(U 338-E) 2018 General Rate Case A Workpapers. RO-Cost Escalation SCE-09 Volume 01, Chapter VII

Transcription

1 (U 338-E) 208 General Rate Case A Workpapers RO-Cost Escalation SCE-09 Volume 0, Chapter VII September 206

2 Workpaper Southern California Edison / 208 GRC VII. COST ESCALATION A. Purpose and Scope This chapter estimates the effects of inflation on the labor, non-labor, and capital costs of an electric utility in California. In this chapter SCE explains and supports the escalation rates used to deflate recorded O&M and administrative and general (A&G) recorded expenses from and forecast O&M and A&G expenses for Next, SCE explains and supports the escalation rates used to forecast the inflationary effects on capital expenditures. Section of this chapter summarizes the O&M and A&G escalation rates that SCE developed for use in this proceeding. Section 2 provides the methodology and sources SCE used to develop the O&M and A&G escalation rates. In this section, SCE presents the escalation rates developed for Palo Verde O&M escalation. In Section 3, SCE summarizes and explains the capital escalation rates used in this proceeding. Last, in Section 4, SCE presents testimony that demonstrates the difference between IHS Global Insight escalation rate components and the components used to estimate CPI-U and how CPI-U is an inappropriate index to use for estimating the inflation impacts upon an electric utility in California.. O&M and A&G Escalation Rates SCE estimates the labor escalation rate for all of SCE company-wide. SCE estimates the non-labor escalation rates using the following functional categories: steam, hydro, other power production, transmission, distribution, customer service and information (CS&I) and A&G. These escalation rates are summarized in the below Labor and Non-Labor sections. a) Labor Labor price indexes and escalation rates are shown in Table VII-28 below. 8 8 Refer to WP SCE-09 Vol., Chapter VII, p

3 2 Workpaper Southern California Edison / 208 GRC Table VII-28 Labor Escalation Rates Line No Labor Escalation Percent Change 3.6% 3.27% 2.95%.84%.5% 2.78% 3.03% 2.82% 2.79% 2.74% 2 Inflation Index (205 = ) Deflation Index (205 = ) b) Non-labor Non-labor price indexes and escalation rates are shown in Table VII-29 below Refer to WP SCE-09 Vol., Chapter VII, p

4 Workpaper Southern California Edison / 208 GRC Table VII-29 Non-labor O&M Escalation Rates 2. The following sections explain how SCE used this information to develop labor and non- 2 3 labor escalation rates for the recorded period (20-205) and the forecast period ( ). a) Labor Escalation SCE developed the labor escalation rates in Table VII-28 using three sources of 5 6 O&M and A&G Methodology and Estimates information: a) Average Hourly Earnings (AHE) based on recorded SCE payroll data, including hours worked and wages paid. 80 3

5 4 Workpaper Southern California Edison / 208 GRC b) Collective Bargaining Agreements based on collective bargaining agreements that specify straight time wage increases for represented employees. c) IHS Global Insight Power Planner ( Power Planner ) forecasts of labor escalation rates for U.S. electric utilities. () Recorded Period Recorded SCE Payroll Data SCE recorded labor escalation is based on calculating actual annual average annual earnings (AHE) at the employee level across the company. The AHE calculation is based on data that includes actual hourly wages paid and corresponding hours for straight time, overtime, and double time labor. To calculate the AHE, effective hours are calculated as the sum of: (i) straight-time hours, (ii) overtime hours multiplied by one and one-half, and, (iii) double time hours multiplied by two. Wages are summarized across three categories and are then divided by effective hours worked to calculate average hourly earnings. This method removes the effect of year-to-year variations in overtime and double-time hours worked. (2) Forecast Period (a) Collective Bargaining Agreements For 206 and 207, SCE s represented employees will receive a wage increase of 3.24 percent based on the weighted-average of the two collective bargaining agreements for the International Brotherhood of Electrical Workers (IBEW) and the Utility Workers Union of America (UWUA). For 206 and 207, the UWUA collective bargaining agreement has a wage increase of 3% and the IBEW collective bargaining agreement has a wage increase of 3.25%. For 208 and 209, only the UWUA has a collective bargaining agreement in place during the three-year cycle that this application covers, and the wage increase is 2.75%. For 2020, the represented employee labor escalation rate is based on IHS Global Insight forecasts, as explained below. (b) Global Insight Forecasts of Labor Escalation 83 SCE purchases economic projection data from IHS Global Insight, one of the largest and most respected economic forecasting services in the world. The IHS Global Insight Power Planner publication provides projections of wage increases for electric power generation workers, transmission and distribution workers, managers and administrators, and professional and technical 83 Refer to WP SCE-09 Vol., Part VII, p. 6. 8

