Southern California Edison Revised Cal. PUC Sheet No E Rosemead, California (U 338-E) Cancelling Revised Cal. PUC Sheet No.

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1 Southern California Edison Revised Cal. PUC Sheet No E Rosemead, California (U 338-E) Cancelling Revised Cal. PUC Sheet No E PRELIMINARY STATEMENT Sheet 1 Safety and Reliability Investment Incentive Mechanism (SRIIM) 1. Purpose The Safety and Reliability Investment Incentive Mechanism (SRIIM) shall determine the difference between: (1) actual (recorded) safety and reliability-related capital additions; and (2) the authorized level of safety and reliability-related capital additions in Decision (D.) Additionally, the SRIIM will track the staffing target. If by the end of 2017, SCE has fully implemented its safety and reliability-related capital spending and maintained a staffing target greater than or equal to the 2012 year-end levels 2,225 SRIIM Employee Target positions, no customer refunds shall be required. If an overcollection in revenue requirement is determined from (1) the authorized reliability-related capital additions being greater than recorded adjusted capital additions or (2) from a net short fall in the SRIIM Employee Target, the associated revenue requirement shall be refunded to customers. 2. Definitions a. SRIIM Capital Additions For purposes of recording entries in the SRIIM, Capital Additions shall be defined as Gross Capital Additions plus associated Cost of Removal. b. Authorized SRIIM Safety and Reliability-Related Capital Expenditures and Capital Additions The SRIIM Safety and Reliability-Related Capital Expenditures are the capitalrelated costs specifically identified in preserving long-term electric service reliability for customers. Table A shows the amounts adopted by D for each of the relevant categories. (D) Table A - Authorized SRIIM Expenditures 1/ Nominal $ Worst Circuit Rehabilitation 104, , ,484 Underground Cable Life 26,892 27,430 27,979 CIC Replacement 75,452 76,961 78,500 Underground Switch 9,625 9,818 10,014 Underground Structure Replacement 57,750 58,905 60,083 Circuit Breaker Replacements 24,375 24,863 25,360 Substation Transformer Replacement 48,328 49,294 50,280 Total SRIIM Expenditures 346, , ,700 1/ 2016 and 2017 expenditures are escalated annually by 2% per the Post Test Year mechanism adopted in D Advice 3314-E R.O Nichols Date Filed Nov 25, 2015 Decision Senior Vice President Effective Jan 1, C12

2 Southern California Edison Revised Cal. PUC Sheet No E Rosemead, California (U 338-E) Cancelling Revised Cal. PUC Sheet No E PRELIMINARY STATEMENT Sheet 2 Safety and Reliability Investment Incentive Mechanism (SRIIM) 2. Definitions The associated authorized capital additions including cost of removal are shown in Table B. (D) Table B - Authorized SRIIM Capital Additions 2/ Nominal $ Total SRIIM Capital Additions 366, , ,258 2/ 2016 and 2017 additions are escalated annually by 2% per the Post Test Year mechanism adopted in D The capital expenditures identified in Table A and the associated cumulative capital additions forecast to be added to plant-in-service by December 31, 2017 (plus associated cost of removal) are subject to SRIIM. c. Authorized SRIIM High Priority Exception Expenditures and Capital Additions The High Priority Capital Expenditures are expenditures identified as affecting the SRIIM categories above (section 2.b). The High Priority capital additions are used to adjust the recorded SRIIM Capital Additions. The authorized SRIIM High Priority Capital Expenditures and associated Capital Additions amounts reflect expenditures adopted in D , including cost of removal, and are shown in Tables C and D. (D) Table C - Authorized High Priority Expenditures 3/ Nominal $ Claims 25,810 26,327 26,853 Customer Growth 303, , ,231 Storms 46,492 47,421 48,370 Total High Priority Expenditures 376, , ,454 3/ 2016 and 2017 expenditures are escalated annually by 2% per the Post Test Year mechanism adopted in D Advice 3314-E R.O Nichols Date Filed Nov 25, 2015 Decision Senior Vice President Effective Jan 1, C14

