BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA ) ) ) ) )

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1 BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA Joint Application of Southern California Edison Company (U 338-E and San Diego Gas & Electric Company (U 902-E For Cost Recovery Of The Wheeler North Reef Expansion Project Marine Mitigation Costs. A (Filed 12/1/16 SOUTHERN CALIFORNIA EDISON COMPANY'S (U 338-E MOTION TO ESTABLISH A MEMORANDUM ACCOUNT FRANK MCNULTY WALKER MATTHEWS Attorneys for SOUTHERN CALIFORNIA EDISON COMPANY 2244 Walnut Grove Avenue Post Office Box 800 Rosemead, California Telephone: ( Facsimile: ( Walker.Matthews@sce.com Dated: March 24, 2017

2 BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA Joint Application of Southern California Edison Company (U 338-E and San Diego Gas & Electric Company (U 902-E For Cost Recovery Of The Wheeler North Reef Expansion Project Marine Mitigation Costs. A (Filed 12/1/16 SOUTHERN CALIFORNIA EDISON COMPANY'S (U 338-E MOTION TO ESTABLISH A MEMORANDUM ACCOUNT Pursuant to Rule 11.1 of the California Public Utilities Commission s (Commission Rules of Practice and Procedure, Southern California Edison Company (SCE respectfully files this Motion to Establish a Memorandum Account to allow for the tracking of costs incurred for the Wheeler North Reef Expansion Project (WNR Expansion Project proposed in SCE s and San Diego Gas & Electric Company s (SDG&E Joint Application (A (Joint Application. SCE has also filed and served concurrent with this Motion, a Motion to Shorten Time to Respond, which requests the Commission require responses to be submitted by March 31, 2017 to allow for a decision on the Motion as soon as practicable. SCE also respectfully requests the Commission expedite its consideration of SCE s Motion so that SCE is able to track WNR Expansion Project costs for future rate recovery, pending the Commission s decision on the Joint Application, and not lose the ability to recover costs

3 I. INTRODUCTION On December 1, 2016, SCE and SDG&E filed a Joint Application requesting the Commission approve cost recovery for the WNR Expansion Project. As explained in supporting testimony (Exhibit SCE-1, the WNR Expansion Project is necessary to meet SCE s and SDG&E s compliance obligations under the California Coastal Commission s (CCC coastal development permit (CDP for San Onofre Nuclear Generating Station Unit Nos 2&3 (SONGS 2&3. In the CCC s September 14, 2016 letter to SCE, the CCC expressed their interest in shortening the timeline for the WNR Expansion Project and directed SCE to implement the project now without delay. To meet the CCC s timing requirements, SCE must take immediate action and move forward with the WNR Expansion Project, including design and engineering planning, ocean surveying, and environmental permitting, for the CCC s, California State Lands Commission s (SLC, and other federal and state agencies approval. Although the Commission has authorized cost recovery for SCE s ongoing operation & maintenance (O&M expenses for SONGS marine mitigation activities in SCE s general rate cases (GRCs, the Commission has not approved cost recovery for the WNR Expansion Project. Therefore, SCE requests that the Commission authorize SCE to establish a memorandum account so that SCE can track WNR Expansion Project costs and avoid retroactive ratemaking issues while the Joint Application remains pending. SCE did not request a memorandum account when filing the Joint Application in December, 2016 because SCE anticipated that early, lower-cost WNR Expansion Project activities planned for 2017 could be completed within SCE s budget for SONGS marine mitigation activities. SCE had also proposed an expedited procedural schedule that was not adopted. During SCE s recent meetings with the CCC, the CCC has further emphasized the need for SCE to move forward quickly and shorten the timeline for the WNR Expansion Project. Therefore, SCE must try to accelerate the project schedule, which will involve incurring costs in - 2 -

4 excess of funding authorized in SCE s GRC by the Commission, sooner than forecasted in the initial Joint Application. The planned activities that SCE is accelerating (ocean surveying, environmental permitting, WNR lease amendment offer the benefit of providing flexibility in selecting an alternative design with lower costs. II. DISCUSSION A. Proposed Memorandum Account This Motion requests that the Commission approve modifying SCE s Preliminary Statement, Part N, Memorandum Accounts, to reflect the establishment of the WNR Expansion Project Memorandum Account (WNREPMA. The establishment of the WNREPMA is necessary so that the SCE can proceed immediately with various WNR Expansion Project activities, without precluding cost recovery at a future date due to the rule against retroactive ratemaking. Similar to all Commission-approved memorandum accounts, the WNREPMA will protect against retroactive ratemaking issues, but will not guarantee rate recovery prior to the Commission s approval of the Joint Application. SCE proposes to only use this interim ratemaking (i.e., the WNREPMA to track the O&M costs, including outside services costs (e.g., consultants and vendors, associated with the WNR Expansion Project, while the Joint Application remains pending. The Commission will review in the Joint Application the reasonableness of SCE s cost recovery proposal for WNR Expansion Project activities. SCE s proposal includes a ratemaking process so that customers pay only the actual WNR Expansion Project costs, no more or less. Under the proposal, SCE would record the WNR Expansion Project costs incurred to the distribution sub-account of SCE s Base Revenue Requirement Balancing Account (BRRBA each month. The requested memorandum account is consistent with and would facilitate this proposed ratemaking process. If the Commission authorizes SCE to establish the WNREPMA, - 3 -