6 Workpaper Southern California Edison / 208 GRC workers. The Power Planner labor cost projections are national projections and are not specific to the Western US or Southern California. For 206, SCE employees have received an average wage increase of 2.78% as noticed in SCE s 206 Post-Test Year filing. This increase is based upon a weighted average of the current collective bargaining agreements and forecast labor escalation rates provided by IHS Global Insights Power Planner available in November This labor escalation methodology is consistent with the forecast period, with only the forecast vintage (November 205) being the difference. For , labor rates have not been determined. To estimate labor escalation for these years, SCE constructed a weighted average of forecast labor escalation rates provided by IHS Global Insights Power Planner 85 publication and the ratified collective bargaining agreements. In order to properly weight the different labor escalation forecasts from IHS Global Insight, and in the case of collective bargaining agreements, a table is provided to properly weight the different labor groups and labor escalation rates. The weighting is based on the total wages paid by the specified employee categories. Table VII-30 below illustrates the categories of our workers and the share of total wages and salaries that they earn. These are the weights to construct the weighted average escalation rates for IHS Global Insight Power Planner, Quarter 3, IHS Global Insight Power Planner, Quarter 4, Refer to WP SCE-09 Vol., Part VII, pp

7 6 Workpaper Southern California Edison / 208 GRC Table VII-30 Labor Escalation Weighting Line No. Employee Category IHS Global Insight Share of Total Variable IHS Global Insight Variable Description Wages Utility Price and Wage Indicators, AHE, Physical Workers CEU Transmission and Distribution Workers % Utility Price and Wage Indicators, AHE, Clerical Workers CEU Transmission and Distribution Workers 3.390% Managers and Employment Cost Index, ECIPWMBFNS 3 Administrators Managers and Administrators % Professional and US, Wages and Sal, Private, Professional, ECIPWPSTNS 4 Technical Workers Scientific, Technical, 3.737% 5 Total % b) Non-labor Escalation () Global Insight Indexes For recorded and forecast non-labor escalation, SCE is using indexes provided by the IHS Global Insight Power Planner 87 publication. Power Planner provides indexes of O&M combined materials and services costs by the functional O&M categories of steam, nuclear, hydro, other power production, transmission, distribution, customer accounts, customer service information and administrative and general. To provide relevant indexes, SCE re-bases the indexes to equal.000 in 205, the last recorded year. SCE s non-labor indexes and non-labor escalation rates are shown above in Table VII-29. (2) Blended O&M Escalation For Palo Verde 88 SCE does not operate Palo Verde Nuclear Generation Station (Palo Verde), which is operated by Arizona Public Service (APS). APS bills SCE for its share of operating costs, which include both labor and non-labor. SCE s books payments sent to APS as a non-labor expense. To properly escalate these O&M costs, SCE blends our non-labor escalation and labor escalation by weighting and escalating the labor and non-labor costs to arrive at a Palo Verde-blended O&M escalation rate. The current labor weighting for Palo Verde is 57.43%; the non-labor weighting is 42.57%. In order to provide relevant indexes, SCE re-bases the indexes to equal.000 in 205, so the base year of the index is equal 87 IHS Global Insight Power Planner, Quarter 4, Refer to WP SCE-09 Vol., Chapter VII, pp

