2018 General Rate Case

Transcription

1 Application No.: A.-0- Exhibit No.: SCE-0, Vol. Witnesses: T. Reeves (U -E) 0 General Rate Case Transmission & Distribution (T&D) Volume - Other Costs, Other Operating Revenues Before the Public Utilities Commission of the State of California Rosemead, California September, 0

2 SUMMARY This exhibit describes the activities performed by SCE s Transmission & Distribution (T&D) Grid Interconnection Contract Development, Reliability Standards Compliance, Grid Contract Management, Distribution Construction Contract Management, and Real Properties groups. We also discuss T&D work order write-offs and claims, line rents, underground locating, and related expense. In this testimony, SCE is requesting $0. million in operations and maintenance expense for Test Year 0 for these areas. With the savings of $0 million identified in Table I- of Exhibit SCE-0, Vol., SCE s O&M request becomes $ million, as seen on the figure below. In this exhibit we forecast $0.0 million for Other Operating Revenue from transactions not associated with the sale of electric energy. Other Costs, Other Operating Revenues O&M Expenses 0 Forecast (Total Company Constant 0 $Millions)

3 SCE-0: Transmission & Distribution Volume - Other Costs, Other Operating Revenues Table Of Contents Section Page Witness I. SUMMARY OF TESTIMONY... T. Reeves A. B. C. Content and Organization of Testimony... O&M Request and History, Capital Request History and Request by Major Category... Overview... II. 0 DECISION... A. B. Compliance Requirements... Comparison of Authorized 0 to Recorded... III. T&D OPERATIONAL SUPPORT, OTHER COSTS AND OTHER OPERATING REVENUE... A. T&D Operational Support Activity Descriptions, Recorded Costs, and Test Year Forecasts.... Grid Interconnection Contract Development (Portion of GRC Account.0)... a) b) Activity Description... Scope and Cost Forecast... () () Historical Variance Analysis... Cost Forecast.... Grid Contract Management (Portion of GRC Account.0)... a) b) Activity Description... Scope and Cost Forecast... () () Historical Variance Analysis... Cost Forecast... -i-

4 SCE-0: Transmission & Distribution Volume - Other Costs, Other Operating Revenues Table Of Contents (Continued) Section Page Witness. Distribution Construction Contract Management (GRC Account.0)... a) b) Activity Description... Scope and Cost Forecast...0 () () Historical Variance Analysis...0 Cost Forecast.... Reliability Standards Compliance (GRC Account 0.)... a) b) Activity Description... Scope and Cost Forecast... () () Historical Variance Analysis... Cost Forecast.... Real Properties (GRC Account 0.0)... a) b) Activity Description... Scope and Cost Forecast... () () Historical Variance Analysis... Cost Forecast... B. T&D Other Costs Activity Descriptions, Recorded Costs, and Test Year Forecasts.... Activity Description - Work Order Write-Offs and Claims... a) Scope and Cost Forecast... () Historical Variance Analysis - Transmission/Substation Work Order Write-Offs (GRC Account 0.)... -ii-

5 SCE-0: Transmission & Distribution Volume - Other Costs, Other Operating Revenues Table Of Contents (Continued) Section Page Witness () Historical Variance Analysis - Distribution Work Order Write-Offs (GRC Account.)... () Historical Variance Analysis - Claims Write-Offs (GRC Account.)... () Cost Forecast - Transmission/Substation Work Order Write-Offs (GRC Account 0.)... () () Cost Forecast - Distribution Work Order Write-Offs (GRC Account.)... Cost Forecast - Claims Write-Offs (GRC Account.).... Activity Description - Line Rents...0 a) Scope and Cost Forecast...0 () Historical Variance Analysis Transmission Line Rents (GRC Account.0)... () Historical Variance Analysis Distribution Line Rents (GRC Account.)... () () Cost Forecast Transmission Line Rents (GRC Account.0)... Cost Forecast Distribution Line Rents (GRC Account.).... Underground Locating Services (GRC Account.)... a) b) Activity Description... Scope and Cost Forecast... -iii-

6 SCE-0: Transmission & Distribution Volume - Other Costs, Other Operating Revenues Table Of Contents (Continued) Section Page Witness () () Historical Variance Analysis... Cost Forecast.... Capital Related Expense (GRC Accounts 0. and.)... a) b) Activity Description... Scope and Cost Forecast... () () Historical Variance Analysis... Cost Forecast.... Summary of GRC Accounts...0 a) b) c) d) e) f) g) h) i) j) GRC Account GRC Account GRC Account.0... GRC Account.0... GRC Account GRC Account.... GRC Account.0... GRC Account.... GRC Account.... GRC Account C. T&D Other Operating Revenue Activity Descriptions, Recorded Costs, and Test Year Forecasts.... Ownership Charges (GRC Account.00)... a) b) Historical Variance Analysis... Forecast... -iv-

7 SCE-0: Transmission & Distribution Volume - Other Costs, Other Operating Revenues Table Of Contents (Continued) Section Page Witness. Pole Rentals (GRC Account.00)... a) b) Historical Variance Analysis... Forecast.... Transmission and Distribution Services (GRC Accounts.00,.0,.0, and.0)... a) b) c) d) GRC Account GRC Account.0 - Transmission and Distribution Services... GRC Account.0... GRC Account.0... () () Historical Variance Analysis... Forecast.... Generation Radial Tie-Lines (GRC Accounts. and.0)... a) b) Historical Variance Analysis... Forecast.... Tie-line Facilities Rental Agreements (GRC Account.)... a) b) Historical Variance Analysis...0 Forecast...0. Miscellaneous Revenue (GRC Account.00)...0 a) b) c) One-Time Added Facilities...0 Relocations/Claims... Property License Fee Revenue... () Historical Variance Analysis... -v-

