October 4, 2005 RE: APPLICATION /INVESTIGATION

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1 Frank A. McNulty Senior Attorney October 4, 2005 Docket Clerk California Public Utilities Commission 505 Van Ness Avenue San Francisco, California RE: APPLICATION /INVESTIGATION Dear Docket Clerk: Enclosed for filing with the Commission are the original and five copies of the RESPONSE OF SOUTHERN CALIFORNIA EDISON COMPANY (U 338-E TO THE OFFICE OF RATEPAYER ADVOCATES MOTION TO STRIKE PORTIONS OF THE UPDATE TESTIMONY in the above-referenced proceeding. We request that a copy of this document be file-stamped and returned for our records. A self-addressed, stamped envelope is enclosed for your convenience. Your courtesy in this matter is appreciated. Very truly yours, FAM:aa:LAW# Enclosures cc: All Parties of Record (U 338-E P.O. Box Walnut Grove Ave. Rosemead, California ( Fax (

2 BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA Application of Southern California Edison Company (U 338-E for Authority to, Among Other Things, Increase Its Authorized Revenues for Electric Service in 2006, and to Reflect that Increase in Rates. Investigation on the Commission s Own Motion into the Rates, Operations, Practices, Service and Facilities of Southern California Edison Company. Application (Filed December 21, 2004 Investigation (Filed May 26, 2005 RESPONSE OF SOUTHERN CALIFORNIA EDISON COMPANY (U 338-E TO THE OFFICE OF RATEPAYER ADVOCATES MOTION TO STRIKE PORTIONS OF THE UPDATE TESTIMONY MEGAN SCOTT-KAKURES JAMES M. LEHRER FRANK A. MCNULTY Attorneys for SOUTHERN CALIFORNIA EDISON COMPANY 2244 Walnut Grove Avenue Post Office Box 800 Rosemead, California Telephone: ( Facsimile: ( scegrc@sce.com Dated: October 4, 2005

3 BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA Application of Southern California Edison Company (U 338-E for Authority to, Among Other Things, Increase Its Authorized Revenues for Electric Service in 2006, and to Reflect that Increase in Rates. Investigation on the Commission s Own Motion into the Rates, Operations, Practices, Service and Facilities of Southern California Edison Company. Application (Filed December 21, 2004 Investigation (Filed May 26, 2005 RESPONSE OF SOUTHERN CALIFORNIA EDISON COMPANY (U 338-E TO THE OFFICE OF RATEPAYER ADVOCATES MOTION TO STRIKE PORTIONS OF THE UPDATE TESTIMONY I. INTRODUCTION Pursuant to Rule 45(f of the California Public Utilities Commission (Commission Rules of Practice and Procedure, Southern California Edison Company (SCE hereby responds to the Office of Ratepayer Advocates (ORA motion to strike portions of SCE s update testimony. ORA s motion should be denied

4 II. THE POSTAGE INCREASE UPDATE TESTIMONY IS APPROPRIATE AND SHOULD NOT BE STRICKEN SCE must regularly communicate with its approximately 4.6 million customers. For example, each month we must render bills and provide our customers with various communications mandated by statute or Commission regulation. To do so we use the most economical means available, the United States mail. However, in April of this year the Postal Service asked the Postal Commission to increase postage rates by about 5.4 percent overall. The impact of this postage increase on our cost of service is easily quantified and there is nothing we can do to avoid its impact in 2006 and beyond. Therefore, we included in our update testimony a description of this cost change and a quantification of its impact on our 2006 revenue requirement. ORA has moved to strike SCE s update testimony on postage expense because the Postal Rate Commission has not yet acted on the Postal Service s request. However, recent developments in the postage rate case support the conclusion that a postal rate increase is very certain and thus known. The U.S. Postal Service has just filed in its case signatures to a settlement agreement from 36 of the 46 parties that have intervened as full or limited participants in the postage rate case. 1 The settlement agreement s terms include the 5.4 percent rate increase with an effective date of January The settlement agreement also seeks a Recommended Decision from the U.S. Postal Rate Commission no later than October 31, Pursuant to Title 39 of the Code of Federal Regulations, any Recommended Decision will then be submitted to the Board of Governors of the U.S. Postal Service. The U.S. Postal Service is clearly 1 Pursuant to Rule 73 of the CPUC s Rules of Practice and Procedure and Section 452(h of the State of California Evidence Code, SCE asks that official notice be taken of the following two documents filed with the Postal Rate Commission: (1 Notice of United States Postal Service of Filing Signatures for Stipulation and Agreement, Docket No. R (September 23, 2005; and (2 Initial Brief of the United States Postal Service, Docket No. R (September 26, 2005, pages i - vii. Copies of the two documents are attached hereto as Attachments A and B, respectively