8 Workpaper Southern California Edison / 208 GRC 7 2 to.000 during the last recorded year (205). SCE illustrates the Palo Verde escalation rates below in Table VII-3. Table VII-3 Palo Verde Blended O&M Escalation Rates Palo Verde O&M 3.8% 2.23%.49%.76%.66%.66% 2.65% 2.73% 2.62% 2.45% Inflation Index Deflation Index (3) Health Care Escalation In Exhibit SCE-06, Volume 02, Chapter VIII, SCE presents estimates of test year health care costs that do not incorporate the non-labor escalation rates discussed here. Because SCE treats health care cost trends separately, the effect of health care changes is removed from the A&G non-labor escalation rates in this chapter. This was done by requesting adjusted A&G non-labor escalation rates from Global Insight Power Planner that specifically exclude the effect of health care cost escalation. Therefore, there is no double-counting of escalation between the health care escalation rates in Exhibit SCE-06, Volume 02, Chapter VIII and the escalation rates illustrated within this chapter. 3. Capital Cost Escalation a) Purpose This section presents our forecast capital escalation rates. Forecast capital escalation rates for all variables, except General Plant, are based on the IHS Global Insight Power Planner Construction Costs Indexes. 89 Table VII-32 summarizes the capital escalation rates developed for this case. 90 SCE estimated capital escalation rates for the following functional categories: Transmission Distribution Generation - Hydro Generation Steam (Four Corners - Plateau) Generation Other (Gas Peakers and Mountainview) 89 IHS Global Insight Power Planner, Quarter 4, Refer to WP SCE-09 Vol., Chapter VII, p

9 8 Workpaper Southern California Edison / 208 GRC General Plant Nuclear Palo Verde b) Capital Escalation Rates SCE s capital escalation rates, except for General Plant, are based on the IHS Global Insight forecasts of the Handy-Whitman Index of Public Utility Costs. 9 SCE purchases economic projection data from IHS Global Insight, one of the largest and most respected economic forecasting services in the world. For , SCE used the IHS Global Insight Forecast of Handy-Whitman Construction Cost Indexes for the Pacific and Plateau Region, 92 which directly forecast the indexes included in the Handy-Whitman Construction Cost Indexes Pacific and Plateau Region indexes referenced above. To provide relevant indexes, SCE re-bases the indexes to equal.000 in 205, so the base year of the index is equal to.000 during the last recorded year (205). For General Plant capital escalation, SCE built an index based to estimate General Plant inflation. 93 The weighting of the General Plant cost categories that comprise the General Plant index is based on recorded General Plant costs for 203 through 205 as recorded in SCE s FERC Form. The General Plant cost categories are assigned the appropriate IHS Global Insight variables 94 and weighted by the General Plant recorded costs for 203 through 205. SCE re-bases the indexes to equal.000 in 205, so the base year of the index is equal to.000 during the last recorded year (205). 9 The Handy-Whitman Indexes are published by Whitman, Requardt, and Associates, LLP, located in Baltimore, Maryland, as they have been since 924. SCE has used Handy-Whitman indexes in various General Rate Cases. Pacific Gas and Electric Company, San Diego Gas & Electric Company and Southern California Gas Company use various Handy-Whitman indexes in constructing their respective escalation indexes in their General Rate Cases. 92 IHS Global Insight Power Planner Quarter Cost Trends of Electric Utility Construction: Pacific Region, Table A Refer to WP SCE-09 Vol., Chapter VII p IHS Global Insight Long Term Macro Forecast Quarter 4, 205, variables JPGDP, JPIFNREEMISCB, JPIFNRESXF, WPI, WPI2, and WPI4. 85

10 Workpaper Southern California Edison / 208 GRC 9 Table VII-32 Capital Escalation Rates Line no Capital Escalation Total Steam Production Plant.80%.0%.99% 2.72% 2.5% 2.54% 2 Inflation Index Deflation Index Total Hydraulic Production Plant.73%.82% 2.40% 2.40% 2.45% 2.40% 6 Inflation Index Deflation Index Total Other Production Plant 2.98% 2.85% 2.5%.65% 2.% 2.64% 0 Inflation Index Deflation Index Total Transmission Plant.45%.37% 2.22% 2.47% 2.63% 2.62% 4 Inflation Index Deflation Index Total Distribution Plant 2.72%.89% 2.08% 2.52% 3.4% 3.8% 8 Inflation Index Deflation Index General Plant 0.99% 0.88%.42%.88%.82%.8% 22 Inflation Index Deflation Index Total Nuclear Palo Verde 2.03%.05%.90% 2.52% 2.55% 2.46% 26 Inflation Index Deflation Index Handy-Whitman Public Utility Construction Cost, IHS Global Insight Forecasts, and SCE Labor Indexes are More Appropriate Indexes to Estimate Utility Cost Escalation than CPI-U The Handy-Whitman Index of Public Utility Construction Costs, IHS Global Insight Forecasts, and SCE labor indexes are the most appropriate cost indexes to forecast cost escalation when estimating O&M and capital cost escalation for an electric utility in California. The Handy-Whitman Index of Public Utility Construction Costs and IHS Global Insight forecasts O&M and capital cost escalation have been relied upon by the Commission in numerous regulatory proceedings regarding O&M 86

