March 3, 2006 ADVICE 1976-E (U 338-E) PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA ENERGY DIVISION

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2 Akbar Jazayeri Vice President, Revenue and Tariffs March 3, 2006 ADVICE 1976-E (U 338-E) PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA ENERGY DIVISION SUBJECT: Required Rate Change Associated With the Completion of the Twelve-Month Transmission Revenue Refund Implemented on April 14, 2005 Pursuant to Resolution E-3895 In accordance with Resolution E-3895 (Resolution), Southern California Edison Company (SCE) hereby submits for filing the following changes to its tariff schedules. The revised tariff sheets are listed on Attachment A and are attached hereto. PURPOSE The purpose of this advice filing is to revise Distribution and Generation rate levels to remove the impact of the $134 million transmission refund adopted in the Resolution. BACKGROUND In Advice 1783-E, SCE proposed to credit the transmission rate refund ( transmission refund ) ordered in SCE s Federal Energy Regulatory Commission Docket No. ER to Bundled Service Customers through the operation of the Energy Resource Recovery Account (ERRA) Balancing Account. The ERRA Balancing Account balance was consolidated into Generation rate levels in Advice 1808-E (see discussion below). SCE also proposed that its Direct Access (DA) Customers share of the transmission refunds be credited to the Historical Procurement Charge Balancing Account (HPCBA), which would have the effect of expediting the recovery of the balance in the HPCBA. On April 23, 2004, the Energy Division approved SCE s Advice 1783-E. On July 16, 2004, SCE filed Advice 1808-E which consolidated various authorized revenue requirements into rate levels, including SCE s authorized 2004 GRC revenue requirement and the transmission refund. On August 5, 2004, the Alliance for Retail Energy Markets (AReM) filed a protest of SCE s Advice 1808-E, in which it expressed P.O. Box Walnut Grove Ave. Rosemead, California (626) Fax (626)

3 ADVICE 1976-E (U 338-E) March 3, 2006 concern with SCE s proposed treatment of the transmission refund. AReM argued that: 1) Some DA Customers would not receive any portion of the transmission refunds, 2) DA Customers would not receive the immediate benefit of the transmission refunds, and 3) SCE s Generation rates resulting from SCE s proposal would be artificially low. RESOLUTION E-3895 On January 27, 2005, the Commission issued Resolution E Ordering Paragraph No. 4 of the Resolution rescinded the Energy Division s approval of SCE s Advice E and ordered SCE to credit the refund of transmission rate revenues to customer classes through a newly created transmission account. The Resolution also adopted SCE s proposal to refund the transmission rate revenues through a reduction in Distribution rates. Specifically, the Resolution adopted the following ratemaking changes for the transmission refund: 1. SCE will make a debit entry to its ERRA and a credit entry to a newly established transmission sub-account of its BRRBA for $134 million; 2. For a twelve (12)-month period, SCE will reduce its Distribution rates by $134 million in order to refund transmission rate overcharges to customers and amortize the balance in the transmission sub-account of the BRRBA. After the end of the 12-month amortization period, Distribution rates will be adjusted to remove the refund amount; 3. SCE will increase its Generation rates to remove the $134 million refund that had been reflected in Generation rates at the time the Resolution was issued; 4. SCE will remove the credit made to the HPCBA for its DA Customer s share of the transmission refunds; and 5. The rate level changes identified above will be consolidated with rate changes that SCE will implement in its 2005 ERRA Forecast of Operations proceeding (Application No ). On February 10, 2005, SCE filed Advice 1864-E to implement the Resolution establishing the transmission sub-account of the BRRBA pursuant to No. 1 above. Consistent with No. 5 above, SCE included the rate changes required in the Resolution in Advice 1886-E which was filed on April 11, 2005 in compliance with SCE s 2005 ERRA Forecast Decision No (i.e., SCE reversed the refund that was included in Generation rates and included the refund in Distribution rates). The rates included in Advice 1886-E were implemented on April 14, 2005.

4 ADVICE 1976-E (U 338-E) March 3, 2006 APRIL 14, 2006 REVENUE REQUIREMENT AND RATE CHANGE Pursuant to Resolution E-3895, SCE is required to remove the refund from Distribution rates after 12 months, which is April 14, 2006 (see No. 2 above). Table 1 below summarizes, by rate component, the revenue requirement changes (i.e., an increase in the Distribution revenue requirements and a decrease in the Generation revenue requirement) that are required to remove the impact of the transmission refund that has been in effect for the preceding 12-month period. 1 1 SCE s current rates were implemented on February 4, 2006 in Advice 1962-E.