5 assuming the rate increase will be in effect by January. It just issued a press release, dated September 27, 2005, on the topic of a new five-year plan already approved by the Board of Governors, which states that its Fiscal Year 2006 operating plan is predicated on a postage rate change of 5.4 percent taking effect in January 2006, driven by a requirement to place $3.1 billion in an escrow account by the end of the year. 2 SCE proposes to increase its annual Authorized Base Revenue Requirement (ABRR by $1.018 million on the effective date of the U.S. postage increase and will advise the Commission of that increase with a compliance advice letter. By using this process, SCE s revenue requirement will be correctly stated should the U.S. Postal Commission issue a decision with an implementation date other than January 2006 or decide against the postage rate increase. ORA s motion to strike the postage update testimony should be denied because the existence of the expected postage increase is known the amount of the increase is certain (5.4 percent and a recommended decision is likely by October 31, 2005, before a proposed decision is issued in this GRC. Moreover, SCE s proposed implementation methodology ensures ratepayers will only bear the cost of an increase when and if it occurs. III. THE MOHAVE UPDATE TESTIMONY IS APPROPRIATE UNDER THE CIRCUMSTANCES AND SHOULD NOT BE STRICKEN ORA also moves to strike the portion of SCE s update testimony that addresses the Mohave Generating Station (Mohave. 3 ORA characterizes this testimony as merely argument, and claims that it is beyond the proper bounds of the September 26 th update as foreseen in the Rate Case Plan and in the Scoping Memo for this proceeding. 4 2 SCE requests that official notice also be taken of the September 27, 2005, News Release by the United States Postal Service, a copy of which is attached hereto as Attachment C. 3 ORA s mmotion does not specifically identify the portions of SCE s update testimony it would have the Commission strike. Presumably, ORA would have any reference to Mohave stricken from the update record. 4 ORA Motion, p

6 In fact, it is entirely appropriate under the circumstances that SCE update the Commission and the parties at this juncture regarding Mohave; the September 26 th Update Testimony is a perfectly suitable and appropriate vehicle for doing so. Mohave s post-2005 status has remained impossible to predict during the course of this case, leading SCE to introduce into evidence three alternative post-2005 Mohave scenarios and to state more than once that it would update the Commission on Mohave as circumstances allowed. 5 SCE s update testimony on Mohave simply follows through on that commitment, in a way that allows all parties an opportunity to cross-examine SCE s witness on the subject. If anything, SCE would be remiss if, having presented three alternative Mohave scenarios and having indicated that a Mohave update would follow, we were not to update the record. Note that this update testimony does not alter SCE s requested revenue requirement. Simply because SCE continues to believe, based upon the latest facts as described in its update testimony, that the Mohave Continued Operation scenario remains the most appropriate scenario to use for revenue requirement purposes in no way reduces the update testimony to merely argument. In fact, describing this testimony as argument would mean that any facts supporting a different scenario would be appropriate update material while any facts supporting the Continued Operation scenario would not. If the ALJ concludes the Rate Case Plan and Scoping Memo precludes from presenting the Mohave testimony in this update phase, then SCE should be allowed to resubmit the Mohave testimony as a separate late-filed exhibit on which parties can conduct discovery and crossexamination. SCE believes this alternative procedural path would be less efficient than proceeding with it in the update phase as submitted. But in any event this testimony should become part of the record. 5 Exhibit 120, p. 2; SCE, Fohrer, Tr. 6/175-77; SCE Opening Brief, p

7 IV. CONCLUSION For the foregoing reasons, ORA s motion to strike SCE s update testimony should be denied. Respectfully submitted, MEGAN SCOTT-KAKURES JAMES M. LEHRER FRANK A. MCNULTY By: Frank A. McNulty Attorneys for SOUTHERN CALIFORNIA EDISON COMPANY 2244 Walnut Grove Avenue Post Office Box 800 Rosemead, California Telephone: ( Facsimile: ( scegrc@sce.com October 4,

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25 CERTIFICATE OF SERVICE I hereby certify that, pursuant to the Commission s Rules of Practice and Procedure, I have this day served a true copy of RESPONSE OF SOUTHERN CALIFORNIA EDISON COMPANY (U 338-E TO THE OFFICE OF RATEPAYER ADVOCATES MOTION TO STRIKE PORTIONS OF THE UPDATE TESTIMONY on all parties identified on the attached service list(s. Service was effected by one or more means indicated below: Transmitting the copies via to all parties who have provided an address. First class mail will be used if electronic service cannot be effectuated. Placing the copies in sealed envelopes and causing such envelopes to be delivered by hand or by overnight courier to the offices of the Commission or other addressee(s. Placing copies in properly addressed sealed envelopes and depositing such copies in the United States mail with first-class postage prepaid to all parties. Directing Prographics to place the copies in properly addressed sealed envelopes and to deposit such envelopes in the United States mail with first-class postage prepaid to all parties. Executed this 4th day of October, 2005, at Rosemead, California. Linda Morales Project Analyst SOUTHERN CALIFORNIA EDISON COMPANY 2244 Walnut Grove Avenue Post Office Box 800 Rosemead, California 91770