BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA Application of Pacific Gas and Electric Company ) to Revise Its Electric Marginal Costs, Revenue ) A.16-06-013 Allocation, and Rate Design. ) (Filed June 30, 2016) ) U 39 M ) SOUTHERN CALIFORNIA EDISON COMPANY'S (U 338-E) FIXED COST WORKSHOP PRESENTATIONS FADIA R. KHOURY RUSSELL A. ARCHER Attorneys for SOUTHERN CALIFORNIA EDISON COMPANY 2244 Walnut Grove Avenue Post Office Box 800 Rosemead, California 91770 Telephone: (626) 302-2865 Facsimile: (626) 302-6962 E-mail: Russell.Archer@sce.com Dated: November 22, 2016
BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA Application of Pacific Gas and Electric Company ) to Revise Its Electric Marginal Costs, Revenue ) A.16-06-013 Allocation, and Rate Design. ) (Filed June 30, 2016) ) U 39 M ) SOUTHERN CALIFORNIA EDISON COMPANY'S (U 338-E) FIXED COST WORKSHOP PRESENTATIONS Southern California Edison (SCE) hereby files a copy of SCE’s Fixed Cost Workshop Presentations dated October 13, 2016 and November 2, 2016, in order to ensure these documents are preserved in the formal record in this proceeding. 1 Respectfully submitted, FADIA R. KHOURY RUSSELL ARCHER /s/ Russell Archer By: Russell Archer Attorneys for SOUTHERN CALIFORNIA EDISON COMPANY 2244 Walnut Grove Avenue Post Office Box 800 Rosemead, California 91770 Telephone: (626) 302-2865 Facsimile: (626) 302-6962 E-mail: Russell.Archer@sce.com November 22, 2016 1 On November 15, 2016, Administrative Law Judge McKinney ordered Pacific Gas & Electric Company (PG&E) to formally file its proposal in this proceeding for the same reason.
FIXED COST WORKSHOP PRESENTATION DATED OCTOBER 13, 2016
Fixed Cost Workshop CPUC 10/13/2016 Reuben Behlihomji - SCE Southern California Edison
Costs and Authorized Revenue Authorized Revenue Requirements: Marginal Costs: Total amount of cost recovery authorized by The difference in cost for a finite increment of the Commission for different functional product or service provided. These costs are typically components of utility revenue categorized into short run and long run costs. Marginal costs reflect the principles of cost causation when allocating revenue responsibility to rate groups. • Energy Charges Fuel and Purchase Power • Generation o GHG o Energy – Short run value of energy (kWh) market o DWR Power charges prices for a fixed level of installed generation o capacity Capacity – Long run value of investing in new • Base Charges o generation capacity (kW) Utility owned generation o Distribution • Delivery - Distribution o Transmission o Customer o Long run value of customer connection costs • Balancing Accounts (Transformer, Service and Meter) Short run value for customer service costs Design Demand – Long Run valuation of o investments in capacity (kW) addition • Public Purpose Programs • Delivery – Transmission Marginal costs have not been adopted at FERC o CONFIDENTIAL 2 Southern California Edison
Fixed Costs WHAT • Costs that typically do not vary by usage or quantity of energy (kWh) consumed WHY • State policy objectives, implemented through rates should act in concert with the need for efficient pricing • Principles of cost causation should complement the efficient deployment of capital by market participants • Rates should promote equity while suitably appropriating any subsidy • Ensure prudent recovery of costs to promote a stable, affordable, and reliable grid that is core to implementing the State’s energy objectives HOW • To be determined as part of this workshop. In today’s presentation, SCE has replicated PG&E’s approach when presenting our costs CONFIDENTIAL 3 Southern California Edison