5 SCE would transfer the amounts tracked in the WNREPMA to the distribution subaccount of the BRRBA, upon Commission approval of the Joint Application. Next, pursuant to the Commission-adopted process for reviewing SCE s balancing accounts, the recorded operation of the BRRBA would be reviewed by the Commission in SCE s annual Energy Resource Recovery Account (ERRA Review applications. The Commission s review of transferred amounts will provide that all entries to the account are stated correctly and are consistent with Commission decisions. SCE will include testimony specifically addressing the WNR Expansion Project recorded costs, including the amounts tracked in the WNREPMA, in its annual ERRA Review applications. B. SCE s Request For A Memorandum Account Is Reasonable The Commission has the authority to approve the creation of a memorandum account to address retroactive ratemaking issues caused by potential delays in the Commission s review of a utility s application. 1 By tracking costs in a memorandum account, a utility preserves the opportunity to seek recovery of these costs at a later date without raising retroactive ratemaking issues. 2 The Commission has identified various factors useful in considering a utility s request to establish a memorandum account, including whether: (1 the expense is caused by an event of an exceptional nature that is not under the utility s control; 1 Decision (D (SCE s 2012 GRC; D (SCE s 2009 GRC; D (SCE s 2006 GRC. 2 D ( It is a well-established tenet of the Commission that ratemaking is done on a prospective basis. The Commission's practice is not to authorize increased utility rates to account for previously incurred expenses, unless, before the utility incurs those expenses, the Commission has authorized the utility to book those expenses into a memorandum or balancing account for possible future recovery in rates. This practice is consistent with the rule against retroactive ratemaking. (emphasis added

6 (2 the expense cannot have been reasonably foreseen in the utility s last GRC and will occur before the utility s next scheduled GRC; (3 the expense is of a substantial nature in the amount of money involved; and (4 customers will benefit by memorandum account treatment. 3 The Commission considers the factors for guidance and does not require all factors to be met before authorizing a memorandum account. 4 These four factors warrant the Commission s approval of SCE s proposed memorandum account to track WNR Expansion Project costs. 1. The CCC Is Requiring SCE To Take Immediate Action First, the project expenses SCE anticipates incurring prior to the Commission s decision on the Joint Application are caused by the timing imposed by the CCC s requirements, which are beyond SCE s control. As explained in SCE s supporting testimony, 5 CCC-appointed scientists concluded in a 2015 report 6 that the present size and configuration of the WNR is not sufficient to meet the CCC s mandated performance requirements for fish biomass. 7 In May 2016, SCE received formal notification from the CCC Executive Director that remediation (i.e., expansion of the WNR is necessary to meet the CDP requirements, 8 and directed SCE to submit a remediation plan. 9 In July 2016, SCE responded to the CCC and sought to reduce and/or delay the CCC s remediation requirements, asserting in part that the requirements were premature 3 D (approving memorandum account for California Water Service Company s costs incurred for remediating water-well contamination to meet various requirements; D (approving memorandum account for PacifiCorp s share of program costs of implementing Assembly Bill (AB 32 requirements. 4 D See Exhibit SCE-1. 6 See Exhibit SCE-1, Appendix A, Report on the causes of low fish standing stock at Wheeler North Reef and possible solutions for remediation, attached to Susan Hansch letter to SCE, dated March 10, See Exhibit SCE-1, Appendix A, Letter from Susan Hansch to SCE, dated March 10, See Exhibit SCE-1, Appendix A, Letter from John Ainsworth to SCE, dated May 24, See Permit No A, p. 34 ( The permittee shall be responsible for fully implementing any remedial measures deemed necessary by the Executive Director