8 SCE-0: Transmission & Distribution Volume - Other Costs, Other Operating Revenues Table Of Contents (Continued) Section Page Witness () Forecast.... Added Facilities / Interconnection Facilities... a) SCE-Financed Added Facilities (GRC Account.00)... () () Historical Variance Analysis... Forecast... b) SCE-Financed Interconnection Facilities (GRC Account.0)... () () Historical Variance Analysis... Forecast... c) Customer-Financed Added/Interconnection Facilities (GRC Account.00)... () () Historical Variance Analysis... Forecast... -vi-

9 0 0 0 I. SUMMARY OF TESTIMONY A. Content and Organization of Testimony This exhibit describes the activities performed by SCE s Transmission & Distribution (T&D) Grid Interconnection Contract Development, Reliability Standards and Compliance, Grid Contract Management, Distribution Construction Contract Management, and Real Properties groups. We also discuss T&D work order write-offs and claims, line rents, underground locating, and related expense. In this exhibit we forecast Other Operating Revenue from transactions not associated with the sale of electric energy. B. O&M Request and History, Capital Request History and Request by Major Category SCE is requesting $0. million in operations and maintenance expense for Test Year 0 for the areas listed above. This funding will allow these organizations to manage contracts under the jurisdiction of the California Public Utilities Commission (CPUC or Commission) and Federal Energy Regulatory Commission (FERC), as well as properly account for miscellaneous operations and maintenance costs. C. Overview Many of the cost activities in this chapter are driven by regulatory oversight and/or laws and statutes. For example: The activities of the Grid Interconnection Contract Development, Reliability Standards and Compliance, Grid Contract Management, and Distribution Construction Contract Management groups are primarily driven by the requirements provided by regulatory agencies (Commission, FERC, NERC, etc.) and various state and federal laws. Capital-related expense and work order write-off are required accounting treatments under the Code of Federal Regulations and Generally Accepted Accounting Principles. Line Rents are driven in part by the obligation to compensate government agencies for the use of public land. Underground Locating Service is required by California State Law. Many of the revenue activities described in this chapter are also required for regulatory/legal reasons. For example: Ownership Charges, Added/Interconnection Facilities, Transmission and Distribution Services, and Tie-Lines are required under Commission and FERC tariffs.

10 Pole Rentals are required by Commission decisions and state law.

11 0 II. 0 DECISION A. Compliance Requirements There were no compliance requirements identified in D.--0 for the activities in this chapter. B. Comparison of Authorized 0 to Recorded In the 0 GRC, the Commission authorized $0 million for T&D Operational Support and Other Costs for the 0 Test Year, and SCE recorded $ million as shown in Figure II-. The lower expenses for Operational Support were due primarily to not hiring additional personnel. The lower expenses in write-off were driven by normal fluctuations in business. The increase in related expense was due primarily to changes in the mix of capital projects. The 0 GRC decision authorized $ million in Operational Excellence O&M benefits, which were forecast as several different line items. These benefits were realized in many other GRC accounts throughout T&D s recorded costs; therefore, the $ million is shown as a difference in Figure II-. In other words, the Operational Excellence benefits are provided to show a consistent authorized to recorded variance, but do not represent SCE s realization of these benefits.

12 Figure II- Other Costs, Other Operating Revenues 0 GRC Authorized Variance Summary 0 O&M (Total Company Constant 0 $Millions) Refer to WP SCE-0 Vol., pp. (O&M Authorized vs. Recorded).

13 III. T&D OPERATIONAL SUPPORT, OTHER COSTS AND OTHER OPERATING REVENUE In this chapter we present: () the Operations and Maintenance (O&M) forecast for Transmission & Distribution s (T&D) operational support groups, write-offs, services, and related expense; and () the Other Operating Revenue (OOR) forecast from transactions not associated with the sale of electric energy. For Test Year 0, we forecast $0. million of O&M, shown in Table III- and $0.0 million of OOR, shown in Table III-. Table III- O&M Request (Total Company Constant 0 $Millions) O&M Requests GRC Account 0 Request Grid Interconnection Contract Development.0 $,0 Grid Contract Management.0 $,0 Operational Support Distribution Construction Contract Management.0 $, Reliability Standards Compliance 0. $,0 Real Properties 0.0 $, Transmission 0. $,0 Write-Offs Distribution. $, Claims. $, Transmission Line Rents.0 $,0 Services Distribution Line Rents. $, Underground Locating. $,0 Related Transmission/Substation Capital-Related Expense 0. $, Expense Distribution Capital-Related Expense. $ 0, FERC-Jurisdictional (Only in Workpapers) 0. $,0 Total $ 0, 0 A. T&D Operational Support Activity Descriptions, Recorded Costs, and Test Year Forecasts. Grid Interconnection Contract Development (Portion of GRC Account.0) The labor and non-labor expenses for Grid Interconnection Contract Development (GICD) are recorded in GRC Account.0 and are shown in Table III-.

14 a) Activity Description GICD manages customer requests and develops contracts for generation interconnection, large retail and load growth projects for both transmission and distribution service, from receipt of an application, through the negotiation process, to the final signature of an interconnection, transmission, or added facilities contract. GICD also manages the process to revise agreements as customers seek changes to their existing contracts. In addition to managing the interconnection process, GICD manages certain transmission contracts that predate the formation of the California Independent System Operator (CAISO). b) Scope and Cost Forecast Table III- Grid Interconnection Contract Development Portion of GRC Account.0 Recorded and Adjusted 0-0/Forecast 0-0 (Constant 0 $000) Recorded Forecast Labor $, $, $, $, $, $, $, $, Non-Labor $ $,0 $,0 $, $, $, $, $, Total $, $, $, $, $,0 $,0 $,0 $,0 Ratio of Labor to Total % % % % % % % % Basis of Forecast: Last Year Recorded Basis of Labor/Non-Labor Split: Last Year Recorded Labor/Non-Labor Ratio 0 () Historical Variance Analysis (a) Labor The historical labor expenses are relatively flat. (b) Non-Labor The increase of $,0,000 from 0 to 0 was due primarily to hiring additional contractors because of a backlog of contract negotiations, which were caused by the increased volume and complexity of interconnections. The decrease of $,000 from 0 to 0 was Contracts are governed by both CPUC and FERC tariffs. Refer to WP SCE-0 Vol., pp. -.