11 0 Workpaper Southern California Edison / 208 GRC and capital escalation, and are a reliable source for historical utility construction cost information. 95 The Handy-Whitman index utilized in this chapter is based on actual construction cost data for utility capital projects in the Pacific region. SCE bases the labor cost escalation index on the actual labor escalation rates SCE incurred during the recorded period (20 205). For the forecast period ( ), SCE bases its labor cost escalation forecast on SCE s represented employees contractual wage increase and Global Insight Power Planner labor cost forecasts for the forecast period ( ). CPI-U is based on costs that are unrelated to the costs of performing utility capital projects and performing utility O&M in California and Arizona. According to the U.S. Bureau of Labor Statistics (BLS) website, 96 The Consumer Price Index (CPI) is a measure of the average change in prices over time of goods and services purchased by households. Obviously, the basket of goods for households is not representative of the basket of goods purchased by utilities for transmission, distribution, gas peakers, distributed energy resources, and O&M projects in California and Arizona. This is evidenced by the BLS Relative importance of components in the Consumer Price Indexes: U.S. city average 97 where the BLS lists the components of CPI-U. According to the BLS, the CPI-U s components are: Table VII-33 Components of CPI-U 95 For instance, SCE has used IHS Global Insight indexes in all of its general rate cases since at least the early 980s. Pacific Gas & Electric, San Diego Gas & Electric, and Southern California Gas Company also use various IHS Global Insight indexes in their general rate cases. 96 Bureau of Labor Statistics, Consumer Price Index Summary April 206, released May 7, 206 Brief Explanation of the CPI 97 Bureau of Labor Statistics, Consumer Price Index Table. Relative importance of components in the Consumer Price Indexes: U.S. city average, December pdf. 87

12 Workpaper Southern California Edison / 208 GRC

13 2 Workpaper Southern California Edison / 208 GRC more accurate indexes to estimate the inflationary effects of running an electric utility in California and Arizona than a generic household inflation index such as CPI-U. This theory, that CPI does not properly represent the inflation of costs utilities incur, holds true for all O&M and capital escalation rates presented in this chapter. 89

14 208 General Rate Case Index of Workpapers SCE-09, Vol. 0, Chapter VII DOCUMENT PAGE(S) Labor Escalation Indexes Annual Percent Changes And Escalation Factor To 205$ 2 IHS Global Insight Nonlabor Escalation Annual Percent Changes And Escalation Factor To 205$ 3 O&M Nonlabor Escalation IHS Global Insight Variables And Correspondence To SCE Variables 4 Forecast Labor Escalation Detail Annual Percent Changes And Escalation Factor To 205$ 6 Operation And Maintenance Wage Escalation Composite Wage Escalation - Employee Category Share 7 Composite Labor Escalation Weighting 8 IHS Global Insight Capital Escalation Annual Percent Changes And Escalation Factor To 205$ 0 Handy-Whitman And IHS Global Insight Variables And Correspondence To SCE Variables Capital Escalation General Plant IHS Global Insight Variables, Weights And Indexes 2 Capital Escalation General Plant - Spending By FERC Account And Associated IHS Global Insight Variables 3 Capital Escalation General Plant - IHS Global Insight Variables & Descriptions 4 Palo Verde O&M Escalation - Labor Weighting - Labor As A Percent Of O&M Costs 6 Palo Verde O&M Escalation - Blended O&M Escalation Calculation 7

