Protests should be mailed to: IMC Program Manager Energy Division California Public Utilities Commission 505 Van Ness Avenue, Room 4002 San Francisco, California Facsimile: (415) jjr@cpuc.ca.gov Copies should also be mailed to the attention of the Director, Energy Division, Room 4004 (same address above). In addition, protests and all other correspondence regarding this advice letter should also be sent by letter and transmitted via facsimile or electronically to the attention of: Akbar Jazayeri Director of Revenue and Tariffs Southern California Edison Company 2244 Walnut Grove Avenue, Rm. 303 Rosemead, California Facsimile: (626) Emelyn.Lawler@sce.com

6 ADVICE 1622-E (U 338-E) May 17, 2002 Bruce Foster Vice President of Regulatory Operations Southern California Edison Company 601 Van Ness Avenue, Suite 2040 San Francisco, California Facsimile: (415) Bruce.Foster@sce.com There are no restrictions on who may file a protest, but the protest shall set forth specifically the grounds upon which it is based and shall be submitted expeditiously. In accordance with Section III, Paragraph G, of General Order No. 96-A, SCE is furnishing copies of this advice filing to the interested parties shown on the attached service list and A Address change requests to the attached GO 96-A Service List should be directed to Emelyn Lawler at (626) or by electronic mail at Emelyn.Lawler@sce.com. For changes to all other service lists, please contact the Commission s Process Office at (415) or by electronic mail at ven@cpuc.ca.gov. Further, in accordance with Public Utilities Code Section 491, notice to the public is hereby given by filing and keeping the advice filing open for public inspection at SCE s corporate headquarters. To view other SCE advice letters filed with the Commission, log on to SCE s web site at and choose Regulatory Info Center/Advice Letters. For questions, please contact Karen Salvato at (626) or by electronic mail at Karen.Salvato@sce.com. Southern California Edison Company AJ:ks/eml Enclosures Akbar Jazayeri

7 Appendix A Southern California Edison Company Proposal to Implement Capital Additions Provision of the Settlement Agreement Background Section 2.6 of the Settlement Agreement provides that SCE may make capital expenditures above the level contained in current rate levels and recover the revenue requirement on such amount through the PROACT ratemaking structure as a Recoverable Cost. Section 2.6 limits SCE s total capital expenditures to $900 million in a calendar year. In Advice 1586-E (Original PROACT Filing), SCE proposed the establishment of the Capital Additions Tracking Account to track the recorded amount of capital expenditures (up to $900 million) that exceeds the level of capital expenditures reflected in the rates currently authorized by the Commission in order to determine the applicable amount of Capital Addition-related Recoverable Costs. In its Protest to Advice 1586-E, ORA recommended that the Commission specify an expeditious process to define the level of capital expenditures included in current rates. In Resolution E-3765, the Commission ordered SCE to work with ORA, TURN, and Aglet to determine the appropriate process to comply with the capital additions provision of the Settlement Agreement. In addition, Resolution E-3765 requires that SCE make its proposal either through an application or advice letter and that no amounts should be included in the tracking account until the Commission determines the amount that is embedded in current rates. Overview of the Regulatory Process for Capital The regulatory process for capital begins when expenditures are made for costs incurred on various capital-related projects. Plant additions (gross additions) are then developed from those capital expenditures by totaling all the expenditures and adding amounts for overheads. The timing of when a capital expenditure becomes a plant addition (i.e. closed to plant) is based on actual completion dates of various projects. 1 Next, plant additions, net of retirements, (net additions) are added to existing plant-in-service as a part of rate base. A revenue requirement, including depreciation, return and taxes is then calculated on rate base. That revenue requirement is the amount included in rates to be recovered from customers. Proposal to Determine Capital Expenditures in Current Rates In order to implement Section 2.6 of the Settlement Agreement, the amount of capital expenditures contained in current rate levels must be determined for generation, transmission, and distribution assets. For purposes of this determination, SCE assumes that its capital expenditures are equal to its capital additions and that the capital additions tracking mechanism would begin on 1 For rate case purposes, forecast amounts are used for capital expenditures and forecast completion dates determine when the forecast capital additions are included in rate base.

