CPUC Votes to Scale Down Edison Rate Increase

By Published On: November 30, 2012

Regulators Nov. 29 unanimously approved a rate hike for Southern California Edison that boosts the utility’s base revenue to $5.7 billion this year--much less than it originally sought in its test year 2012 general rate case. “The economy remains at the forefront of the news,” said commissioner Tim Simon, primary author of the decision. He noted that Southern California--Edison’s service territory--was particularly hard-hit by recession. “No one gets everything they want,” remarked commissioner Mike Florio, “but they got what they need.” Based on concern about the economy and ratepayers’ capacity to pay more for power, the California Public Utilities Commission’s decision cuts the utility’s original request of $6.3 billion by 9.55 percent, but that still allows a 5.45 percent increase in rates. While the commission tightened the reins on spending, the decision allows substantial increases in its overall rate base. It also allows what has amounted to a steady increase in rates and spending. “Rates will go up faster than the rate of inflation, which will put more customers at risk of being shut off and left in the dark,” stated Marcel Hawiger, The Utility Reform Network staff attorney. “The commission paid lip service to the need for Edison belt tightening, then handed them a larger belt.” The decision observes that Edison is going through a major transition to upgrade its infrastructure and meet new environmental objectives requiring massive investments in renewable energy and energy efficiency. Those expenditures loom particularly large due to the sheer size of the utility, one of the largest in the nation serving an area of 50,000 square miles that is home to 13 million people. Florio said that without investment to upgrade the utility’s infrastructure, “system outages go up, frustration goes up, and service deteriorates. We don’t want that.” More investment in the distribution system is needed, he added, to accommodate rooftop solar systems and an increasing number of electric vehicles charging off the grid. The decision orders what it calls “some belt-tightening” at Edison, to require “more efforts at cost-effectiveness, slower implementation of some activities, and disallowances of non-essential costs and projects.” For instance, it restrains the utility’s requested spending authority for executive compensation, employee bonus programs, and employee 401-K and health care benefits programs largely by tightening assumptions on their projected annual cost increases, Shareholders are free to cover additional expenditures. The decision trims planned operation and maintenance costs by $243 million and reduces capital outlays by $814 million. These reductions in Edison’s request are expected not to affect safety. As a safeguard for ratepayers, the new rates require the utility to track in a memorandum account 2012 test year operation and maintenance expenses for its troubled San Onofre Nuclear Generating Station, as well as post-2011 capital expenditures on the plant. The decision provides for CPUC review of those expenditures, which are subject to refund to ratepayers if they aren’t deemed reasonable. Edison is required to report on its efforts to improve emergency response and communications with its customers when outages occur. The utility was severely criticized for its response to a hurricane-force windstorm that swept through its service territory in 2011, causing widespread power outages that took days to restore (Current, Feb. 3, 2012). Simon said Edison must pre-deploy tree trimmers when major wind events are forecast and do a better job of communicating with local officials and customers, particularly medical baseline customers. The utility also must visit the homes of medical customers to inform them of outage restoration times if it cannot reach them on the phone. The utility’s rate base increases by 20.7 percent compared to the last general rate case test year decision in 2009, from $14.8 billion to $17.8 billion. Authorized base revenues under the decision mark a 19 percent increase over base revenues of $4.8 billion in 2009.

Share this story

Not a member yet?

Subscribe Now