15 Workpaper Southern California Edison / 208 GRC COST ESCALATION LABOR AND NONLABOR O&M ESCALATION

16 2 Workpaper Southern California Edison / 208 GRC SOUTHERN CALIFORNIA EDISON COMPANY LABOR ESCALATION ANNUAL PERCENT CHANGES AND ESCALATION FACTOR TO 205$ Function Steam Generation Hydro Generation Other Generation Inflation Inflation Inflation Line No. Year % Change Index % Change Index % Change Index % % % % % % % % % % % % % % % % % % % % % % % % % % % % % %.499 Function Transmission Distribution Customer Accounts Inflation Inflation Inflation Line no. Year % Change Index % Change Index % Change Index % % % % % % % % % % % % % % % % % % % % % % % % % % % % % %.499 Function CS&I Line no. Year % Change Inflation Index % % % % % % % % % %.499 2

17 Workpaper Southern California Edison / 208 GRC 3 SOUTHERN CALIFORNIA EDISON COMPANY IHS GLOBAL INSIGHT NONLABOR ESCALATION ANNUAL PERCENT CHANGES AND ESCALATION FACTOR TO 205$ Created on Mon 22 Feb 206, :50 AM EST (6:50 GMT) Mnemonic Short Label JEFOMMS JEHOMMS JEOOMMS JETOMMS JEDOMMS JECAOMS JECSIOMS JEADGOMMS@H JENOMMS (Palo Verde) United States, Electric - Total Steam Production Index Operation and Maintenance Cost Index (MS), Units: (202=.000) Percent Change United States, Electric - Total Hydro Production Index Operation and Maintenance Cost Index (MS), Units: (202=.000) Percent Change United States, Electric - Total Other Production Index Operation and Maintenance Cost Index (MS), Units: (202=.000) Percent Change United States, Electric - Total Transmission Plant Index Operation and Maintenance Cost Index (MS), Units: (202=.000) Percent Change United States, Electric - Total Distribution Plant Index Operation and Maintenance Cost Index (MS), Units: (202=.000) Percent Change United States, Electric Customer Accounts - Index Operation Cost Index (MS), Units: (202=.000) Percent Change United States, Electric Customer Service and Index Information Operation Cost Index (MS), Units: (202=.000) Percent Change United States, Electric - Total Administration and Index General Operation and Maintenance Cost Index Without Healthcare (LMS), Units: (202=.000) Percent Change United States Electric - Total Nuclear Production Index Operation and Maintenance Cost Index (MS) Source: IHS Global Insight Units: (202=.000) Percent Change (0.37)

18 4 Workpaper Southern California Edison / 208 GRC SOUTHERN CALIFORNIA EDISON COMPANY O&M NONLABOR ESCALATION IHS GLOBAL INSIGHT VARIABLES AND CORRESPONDENCE TO SCE VARIABLES SCE Variable Name Steam Generation Nuclear Generation Hydro Generation Other Generation Transmission Distribution Customer Accounts CS&I A&G@H Global Insight Variable Name Global Insight Description Type JEFOMMS Total Steam Production O&M Cost Index (MS) JENOMMS Total Nuclear Production O&M Cost Index (MS) JEHOMMS Total Hydro Production O&M Cost Index (MS) JEOOMMS Total Other Production O&M Cost Index (MS) JETOMMS Total Elec. Trans. O&M Index (MS) JEDOMMS Total Elec. Distr. O&M Cost Index (MS) JECAOMS Elec. Customer Accounts Operation Cost Index (MS) Elec. Customer Services and JECSIOMS Info. Operation Cost Index (MS) Total Elec. Admin. And JEADGOMMS@H General O&M Cost Index Without Healthcare Expenses Total Operation and Maintenance Total Operation and Maintenance Total Operation and Maintenance Total Operation and Maintenance Total Operation and Maintenance Total Operation and Maintenance Operation Operation Total Operation and Maintenance 4