8 Appendix A Southern California Edison Company Proposal to Implement Capital Additions Provision of the Settlement Agreement January 1, 2002 for administrative ease. The derivation of each component is discussed below and the attached spreadsheet shows the corresponding amounts. 1. Generation As ORA acknowledged in its Protest to Advice 1586-E, the determination of generation-related capital additions included in rate levels should be relatively straightforward. SCE proposes to use the capital additions adopted by the Commission in D to be effective January SCE provided a forecast of 2002 generation-related capital additions, with the exception of SONGS 2&3 capital additions, in the URG proceeding that was not contested by any party. This forecast can be used as a proxy for estimating the generation-related amount included in rates. However, based on D , SCE s revenue requirement based on recorded capital additions will be allowed as a Recoverable Cost. Thus, for generation-related capital additions, excluding SONGS 2&3 capital additions, amounts actually recorded will be the amounts assumed to be in current rate levels. For SONGS 2&3, SCE uses the capital additions forecast used in the 1995 GRC. 2. Transmission SCE proposes to use the test year capital additions from SCE s most recent FERC-approved rate case. Thus, until SCE s 2002 FERC rate case is approved and implemented in September 2002, SCE will continue to use the capital additions from SCE s test year 1998 FERC rate case. (Note: This approach is consistent with ORA s proposal included in its Protest to Advice 1586-E.). To derive an annual amount SCE will prorate the capital expenditures using the 1998 FERC rate case capital additions for eight months and the 2002 FERC rate case capital additions for four months. 3. PBR Distribution In its Protest to Advice 1586-E, ORA recognizes that SCE s distribution rates are currently set based on a PBR formula, rather than based on a test year determination, so the amount of authorized capital additions will need to be derived. SCE agrees with this characterization. However, the Commission recently issued D that converted SCE s rate PBR to a revenue requirement PBR. SCE proposes to use recorded 2000 capital additions as the starting point Using recorded 2000 capital additions is appropriate because SCE s distribution PBR performance resulted in no sharing of PBR net revenues for 2000, so it can be assumed that SCE s 2000 PBR rate levels reflect its actual costs including capital additions. The 2000-recorded capital additions would be escalated to year 2002 authorized capital additions based

9 Appendix A Southern California Edison Company Proposal to Implement Capital Additions Provision of the Settlement Agreement on the CPI-X Update Rule. (Note: This approach is consistent with ORA s estimate of the amount of capital additions included in distribution rate levels as provided in revised testimony in the PBR Extension proceeding, except that we propose to use gross plant additions rather than net plant additions. Implementation of Proposal Once the Commission sets the level of capital expenditures (gross capital additions) included in current rate levels, SCE will modify its Capital Additions Tracking Account to operate as follows: 1. On an annual basis determine the difference between 1) capital expenditures (gross capital additions) included in rate levels (as determined above) and 2) recorded capital expenditures including corporate overheads capped at $900 million. 2. To the extent that recorded capital expenditures exceed the amount included in rate levels as determined in step 1 above such amount will be converted to a revenue requirement. 3. The revenue requirement will be recorded as a Recoverable Cost in the Settlement Rates Balancing Account (SRBA).

