SCE 2018 GRC Overview

October 24, 2016

Agenda

1

- Introductions

- Safety

- Announcements

- Overview of SCE’s 2018 GRC and Strategic Objectives

- Organization of Testimony Exhibits

- Risk-Informed Planning

- 2018 Revenue Requirement and Comparison to 2015

- Overview of Request by Exhibit

- Q&A

Safety Moment

- Evacuation/Exits

- CPR/911/Meet Emergency Responders

2

3

Halloween Electrical Safety

Consider using battery powered or electric lights

instead of candles for decorations

Keep electric cords out of high traffic areas to avoid

tripping hazards for trick or treaters

Plug outdoor decorations to circuits protected by Ground Fault Circuit

Interrupters to prevent electric shock

Do not overload outlets

GRC Workshop Schedule

4

Date Time Topic Presenter

October 24 10-12pm General Rate Case Overview Shinjini Menon

October 24 1- 4:30pmGrid Reinforcement/ Grid Modernization

Erik TakayesuRussell Ragsdale

November 2 10am-12pm Safety/Risk-Informed PlanningPaul JeskeAmir AnghaRobert Woods

November 21:15-2:15pm

CS Re-PlatformThomas WalkerLorene Miller

November 22:30-4:15pm

Poles Christine Fanous

November 3 10am-12pmPost Test-Year Ratemaking/ Depreciation

Paul HuntAlan Varvis

November 3 1-3 pmRO Model Updates/ Scenarios/ Ratebase

Douglas TesslerDavid Gunn

November 33:15-4:30pm

Taxes Mark Childs

OUR STRATEGIC OBJECTIVES SUPPORT CALIFORNIA’S PUBLIC POLICIES AND WILL BUILD A BETTER GRID FOR ALL OF OUR CUSTOMERS. keep our customers safe, provide them reliable service, give them more energy choices, communicate quickly and effectively with them, and prudently spend the money they pay in rates

5

Be Safe In All We Do

Reinforce Grid Reliability And Resiliency

Accelerate integration DERs without Compromising Safety and Reliability

Improve Service and Choices to Meet Evolving Customer Needs

Enhance Operational Efficiency and Effectiveness

SCE’s request takes a balanced approach to continuing to safely and reliably serve

our customers clean energy at reasonable rates, while meeting, or preparing to

meet, the more advanced and complex requirements of tomorrow.

Significant safety and risk-informed decision making discussion in testimony and

work-papers including mapping risk impacts to enterprise risks and GRC request.

SCE 2018 GRC Exhibit Organization

6

SCE-01 Policy Overview of SCE’s GRC

SCE-02 Transmission

& Distribution (T&D)

Vol. 1: Operational Overview and Risk

Vol. 2: Customer Driven Programs

Vol. 3: System Planning

Vol. 4: Distribution Maintenance & Inspection

Vol. 5: Distribution Construction & Maintenance

Vol. 6: Substation Construction & Maintenance

Vol. 7: Transmission Construction & Mtce

Vol. 8: Infrastructure Replacement

Vol. 9: Poles

Vol. 10: Grid Modernization

Vol. 11: Grid Technology

Vol. 12: Training & Safety

Vol. 13: Other Costs & OORs

SCE-03

Customer Service (CS)CS O&M, Capital, and OORs

SCE-04 Information

Technology (IT)

Vol. 1: IT O&M and Hardware

Vol. 2: OU Capital Software Projects

Vol. 3: CS Re-Platform

SCE-05

Power Supply (PS)

Vol. 1: Palo Verde

Vol. 2: Energy Procurement

Vol. 3: Hydro

Vol. 4: Mountainview, Peakers, Mohave Closure

Vol. 5: Solar Photovaltaic and Fuel Cell

Programs

SCE-06- Human

Resources (HR)

Vol. 1: HR O&M

Vol. 2: Benefits and Other Compensation

Vol. 3: Total Compensation Study

SCE-07 Operational

Services

Vol. 1: Business Resiliency

Vol. 2: Corporate Environmental

Vol. 3: Corporate Real Estate

Vol. 4: Corporate Safety

Vol. 5: Corporate Security

Vol. 6: Supply Mgmt and Supplier Diversity

SCE-08

Administrative &

General (A&G)