7 given that the CDP affords SCE 10 years, or until 2019, to comply with the WNR s performance criteria. 10 SCE also emphasized its obligations to zealously protect customer interests. 11 In mid-september 2016, the CCC rejected SCE s arguments and asserted that WNR remediation is required now: 12 Monitoring data indicate that the current size and configuration of WNR is insufficient to consistently meet the permit requirement for a minimum fish stand stock of 28 US tons. The analysis supporting this conclusion did take into account the increasing trend in fish biomass, but found that the reef is not large enough to consistently sustain 28 tons of fish over the long term. Thus, in order to comply with the permit conditions, remedial actions must be taken now. 13 The CCC added that CCC Executive Director can require remediation at any time if monitoring data indicates performance standards are not being met. 14 The CCC also expressed concerns about the timeframe proposed by SCE, and indicated they would like to meet to discuss ways to shorten the proposed timeline. 15 The CCC requested SCE to proceed with developing a project description, and preparing design, engineering, and construction plans. 16 Consequently, SCE does not have the discretion to ignore the CCC s requirements, must comply with them immediately, and must incur certain expenses prior to the Commission s decision on the Joint Application. 2. The Expenses Are Not Included In SCE s GRC Second, the expenses could not have been included in SCE s 2018 GRC. In D (SCE s 2015 GRC, the Commission authorized SCE to submit an application, separate from 10 See Exhibit SCE-1, Appendix A, Letter from SCE to CCC, dated July 8, Id. 12 See Exhibit SCE-1, Appendix A, Letter from CCC to SCE, dated September 14, 2016, at p. 1 ( The first issue is my determination that remediation is required for WNR now.. 13 Id., at p Id., at p Id. at p Id

8 SCE s GRC, to the extent SCE needed to seek cost recovery for any additional reef construction not included in SCE s GRC. 17 In August 2016, SCE submitted in its 2018 GRC application a forecast for labor and non-labor costs for ongoing management and maintenance activities related to the marine mitigation projects. 18 Subsequent to SCE s preparation of its 2018 GRC application, the CCC directed SCE in September, 2016 to implement the WNR Expansion Project immediately. 19 Due to this timing and the CPUC s direction provided in D , the costs for the WNR Expansion Project were not included (and could not have been included in SCE s 2018 GRC application. 3. The Expenses Will Be Substantial Third, to comply with the CCC s mandate and timing requirements, SCE must begin to incur substantial costs related to the WNR Expansion Project prior to the Commission s decision on the Joint Application. The reef construction forecast included in the Joint Application was based on a preliminary design. SCE must meet with the CCC and SLC to discuss the process and the information needed to develop a more detailed design. The CCC will approve the design, and the SLC will approve the amendment to the WNR lease and serve as the lead agency for the California Environmental Quality Act (CEQA process SCE began these discussions shortly after submitting the Joint Application, 20 and must complete several additional activities with the CCC and SLC over the next several upcoming months. For example, to construct the additional reef as required, the approved footprint for the 17 See D , p. 289 ( In the event that CCC does require additional reef construction, or other measures, SCE and SDG&E may file an application to recover costs at that time.. 18 Application (A See Exhibit SCE-1, Appendix A, Letter from CCC to SCE, dated September 14, 2016, at pp SCE has met with the CCC (December, 2016 and January, 2017 and the SLC (January, 2017 to discuss alternative reef designs and the environmental review and licensing process. During those meetings, SCE and the CCC discussed ways of reducing the overall cost of the WNR, including reducing the extent of future compliance monitoring

9 WNR must be expanded. Therefore, SCE submitted an application to the SLC on February 22, 2017 to expand the WNR lease. SCE also has contracted surveyors to map the ocean floor and the biological resources in the area by June Once the surveys are completed and reviewed, a more detailed project design and an environmental analysis can be developed in coordination with the CCC and SLC. With an expanded, mapped construction area, SCE will have more flexibility with developing the footprint and configuration of alternative designs, providing an opportunity for SCE to advocate for a less costly reef design. Each of these planned activities involve significant costs. To date, SCE has been able to complete initial meetings and planning efforts using its budget for SONGS marine mitigation. However, SCE will soon need to incur substantial, additional costs in excess of GRC-authorized marine mitigation funding amounts to conduct the required ocean floor surveys, move forward with the CEQA process, and complete other related project activities. 21 If an accelerated schedule is agreed upon, SCE would incur WNR construction costs (a portion or all as early as Under this accelerated schedule, SCE forecasts it will incur nearly $1 million in 2017 for design, engineering, and permitting activities. SCE also will incur about $28 million in 2018 for construction costs (if SCE complete the construction in one year. 22 Therefore, a memorandum account is appropriate to allow SCE to track the substantial expenses associated with these activities for future cost recovery, pending the Commission s decision on the Joint Application. 4. Customers Will Benefit From Memorandum Account Treatment Fourth, the Commission s approval of the memorandum account will allow SCE to move forward with various project activities that will provide SCE an opportunity to reduce project 21 See Appendix A, SCE s Response to Data Request Set A TURN-SCE-DR-1, Question No. 6. As summarized in SCE s response, SCE has developed a new proposed construction plan schedule with input from the CCC and SLC. The new proposed schedule accelerates the overall project schedule, initially described in Exhibit SCE-1, Table III-1, so that final construction of the expanded reef may be completed in as opposed to If construction spans two years due to delays caused by the lobster season, SCE would incur construction costs of about $14 million each year in 2018 and