3 Southern California Edison Revised Cal. PUC Sheet No E Rosemead, California (U 338-E) Cancelling Revised Cal. PUC Sheet No E PRELIMINARY STATEMENT Sheet 3 Safety and Reliability Investment Incentive Mechanism (SRIIM) 2. Definitions Table D - Authorized High Priority Capital Additions 4/ Nominal $ Total High Priority Capital Additions 259, , ,484 4/ 2016 and 2017 additions are escalated annually by 2% per the Post Test Year mechanism adopted in D d. Recorded SRIIM Capital Additions Adjustment The difference between the authorized High Priority exception Capital Additions and recorded High Priority categories Capital Additions can be used to offset underspending the SRIIM Capital Additions. Overspending in High Priority categories can offset underspending in SRIIM categories if two conditions are true. (1) Overspending in High Priority categories exceeds 10% of the adopted forecast for those categories (2) SCE s rate of return on rate base for the period does not exceed the authorized rate of return That is, if recorded High Priority Capital Additions exceed amounts authorized by the Commission and subject to satisfying Conditions 1 and 2 described above (Section 2.d.), the SRIIM capital target would be adjusted by this amount. However, pursuant to D , the first 10% of the overspending on High Priority categories cannot be used to offset underspending in the core SRIIM categories. e. Adjusted Recorded SRIIM Capital Additions Adjusted recorded SRIIM Capital Additions shall be the sum of the Recorded SRIIM Capital Additions (section 2a) and the Recorded SRIIM Capital Additions Adjustment (section 2d). (L) 3C8

4 Southern California Edison Original Cal. PUC Sheet No E Rosemead, California (U 338-E) Cancelling Revised Cal. PUC Sheet No E PRELIMINARY STATEMENT Sheet 4 Safety and Reliability Investment Incentive Mechanism (SRIIM) 2. Definitions f. Cumulative Shortfall (1) The Capital Additions Cumulative Shortfall (if any) is the difference between the Authorized SRIIM capital additions (including associated cost of removal) and the Adjusted Recorded SRIIM Capital Additions from January 1, 2015 through December 31, If there is a cumulative shortfall at the end of SRIIM, SCE shall return to customers the accumulated capital-related revenue requirement plus interest. (2) The SRIIM Employee Target Shortfall (if any) is the result of the net shortfall in SRIIM job categories from the 2012 year-end headcount level of 2,225 employees through December 31, If there is a cumulative shortfall at the end of SRIIM, SCE shall return to customers the O&M related revenue requirement plus interest. If an employee shortfall develops in the fourth quarter of 2017, SCE will have the first quarter of 2018 to address the shortfall. (L) (L) 4C10

5 Southern California Edison Revised Cal. PUC Sheet No E Rosemead, California (U 338-E) Cancelling Revised Cal. PUC Sheet No E PRELIMINARY STATEMENT Sheet 5 (L) Safety and Reliability Investment Incentive Mechanism (SRIIM) 2. Definitions g. SRIIM Employee Target (1) The SRIIM Employee Target is set to equal the 2012 year-end headcount of 2,225 employees for the combined SRIIM job categories. The SRIIM SCE Employee Target shall be calculated as the difference between the number of SCE Employees working in the SRIIM job categories in December 2017 and the number of SCE Employees working in the SRIIM job categories in December (2) The SRIIM Job Categories shall include the following Distribution: E-Crew, Lineman, Sr. Cable Splicer, Apprentice Lineman, Groundman A, Groundman; Transmission: Lineman, Groundman A, Apprentice Lineman; Senior Patrolman; Troubleman; System Operator; Substation Operator; Electrician: Substation, Apprentice Substation; Technician: Test, Test Supervision working in these job classifications. 5C11

6 Southern California Edison Revised Cal. PUC Sheet No E Rosemead, California (U 338-E) Cancelling Revised Cal. PUC Sheet No E PRELIMINARY STATEMENT Sheet 6 (L) Safety and Reliability Investment Incentive Mechanism (SRIIM) 2. Definitions h. SRIIM Employee Target Shortfall Calculations (1) Net Shortfall is less than 50 If SCE s net shortfall in the SRIIM Employee Target positions is less than 50, SCE will return $20,000 per position under 50 to customers. (2) Net Shortfall is greater than 50 If SCE s net shortfall in the SRIIM Employee Target positions is greater than 50, SCE will return an additional amount of $1,000,000, plus $80,000 for each position greater than 50, to customers. 6C11

