Southern California Edison Seeks to Add Wildfire Risk Component in Cost of Capital Filing With California Public Utilities Co...
April 22 2019 - 3:55PM
Business Wire
Southern California Edison today asked the California Public
Utilities Commission (CPUC) to include a wildfire risk component in
setting the company’s authorized cost of capital for utility
operations for the three-year period starting in 2020.
In its application, SCE is seeking a return on common equity
(“Base ROE”) of 10.6% for 2020, compared to its current Base ROE of
10.3%. This level of return reflects capital needs for safe,
reliable day-to-day operations and investments the company is
making to help achieve California’s ambitious clean energy
goals.
In addition to the Base ROE, SCE is seeking an additional ROE of
6% to compensate investors for the higher risks associated with
uncertain state policies for utility cost recovery and liability
resulting from California’s devastating wildfires (“Wildfire Risk
ROE”). SCE will seek to reduce or remove this Wildfire Risk ROE in
the future if there is a material reduction in its wildfire risk
due to regulatory or legislative reform.
Today’s state filing is consistent with an April 11 filing SCE
made with the Federal Energy Regulatory Commission (FERC) asking
that agency to include a wildfire risk adjustment in its authorized
return on equity for the 20% of SCE’s rate base regulated by
FERC.
At the time of the FERC filing and again today, the company
emphasized that it does not view the inclusion of wildfire-related
adjustments in these proceedings to be a long-term solution to the
urgent situation utilities in California are facing, but a
near-term necessity in order to attract the capital needed to
provide safe, reliable electricity.
All investor-owned utilities in California are required to file
an application with the CPUC every three years as part of the cost
of capital proceeding. The CPUC process includes opportunities for
public input; following a period of hearings and testimony, a final
decision from the CPUC is anticipated by year’s end.
The CPUC is charged with setting the authorized cost of capital
at a level that is adequate to attract investor capital to provide
up-front funding for needed infrastructure and equipment. In
practice, this level is determined by comparing market returns on
investments for other companies with similar levels of risk;
however, SCE recently has experienced downgrades of its credit
ratings by major rating agencies as a result of the growing risk of
wildfires and California’s current legal and regulatory framework.
These downgrades have led to increased costs for obtaining
capital.
The company estimates that the average SCE residential customer
would see an increase of about $12.20 per month on their average
monthly bill of about $100 if the cost of capital application is
approved as submitted. The company previously estimated that the
ROE authorization requested of FERC would result in an increase of
about $2.20 per month for the average residential customer
“Creditworthy investor-owned utilities are critical to the
future of California,” said Caroline Choi, senior vice president of
Corporate Affairs for SCE and its parent company, Edison
International. “We will continue to work with urgency with the
governor, legislators and regulators to find comprehensive
solutions for wildfire-related cost recovery and liability that
restore investor confidence.”
About Southern California Edison
An Edison International (NYSE:EIX) company, Southern California
Edison is one of the nation’s largest electric utilities, serving a
population of approximately 15 million via 5 million customer
accounts in a 50,000-square-mile service area within Central,
Coastal and Southern California.
Safe Harbor Statement for Investors
Statements contained in this press release about the Thomas
Fire, and other statements that do not directly relate to a
historical or current fact, are forward-looking statements. In this
press release, the words "believes," "continuing to," "predict,"
"plan," "may," "will," and variations of such words and similar
expressions, or discussions of strategy, plans or actions, are
intended to identify forward-looking statements. Such statements
reflect our current expectations; however, such statements
necessarily involve risks and uncertainties. Actual results could
differ materially from current expectations. Important factors that
could cause different results include the timing and outcome of the
investigations and internal review of the Thomas Fire. Other
important factors are discussed in Southern California Edison’s
Form 10-K and other reports filed with the Securities and Exchange
Commission, which are available on our
website: edisoninvestor.com.
Edison International and Southern California Edison Company have
no obligation to publicly update or revise any forward-looking
statements, whether due to new information, future events or
otherwise.
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Media Contact: Charles Coleman, (626) 302-2255Investor Relations
Contact: Sam Ramraj, (626) 302-2540
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