10 expenses for the benefit of customers. As noted above, the ocean mapping activities will give SCE increased flexibility with developing the footprint and configuration of alternative designs, which will in turn provide an opportunity for advocating a less costly reef design. In addition, SCE will be able to develop detailed plans sooner for the CCC s and SLC s consideration, ultimately providing greater cost certainty. Finally, there is no downside or disadvantage to customers presented by the Commission s approval of a memorandum account. By authorizing a memorandum account, the Commission is not approving or pre-judging cost recovery of WNR Expansion Project costs. SCE s ability to recover the costs will still be subject to the Commission s decision on the Joint Application. III. CONCLUSION For the foregoing reasons, the Commission should authorize SCE to establish a memorandum account to allow for the tracking of costs incurred for the WNR Expansion Project

11 Respectfully submitted, FRANK MCNULTY WALKER MATTHEWS /s/ Walker Matthews By: Walker Matthews Attorneys for SOUTHERN CALIFORNIA EDISON COMPANY 2244 Walnut Grove Avenue Post Office Box 800 Rosemead, California Telephone: ( Facsimile: ( March 24,

12 Appendix A SCE s Response to Data Request

13 Southern California Edison 2016 Marine Mitigation A DATA REQUEST SET A TURN-SCE-DR-1 To: TURN Prepared by: Patrick Tennant Title: Manager, Mitigation and Restoration Dated: 03/01/2017 Question 06: In Table III-1 of SCE s testimony in this proceeding, SCE sets out a Potential Construction Schedule To Be Finalized with the CCC. Please provide an updated version of this construction schedule based on SCE s current best approximation of project elements, duration, and completion dates. lease also state whether the CCC has finalized the schedule and, if so, when that finalization took place. Response to Question 06: SCE has discussed the Potential Construction Schedule with CCC and SLC. Input provided by both agencies was used to develop schedule timeframes for the SLC lease amendment approval, CEQA process, and CCC Coastal Development Permit process. Approvals of other federal and state discretionary permits were estimated based on SCE s experience with those agencies and will be updated when discussions with those agencies have taken place. Construction timeframes were estimated based on SCE s experience from Phase I and Phase II of WNR. Construction will likely be restricted to a time frame of June through the start of the lobster season (roughly the end of September, which is why there are two Construction Windows identified in the schedule. At this time, SCE has not committed to a schedule different that that presented in the filing. However, both SLC and CCC have indicated that they will make a concerted effort to accelerate their parts of the schedule. Project Element Approximate Start Date Approximate Completion Date State Lands Lease Amendment Complete 02/22/2017 Additional Surveys (Sonar and biological, project Started June 2017 design, and development of preferred project Approval of preferred project by CCC and SLC June 2017 June 2017 staff CEQA/NEPA Process June 2017 December 2017* A-1

14 Procurement of construction contractor July 2017 December 2017 Development of construction plans December 2017 June 2018 Development of Final Design, based on January 2018 January 2018 CEQA/NEPA findings Submittal of State and Federal Agency Permit January 2018 June 2018 Applications Sourcing/Procurement of rocks January 2018 July 2018 Coastal Development Permit January 2018 June 2018 Construction Window 1 June 2018 October 2018 Construction Window 2 June 2019 October 2019 As built permit close out CCC Monitoring Commences Upon 3 months completion 1 st Spring/Summer after construction A-2

15 BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA Joint Application of Southern California Edison Company (U 338-E and San Diego Gas & Electric Company (U 902-E For Cost Recovery Of The Wheeler North Reef Expansion Project Marine Mitigation Costs. Application No (Filed December 1, 2016 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 MOTION TO ESTABLISH A MEMORANDUM ACCOUNT on all parties identified on the attached service list(s A Service was effected by one or more means indicated below: Transmitting the copies via to all parties who have provided an address. Placing the copies in sealed envelopes and causing such envelopes to be delivered by hand or overnight courier to the offices of the Commissioner(s or other addressee(s. ALJ Darcie Houck California Public Utilities Commission 505 Van Ness Avenue San Francisco, CA Executed on March 24, 2017, 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

