SCE Wins $7.7 Billion Rate Case

By Published On: August 19, 2021

The California Public Utilities Commission approved a 19% increase in Southern California Edison’s triennial rate case. Its revenue requirement will rise from the current authorized rate of $6.4 billion to $7.7 billion by 2023.

Much of the revenue and big rate hike—close to $4 billion over the three years—is attributable to the cost to insulate miles of power lines in fire-prone areas and annual wildfire insurance. Ratepayers pay for all of this.

SCE is allowed to increase its revenue above the 2020 authorized revenue by $489 million, a 7.6% increase this year, to reach $6.9 billion. For 2022, the utility got the okay to raise its revenue another $382 million, a 5.5% increase, and yet another $437 million, a 6% rise, in 2023.

The 2021 revenue increase translates into an average residential rate hike this year of $147, an 8.9% increase, under the CPUC decision approved unanimously Aug. 18. Struggling ratepayers on assistance programs will see their utility bills rise nearly $101 this year, which also is an 8.9% rise. The bill increases go into effect in October to avoid adding to higher rates this summer, said Commissioner Genevieve Shiroma.

“We should not sugar coat the rate increases,” said Commissioner Cliff Rechtschaffen. “They are significant.”

The Utility Reform Network and the CPUC’s Public Advocates Office had pushed for lower rate increases, including a reduction in the covered lines, and urged the costs of the wildfire liability insurance be split between ratepayers and shareholders.

“The rate increase is too high and simply unaffordable for many Southern Californian families,” Elise Torres, TURN staff attorney, said. “Higher rates makes it harder to increase building and vehicle electrification and reach our climate goals,” she warned.

The decision includes $2.4 billion in spending to cover 4,500 miles of power lines in risky areas. That represents more than 90% of SCE’s capital expenditure forecast for wildfire management, according to the decision.

SCE must “justify” covered lines

Commission President Marybel Batjer said SCE “must do a better job of explaining why it has gone all in on covered conductors.” She noted that the commission SCE’s 2021 wildfire mitigation plan was separately approved earlier as part of the Commission’s Thursday consent calendar. She stressed that the resolution requires the utility to “justify and value” of the mitigation expected from covered conductors by this November, the costs of which are included in the rate case.

This level of spending on insulated electrical lines is unprecedented.

“It is a buy down of risk,” Shiroma said during the Thursday meeting.

SCE was pleased that so much of its rate request, particularly for covered wires, was granted. According to Kevin Payne, utility president, affordability is an issue but “our customers in high fire threat areas and beyond cannot afford more wildfires.”

The  $2.4 billion to cover 4,500 miles of wires between 2019 and 2023 is close to $1 billion more than what the July 9 proposed decision would have allowed. It would have authorized $1.5 billion in expenditures to blanket 2,750 miles in high risk fire areas.

“While covering lines is an important risk mitigation it must be balanced with other important risk reduction measures,” said Katy Morsony, TURN attorney.

In contrast, SCE plans to spend $56 million on its 2021 hazardous tree program, which includes cutting down 20,000 trees.

The decision also allows SCE to spend more than $2.4 billion on insulated wires, but be subject to a reasonableness review.

“Large risk reduction” but at what cost?

There was considerable dispute over how many miles of line coverage in high fire threat areas was feasible and how much it would reduce wildfire risk. Morsony agreed covered wires will result in “large risk reduction.” But based on SCE’s modeling, the increase in miles only reduces the risk by a small percent compared to TURN’s $1 billion proposal to cover 2,500 miles, and at a much higher cost, according to Morsony. “TURN does not agree this is consistent with what is necessary, affordable, and cost-effective.”

SCE had sought $3.4  billion to cover 6,272 miles of lines.

The rate case also approved executive compensation but reduced it by $118 million.

Shiroma said the rate case included four tracks, with this week’s 700-plus page decision a central part. Evidentiary and public hearings were held remotely, allowing far greater public participation, she said.

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