Chino Hills sides with SCE over cost recovery

The city of Chino Hills has asked California regulators to allow Southern California Edison (SCE) to recover costs associated with exploring the possibility of undergrounding Segment 8a of  the Tehachapi Renewable Transmission Project (TRTP) that will run through a portion of the city even before regulators order such an alignment (Docket No. A07-06-031).

In a response to an SCE contracting report it filed with the California Public Utilities Commission (CPUC) on Jan. 22, the city of Chino Hills said it had changed its earlier position that SCE should not be permitted accelerated recovery of costs incurred to explore the possibility of undergrounding a portion of the line.

In its proposed rate recovery proposal submitted to the CPUC on Nov. 30, 2012, SCE described three categories of costs for which it would seek recovery: advanced engineering and costing efforts on viable underground designs, solicitation of bids from the market to refine cost estimates, and advanced contracting efforts on construction activities, materials and equipment.

In its first response to that proposal, the city maintained that the category of advanced contracting activities was too vague for the commission to make a reasoned determination as to whether the activities were critically necessary, prudent and in the public interest. Therefore, it argued against allowing recovery of those costs prior to a commission ruling ordering an underground alignment.

The city did agree that certain cost categories identified by SCE, including engineering/costing efforts on underground designs and costs incurred to refine cost estimates, were readily recoverable as TRTP project costs.

In its contract report, SCE identified up to $33m in costs for which it sought cost recovery assurance, including $3m for pre-production cable testing, $1.5m for engineering work necessary to finalize the information needed for the commencement of construction, $200,000 related to property acquisition; $250,000 for the work necessary to secure amendments to environmental permits; and up to $28m for contract termination penalties related to cable procurement contracts.

In its filing, the city said the costs were reasonable.

“The amount requested is not exorbitant and each activity for which cost recovery is sought is intended to ensure that all the necessary pieces are in place to immediately proceed with the construction of an underground alternative upon issuance of a commission decision, and thus help to ensure timely completion of the TRTP,” the city said.

Ensuring timely completion of the project is vital to meeting the state’s policy goals, the city added.

“The need for timely completion of the TRTP is driven by the fact that the project is a key piece of infrastructure that will assist in the achievement of California’s aggressive renewable energy goals,” the city said in its filing.

With the additional information provided by SCE in its contract report, the city said it was convinced that the utility should be allowed cost recovery prior to a CPUC decision on undergrounding.

“Through its contracting report, SCE has provided the information necessary for the commission to make that determination, and asked that the commission authorize SCE to incur costs “not to exceed $33 million for the purpose of engaging in those activities,” the city concluded.

When completed, the 250-mile, 500-kV TRTP will be capable of moving up to 4,500 MW of renewable energy from the Tehachapi, Calif., area to population centers in Los Angeles and San Bernardino counties to help meet California’s renewable portfolio standard, which calls for 33% renewable energy by 2020.

The $2.2bn project is scheduled to be in service in 2015, according to the assigned commissioner’s ruling issued by CPUC President Michael Peevey on July 2, 2012.

SCE is a subsidiary of Edison International (NYSE:EIX).