16 CPUC - Service Lists - A Page 1 of 2 3/24/2017 CPUC Home CALIFORNIA PUBLIC UTILITIES COMMISSION Service Lists PROCEEDING: A EDISON AND SDG&E - F FILER: SAN DIEGO GAS & ELECTRIC COMPANY LIST NAME: LIST LAST CHANGED: MARCH 14, 2017 DOWNLOAD THE COMMA-DELIMITED FILE ABOUT COMMA-DELIMITED FILES Back to Service Lists Index Parties WALKER A. MATTHEWS III EMMA D. SALUSTRO SENIOR ATTORNEY ATTORNEY SOUTHERN CALIFORNIA EDISON COMPANY SAN DIEGO GAS & ELECTRIC COMPANY 2244 WALNUT GROVE AVENUE, ROOM CEDNTURY PARK CT., CP32D ROSEMEAD, CA SAN DIEGO, CA FOR: SOUTHERN CALIFORNIA EDISON COMPANY FOR: SAN DIEGO GAS & ELECTRIC COMPANY MARION PELEO ROBERT FINKELSTEIN GENERAL COUNSEL LEGAL DIVISION THE UTILITY REFORM NETWORK ROOM MARKET ST., STE VAN NESS AVENUE SAN FRANCISCO, CA SAN FRANCISCO, CA FOR: THE UTILITY REFORM NETWORK FOR: ORA Information Only MRW ASSOCIATES CASE ADMINISTRATION MRW & ASSOCIATES SOUTHERN CALIFORNIA EDISON COMPANY ONLY 8631 RUSH STREET ONLY, CA ROSEMEAD, CA DONALD KELLY EXE. DIRECTOR WENDY D. JOHNSON REGULATORY BUSINESS MGR.

17 CPUC - Service Lists - A Page 2 of 2 3/24/2017 UTILITY CONSUMERS' ACTION NETWORK SAN DIEGO GAS & ELECTRIC COMPANY 3405 KENYON ST., STE CENTURY PARK CT., CP32F SAN DIEGO, CA SAN DIEGO, CA CENTRAL FILES SAN DIEGO GAS & ELECTRIC COMPANY 8330 CENTURY PARK CT, CP31-E SAN DIEGO, CA State Service DAVID PECK ERIC GREENE PRESIDENT PICKER MARKET STRUCTURE, COSTS AND NATURAL GAS ROOM 4108 AREA 4-A 505 VAN NESS AVENUE 505 VAN NESS AVENUE SAN FRANCISCO, CA SAN FRANCISCO, CA DARCIE HOUCK DIVISION OF ADMINISTRATIVE LAW JUDGES 300 Capitol Mall Sacramento, CA TOP OF PAGE BACK TO INDEX OF SERVICE LISTS

18 CPUC - Service Lists - A Page 1 of 2 3/24/2017 CPUC Home CALIFORNIA PUBLIC UTILITIES COMMISSION Service Lists PROCEEDING: A EDISON AND SDG&E - F FILER: SAN DIEGO GAS & ELECTRIC COMPANY LIST NAME: HRG LAST CHANGED: FEBRUARY 6, 2017 DOWNLOAD THE COMMA-DELIMITED FILE ABOUT COMMA-DELIMITED FILES Back to Service Lists Index State Service PAMELA GAVIN-WATTS ALLISON BROWN MANAGEMENT SERVICES BRANCH EXECUTIVE DIRECTOR 320 West 4th Street Suite 500 ROOM 2102 Los Angeles, CA VAN NESS AVENUE SAN FRANCISCO, CA ANA M. GONZALEZ AROCLES AGUILAR DIVISION OF ADMINISTRATIVE LAW JUDGES LEGAL DIVISION ROOM 2106 ROOM VAN NESS AVENUE 505 VAN NESS AVENUE SAN FRANCISCO, CA SAN FRANCISCO, CA EDWARD F. RANDOLPH MICHAEL PICKER ENERGY DIVISION PRESIDENT PICKER ROOM 4004 ROOM VAN NESS AVENUE 505 VAN NESS AVENUE SAN FRANCISCO, CA SAN FRANCISCO, CA VALERIE MALLIETT DARCIE HOUCK DIVISION OF ADMINISTRATIVE LAW JUDGES DIVISION OF ADMINISTRATIVE LAW JUDGES ROOM STAR 300 Capitol Mall 505 VAN NESS AVENUE Sacramento, CA SAN FRANCISCO, CA

19 CPUC - Service Lists - A Page 2 of 2 3/24/2017 TOP OF PAGE BACK TO INDEX OF SERVICE LISTS