10 Appendix B Southern California Edison Gross Capital Additions (Capital Expenditures) in 2002 Rate Levels Thousands of Dollars Generation SONGS 2&3 Palo Verde Mohave Four Corners Hydro 1/ 2/ 2/ 2/ 2/ January 1, 2002 September 1, 2002 to August 31, 2002 to December 31, ,600 62,600 12,500 12,500 9,240 9,240 7,920 7,920 21,243 21, , ,503 FERC Transmission 1998 FERC Rate Case 39, FERC Rate Case 84,173 PBR Distribution 2000 Gross Additions 724, ,267 CPI-x for 1.35% 9,778 9,778 CPI-x for 1.76% 12,919 12, Gross Additions 746, ,964 Less Reimbursable Amount Subtotal 900, ,640 3/ (97,059) (97,059) Total 803, ,581 Prorated Amount Assuming the 2002 FERC Rate Case is effective September 1, ,943 1/ Amount based on 1995 GRC forecast (D ). 2/ 2002 estimated amounts included in the URG application. 3/ Estimated amount based on 2000 recorded amounts.

11 Public Utilities Commission 1623-E Attachment A Cal. P.U.C. Sheet No. Title of Sheet Cancelling Cal. P.U.C. Sheet No. Revised E Preliminary Statement Part N Revised E* Revised E Revised E Preliminary Statement Part N Revised E* Revised E* Preliminary Statement Part Z Revised E** Revised E Table of Contents Revised E Revised E Table of Contents Revised E 1

12 Southern California Edison Revised Cal. PUC Sheet No E Rosemead, California Cancelling Revised Cal. PUC Sheet No E* E PRELIMINARY STATEMENT Sheet 7 N. MEMORANDUM ACCOUNTS (Continued) (Continued) 5. Not Used 6. Local Area Revenue Mechanism (LARM) Memorandum Account. The Company shall maintain a Local Area Revenue Mechanism Memorandum Account as authorized by Resolution E The Authorization Date shall be April 12, The purpose of the LARM Memorandum Account is to record all costs resulting from the gas user's tax assessed by the City of El Segundo for gas purchased by the Company to generate electricity at the El Segundo Generating Station. Such costs shall include, but not be limited to, the utility gas user's taxes recorded by the Company and recorded administrative and general expense associated with implementing the gas user's tax. Disposition of amounts in this account shall be determined in the annual Revenue Adjustment Proceeding (RAP) or other proceeding expressly authorized by the Commission. 7. Capital Additions Tracking Account The purpose of the Capital Additions Tracking Account is to track the recorded amount of capital expenditures (up to $900 million per calendar year) that exceeds the level of capital expenditures reflected in currently authorized CPUC rates, in accordance with Section 2.6 of the Settlement Agreement. 1/ Section 2.6 of the Settlement Agreement states: SCE shall be entitled to make capital expenditures above the level contained in current rates. To the extent such expenditures do not exceed $900 million in a calendar year, then the revenue requirement until the effectiveness of retail rates established by SCE s next General Rate Case that is associated with capital expenditures above the level contained in current rates, shall be Recoverable Costs. (L) (L) (T) 1/ The October 2, 2001 Settlement Agreement between SCE and the CPUC regarding the cost recovery of certain Procurement-Related Obligations. (L) (L) (Continued) (To be inserted by utility) Issued by (To be inserted by Cal. PUC) Advice 1622-E John R. Fielder Date Filed May 17, 2002 Decision Senior Vice President Effective Jun 26, H12 Resolution E-3765