19 Workpaper Southern California Edison / 208 GRC 5 COMPOSITE WAGE ESCALATION 5

20 6 Workpaper Southern California Edison / 208 GRC SOUTHERN CALIFORNIA EDISON COMPANY FORECAST LABOR ESCALATION DETAIL ANNUAL PERCENT CHANGES AND ESCALATION FACTOR TO 205$ Employee Category Physical/ Technical Clerical Professional & Managers & Technical Administrators Workers All Employees Inflation Index Weight 32.3% 3.4% 22.6% 3.7% 00.0% % 2.95% 2.7% 3.08% 3.03% % 2.97% 2.88% 2.80% 2.82% % 2.79% 2.83% 2.80% 2.79% % 2.60% 2.84% 2.85% 2.74%.50 = indicates collective barganing agreement 6

21 Workpaper Southern California Edison / 208 GRC 7 SOUTHERN CALIFORNIA EDISON COMPANY OPERATION AND MAINTENANCE WAGE ESCALATION COMPOSITE WAGE ESCALATION - EMPLOYEE CATEGORY SHARE Function Total Wages 205 Percent share Clerical Total $ 77,63, % Manager/Supervisor Tot $ 299,704, % Physical/Technical Total $ 428,83, % Professional/Technical $ 420,983, % Total $,326,484, % 7

22 8 Workpaper Southern California Edison / 208 GRC SOUTHERN CALIFORNIA EDISON COMPANY COMPOSITE LABOR ESCALATION WEIGHTING Line No. Employee Category IHS Global Insight Share of Total Variable IHS Global Insight Variable Description Wages Utility Price and Wage Indicators, AHE, Physical Workers CEU Transmission and Distribution Workers % Utility Price and Wage Indicators, AHE, Clerical Workers CEU Transmission and Distribution Workers 3.390% Managers and Employment Cost Index, ECIPWMBFNS 3 Administrators Managers and Administrators % Professional and US, Wages and Sal, Private, Professional, ECIPWPSTNS 4 Technical Workers Scientific, Technical, 3.737% 5 Total % 8

23 Workpaper Southern California Edison / 208 GRC 9 CAPITAL ESCALATION 9

24 0 Workpaper Southern California Edison / 208 GRC Capital Escalation Total Steam Production Plant % 3.34%.38%.44%.80%.0%.99% 2.72% 2.5% 2.54% Total Hydraulic Production Plant % 2.4%.68%.6%.73%.82% 2.40% 2.40% 2.45% 2.40% Total Other Production Plant % 7.4% 2.90% 3.59% 2.98% 2.85% 2.5%.65% 2.% 2.64% Total Transmission Plant %.22%.9%.76%.45%.37% 2.22% 2.47% 2.63% 2.62% Total Distribution Plant % 3.46% 3.6% 3.2% 2.72%.89% 2.08% 2.52% 3.4% 3.8% Total Nuclear Palo Verde % 4.57%.45%.00% 2.03%.05%.90% 2.52% 2.55% 2.46% 0

25 Workpaper Southern California Edison / 208 GRC SOUTHERN CALIFORNIA EDISON COMPANY HANDY-WHITMAN AND GLOBAL INSIGHT VARIABLES AND CORRESPONDENCE TO SCE CAPITAL VARIABLES Line No. SCE Variable Global Insight Variable Handy-Whitman Variable Global Insight Variable Name Region Steam Generation Total Steam Production Plant Total Steam Production Plant JUEPPF@PCF Pacific 2 Hydro Generation Total Hydraulic Prod. Plant Total Hydraulic Prod. Plant JUEPPH@PCF Pacific 3 Other generation Total Other Production Plant Total Other Production Plant JUEPPO@PCF Pacific 4 Transmission Total Transmission Plant Total Transmission Plant JUEPT@PCF Pacific 5 Distribution Total Distribution Plant Total Distribution Plant JUEPD@PCF Pacific 6 Nuclear Palo Verde Total Nuclear Production Plant Total Nuclear Production Plant JUEPPN@PLA Plateau