7 Southern California Edison Revised Cal. PUC Sheet No E Rosemead, California (U 338-E) Cancelling Revised Cal. PUC Sheet No E PRELIMINARY STATEMENT Sheet 7 (L) Safety and Reliability Investment Incentive Mechanism (SRIIM) 2. Definitions i. Interest Rate The Interest Rate shall be the most recent annual interest rate on three month Financial or Non-financial Commercial Paper rate (prime, three months) published monthly in the Federal Reserve Statistical Release H.15, whichever is available on the first day of the month. j. CPUC Jurisdictional Factor The distribution O&M-related CPUC jurisdictional factor reflected in D is percent. k. Revenue Requirement Multiplier The Revenue Requirement Multiplier shall reflect SCE s most current Commissionauthorized factors that are used in calculating a capital-related revenue requirement including depreciation rates, rate of return on rate base, and income tax rates. For 2015, the annual Revenue Requirement Multiplier shall be set at 16.27%. l. Effective Date The effective date of SRIIM is January 1, Determining a Capital Related SRIIM Base Revenue Requirement Reduction Amount If a calculation of SRIIM Capital Additions base revenue requirement reduction amount is necessary, that is if a Capital Additions cumulative shortfall exists, the base revenue requirement reduction amount shall be determined as follows: a. The recorded adjusted SRIIM Capital Additions cumulative shortfall shall be allocated to each month during the period January 1, 2015 through December 31, 2017 evenly after it has been CPUC jurisdictionalized by applying the applicable distribution capital-related CPUC Jurisdictional Factor; b. A monthly revenue requirement balance shall be determined for each month during the period January 1, 2015 through December 31, 2017 by multiplying the monthly cumulative difference between the authorized and the adjusted recorded SRIIM Capital Additions by the applicable monthly Revenue Requirement Multiplier; If SCE s recorded Capital Additions exceed authorized levels, SCE shall not recover from customers any additional base revenue requirement associated with its recorded Capital Additions; c. Monthly interest shall be added by applying the Interest Rate to the average of the beginning and ending monthly revenue requirement balances; d. The Distribution-related revenue requirement shall be credited to the Distribution Sub-account of the BRRBA to be returned to customers. 7C10

8 Southern California Edison Revised Cal. PUC Sheet No E Rosemead, California (U 338-E) Cancelling Revised Cal. PUC Sheet No E PRELIMINARY STATEMENT Sheet 8 (L) Safety and Reliability Investment Incentive Mechanism (SRIIM) 4. Determining SRIIM Employee Target Related Revenue Reduction Amount If a calculation of the SRIIM Employee Target positions reduction is necessary, that is the SRIIM Employee Target cumulative shortfall exists, the reduction amount shall be determined as follows: a. If SRIIM Employee Target net shortfall in positions is less than 50, multiply the shortfall by $20,000. b. If SRIIM Employee Target net shortfall in positions is greater than 50, multiply the difference between 50 and the amount greater than 50 by $80,000, plus $1,000,000. c. The amount determined in (a) or (b) above shall be allocated each month during the period January 1, 2015 through December 31, 2017 evenly. d. The monthly revenue requirement amount shall be CPUC jurisdictionalized by applying the distribution O&M CPUC jurisdictional factor. e. Monthly interest shall be added by applying the Interest Rate to the average of the beginning and ending monthly revenue requirement balances; 5. SRIIM Report By April 2018, SCE shall submit an advice letter to the Commission that reports SCE s adjusted recorded SRIIM capital additions for calendar years 2015 through 2017 and includes support for the calculation of a base revenue requirement reduction amount (if any). The advice letter will include all necessary information and supporting workpapers for the Commission to review and approve SCE s post test year SRIIM Capital Additions rate recovery. The advice letter will also include the recorded number of SRIIM Employee Target positions for calendar years 2015 through 2017 and shall include the SRIIM SCE Employee Target and include support for the calculation of a reduction amount (if any). If an employee shortfall develops in the fourth quarter of 2017, SCE will have the first quarter of 2018 to address the shortfall. SCE will inform the Commission by letter if it intends to utilize the timing modification. SCE will also include all necessary information and supporting workpapers for the Commission to review and approve. 8C10