13 Southern California Edison Revised Cal. PUC Sheet No E Rosemead, California Cancelling Revised Cal. PUC Sheet No E* PRELIMINARY STATEMENT Sheet 8 N. MEMORANDUM ACCOUNTS (Continued) (Continued) 7. Capital Additions Tracking Account (Continued) The amount of capital expenditures embedded in SCE s current CPUC-authorized rates is estimated to be $ million. This amount will be trued up for recorded generation capital expenditures, except for SONGS 2&3 capital expenditures. Entries to this account shall be made as follows: a. On an annual basis determine the difference between 1) capital expenditures (gross capital additions) included in rate levels; and 2) recorded capital expenditures, including corporate overheads, capped at $900 million. b. To the extent that recorded capital expenditures exceed authorized capital expenditures such amount will be converted to a revenue requirement. c. The revenue requirement will be recorded as a Recoverable Cost in the Settlement Rates Balancing Account (SRBA). (L) (T) (T) (N) (N) 8. CDWR Charges and Net Short Procurement Costs Tracking Account The purpose of the CDWR Charges and Net Short Procurement Costs Tracking Account is to track the difference between: (1) Stabilized CDWR Charges, and (2) the sum of SCE s Net Short Procurement Costs and CDWR Charges. This difference can be used to determine if an increase or decrease to Settlement Rates during the Rate Repayment Period is needed, in accordance with Section 1.1.w of the Settlement Agreement and Resolution E Changes in Settlement Rates shall be determined in an appropriate CPUC proceeding. Interest expense shall not accrue in this tracking account. a. Definitions (1) CDWR CDWR is the California Department of Water Resources. (2) CDWR Charges CDWR Charges are retail charges for electricity that CDWR sells, and has sold, to retail customers in SCE s service territory, including associated financing costs. (L) (Continued) (To be inserted by utility) Issued by (To be inserted by Cal. PUC) Advice 1622-E John R. Fielder Date Filed May 17, 2002 Decision Senior Vice President Effective Jun 26, H13 Resolution E-3765

14 Southern California Edison Revised Cal. PUC Sheet No E* Rosemead, California Cancelling Revised Cal. PUC Sheet No E** PRELIMINARY STATEMENT Sheet 6 (Continued) Z. SETTLEMENT RATES BALANCING ACCOUNT (Continued) 5. Recoverable Costs (Continued) h. Debit entry equal to amounts recorded in the Public Purpose Programs Adjustment Mechanism (PPPAM) Balancing Account; i. Debit entry equal to amounts recorded in the PBR Exclusions Distribution Adjustment Mechanism (EDAM) Balancing Account; j. Debit entry equal to amounts recorded in the Nuclear Decommissioning Adjustment Mechanism (NDAM) Balancing Account; k. Debit entry equal to amounts recorded in the Employee-Related Balancing Account (ERBA); l. Debit entry equal to amounts recorded in the Risk Management Memorandum Account ( Hedging costs), after approval by the CPUC; m. A debit entry equal to amounts recorded in the Commission Directed Costs Tracking Account; n. A debit entry equal to the revenue requirement associated with capital expenditures above the level contained in current rates as tracked in the Capital Additions Tracking Account. o. Debit or credit entry equal to Rate Reduction Bond (RRB) Memorandum Account activity; p. A credit entry equal to the amortization of amounts recorded in the Demand Reduction and Self-Generation Program Incremental Costs Balancing Account; q. Other amounts as expressly authorized by the CPUC. (N) (N) (T) (T) (T) Interest expense shall not be recorded in the SRBA since the net monthly activity (whether positive or negative) is transferred to the PROACT. (Continued) (To be inserted by utility) Issued by (To be inserted by Cal. PUC) Advice 1622-E John R. Fielder Date Filed May 17, 2002 Decision Senior Vice President Effective Jun 26, H12 Resolution E-3765

15 Southern California Edison Revised Cal. PUC Sheet No E Rosemead, California Cancelling Revised Cal. PUC Sheet No E TABLE OF CONTENTS Sheet 1 Cal. P.U.C. Sheet No. TITLE PAGE E TABLE OF CONTENTS - RATE SCHEDULES E TABLE OF CONTENTS - LIST OF CONTRACTS AND DEVIATIONS E TABLE OF CONTENTS - RULES E TABLE OF CONTENTS - BASELINE REGIONS E TABLE OF CONTENTS - SAMPLE FORMS E E PRELIMINARY STATEMENT: A. Territory Served E B. Description of Service E C. Procedure to Obtain Service E D. Establishment of Credit and Deposits E E. General E F. Symbols E G. Gross Revenue Sharing Mechanism E E H. Baseline Service E I. NOT IN USE... J. Employee-Related Balancing Account E K. Nuclear Decommissioning Adjustment Mechanism E L. Performance-Based Ratemaking Exclusions Distribution Adjustment Mechanism E M. Income Tax Component of Contributions E N. Memorandum Accounts E E E E E E E E E O. California Alternative Rates for Energy (CARE) Adjustment Clause E P. Optional Pricing Adjustment Clause (OPAC) E (T) (T) (Continued) (To be inserted by utility) Issued by (To be inserted by Cal. PUC) Advice 1622-E John R. Fielder Date Filed May 17, 2002 Decision Senior Vice President Effective Jun 26, H9 Resolution E-3765