15 0 0 due primarily to a reduction in the need for such contractors as the backlog was reduced. The decrease of $,000 from 0 to 0 was due primarily to a change in division overhead allocation. () Cost Forecast The number of new generator interconnection requests has fluctuated in the past and may increase again in the future due to an increase in the Renewable Portfolio Standards (RPS) to 0% by 00 and construction of more distributed generation projects. In addition, we expect to receive more requests for large load projects triggered by customer expansions. SCE has also seen an increase in the complexity of interconnection requests. Many are concentrated in certain renewable-rich energy zones or new technologies, such as energy storage, that complicate the transmission planning and negotiation process. Despite these drivers of increased volume and complexity, GICD strives to be more efficient and expects to manage the increased workload with existing staffing. For Test Year 0, we forecast labor expenses of $. million and non-labor expenses of $. million which is based on 0 recorded.. Grid Contract Management (Portion of GRC Account.0) The labor and non-labor expenses associated with Grid Contract Management are recorded in GRC Account.0 and are shown in Table III-. a) Activity Description The Grid Contract Management (GCM) group primarily manages FERC- and CPUC-jurisdictional interconnection contracts. These contracts support growth in renewable energy and foster a reliable energy supply for customers throughout SCE s service territory. The contracts set forth the terms and conditions under which generators and other parties connect to SCE s electrical grid. After contracts or agreements are executed, they are managed by GCM from cradle-to-grave. When newly executed contracts are received, this group analyzes all of the provisions and obligations to identify actions items that must be taken. Here are examples of common action items performed over the life of the contract: Obtain, monitor and release security postings, e.g., for study work, construction, current tax liability reassessment, etc. See SCE-0 Vol. 0 and the response to Master Data Request Question I.A.. Most contracts have a renewable clause into perpetuity and are seldom terminated.

16 0 Provide monthly meter load data to generators. Monitor and obtain proof of generators insurance coverage, maintenance schedules, and production forecasts. Calculate, coordinate and monitor billing for construction, ongoing operations and maintenance, and demand load. Calculate quarterly transmission credit refunds. Monitor suspensions and perform termination actions. Modify contracts due to changes in rates, compliance requirements, final costs, etc. The contract managers in this group also act as a single point of contact (postconstruction), resolve audit and contract dispute issues, monitor compliance with new regulations, and provide data for required FERC and CPUC reporting. b) Scope and Cost Forecast Table III- Grid Contract Management Portion of GRC Account.0 Recorded and Adjusted 0-0/Forecast 0-0 (Constant 0 $000) Recorded Forecast Labor $, $, $,0 $, $,0 $,0 $,0 $,0 Non-Labor $ $ $ $ $ $ $ $ Total $,0 $, $, $,0 $,0 $,0 $,0 $,0 Ratio of Labor to Total % % % % % % % % Basis of Forecast: Last Year Recorded Basis of Labor/Non-Labor Split: Last Year Recorded Labor/Non-Labor Ratio () Historical Variance Analysis (a) Labor The decrease of $,000 from 0 to 0 and the $,000 increase from 0 to 0 were due primarily to fluctuations in staffing levels caused by employees Refer to WP SCE-0 Vol., pp. -.

17 0 0 leaving the organization and being backfilled, and employees temporarily departing and returning from protected leave. (b) Non-Labor From 0 to 0, non-labor is relatively flat. From 0 to 0, the decrease of $,000 was due primarily to a change in division overhead allocation. () Cost Forecast As discussed in the forecast above for GICD, the volume of new contracts in negotiation is expected to steadily rise for the foreseeable future, resulting in an increase in contracts needing to be managed by GCM. Despite these expected increases, GCM continually looks for ways to improve efficiency, and expects to manage the increased contract volume with existing staffing. For Test Year 0, we forecast labor expenses of $.0 million and non-labor expenses of $,000 which is based on 0 recorded.. Distribution Construction Contract Management (GRC Account.0) The labor and non-labor expenses associated with Distribution Construction Contract Management are recorded in GRC Account.0 and are shown in Table III-. a) Activity Description CPUC Tariff Rules and require that developers (and others adding load to the distribution system) pay their portion of the costs associated with line and service extension projects. In addition, CPUC Tariff Rules and 0 require that customers make advance payment for other requests, such as temporary electric services and relocations of electric facilities. Collecting funds for all of these activities protects the financial interests of the ratepayers. Distribution Construction Contract Management performs the following activities: Manages CPUC Tariff Rules,,, and real properties contracts, including refunds, billings, payments, and collections throughout the contract life, where applicable. Determines accounting treatment of advance payments collected from customers. Staffs a help desk to answer questions from developers and other customers. See SCE-0 Vol. 0 and the response to Master Data Request Question I.A..

18 Provides analytical support for an SAP-based contract-management system (Contract Billing System), including interfaces to other software systems, modifications, and process improvements. The non-labor portion of this account includes costs for supplemental workers and employee expenses. Non-labor also includes chargebacks for printing, employee relocations, and information technology. b) Scope and Cost Forecast Table III- Distribution Construction Contract Management GRC Account.0 Recorded and Adjusted 0-0/Forecast 0-0 (Constant 0 $000) Recorded Forecast Labor $, $, $ $ $, $, $, $, Non-Labor $ $ $ $ $ $ $ $ Total $,0 $,0 $ $, $, $, $, $, Ratio of Labor to Total % % % % 0% 0% 0% 0% Basis of Forecast: Last Year Recorded Basis of Labor/Non-Labor Split: Last Year Recorded Labor/Non-Labor Ratio 0 () Historical Variance Analysis (a) Labor From 0 to 0, the $.0 million decrease was primarily due to decreased personnel following the implementation of the Contract Billing System in May 0, which enabled greater automation of a portion of this group s activities. Also, a portion of the group charged to overhead accounts during 0. This accounting treatment reverted back in 0 resulting in an increase of $,000. The $,000 increase from 0 to 0 was due primarily to fluctuations in staffing levels caused by employees leaving the organization and being backfilled, and employees temporarily departing and returning from protected leave. Refer to WP SCE-0 Vol., pp. -. 0