Vol. 1: Ethics and Compliance

Vol. 2: Corp Communications, Regulatory

Affairs, Local Public Affairs

Vol. 3: Financial Services, Audit Services,

and Enterprise Risk Management

Vol. 4: Law, Claims, and Workers Comp

Vol. 5: Property & Liability Insurance

SCE-09 Results of

Operations

Vol. 1: Revenue Requirements, Ratemaking,

Sales, OOR, Escalation, Post TY Ratemaking

Vol. 2: Plant, Taxes, Depreciation, Rate Base,

Customer Deposits

Vol. 3: Depreciation Study

SCE-10

Compliance

Compliance Requirements from 2015 GRC

and Other Proceedings

SCE-11 C For ATJoint Center for Accessible Technology

Testimony

SCE- 12 CEMARecovery of Bark Beetle-related costs for

2012-2014 CEMA

Risk-Informed Decision-Making Discussion in SCE 2018 GRC

August 12, 2016 7

Topic GRC Volume

SCE’s vision for risk-informed

decision-makingPolicy Volume (SCE-01)

Risk-Informed Decision-Making

framework Enterprise Risk Management Program – Finance Volume (SCE-08, Vol. 03)

Demonstration of risk-informed

decision-making pilot for T&D

operational risks

T&D Volume (SCE-02, Vol. 01)

Demonstration of risk-informed

decision-making for Non-T&D

pilots

(in order of exhibits)

Customer Service – Implementation of a new customer relationship &

billing system re-platform (SCE-04 – Vol. 03)

Power Supply Hydro – Dam safety (SCE-05, Vol. 03)

Business Resiliency – Seismic evaluation & retrofit (SCE-07, Vol. 01)

Corporate Real Estate – Facilities upgrades (SCE-07, Vol. 03)

Corporate Security – Physical security of critical infrastructure (SCE-07, Vol.

05)

Mapping of important risk

outcomes to the GRC requestsPolicy Volume (SCE-01)

Mapping of important risk

outcomes to enterprise level risksEnterprise Risk Management Program – Finance Volume (SCE-08, Vol. 03)

GRC Revenue Requirement Forecast ($ millions)

8

*One-time recovery of pre-2018 costs related to Residential Rate Reform, SmartConnect® Opt-Out and 2012-2014 Bark Beetle-related costs.** Excludes One-time recovery in 2018

2018 Revenue Requirement represents a 2.7 percent increase over presently authorized total rates

or 5.5 percent over presently authorized GRC base rates (net of estimated kWh sales reductions)

Significant Highlights of our Request

• Continued focus on infrastructure maintenance and replacement including

– Overhead conductor program to address downed wire risk

– Pole replacements and strengthening based on intrusive inspections and pole loading assessments

– Mainline and CIC underground cable replacement

• Upgrading system capacity and capability to improve safety and reliability and enable DER

integration

– Updating infrastructure, such as 4kV circuits and substations to increase capacity, improve reliability, and address

technology obsolescence

– Implementing additional capabilities, such as increased distribution and substation automation to monitor and control grid

equipment in real-time

– Installing communication networks, such as expanding the fiber optic and field area networks for real-time data transfer to

support grid automation

– Developing technology platforms that will be the foundational tools for forecasting grid performance, handling grid

planning, and managing outages and operating the distribution grid

• Customer Service Re-platform

– Replace disparate, obsolete and aged applications and integrate customer data from various sources

– Mitigate the risk of system failure and inability to recover in a timely manner to provide continuity to customer interactions

and many other critical operations such as billing and outage communication that depend on the customer information

system.

• 2018 TY forecast includes over $85 million in O&M savings and approximately $200 million of

capital expenditure savings to be achieved from operational efficiency and productivity

improvement initiatives

9

Results of Operations Highlights

• Depreciation

– Addressed Commission directives from 2015 GRC Decision

– Incorporates “gradualism” principle to reduce incremental net salvage-related depreciation

expense compared to what SCE’s depreciation study revealed to moderate the rate impact

• Taxes

– Repair Deductions and Bonus Depreciation continue to be significant drivers

– Proposal to extend the two-way Tax Accounting Memorandum Account (TAMA)

• Post-Test Year Mechanisms

– Option 1: Use specific capital expenditure forecast for 2018, 2019 and 2020

– Option 2: Escalate 2018 capital additions by 5% per year for 2019 and 2020, with one-time

adjustment for CS Re-platform project closing in 2020.

