By Rich Heidorn Jr.

FERC on Tuesday approved a settlement reducing Southern California Edison’s 2018 base transmission revenue requirement (TRR) and return on equity, and a partial settlement on the utility’s 2019 request for an ROE increase to reflect wildfire risks.

The commission approved an uncontested settlement in a dispute over SCE’s 2018 base TRR and revisions to its formula rate methodology (ER18-169-002). It set the case for hearing and settlement procedures in late 2017, saying that although SCE proposed a reduction in its TRR, “a further decrease may be warranted.” (See FERC Sets Hearing on SCE Tx Rates; Glick Dissents.)

The commission approved the deal after its endorsement by FERC trial staff, which said the settlement “provides numerous benefits to customers,” including increased transparency of the utility’s cost inputs and “near-immediate rate relief.”

SCE had proposed a base ROE of 10.3%. The settlement reduces that to 9.92%, exclusive of the 50-basis-point CAISO adder and project-specific adders equivalent to 0.78%.

The true-up TRR for 2018 was set at $1.079 billion. SCE had sought a TRR of $1.169 billion, down from $1.189 billion in 2017.

The settlement also adjusts how SCE calculates its capital structure, limits its recovery of incentive compensation and allows more time for stakeholders to discuss draft annual updates with the company.

The utility also agreed to pay up to $350,000 for the California Public Utilities Commission’s consultant to participate in the CAISO transmission planning process, the transmission maintenance and compliance review, and the 2019 formula rate annual update and settlement negotiations. SCE and the CPUC also agreed to continue discussions on potential rate design modifications.

SCE’s proposed two-year limitation on correction of errors was eliminated.

FERC had required SCE to file a replacement transmission rate recovery mechanism as part of a settlement over its original formula rate, which took effect in 2012. SCE had recovered its TRR through stated rates after unbundling its retail transmission rates and transferring operational control of its transmission network to CAISO in 1997.

SCE Wins 12.47% ROE in Temporary Deal

The commission on Tuesday also approved a partial settlement reducing SCE’s ROE from 17.62% to 12.47% as settlement proceedings continue over the company’s 2019 TRR (ER19-1553-001).

SCE requested the 17.62% ROE in April, citing “dramatic material changes to SCE’s regulatory and financial conditions that have occurred” since the utility’s prior rate took effect in October 2017 — a reference to the potential for multibillion-dollar costs based on California’s strict liability standard for utility-sparked wildfires. In June, FERC tentatively accepted the increase but postponed any change for the maximum five months and set it for an evidentiary hearing. (See FERC Leery of SCE’s ROE Request for Wildfires.)

The partial settlement, which was unopposed, “does not definitively resolve any issues set for hearing but reduces SoCal Edison’s ROE on an interim basis,” the commission wrote. It noted trial staff’s comments that the commission “has not found the 12.47% ROE to be fair, reasonable or in the public interest, and that it is leaving a final determination on that issue to the existing hearing and settlement judge procedures.”