19 0 0 (b) Non-Labor Non-labor is relatively flat. () Cost Forecast Much of the work described above is driven by external forces and we expect continued fluctuations in volume. However, because of the automation of many of the contract management activities in this group, we expect to manage the workload with existing staffing. For Test Year 0, we forecast labor expenses of $. million and non-labor expenses of $,000 which is based on 0 recorded.. Reliability Standards Compliance (GRC Account 0.) The labor and non-labor expenses associated with Reliability Standards Compliance are recorded in GRC Account 0. and are shown in Table III-. a) Activity Description SCE must comply with many new and modified reliability standards, including cyber security. Within T&D, the Reliability Standards Compliance Group takes the lead for these activities. The Reliability Standards Compliance (RSC) group performs the following activities within T&D: Project manages the implementation of new FERC, North American Electric Reliability Council (NERC), and Western Electricity Coordinating Council (WECC) rules and regulations. Provides governance and advisory services for managing compliance with FERC-approved reliability standards. Acts as a liaison between T&D and Regulatory Operations, Power Supply, Information Technologies, Corporate Security, and NERC Compliance Program groups. Represents T&D in industry compliance forums, including the NERC, WECC, Edison Electric Institute, Western Interconnection Forum, and the California Reliability Standards Collaboration Group and provides timely information to affected T&D stakeholders.

20 Leads, assists, or coordinates ongoing reliability compliance commitments by identifying key compliance issues and risks and ensure proper controls are established. Leads, assists, or coordinates Western Electricity Coordinating Council (WECC) reliability compliance self-certifications, spot checks, and audits. b) Scope and Cost Forecast Table III- Reliability Standards Compliance GRC Account 0. Recorded and Adjusted 0-0/Forecast 0-0 (Constant 0 $000) Recorded Forecast Labor $ $ $0 $, $, $, $, $, Non-Labor $ $ $ $ $ $ $ $ Total $, $, $,0 $, $,0 $,0 $,0 $,0 Ratio of Labor to Total % % 0% 0% % % % % Basis of Forecast: Last Year Recorded Basis of Labor/Non-Labor Split: Last Year Recorded Labor/Non-Labor Ratio 0 () Historical Variance Analysis (a) Labor From 0 to 0, the $,000 increase was primarily due to increased personnel, who were needed to perform additional compliance activities required as FERC and NERC issued new standards that were required to be implemented by SCE. 0 (b) Non-Labor From 0 to 0, the decrease of $,000 was primarily due to the reduction of contractor charges related to the completion of the 0 WECC Compliance Audit. Refer to WP SCE-0 Vol., pp For a complete discussion of NERC requirements in 0-, please see A.--00, SCE-0 Vol., pp. -.

21 0 0 () Cost Forecast The ever-increasing quantity and complexity of new and revised standards is expected to continue; however, we expect to manage the resulting workload with existing staffing. For Test Year 0, we forecast labor expenses of $. million and non-labor expenses of $,000 which is based on 0 recorded.. Real Properties (GRC Account 0.0) The labor and non-labor expenses associated with Real Properties are recorded in GRC Account 0.0 and are shown in Table III-. a) Activity Description T&D s Real Properties Division purchases and manages the land and rights needed to build and maintain SCE s electrical system. Real Properties has two primary responsibilities: () acquire land and land rights; and () manage land owned by SCE. When SCE builds a greenfield project, it must acquire land. Real Properties identifies land suitable for SCE s infrastructure projects, and then purchases that land. This group also negotiates the purchase of land rights and secures permits from government agencies such as the Bureau of Land Management and the US Forest Service. These permits allow SCE to construct and operate facilities on lands under federal and state jurisdiction. The cost of acquiring land is a capital expenditure, and therefore is included in the cost forecasts for projects that require land purchase. These projects are discussed in the System Planning Capital Projects testimony in Exhibit SCE-0, Volume 0. Other activities performed by this organization are: Safeguard all SCE land and land rights, including removing unauthorized items from our rights of way that interfere with the safe operation of the electrical system. Land survey, property title research, real estate document preparation, escrow administration, land appraisal, and mapping. Managing real estate-related contracts and documents, such as grant deeds, easements, quitclaims and licenses.

22 b) Scope and Cost Forecast Table III- Real Properties GRC Account 0.0 Recorded and Adjusted 0-0/Forecast 0-0 (Constant 0 $000) Recorded Forecast Labor $, $, $,0 $, $, $, $, $, Non-Labor $,0 $, $, $ $ $ $ $ Total $, $, $, $, $, $, $, $, Ratio of Labor to Total % % % % % % % % Basis of Forecast: Last Year Recorded Basis of Labor/Non-Labor Split: Last Year Recorded Labor/Non-Labor Ratio 0 () Historical Variance Analysis The $. million decrease in non-labor and the $,000 increase in labor from 0 to 0 was due primarily to a shift from contract workers to SCE employees to support increased work on transmission projects. The decreases from 0 through 0 were due primarily to an accounting change where employees and contractors who previously charged to specific expense and capital accounting, instead charged to accounting that allocates to expense and capital based on overall T&D work. () Cost Forecast The future activities required to acquire land and land rights, and manage the land that SCE owns, are expected to remain stable. SCE expects to manage the resulting workload with existing staffing. For Test Year 0, we forecast labor expenses of $. million and non-labor expenses of $,000 which is based on 0 recorded. Refer to WP SCE-0 Vol., pp. -.

