By Hudson Sangree

The effort to prevent utility equipment from causing disasters was a major reason the California Public Utilities Commission decided Thursday to extend the general rate case cycle for the state’s investor-owned utilities from three years to four.

After the 2010 San Bruno gas pipeline explosion and years of catastrophic wildfires starting in 2007, the commission opened its general rate case (GRC) rulemaking in 2013 “out of concern that the energy utilities were not explicitly or adequately addressing safety and reliability issues in their GRC funding requests.”

In December 2014, the commission added a Risk Assessment Mitigation Phase and the related Safety Model Assessment Proceeding to the IOUs’ rate cases. The protocols require IOUs to examine the risks they face and propose strategies to mitigate those risks, which the commissioners must then approve. (See CPUC Adds RAMP Costs to Rate Case for 1st Time.)

In its latest decision, the commission said moving to a four-year GRC cycle would bolster disaster-prevention efforts.

“The longer cycle will allow the utilities and stakeholders to dedicate more time to implementing the new risk-mitigation and accountability structures that this commission established earlier in this rulemaking, and less time litigating GRC applications,” it said.

The longer cycle also will let the commission monitor “utility spending in something closer to real time, especially when the utility decides to reprioritize authorized funding for another purpose.”

With circumstances changing quickly because of wildfires, utilities have had to redirect money to fire prevention efforts such as tree trimming, line inspections and repairs. (See California Regulators OK Utility Wildfire Plans.)

In addition, the commission said it hoped the four-year cycle would improve efficiency in the GRC process, which can be delay-prone, by providing more time to work through difficulties.

“General rate cases are the bread and butter of what we do,” Commissioner Clifford Rechtschaffen said at Thursday’s meeting. “They’re very complex, very time consuming,” and at least one rate case is always pending, he said.

In a GRC, the commission authorizes a utility to recover capital investments and annual operations and maintenance expenses through rates charged to customers. Fundamental principles include balancing the needs of investors and ratepayers and providing safe and reliable service at a reasonable cost.

The commission’s unanimous decision said the “task we face is how to adhere to these principles in a world where — as all stakeholders can surely agree — events are moving much more quickly than can be accommodated by the existing GRC process.”

“In such circumstances, the importance of commission oversight in the midst of a utility’s GRC cycle increases,” it said. “It is no longer sufficient for the commission to authorize a multiyear GRC revenue requirement for the utility and then sit back and wait for the utility and intervenors to report back three years later regarding whether the utility spent the authorized amounts, for specifically authorized purposes, or found it necessary to use the funds elsewhere.”

The move to a four-year cycle was supported by two of the state’s large IOUs, Pacific Gas and Electric and San Diego Gas & Electric, and by the commission’s Public Advocates Office.

PG&E said the four-year cycle would allow for adjustments to the revenue requirement to address unusual circumstances and give the commission more time to weigh “the extraordinary amount of evidence” in GRCs.

CPUC staff, Southern California Edison, the state’s second largest IOU, and The Utility Reform Network, a consumer advocacy group, objected to the move.

Staff expressed concerns about switching to a four-year cycle, citing potential problems such as increased uncertainty about forecasted expenditures in the additional fourth year.

SCE did not oppose a four-year cycle outright but said it worried the longer cycle would lead to shortfalls in authorized spending. It asked for “greater tolerance on the part of the commission and parties with respect to errors and variances in forecasting.”

The new four-year cycle and other provisions incorporated into the order take effect June 30. A series of workshops to deal with implementing the changes and increasing efficiency in the GRC process will take place over the next year, the commission said.