On June 11, 2019, FERC accepted, suspended for five months, and set for hearing Southern California Edison Company’s (“SoCal Edison”) revised transmission owner tariff and formula rate (“Formula Rate”), which includes an increased base 2019 transmission revenue requirement (“2019 TRR”).  SoCal Edison’s proposed rate increase is intended to account for the increased financial risks associated with wildfires in California.   

According to SoCal Edison, wildfire-related factors outside of its control have created a risk of wildfire liability.  As a result, SoCal Edison proposed a return on equity (“ROE”) of 17.62, which includes a base ROE of 11.12 percent with a 600 basis point adder to account for the wildfire liability, as well as a 50 basis point adder for SoCal Edison’s continued participation in the California Independent System Operator Corporation (“CAISO”).

FERC accepted SoCal Edison’s revised Formula Rate and related 2019 TRR but set them for hearing and settlement judge procedures.  Among other things, several protestors asserted that SoCal Edison’s proposed 11.12 base ROE, 600 basis point adder for wildfire liability, and 50 basis point adder for CAISO participation were unjust and unreasonable.  In response, SoCal Edison explained that the 600 basis point adder is necessary due to its “unique” risk profile among electric utilities because it faces an increasing risk of wildfires.  But upon its preliminary analysis of the filing, FERC found that the Formula Rate and 2019 TRR had not been shown to be just and reasonable.  FERC further found that SoCal Edison’s proposed rates may result in “substantially excessive revenues,” and, therefore, suspended the proposed rate for the maximum five-month period.

A copy of FERC’s order is available here.