23 0 0 B. T&D Other Costs Activity Descriptions, Recorded Costs, and Test Year Forecasts. Activity Description - Work Order Write-Offs and Claims This section discusses expenses for canceled capital projects, uncollected costs for billable work orders, and unpaid claims for damaged facilities. All of these items are normal costs of business. Canceled projects occur for several reasons. For example, during the initial phase of a capital project, costs are incurred for design, right-of-way, and government agency permits; however, due to changes in operating requirements and/or criteria, the project may no longer be needed. In such cases, the associated capital order is cancelled and the expenditures are recorded to work order write-off expense. If cancellation occurs after construction has begun and material has been installed, all reusable material will be returned to inventory, and the labor or other remaining charges are recorded to work order write-off expense. Write-offs can also occur when we perform billable work for a customer, such as a relocation, and the bill is not paid. The labor and non-labor expenses associated with work order write-offs record to GRC Account 0. (transmission/substation) and. (distribution) and are shown in Table III- and Table III-. Write-offs can occur from unpaid claims involving damage to our facilities, primarily due to cars hitting our poles or other parties damaging our underground facilities while digging. When these events occur, SCE repairs the damaged facilities and bills the responsible party, if known, so ratepayers are not burdened by these costs. Although we try to collect from the responsible party, not all efforts will result in a collection. When such invoices are deemed uncollectible, the invoice is written off and the amount is recorded to this account. If payment is ultimately received for a previously written-off invoice, a credit is reflected in this account. Technically, this write-off activity is accomplished on a monthly basis by multiplying the outstanding claims receivable balance by the five-year historical ratio of write-offs. The result is compared to the previous month s provision balance, and a debit or credit is made to this account to adjust to the new requirement. The labor and non-labor expenses associated with claims write-offs record to GRC Account. and are shown in Table III-.

24 a) Scope and Cost Forecast Table III- Transmission Work Order Write-Offs Portion of GRC Account 0. Recorded and Adjusted 0-0/Forecast 0-0 (Constant 0 $000) Recorded Forecast Labor $ $ $ $ $ $ $ $ Non-Labor $ $, $, $,0 $ $, $, $, Total $, $, $,0 $,0 $ $,0 $,0 $,0 Ratio of Labor to Total % % % % % 0% 0% 0% Basis of Forecast: Year Average Basis of Labor/Non-Labor Split: Year Weighted Average Labor/Non-Labor Ratio Table III- Distribution Work Order Write-Offs Portion of GRC Account. Recorded and Adjusted 0-0/Forecast 0-0 (Constant 0 $000) Recorded Forecast Labor $, $, $,0 $, $, $, $, $, Non-Labor $, $, $,0 $, $, $, $, $, Total $, $, $, $, $,0 $, $, $, Ratio of Labor to Total % % % % % 0% 0% 0% Basis of Forecast: Itemized Forecast Basis of Labor/Non-Labor Split: Year Weighted Average Labor/Non-Labor Ratio Refer to WP SCE-0 Vol., pp. -. Refer to WP SCE-0 Vol., pp. -0.

25 Table III- Distribution Claims Write-Offs GRC Account. Recorded and Adjusted 0-0/Forecast 0-0 (Constant 0 $000) Recorded Forecast Labor $ $ $ $ $ $ $ $ Non-Labor $, $, $,0 $0,0 $, $, $, $, Total $, $, $,0 $0,0 $, $, $, $, Ratio of Labor to Total 0% 0% 0% 0% 0% 0% 0% 0% Basis of Forecast: Year Average Basis of Labor/Non-Labor Split: Year Weighted Average Labor/Non-Labor Ratio 0 () Historical Variance Analysis - Transmission/Substation Work Order Write-Offs (GRC Account 0.) The combined labor and non-labor costs varied throughout the historical period due to fluctuating levels of project cancellations and uncollected invoices for billable projects. To help illustrate the activity in this account, below are examples of some of the larger transactions recorded over the period 0-0: $0. million of engineering and licensing costs incurred for the San Bernardino - Vista 00kV transmission line upgrade were written off in 0. The upgrade was determined to no longer be necessary due to additional technical study and analysis which concluded that the West of Devers project will mitigate the line s overload potential. $0. million in 0 and $. million in 0 for several towers in the Chino area of the Tehachapi Renewable Transmission Project due to a change in design required by the Federal Aviation Administration. $0. million of engineering and licensing costs incurred for the Drycreekwind to Whirlwind 0kV transmission line which was Refer to WP SCE-0 Vol., pp. 0-. Amounts in rounded nominal dollars.

26 0 0 written off in 0, due to a scope change. The transmission line was determined to no longer be necessary because the generator connected directly into the Whirlwind substation. () Historical Variance Analysis - Distribution Work Order Write-Offs (GRC Account.) The combined labor and non-labor costs varied throughout the historical period due to fluctuating levels of project cancellations and uncollected invoices for billable projects. To help illustrate the type of activity in this account, below are examples of some of the larger transactions recorded over the period 0-0: $0. million in 0 related to a portion of an engineering study which was not collectible due to a contractual agreement with a government agency. $0. million in 0 related to design work done for a government agency for a project ultimately canceled. $0. million in 0 and $0. million in 0 for a true-up invoice disputed by the customer. Collection efforts are ongoing. $0. million in 0 for scrapped material. () Historical Variance Analysis - Claims Write-Offs (GRC Account.) The combined labor and non-labor costs varied throughout the historical period, due to fluctuating levels of claims receivable balances and collection percentages. As discussed above in section III.B., monthly, the outstanding claims receivable balance is multiplied by the fiveyear historical ratio of write-offs. The result is compared to the previous month s provision balance, and a debit or credit is made to this account to adjust to the new requirement. () Cost Forecast - Transmission/Substation Work Order Write-Offs (GRC Account 0.) For Test Year 0, we forecast combined labor and non-labor expenses of $.0 million based on a five-year average. In D.--0, the Commission stated for those accounts that have significant fluctuations in recorded costs from year to year, or which are influenced by external forces beyond the control of the utility, an average of recorded expenses over a period of Amounts in rounded nominal dollars.