26 2 Workpaper Southern California Edison / 208 GRC SOUTHERN CALIFORNIA EDISON COMPANY CAPITAL ESCALATION GENERAL PLANT IHS GLOBAL INSIGHT VARIABLES, WEIGHTS AND INDEXES Line No. GI Variable Weight JPGDP 2.9% %.84%.63%.64%.00%.48%.97% 2.05% 2.05% 2.09% 3 JPIFNREEMISCB 47.8% % 2.2% 0.66% 0.9% 0.78% 0.60%.35% 2.00%.80%.72% 5 JPIFNRESXF 5.0% % 2.72% 2.43% 3.32%.98% 2.02% 2.65% 3.65% 3.88% 4.0% 7 WPI 5.0% %.0% 0.7% 0.8% 0.5% -0.3% 0.38%.4%.02%.22% 9 WPI2 28.7% % 2.65% 0.35%.30% 0.90% 0.87%.00% 0.86% 0.85% 0.80% WPI4 0.6% % 2.22%.6%.37%.38% 0.78%.49%.48%.68%.6% General Plant Index 205= Index Percent Change.90% 2.30% 0.86%.39% 0.99% 0.88%.42%.88%.82%.8% 2

27 Workpaper Southern California Edison / 208 GRC 3 SOUTHERN CALIFORNIA EDISON COMPANY CAPITAL ESCALATION GENERAL PLANT SPENDING BY FERC ACCOUNT AND ASSOCIATED IHS GLOBAL INSIGHT VARIABLES Line No. FERC Acct Percent GI Variable Account 389 6, % JPGDP 2 Account ,688, % JPIFNRESXF 3 Account ,880, % WPI2 4 Account 392,739, % WPI4 5 Account 393 5,00, % WPI4 6 Account 394 (2,603,73) -0.3% WPI4 7 Account , % WPI4 8 Account ,358,2 2.88% JPGDP 9 Account ,473, % WPI 0 Account , % JPIFNREEMISCB Account ,806, % JPIFNREEMISCB 2 Account 399 6,846,088.99% JPIFNREEMISCB Grand Total 845,23,27 3

28 4 Workpaper Southern California Edison / 208 GRC SOUTHERN CALIFORNIA EDISON COMPANY CAPITAL ESCALATION GENERAL PLANT IHS GLOBAL INSIGHT VARIABLES & DESCRIPTIONS Global Insight Variable JPGDP JPIFNREEMISCB JPIFNRESXF WPI WPI2 WPI4 Description Chained Price Index--Gross Domestic Product Chained Price Index--Miscellaneous Equipment--Base Chained Price Index--Nonresidential Construction Of Nonfarm Buildings Producer Price Index--Machinery & Equipment Producer Price Index--Furniture & Household Durables Producer Price Index--Transportation Equipment 4

29 Workpaper Southern California Edison / 208 GRC 5 PALO VERDE 5

30 6 Workpaper Southern California Edison / 208 GRC SOUTHERN CALIFORNIA EDISON COMPANY PALO VERDE O&M ESCALATION LABOR WEIGHTING - LABOR AS A PERCENT OF O&M COSTS Palo Verde O&M Labor as Percent of Direct O&M (00% Level PVNGS O&M Used for Billing SCE, $000) Category Yr. Avg Payroll 272,244 27, , ,866 28, ,998 Incentives Gainsharing Total Payroll 272,244 27, , ,866 28, ,998 Directs Total Production Operations 300, ,8 294,9 307, , ,79 Total Production Maintenance 59,80 39,85 39,77 45,787 44,263 45,778 Reg Commission Exp 7,036 5,493 7,074 9,945 7,503 7,40 Year End Incentives Insurance Credit Transmission 6,96 6,945 6,244 6,469 7,63 6,837 Total Directs 484, , ,64 479, , ,86 Palo Verde Labor % of Direct Costs 56.2% 58.5% 59.28% 58.2% 55.30% 57.43% 6

31 Workpaper Southern California Edison / 208 GRC 7 SOUTHERN CALIFORNIA EDISON COMPANY PALO VERDE O&M ESCALATION BLENDED O&M ESCALATION CALCULATION Palo Verde Labor % of Direct Costs 57.43% Line No. GI Variable Labor %_Change 2.42% 2.56%.84% 2.45% 3.7% 2.58% 2.95% 2.97% 2.79% 2.60% CEU Inflation Index GI Variable Nonlabor %_Change 4.2%.79%.02% 0.84% -0.37% 0.42% 2.24% 2.40% 2.38% 2.24% JENOMMS 5 Inflation Index Palo Verde %_Change 3.8% 2.23%.49%.76%.66%.66% 2.65% 2.73% 2.62% 2.45% 8 Blended O&M Inflation Index