5 ADVICE 1976-E (U 338-E) March 3, 2006 Table 1 April 14, 2006 Consolidated Revenue Requirement By Rate Component ($000) Annual Current Consolidated Change in Annual Rev. Rqmts As Of Revenue Rev. Rqmts April 14, 2006 Requirements GENERATION SERVICE Generation Rate Component: 3. SCE: 4. Fuel and Purchased Power 4,312,776 4,312, SONGS 2&3 Steam Generators 3,060 3, Residential Generation Shortfall MA (AB1X) 15,347 15, ERRA Balancing Account 131, , BRRBA Balancing Account (30,177) (30,177) 0 9. URG O&M and Capital 685, , COC Change (2,865) (2,865) Transmission Refund Reversal (Res E-3895) 133,714 0 (133,714) 12. NUIP 13,422 13, Energy Settlement Refunds (198,414) (198,414) Total SCE Generation 5,064,567 4,930,853 (133,714) 15. DWR Power Charge 2,205,735 2,205, Total Generation Rate Component 7,270,302 7,136,588 (133,714) 17. DELIVERY SERVICE 18. Distribution Rate Component: 19. BRRBA Balancing Account (133,204) (133,204) ODAM Balancing Account 12,224 12, RRB Finance Tax Credits (20,656) (20,656) TTA Franchise Fee Obligations 2,298 2, Distribution O&M and Capital 2,770,383 2,770, COC Change (20,814) (20,814) Non-utility Affiliate Credits (24,180) (24,180) Transmission Refund (133,714) 0 133, RCRA 70,088 70, Self Generation/CA Solar Initiative 136, , Mass Media Memo Account 1,675 1, Interruptible Load Prgm MA 9,151 9, AEAP Settlement (DSM Earnings) 11,453 11, EETAMA Amount 6,684 6, Total Distribution Rate Component 2,687,482 2,821, , Nuclear Decommissioning Rate Component: 35. Spent Nuclear Fuel 4,521 4, DOE D&D Fees 5,380 5, NDAM Balancing Account (1,264) (1,264) Decommissioning Trust Fund 32,864 32, Total Nuclear Decommissioning Rate Component: 41,501 41, Public Purpose Programs Rate Component: 41. CARE Balancing Account 9,392 9, PPPAM Balancing Account 57,793 57, Public Goods Charge 181, , Procurement Energy Efficiency 137, , Low Income Energy Efficiency 27,725 27, CARE Administration 4,249 4, Total Public Purpose Programs Rate Component 418, , Transmission Rate Component: 49. Base Transmission 286, , Transmission Balancing Accounts 97,943 97, Total Transmission Rate Component 384, , Trust Transfer Amount (TTA) 262, , DWR Bond Charge 394, , Total Delivery Service 4,188,902 4,322, , Total SCE Revenue Requirement 8,858,959 8,858, Total DWR Revenue Requirement 2,600,245 2,600, Total Company Revenue Requirement 11,459,204 11,459,204 0

6 ADVICE 1976-E (U 338-E) March 3, 2006 In this advice letter, SCE is also modifying Preliminary Statement, Part YY, BRRBA, to eliminate the transmission sub-account as of March 31, 2006 since the sub-account is no longer necessary. Pursuant to the Resolution, SCE amortized the $134 million transmission refund for 12 months beginning April 1, Any remaining balance recorded in the transmission sub-account as of March 31, 2006 will be transferred to the Distribution sub-account of the BRRBA. In addition to implementing this rate change on April 14, 2006, SCE is also implementing revised Transmission Owners Tariff Change Adjustment (TOTCA) rates on April 14, The April 14, 2006 revised rate schedules that incorporate both rate changes have been included in Advice 1977-E filed concurrently with this advice filing on March 3, No cost information is required for this advice filing. This advice filing will not increase any rate or charge, cause the withdrawal of service, or conflict with any other schedule or rule. EFFECTIVE DATE Pursuant to the Resolution, SCE requests that this advice filing become effective on April 14, 2006 subject to review and approval by the Energy Division. NOTICE Anyone wishing to protest this advice filing may do so by letter via U.S. Mail, facsimile, or electronically, any of which must be received no later than 20 days after the date of this advice filing. Protests should be mailed to: CPUC, Energy Division Attention: Tariff Unit 505 Van Ness Avenue San Francisco, California jjr@cpuc.ca.gov and jnj@cpuc.ca.gov Copies should also be mailed to the attention of the Director, Energy Division, Room 4004 (same address above). In addition, protests and all other correspondence regarding this advice letter should also be sent by letter and transmitted via facsimile or electronically to the attention of:

7 ADVICE 1976-E (U 338-E) March 3, 2006 Akbar Jazayeri Vice President, Revenue and Tariffs Southern California Edison Company 2244 Walnut Grove Avenue Rosemead, California Facsimile: (626) AdviceTariffManager@sce.com Bruce Foster Vice President of Regulatory Operations c/o Karyn Gansecki Southern California Edison Company 601 Van Ness Avenue, Suite 2040 San Francisco, California Facsimile: (415) Karyn.Gansecki@sce.com There are no restrictions on who may file a protest, but the protest shall set forth specifically the grounds upon which it is based and shall be submitted expeditiously. In accordance with Section III, Paragraph G, of General Order No. 96-A, SCE is serving copies of this advice filing to the interested parties shown on the attached GO 96-A service list, A , A , and A , Address change requests to the GO 96-A service list should be directed by electronic mail to AdviceTariffManager@sce.com or at (626) For changes to all other service lists, please contact the Commission s Process Office at (415) or by electronic mail at Process_Office@cpuc.ca.gov. Further, in accordance with Public Utilities Code Section 491, notice to the public is hereby given by filing and keeping the advice filing at SCE s corporate headquarters. To view other SCE advice letters filed with the Commission, log on to SCE s web site at For questions, please contact Doug Snow at (626) or by electronic mail at Douglas.Snow@sce.com. Southern California Edison Company AJ:ds:sq Enclosures Akbar Jazayeri

8 CALIFORNIA PUBLIC UTILITIES COMMISSION ADVICE LETTER FILING SUMMARY ENERGY UTILITY MUST BE COMPLETED BY UTILITY (Attach additional pages as needed) Company name/cpuc Utility No.: Southern California Edison Company (U 338-E) Utility type: Contact Person: James Yee! ELC " GAS Phone #: (626) " PLC " HEAT " WATER EXPLANATION OF UTILITY TYPE ELC = Electric GAS = Gas PLC = Pipeline HEAT = Heat WATER = Water (Date Filed/ Received Stamp by CPUC) Advice Letter (AL) #: 1976-E Subject of AL: Required Rate Change Associated With the Completion of the Twelve-Month Transmission Revenue Refund Implemented on April 14, 2005 Pursuant to Resolution E-3895 Keywords (choose from CPUC listing): Compliance, Refund AL filing type: " Monthly " Quarterly " Annual! One-Time " Other If AL filed in compliance with a Commission order, indicate relevant Decision/Resolution #: E-3895 Does AL replace a withdrawn or rejected AL? If so, identify the prior AL: Summarize differences between the AL and the prior withdrawn or rejected AL 1 : Resolution Required? " Yes! No Requested effective date: 4/14/06 No. of tariff sheets: -5- Estimated system annual revenue effect: (%): See Advice 1977-E Estimated system average rate effect (%): See Advice 1977-E When rates are affected by AL, include attachment in AL showing average rate effects on customer classes (residential, small commercial, large C/I, agricultural, lighting). Tariff schedules affected: Service affected and changes proposed 1 : Preliminary Statement Part YY, Table of Contents Pending advice letters that revise the same tariff sheets: 1 Discuss in AL if more space is needed.

9 Protests and all other correspondence regarding this AL are due no later than 20 days after the date of this filing, unless otherwise authorized by the Commission, and shall be sent to: CPUC, Energy Division Attention: Tariff Unit 505 Van Ness Ave., San Francisco, CA and Akbar Jazayeri Director of Revenue and Tariffs Southern California Edison Company 2244 Walnut Grove Avenue Rosemead, California Facsimile: (626) Bruce Foster Vice President of Regulatory Operations c/o Karyn Gansecki Southern California Edison Company 601 Van Ness Avenue, Suite 2040 San Francisco, California Facsimile: (415)

10 Public Utilities Commission 1976-E Attachment A Cal. P.U.C. Sheet No. Title of Sheet Cancelling Cal. P.U.C. Sheet No. Revised E Preliminary Statement Part YY Revised E Revised E Preliminary Statement Part YY Revised E Revised E Preliminary Statement Part YY Original E Revised E Table of Contents Revised E Revised E Table of Contents Revised E 1