27 0 time is a reasonable base estimate. This approach is appropriate due to the fluctuating levels of project cancelations and uncollected invoices for billable projects. () Cost Forecast - Distribution Work Order Write-Offs (GRC Account.) For Test Year 0, we forecast combined labor and non-labor expenses of $. million based on a five-year average after adjustments. In D.--0, the Commission stated for those accounts that have significant fluctuations in recorded costs from year to year, or which are influenced by external forces beyond the control of the utility, an average of recorded expenses over a period of time is a reasonable base estimate. In D.--0, the Commission stated: TURN proposes removing two write-offs from SCE s calculation and that TURN s proposal is a reasonable adjustment to the recorded write-offs and is adopted. SCE has made these adjustments to our historical costs and the forecast has been adjusted accordingly as shown in Table III-0. Table III-0 Adjusted Average for Distribution Work Order Write-Offs GRC Account. (Constant 0 $000) Distribution Work Order Write-Off (.) Recorded,,,,,0 Less: Not adopted per D.--0 (pp -) Provision for delayed relocation invoices in 0 and the reversal in 0 - $. million (0 dollars), (,) Provisions for cancelled/inactive work orders, time value of money (0) (0) (,), (,000) Adjusted Recorded,,,,,0 Average 0-0, () Cost Forecast - Claims Write-Offs (GRC Account.) For Test Year 0, we forecast combined labor and non-labor expenses of $. million. The labor/non-labor split is based on a weighted average five-year historical ratio in this account. In D.--0, the Commission stated for those accounts that have significant fluctuations in recorded costs from year to year, or which are influenced by external forces beyond the control of the Not adopted figures are escalated to 0 dollars using composite distribution rate.

28 0 utility, an average of recorded expenses over a period of time is a reasonable base estimate. This approach is appropriate due to the fluctuating levels of claims receivable balances and collections.. Activity Description - Line Rents Line rents are expenses SCE incurs to rent property SCE does not own but requires for its transmission and distribution system. Expenses include payments to the United States government and others for use of public, private, or tribal lands for line rights of way. Payments are made to entities such as the U.S. Bureau of Land Management, the U.S. Forest Service, the Union Pacific, Burlington Northern, and Santa Fe Railroads, and the Morongo Band of Mission Indians. Expenses for line rents record to GRC Accounts.0 (transmission) and. (distribution) and are shown in Table III- and Table III-. a) Scope and Cost Forecast Table III- Transmission Line Rents GRC Account.0 Recorded and Adjusted 0-0/Forecast 0-0 (Constant 0 $000) Recorded Forecast Labor $ $ $ $ $ $ $ $ Non-Labor $ $ $ $ $ $ $ $ Other $0,0 $, $, $,0 $, $, $, $,0 Total $0,0 $, $, $,0 $, $, $, $,0 Ratio of Labor to Total 0% 0% 0% 0% 0% 0% 0% 0% Basis of Forecast: Itemized Forecast Basis of Labor/Non-Labor Split: Itemized Forecast Refer to WP SCE-0 Vol., pp. -. 0

29 Table III- Distribution Line Rents Portion of GRC Account. Recorded and Adjusted 0-0/Forecast 0-0 (Constant 0 $000) Recorded Forecast Labor $ $ $ $ $ $ $ $ Non-Labor $ $ $ $ $ $ $ $ Other $, $, $,0 $, $, $, $, $, Total $, $, $,0 $, $,0 $, $, $, Ratio of Labor to Total 0% % 0% 0% % 0% 0% 0% Basis of Forecast: Itemized Forecast Basis of Labor/Non-Labor Split: Itemized Forecast 0 () Historical Variance Analysis Transmission Line Rents (GRC Account.0) The historical variances in this account are driven primarily by two factors. The first is a lease from the Morongo Band of Mission Indians. During 0-0, the lease was being negotiated and a bridge agreement was in place. During this period, the amounts paid fluctuated according to the terms of the bridge agreement as well as processing and application fees. These costs totaled $. million in 0 and $. million in 0. In 0, negotiations completed and the annual amount of $. million became fully effective (the lease increases to $.0 million in 0). The second factor was a new line rent for the Devers-Colorado River Devers-Valley 00kV line that began operations in 0 at an annual rate of $0. million. () Historical Variance Analysis Distribution Line Rents (GRC Account.) The historical costs in this account are relatively flat. () Cost Forecast Transmission Line Rents (GRC Account.0) For Test Year 0, we forecast expenses of $.0 million for this account as shown in Table III-. Refer to WP SCE-0 Vol., pp. -0.

30 0 0 For government land rentals, we used three source documents from the federal Bureau of Land Management (BLM):. Corrected 00 and 0 National Agricultural Statistics Service (NASS) Census Per-Acre Land and Building Values and Rents Schedule Zones Used to determine the 0 and 0 zone assignments for counties.. BLM 00-0 Per Acre Rent Schedule Used to determine the 0 Zone Rate per Acre.. BLM 0-0 Per Acre Rent Schedule. Used to determine the 0 Zone Rate per Acre. Using the counties where our line rentals are located for both BLM and United States Forestry Service (USFS uses the same schedules as BLM), we used the zone and zone rate per acre to calculate the 0 forecast for government lands (a.% increase over 0). For 0-00, we then applied the annual.% escalation called for in the rate schedule. 0 Finally, we averaged the 0-00 costs to normalize for the 0 Test Year. For non-government land rentals, we examined the three largest contracts that make up the expenses in this account. The average year-over-year change for these contracts during 0-0 was 0.%. We applied this percentage to 0-00 and averaged the 0-00 costs to normalize for the 0 Test Year. For the Morongo Band of Mission Indians lease, the contract terms call for payments of $.0 million beginning in 0. () Cost Forecast Distribution Line Rents (GRC Account.) For Test Year 0, we forecast expenses of $. million for this account as shown in Table III-. 0 Because we are using escalation factors specific to these contracts, the forecast is classified as other in the Results of Operation model where it will not receive further escalation. Because we are using escalation factors specific to these contracts, the forecast is classified as other in the Results of Operation model where it will not receive further escalation. Refer to WP SCE-0 Vol., pp. -0 ( Line Rent Support Documents ).