16 Southern California Edison Revised Cal. PUC Sheet No E Rosemead, California Cancelling Revised Cal. PUC Sheet No E TABLE OF CONTENTS Sheet 2 (Continued) Cal. P.U.C. Sheet No. PRELIMINARY STATEMENT: (Cont'd) Q. Demand Side Management Adjustment Clause (DSMAC) E E R. NOT IN USE... S. Envest SCE Pilot Program Adjustment Mechanism (EPPAM) E E T. Electric and Magnetic Fields Measurement Program E U. Electric Vehicle Adjustment Clause (EVAC) E V. Hazardous Substance Cleanup Cost Recovery Mechanism E E W. Competition Transition Charge Responsibility (CTC) E E X. Research, Development and Demonstration Adjustment Clause (RDDAC) E Y. Economic Development Adjustment Clause (EDAC) E Z. Settlement Rates Balancing Account E AA. Demand Reduction and Self-Generation Program Incremental Cost (DRSGPIC) E BB. Nongeneration Base Rate Adjustment Mechanism (NBRAM) E E CC. Base Rate Performance Mechanism (BRPM) E E DD. Cost Of Capital Trigger Mechanism E EE. Electric Deferred Refund Account (EDRA) E FF. Public Purpose Programs Adjustment Mechanism E GG.Energy Efficiency Program Adjustment Mechanism (EEPAM E HH. Low Income Energy Efficiency Program Adjustment Mechanism (LIEEPAM) E II. NOT IN USE... JJ. NOT IN USE... KK. Emergency Procurement Surcharge Balancing Account (EPSBA) E LL. NOT IN USE... MM. Procurement Related Obligations Account (PROACT) (T) (Continued) (To be inserted by utility) Issued by (To be inserted by Cal. PUC) Advice 1622-E John R. Fielder Date Filed May 17, 2002 Decision Senior Vice President Effective Jun 26, H9 Resolution E-3765

17 Craig M. Keen Manager of Tariffs November 25, 2002 California Public Utilities Commission 505 Van Ness Avenue, Room 4005 San Francisco, CA Attn: Jerry Royer Energy Division Dear Mr. Royer: Re: Substitute Sheets for Advice 1622-E Enclosed is an original and six copies of Attachment A (in pertinent part) and substitute Sheet No E* 1 for Advice 1622-E. This substitute sheet is necessary to reflect approved tariff changes from Advice 1613-E. Advice 1622-E contains a tariff sheet common to Advice 1613-E, and although Advice 1613-E was filed and effective before Advice 1622-E, a substitute sheet was submitted for Advice 1613-E on September 5, 2002, after the approval of Advice 1622-E. As a result, the tariff changes implemented by Advice 1613-E now need to be reflected as well in Advice 1622-E. These changes help to ensure that all appropriate, approved revisions are contained in the affected tariff sheet. Please replace the enclosed sheets in your master Advice Letter 1622-E file. If you have any questions, please contact Reneé Vazquez at (626) Sincerely, Enclosures 1622-Esub.doc 1 Asterisk denotes a substituted sheet. P.O. Box Walnut Grove Ave. Rosemead, California (626) Fax (626)

18 bcc: 1622-E file (Pastehl Kaballah) Phil Durgin Ruby Galvan Craig Keen Emelyn Lawler Darrah Morgan Debbie Nunes Renee Vazquez Jim Yee P.O. Box Walnut Grove Ave. Rosemead, California (626) Fax (626)