11 Southern California Edison Revised Cal. PUC Sheet No E Rosemead, California Cancelling Revised Cal. PUC Sheet No E PRELIMINARY STATEMENT Sheet 5 YY. Base Revenue Requirement Balancing Account (BRRBA) 3. Operation of the BRRBA: The BRRBA consists of the Distribution Sub-account and the Generation Subaccount. Entries to the BRRBA shall be made monthly as follows: a. Recorded monthly activity in the Distribution Sub-account; b. Plus: recorded monthly activity in the Generation Sub-account; c. Equals: recorded monthly activity in the BRRBA. Interest Expense shall accrue monthly to the BRRBA by applying the Interest Rate to the average of the beginning-of-month and end-of-month balances in the BRRBA. 4. Distribution Sub-account: The purpose of the Distribution Sub-account of the BRRBA is to record the monthly difference between: 1) the ADBRR; and 2) recorded Distribution Revenue. Entries to the Distribution Sub-account shall be made monthly as follows: a. A debit entry equal to the monthly amount of the ADBRR calculated by multiplying the applicable MDP to the annual ADBRR (as determined in Section 2 above), less a provision for FF & U; b. A credit entry equal to BRRBA Distribution Revenue; c. A debit entry to record amounts transferred from the Community Choice Aggregation Implementation Costs Balancing Account. d. A debit entry to record incremental RTEM O&M costs until the Commission has adopted ratemaking in SCE s October 15, 2004 Demand Response Program proceeding. e. A debit entry to record amounts in the Advanced Metering Infrastructure Balancing Account. f. An entry to record other Distribution-related amounts as authorized by the Commission (e.g., transfer of amounts recorded in the Late Payment Charge Revenue Balancing Account). 5. Generation Sub-account: The purpose of the Generation Sub-account of the BRRBA is to record the monthly difference between: 1) the AGBRR; and 2) recorded Generation Revenue. Entries to the Generation Sub-account shall be made monthly as follows: a. A debit entry equal to the monthly amount of the AGBRR calculated by multiplying the applicable MDP (as determined in Section 2 above) to the annual AGBRR without an amount for refueling (as shown in Table C), less a provision for FF & U; (D) (D) (To be inserted by utility) Issued by (To be inserted by Cal. PUC) Advice 1976-E John R. Fielder Date Filed Mar 3, 2006 Decision President Effective Apr 14, H11 Resolution E-3895

12 Southern California Edison Revised Cal. PUC Sheet No E Rosemead, California Cancelling Revised Cal. PUC Sheet No E PRELIMINARY STATEMENT Sheet 6 YY. Base Revenue Requirement Balancing Account (BRRBA) 5. Generation Sub-account: b. A debit entry equal to the monthly amount of the AGBRR calculated by multiplying the applicable MDP (as determined in Section 2 above) to the annual refueling amount included in the annual AGBRR (as shown in Table C), less a provision for FF & U; c. A credit entry equal to BRRBA Generation Revenue; d. An entry to record amounts recorded in the Employee-Related Balancing Account; e. An entry to record Mohave Alternatives Complements Study Costs as authorized by the Commission (net of any co-owner payments); f. A debit entry equal to the San Onofre Nuclear Generating Station (SONGS) Steam Generator Replacement Program (SGRP) Removal and Disposal Costs revenue requirement (the annual CPUC-authorized amount multiplied by the applicable MDP, as determined in Section 2 above) less a provision for FF&U. g. An entry to record other Generation-related amounts as authorized by the Commission (e.g., Yuma Axis credit). (D) (To be inserted by utility) Issued by (To be inserted by Cal. PUC) Advice 1976-E John R. Fielder Date Filed Mar 3, 2006 Decision President Effective Apr 14, H11 Resolution E-3895

13 Southern California Edison Revised Cal. PUC Sheet No E Rosemead, California (U 338-E) Cancelling Original Cal. PUC Sheet No E PRELIMINARY STATEMENT Sheet 7 YY. Base Revenue Requirement Balancing Account (BRRBA) 6. Rate Level Changes Pursuant to D , D , and D , SCE shall update its Distribution and Generation Rate levels to reflect the most current Commissionadopted revenue requirements in its August Energy Resource Recovery Account (ERRA) application. The balance forecast to be recorded in the Distribution Subaccount of the BRRBA (either overcollected or undercollected) on December 31 st of the current year, plus an amount for FF & U, shall be included in the Distribution revenue requirement to either be returned to, or recovered from, SCE s retail electric customers in Distribution rate levels. Likewise, the balance forecast to be recorded in the Generation Sub-account of the BRRBA (either overcollected or undercollected) on December 31 st of the current year, plus an amount for FF & U, shall be included in the Generation revenue requirement to either be returned to, or recovered from SCE s retail electric customers in Generation rate levels. Prior to implementing consolidated Commission-authorized revenue requirements and rate levels to recover those revenue requirements, the BRRBA balance will be updated to reflect the latest recorded balance available. 7. Review Procedures Pursuant to D , D , and D , the recorded operation of the BRRBA for the Record Period (or previous calendar year 12-month period) shall be reviewed by the Commission in SCE s annual April ERRA application to ensure that the entries made in the BRRBA are stated correctly and are consistent with Commission decisions. (D) (To be inserted by utility) Issued by (To be inserted by Cal. PUC) Advice 1976-E John R. Fielder Date Filed Mar 3, 2006 Decision President Effective Apr 14, H12 Resolution E-3895