31 0 For distribution government land rentals, we used the same methodology discussed above for transmission government land rentals. The primary driver of the increase was the reclassification by BLM of San Bernardino County from zone to zone. The resulting rate change from $0. to $. per acre represents a % increase. Since nearly two-thirds of our land rentals from BLM and USFS are in San Bernardino County, this accounts for virtually all of the 0.% increase from 0 to 0. For non-government land rentals, we examined the largest contracts that make up the expenses in this account. The average year-over-year change for these contracts during 0-0 was.%. We applied this percentage to 0-00 and averaged the 0-00 costs to normalize for the 0 Test Year. Table III- Summary of Transmission and Distribution Line Rents Recorded and Adjusted 0/Forecast 0-0 (Constant 0 $000) Distribution (Government Lands) $, $, $,0 $,0 $, $,0 Distribution (Non-Government Lands) $ $ 0 $ $ $ $ 0 Distribution Total $,0 $, $, $, $, $, Average 0-00 $, Transmission (Government Lands) $, $, $, $,00 $,0 $, Transmission (Non-Government Lands) $, $, $, $, $, $, Morongo $,00 $,00 $,00 $,000 $,000 $,000 Transmission Total $, $, $, $,0 $,0 $, Average 0-00 $,0 Change in Bureau of Land Management Rent Schedules from 0 to 00 (Government Lands) Distribution % Distribution 0-00.% Transmission 0-0.% Transmission 0-00.% Change in Non-Government Rent from 0 to 00 Distribution 0-00.% Transmission % Morongo lease terms include an increase of $0. million every five years (beginning in 0). Because we are using escalation factors specific to these contracts, the forecast is classified as other in the Results of Operation model where it will not receive further escalation. Refer to WP SCE-0 Vol., pp. -0 ( Line Rent Support Documents ).

32 0. Underground Locating Services (GRC Account.) The labor and non-labor expenses associated with locating underground facilities record in GRC Account. and are shown in Table III-. a) Activity Description SCE is required by state law to be a member of, participate in, and share in the costs of a regional notification center for calls related to locating underground facilities. SCE uses Underground Service Alert for this service. In addition, state law requires that underground facilities be located and marked prior to excavation. SCE contracts with UtiliQuest to respond to virtually all routine and emergency facility location requests. Some of these requests are initiated by SCE crews and our construction contractors for SCE work. UtiliQuest locates and identifies underground facilities (such as natural gas, electric, or water) by marking the pavement or ground with paint. This service protects public safety and enhances reliability. b) Scope and Cost Forecast Table III- Underground Locating Services Portion of GRC Account. Recorded and Adjusted 0-0/Forecast 0-0 (Constant 0 $000) Recorded Forecast Labor $ $ $ $ $ $ $ $ Non-Labor $0, $, $,0 $0,00 $, $, $, $, Total $0, $, $,0 $0,0 $, $,0 $,0 $,0 Ratio of Labor to Total 0% % 0% 0% 0% 0% 0% 0% Basis of Forecast: Itemized Forecast Basis of Labor/Non-Labor Split: Itemized Forecast California Government Code. Refer to WP SCE-0 Vol., pp. -0.

33 0 () Historical Variance Analysis (a) Labor The labor in this account is immaterial since SCE personnel rarely perform the underground locating work. (b) Non-Labor The non-labor expenses fluctuated based on the number and type of requests for underground locating services. There was also a decrease in 0 due to an accounting change described below. () Cost Forecast For Test Year 0, we forecast expenses of $.0 million of labor and non-labor, based on the five-year adjusted average from 0-0. SCE made an accounting change for recording underground locating services. In 0, we began capitalizing the costs for underground locating service for SCE capital projects. We adjusted our historical costs to reflect this change and our forecast can be seen in Table III-. In D.--0, the Commission stated that for those accounts that have significant fluctuations in recorded costs from year to year, or which are influenced by external forces beyond the control of the utility, an average over a period of time is a reasonable base estimate. This approach is appropriate due to the fluctuating volume and type of requests received.

34 Table III- Accounting Change Adjustment for Underground Locating Service GRC Account. (Constant 0 $000) Underground Locating Service Recorded/Adjusted 0,,,0 0,0, Adjustment for Accounting Change (.%) (,) (,0) (,) (,) - Recorded/Adjusted after Accounting Change,,,,0, Five-Year Average of Recorded/Adjusted after Accounting Change,0 0. Capital Related Expense (GRC Accounts 0. and.) The labor and non-labor expenses associated with capital related expense record in GRC Account 0. and., and are shown in Table III-. a) Activity Description The costs recorded in these accounts represent expenses incurred for work that must be done when capital additions or replacements are being performed. These activities do not qualify for capitalization according to standard accounting guidelines. We have combined Transmission/Substation and Distribution together for purposes of discussion, because they follow the same guidelines and the capital-expense relationship discussed is similar. Table III- provides examples where a capital expenditure would result in related expense being incurred. The 0 capital ratio was calculated by dividing the cost of underground locates performed for SCE work ($,,) by the total cost of underground locates done for all parties ($,,0). The result was multiplied by the overall ratio of T&D capital to expense (.%). The final ratio of.% was applied to the historical period to reduce the expense for forecasting purposes. FERC regulations ( C.F.R. Part 0 (0) Operating Expense Instructions state that expense treatment shall be applied to: Rearranging and changing the location of plant not retired. Also, Electric Plant Instructions state that When a minor item of depreciable property is replaced independently of the retirement unit of which it is a part, the cost of replacement shall be charged to the maintenance account appropriate for the item

