Report 2021-117 Recommendation 9 Responses

Report 2021-117: Electrical System Safety: California's Oversight of the Efforts by Investor‑Owned Utilities to Mitigate the Risk of Wildfires Needs Improvement (Release Date: March 2022)

Recommendation #9 To: Public Utilities Commission

To ensure that utilities do not over-recover, or charge ratepayers more than they should for the activities they perform, the CPUC should make certain that if utilities request reimbursement for the costs questioned in the contractor audits, the utilities provide sufficient quantifiable and detailed analyses to substantiate that the costs were not paid for through the utilities' previously approved rates.

Annual Follow-Up Agency Response From September 2023

This recommendation is considered fully implemented as described in CPUC's 1-Year response dated 3/23/23.

California State Auditor's Assessment of Annual Follow-Up Status: Partially Implemented

As we stated in our prior assessment of this recommendation, the CPUC provided documentation to show that it had resolved the utilities' reimbursement requests for some of the costs questioned in the contractor audits; however, the documentation it provided did not address all of the reimbursement requests. In response to questions requesting clarification about the appendix it provided and how the decisions it referenced resolved the questioned costs, CPUC indicated it would provide additional documentation to substantiate that it had fully implemented our recommendation.

1-Year Agency Response

The CPUC updated its list of proceedings where Investor-Owned Utilities (IOUs) requested wildfire mitigation cost recovery amounts, to add three new proceedings and to indicate that 3 of the 11 proceedings in the list have recently been resolved, see Appendix 1.

We believe the litigation process for each proceeding provides sufficient quantifiable and detailed analyses to substantiate costs. We prepared Appendix 2 to identify which proceedings address Crowe's audit findings. If the ALJ does not feel there was sufficient quantifiable evidence provided, then the ALJ has the option to require additional evidence as done in the SCE proceeding. The ALJ is the most appropriate person to decide whether the IOU provided sufficient quantifiable and detailed analyses to substantiate that the costs were not paid for through the IOU's previously approved rates.

The CPUC addressed Crowe's concerns about tracking costs from WMP to RAMP-GRC to RSAR via the SMAP 2 proceeding (R.20-07-013), via a staff recommendation that was adopted in modified form in Decision (D.)22-10-002, which was issued on October 11, 2022. In that decision, the CPUC gave guidance as to granularity and breadth of IOU cost expenditures, including directing IOUs to a) identify WMP costs as such in cost recovery applications, and b) include non-safety, reliability, and maintenance cost categories which were previously not in Risk Spending Accountability Reports (RSARs).

California State Auditor's Assessment of 1-Year Status: Partially Implemented

Although the CPUC provided documentation to show that it had resolved the utilities' reimbursement requests for some of the costs questioned in the contractor audits, the documentation it provided did not address all of the reimbursement requests. In response to questions requesting clarification about the appendix it provided and how the decisions it referenced resolved the questioned costs, CPUC indicated it would provide additional documentation to substantiate that it had fully implemented our recommendation.

6-Month Agency Response

The CPUC has worked together to create a list of all Crowe's audit findings and assessed the open proceedings that may request cost recovery implicated in those findings. The first review done for this audit response, in 9/2022; CPUC plans to do the other one within six months. There are currently several proceedings where the findings are being reviewed as part of the proceedings, and the Administrative Law Judge (ALJ) is reviewing the reasonableness of those costs to ensure the Investor Owned Utilities (IOUs) provided "sufficient quantifiable and detailed analyses" to support those costs. Please see Appendix 1.

For the remaining proceedings, Energy Division and ALJ will coordinate to perform twice yearly reviews in March and September of any new requests to ensure IOUs comply with audit finding to provide "sufficient quantifiable detailed analyses..."

Furthermore, Crowe recommended improvements to the Wildfire Mitigation Plan (WMP) cost categories to ensure easier tracing and tracking to Risk Spending Accountability Reports (RSAR). This is being addressed in an active proceeding, R.20-07-013, by directing the utilities to identify WMP spending in their General Rate Cases and expanding the RSARs to cover non Safety/Reliability/Maintenance spending. The proposed decision addressing this matter is scheduled for vote on the 10/6 agenda.

California State Auditor's Assessment of 6-Month Status: Partially Implemented

The CPUC has compiled a list of its contracted external auditor's findings involving questioned costs for all six Investor Owned Utilities (IOUs). However, the CPUC did not provide documentation showing that it has reviewed those findings to ensure that the utilities provided sufficient quantifiable and detailed analyses to substantiate that the costs were not paid for through the utilities' previously approved rates, and it appears that the CPUC has delegated this task to the ALJs presiding over rate proceedings. We look forward to reviewing additional information about these reviews in future responses from the CPUC.

60-Day Agency Response

Energy Division (ED), Administrative Law Judge Division (ALJ) and Legal Division (Legal) will work together to create a list of all Crowe Audit Findings for all 6 electric Investor-Owned Utilities (IOUs) and determine if currently open proceedings request cost recovery implicated by that finding.

For IOUs with recovery requests pending, ALJ and ED will work together to determine whether the IOU provided "sufficient quantifiable and detailed analyses to substantiate that costs were not paid for through previously approved rates".

For IOUs that may not yet have requested costs identified in the Crowe Audit Findings, ED/ALJ will coordinate to perform twice yearly review status of any new requests to ensure IOUs comply with audit finding to provide "sufficient quantifiable detailed analyses..."

California State Auditor's Assessment of 60-Day Status: Pending

The CPUC's response indicates that it plans to take action regarding this recommendation but has not yet done so.

All Recommendations in 2021-117

Agency responses received are posted verbatim.