Each year, Southern California Edison (SCE) files an update to its power cost forecast via the Energy Resource Recovery Account (ERRA) application. The ERRA sets generation rates and Power Charge Indifference Adjustment (PCIA) rates for the upcoming year. This year, SCE filed its application on July 1. Through the application, SCE seeks California Public Utilities Commission (CPUC or Commission) authorization for SCE’s revenue requirements for 2021. The forecast revenue requirements consist primarily of SCE’s proposed 2021 power costs, but also include 2020 year-end balancing account balances that SCE requests to recover from, or return to, the customer, as well as other miscellaneous expenses.

The ERRA forecast numbers are preliminary and SCE will update its 2021 ERRA revenue requirement forecast in November 2020 (November Update) so that the latest forecast assumptions, power market pricing, and updated estimated 2020 year-end balancing account balances can be incorporated into SCE’s 2021 rates.

The initial review suggests a slight decrease in generation rates due to the implementation of the ERRA, expected in March 2021. However, other rate changes are forecasted to offset this decrease. The underlying driver of the rate decrease is the reduction in SCE’s bundled load due to customer departure. Additionally, the ongoing COVID-19 pandemic has created forecasting uncertainty related to SCE’s 2021 forecast power cost assumptions; SCE has incorporated assumptions and estimates related to the impact of COVID-19 in 2021.  If the outlook for 2021 appears to be significantly different from what SCE has included in its July forecast, SCE stated that it will address these factors in the November Update.

As mentioned above, SCE implements several rate changes at the start of each year, so the forecasted generation rate decrease is just one piece of the anticipated 2021 annual consolidated rate change. Also under consideration by the Commission is SCE’s 2021 General Rate Case application, a proceeding related to SCE grid safety and resiliency, and an anticipated SCE 2020 ERRA trigger application. A trigger application is filed when the utility over-collects in the current year due to forecast versus actual variance in the ERRA.

CalChoice has teamed with Clean Power Alliance (CPA) to engage specialized legal counsel, Keyes & Fox LLC (Keyes & Fox), to fully vet SCE’s 2021 ERRA. Included on this team is one of the state’s leading ERRA technical rate experts. The ERRA team has begun working on behalf of our members to review and analyze the ERRA application, preparing discovery requests to better understand, and—if appropriate—challenge and protest the costs associated with the ERRA application. Keyes & Fox will participate in hearings, provide expert testimony, prepare rebuttal documents, and perform other related tasks as part of their scope of services.

Next Steps

CalChoice and CPA will participate in frequent meetings with Keyes & Fox and their technical rate expert to discuss findings and strategy. Currently, the team is submitting discovery requests related to the ERRA analysis. Protests to the application are due the first week of August. The procedural schedule includes a prehearing conference, expert testimony, comments, and other activities throughout the fall until a Final Decision is issued by the CPUC, anticipated on December 17. We will keep you apprised of activities related to this application and its proceeding.