35 Table III- Examples of Capital Expenditures and Their Related Expense Capital Expenditure Example Resulting Related Expense Rationale Pole replacement Replacement of insulators Insulators are a minor item of the conductor unit of property which is not being replaced Capacitor bank replacement Moving conductors to make space for the new capacitor bank Rearranging and changing the location of plant not retired Conductor replacement kv cutover New service connection Replacing a cross arm or adding new brackets to the pole Replacing cross arms without replacing the pole or insulators without replacing the conductor Rearranging an existing circuit to accommodate the new line extension Cross arms and brackets are minor items of the pole unit of property which is not being replaced Cross arms are minor items of the pole and insulators are minor items of the conductor units of property which are not being replaced Rearranging and changing the location of plant not retired As these examples show, related expense is directly related to capital expenditures. Therefore, as capital expenditures increase or decrease, there is a corresponding change to related expense. Capital expenditures are discussed in more detail by T&D witnesses in other exhibits.

36 b) Scope and Cost Forecast Table III- Capital Related Expense Portions of GRC Accounts 0. and. Recorded and Adjusted 0-0/Forecast 0-0 (Constant 0 $000) Recorded Forecast Labor $, $, $, $ $, $, $, $, Non-Labor $, $, $, $, $,0 $, $,00 $0, Subtotal 0. $,0 $,0 $, $0, $0, $,0 $, $,. Labor $,0 $, $,0 $,0 $, $, $, $, Non-Labor $, $, $, $, $0,0 $0, $, $, Subtotal. $, $, $, $,0 $,0 $, $, $0, Total $, $0,0 $, $, $, $, $, $, Labor $, $, $, $, $, $, $, $, Non-Labor $,0 $,0 $, $, $, $, $0, $, Ratio of Labor to Total 0% % % % % % % % Basis of Forecast: Itemized Forecast Basis of Labor/Non-Labor Split: Last Year Recorded Labor/Non-Labor Ratio () Historical Variance Analysis The ratio of capital-related expense to capital expenditures varies based on the mix of capital projects in a given year. Table III- shows the adjusted capital-related expenses, the recorded capital expenditures, and the ratio of the two. 0 The table also includes a historical adjustment for compatible units, a methodology that will be implemented in 0. This adjustment makes the history consistent with the new methodology. For more information about this change, please see SCE-0, Volume. Refer to WP SCE-0 Vol., pp. - (for GRC Account 0.) and WP SCE-0 Vol., pp. - (for GRC Account.). 0 Refer to WP SCE-0 Vol., pp. - ( Transmission/Substation and Distribution Capital-Related Expense ).

37 Table III- Transmission/Substation and Distribution Capital-Related Expense GRC Account 0. and. (Total Company Constant 0 $000) < Recorded > Transmission/Substation Capital-Related Expense (0.),0,0, 0, 0, Capital-Related Expense (.) Total Capital-Related Expense,0,0, 0, 0, Capital Expenditures,,,,,,0,0,0,,0 Calculated Capital-Related Expense Ratio 0.% 0.%.% 0.% 0.% Five-Year Weighted Average Ratio 0.% Distribution Capital-Related Expense (.),,,,0,0 Capital-Related Expense (.) - - -, Total Capital-Related Expense,,,,, Adjustment for Compatible Units,,,,,00 Adjusted Recorded Capital-Related Expense,,0,,, Capital Expenditures,0,,0,,,0,,00,,00 Calculated Capital-Related Expense Ratio.%.%.%.0%.% Five-Year Weighted Average Ratio.0% () Cost Forecast We have averaged the 0-0 ratio to develop our forecast to smooth the year-to-year fluctuations. The five-year weighted average ratios of capital-related expense to capital expenditures are 0. percent for transmission/substation and.0 percent for distribution. The 0-00 forecasts were calculated by multiplying the capital-related expense ratio by the forecast capital expenditures for each year and normalizing for the 0 Test Year. The 0 forecast for these expenses are $. million for transmission/substation and $0. million for distribution (see Table III-). The labor/non-labor split is based on a weighted average five-year historical ratio in these accounts. Refer to WP SCE-0 Vol., pp. - ( Transmission/Substation and Distribution Capital-Related Expense ).

38 . Summary of GRC Accounts a) GRC Account 0. Figure III- Summary of GRC Account 0. Recorded and Adjusted 0-0/Forecast 0-0 (Total Company Constant 0 $000) $,00 $,00 $,00 $,000 $00 $00 $00 $00 $ Recorded Forecast Reliability Standards Compliance Labor $ $ $0 $, $, $, $, $, Non-Labor $ $ $ $ $ $ $ $ Sub- Total $, $, $,0 $, $,0 $,0 $,0 $,0 Total 0. Labor $ $ $0 $, $, $, $, $, Non-Labor $ $ $ $ $ $ $ $ Total Expenses $, $, $,0 $, $,0 $,0 $,0 $,0 Refer to WP SCE-0 Vol., pp. -. 0

39 b) GRC Account 0. Figure III- Summary of GRC Account 0. Recorded and Adjusted 0-0/Forecast 0-0 (Total Company Constant 0 $000) $,000 $0,000 $,000 $0,000 $,000 $ Recorded Forecast Transmission Work Order Write-Offs Labor $ $ $ $ $ $ $ $ Non-Labor $ $, $, $,0 $ $, $, $, Sub- Total $, $, $,0 $,0 $ $,0 $,0 $,0 Transmission Capital Related Expense Labor $, $, $, $ $, $, $, $, Non-Labor $, $, $, $, $,0 $, $,00 $0, Sub- Total $,0 $,0 $, $0, $0, $,0 $, $, Total 0. Labor $, $,00 $, $0 $,00 $, $, $, Non-Labor $, $, $, $, $, $, $, $, Total Expenses $, $, $,0 $, $, $,0 $, $,0 Refer to WP SCE-0 Vol., pp. -.