SCE costs using PG&E’s Template 2015 GRC Proposed (A) (B) (C) (D) (E) (F)=(C)+(D)+(E) (G)=(B)-(F) (H)=(C)+(G) (J) (K)=(J)-(F) (L)=(C)+(K) Marginal Costs (Originally Proposed - 06/2014) June 2016 June 2016 Revenue Revenue Requirement Requireme Customer- Capacity- Energy- Total Additional Total Fixed (Excludes Additional Total Fixed nt Related Related Related Marginal Cost Fixed Costs Costs SONGS refund) Fixed Costs Costs Residential ($ million) ($ million) ($ million) ($ million) ($ million) ($ million) ($ million) ($ million) ($ million) ($ million) Distribution $2,430 $644 $1,093 $0 $1,738 $693 $1,337 $2,430 $693 $1,337 Generation** $2,018 $0 $1,181 $1,707 $2,888 $0 $0 $2,376 $0 $0 PPP* $485 $0 $0 $0 $0 $485 $485 $485 $485 $485 Total $4,933 $644 $2,274 $1,707 $4,625 $1,177 $1,822 $5,291 $1,177 $1,822 Customer-months 52,139,961 52,139,961 52,139,961 52,139,961 52,139,961 52,139,961 52,139,961 52,139,961 52,139,961 52,139,961 $/cust-mo $94.6 $12.4 $43.6 $32.7 $88.7 $22.6 $34.9 $101.5 $22.6 $34.9 2015 GRC Adopted*** (A) (B) (C) (D) (E) (F)=(C)+(D)+(E) (G)=(B)-(F) (H)=(C)+(G) (J) (K)=(J)-(F) (L)=(C)+(K) Marginal Costs June 2016 Revenue Revenue Requirement Requireme Customer- Capacity- Energy- Total Additional Total Fixed (Excludes Additional Total Fixed nt Related Related Related Marginal Cost Fixed Costs Costs SONGS refund) Fixed Costs Costs Residential ($ million) ($ million) ($ million) ($ million) ($ million) ($ million) ($ million) ($ million) ($ million) ($ million) Distribution $2,430 $417 $1,231 $0 $1,648 $782 $1,199 $2,430 $782 $1,199 Generation $2,018 $0 $1,059 $1,295 $2,353 $0 $0 $2,376 $22 $22 PPP* $485 $0 $0 $0 $0 $485 $485 $485 $485 $485 Total $4,933 $417 $2,290 $1,295 $4,002 $1,267 $1,684 $5,291 $1,289 $1,706 Customer-months 52,317,500 52,317,500 52,317,500 52,317,500 52,317,500 52,317,500 52,317,500 52,317,500 52,317,500 52,317,500 $/cust-mo $94.3 $8.0 $43.8 $24.7 $76.5 $24.2 $32.2 $101.1 $24.6 $32.6 CONFIDENTIAL 4 Southern California Edison
FIXED COST WORKSHOP PRESENTATION DATED NOVEMBER 2, 2016
CPUC Fixed Cost Workshop: Real Economic Carrying Charge (RECC) Method November 2, 2016 Reuben Behlihomji - SCE Southern California Edison
Recap & Today’s Agenda Authorized Revenue Requirements: Marginal Costs: Total amount of cost recovery authorized by The difference in cost for a finite increment of the Commission for different functional product or service provided. These costs are typically components of utility revenue categorized into short run and long run costs. Marginal costs reflect the principles of cost causation when allocating revenue responsibility to rate groups. • Energy Charges Fuel and Purchase Power o • Generation GHG o Energy – Short run value of energy (kWh) market o DWR Power charges o prices for a fixed level of installed generation capacity Capacity – Long run value of investing in new o • Base Charges generation capacity (kW) Utility owned generation o Distribution o • Delivery - Distribution Transmission o Today’s Agenda: Customer o RECC Method Long run value of customer connection costs • Balancing Accounts (Transformer, Service Drop and Meter) Short run value for customer service costs Design Demand – Long run valuation of o investments in capacity (kW) addition • Public Purpose Programs • Delivery – Transmission Marginal costs have not been adopted at FERC o CONFIDENTIAL 2 Southern California Edison
What is RECC? • Real Economic Carrying Charge (RECC), or “rental”, method as used in revenue allocation and rate design captures the full economic value of deferring a capital investment • It offers a long-run view of marginal costs where the deployment of capital, as a factor of production, changes over time • Uses of RECC include: ‒ Generation Capacity ‒ Distribution Design Demand – Load Growth ‒ Distribution capital for customer connection costs 3 Southern California Edison
RECC Example – Distribution Line Transformer The full economic value of deferring invested capital in the distribution line transformer for one year is • 10% (RECC = $10) of the initial capital investment of $100. Both RECC and New Customer Only (NCO) methods produce the same revenue requirement when • RECC is calculated over a single life cycle (Cycle 1). Both RECC and NCO methods account for second lifecycle replacement. • PV of RR in Year 0 = $199 Perp Perpetuity Stre Stream am REC RECC = = $10 $10 ($199 ($199 min minus $189) $189) PV of RR in Year 1 = $189 PV of RR in Year 0 = $167 Perpetuity Stre Perp Stream am Sing Single Life Stream Life Stream Yr. Yr. Cycle 1 0 1 Cycle 2 Revenue Requirement (RR) Ini Initial Investme ial Investment = nt = $100 $100 Year 33 Key Assumpti y Assumptions: ons: WACC = 7.9%; Inflation = 2.14%; Average Service Life = 33 years 4 Southern California Edison
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