14 Southern California Edison Revised Cal. PUC Sheet No E Rosemead, California Cancelling Revised Cal. PUC Sheet No E TABLE OF CONTENTS Sheet 1 Cal. P.U.C. Sheet No. TITLE PAGE E TABLE OF CONTENTS - RATE SCHEDULES E TABLE OF CONTENTS - LIST OF CONTRACTS AND DEVIATIONS E TABLE OF CONTENTS - RULES E TABLE OF CONTENTS - BASELINE REGIONS E TABLE OF CONTENTS - SAMPLE FORMS E E PRELIMINARY STATEMENT: A. Territory Served E B. Description of Service E C. Procedure to Obtain Service E D. Establishment of Credit and Deposits E E. General E F. Symbols E G. Gross Revenue Sharing Mechanism E E H. Baseline Service E I. NOT IN USE...-E J. Employee-Related Balancing Account E K. Nuclear Decommissioning Adjustment Mechanism E L. Other Distribution Adjustment Mechanism E M. Income Tax Component of Contributions E N. Memorandum Accounts E E E E E E , E E E O. California Alternative Rates for Energy (CARE) Adjustment Clause E P. Optional Pricing Adjustment Clause (OPAC) E (To be inserted by utility) Issued by (To be inserted by Cal. PUC) Advice 1976-E John R. Fielder Date Filed Mar 3, 2006 Decision President Effective Apr 14, H10 Resolution E-3895

15 Southern California Edison Revised Cal. PUC Sheet No E Rosemead, California Cancelling Revised Cal. PUC Sheet No E TABLE OF CONTENTS Sheet 2 Cal. P.U.C. Sheet No. PRELIMINARY STATEMENT: (Cont'd) Q. Demand Side Management Adjustment Clause (DSMAC) E E R. Historical Procurement Charge Balancing Account E S. Procurement Energy Efficiency Balancing Account (PEEBA) E T. Electric and Magnetic Fields Measurement Program E U. NOT IN USE...-E V. Hazardous Substance Cleanup Cost Recovery Mechanism E E W. Departing Load and Customer Generation Departing Load (CGDL) Cost Responsibility E E X. Research, Development and Demonstration Adjustment Clause (RDDAC) E Y. Economic Development Adjustment Clause (EDAC) E Z. Family Energy Rate Associates Balancing Account E AA. California Alternate Rates for Energy (CARE) Balancing Account E BB. PBR Distribution Revenue Requirement Adjustment Factor (PDRRAD E CC. PBR Distribution Performance Mechanism (PDPM) E E E DD. Cost Of Capital Trigger Mechanism E EE. Electric Deferred Refund Account (EDRA) E FF. Public Purpose Programs Adjustment Mechanism E E GG. Energy Efficiency Program Adjustment Mechanism (EEPAM E HH. Low Income Energy Efficiency Program Adjustment Mechanism (LIEEPAM) E II. Bond Charge Balancing Account (BCBA) E JJ. Direct Access Cost Responsibility Surcharge Tracking Account E KK. NOT IN USE...-E LL. NOT IN USE...-E MM. Community Choice Aggregation Implementation Cost Balancing Account E NN. NOT IN USE... -E OO. NOT IN USE... -E PP. NOT IN USE... -E QQ. NOT IN USE... -E RR. NOT IN USE... -E SS. NOT IN USE... -E TT. NOT IN USE... -E UU. Late Payment Charge Revenue Balancing Account (LPCRBA) E VV. Air Conditioning Cycling Device Balancing Account (ACCDBA) E WW. Community Choice Aggregation Cost Responsibility... Surcharge Tracking Account E XX. NOT IN USE... -E YY. Base Revenue Requirement Balancing Account (BRRBA) E E ZZ. Energy Resource Recovery Account E E AAA. Post Test Year Ratemaking Mechanism (PTYR) E E BBB. Employee Safety and Distribution Reliability Performance Incentive Mechanism (SRPIM) E (To be inserted by utility) Issued by (To be inserted by Cal. PUC) Advice 1976-E John R. Fielder Date Filed Mar 3, 2006 Decision President Effective Apr 14, H9 Resolution E-3895