• Memorandum and Balancing Accounts changes including:

– Modification of the Pole Loading and Deteriorated Pole Programs Balancing Account (PLDPBA)

– Modification of the Residential Rate Implementation Memorandum Account (RRIMA) and

Recovery of Residential Implementation Recorded Costs

– Modification of the Safety and Reliability Investment Incentive Mechanism (SRIIM)

– Establishment of the DER Deferred Project Memorandum Account (DERCPMA)

10

CPUC Jurisdictional Capital Expenditures** (Nominal $ Millions)

11

O&M Expenses*(2015 Constant $ Millions)

SCE Test-Year 2018 O&M and Capital Forecast by Exhibit

Total:$2,395 Million

*O&M Data excludes Uncollectible and Songs Decommissioning Credits; includes Capitalized A&G, Capitalized P&B and Franchise Fees** Capitalized Data excludes capitalized A&G, includes customer contributions

Total:$3,965 Million

2015 Recorded Compared to 2018 Forecast – O&M2015 Constant $Millions

12

Note: O&M Data excludes Uncollectible and Songs Decommissioning Credits and includes Franchise Fees, Capitalized A&G, and Capitalized P&B.

13

2015 Recorded Compared to 2018 Forecast – CapitalNominal $Millions

Note- Includes customer contributions of approximately $240 million in 2015 and $290 million in 2018

CPUC Capital Expenditures 2016-2020 Nominal ($Millions)

14

*Capitalized Data excludes capitalized A&G and P&B

Organizational Unit 2016 2017 2018 2019 2020

Customer Service 23 28 39 40 45

Information Technology 232 377 368 309 205

Operational Services 156 209 263 259 238

Power Supply 141 107 103 89 85

Transmission & Distribution 2,508 2,576 3,192 3,240 3,136

Total: 3,060 3,297 3,964 3,937 3,709

15

2018 Request: $612 million

Key Activities

o Inspection and maintenance programs

o Vegetation Management

o Grid Operations

o Outage response and Reactive

Maintenance

o Employee Training

Significant Changes

o Increased pole loading assessments and

repairs

o Increased activity in remediating

transmission line clearance issues to

comply with G.O. 95.

SCE-02: Transmission & Distribution (T&D) - O&MTotal Company 2015 constant $ millions

2015 Recorded 2018 Request

System

Planning

Distribution

Maintenance &

Distribution

Construction &

Maintenance

Transmission

Construction &

Maintenance

$78

Transmission

Construction

&Maintenance

$41

Poles

$44 Grid

Modernizatio Grid

Technology

Safety and

Training

Other Costs

$121

16

2016-2020 Request: $14,652 million

Key Activities

o Customer driven work

o Load Growth and Grid Reinforcement

o Preventive and breakdown maintenance

o Infrastructure repl. of major assets including:

• Poles

• Underground Cables

• Overhead conductors

• Underground structures

• Circuit Breakers

• Substation Transformers

o Grid modernization

• Automation

• Telecommunication

• Technology platforms

Significant Changes

o Pole Programs

o Grid Reinforcement & Grid Modernization

SCE-02: Transmission & Distribution (T&D) – Capital CPUC Jurisdictional nominal $ millions

$2,508 $2,576

$3,192 $3,240 $3,136

2016 2017 2018 2019 2020

Customer Driven

$2,663

System Planning

$2,621

Distribution

Maintenance &

Inspections

$1,377

Distribution

Construction &

Maintenance

Substation Construction &

Maintenance

$590

Transmission

Construction &

Maintenance

$313Infrastructure

Replacement

$2,418

Poles

$1,667

Grid

Modernization

$1,875

Grid Technology

$179

17

CS Operations

Division $149

OU Mgmt. & Support

$8

Customer

Programs &

Services $24

Business

Customer

Division

$19

2018 Request: $200 million

Key Activitieso Meter reading, inspection and maintenance, and

meter installation/removals

o Customer Contact Center services

o Billing, Credit, Payments & Uncollectible Expense

o Customer programs and information delivery

o Business customer account management and

technical services

Significant Changes

o CS Re-Platform

o Bi-monthly Edison SmartConnect Opt-Out meter

reading

o CCA Program Support

o Net Energy Metering

o TOU Period Adjustment and Default Critical Peak

Pricing

o Operational efficiencies

SCE-03: Customer Service - O&MTotal Company 2015 constant $ millions

208200

(8)

2015 Recorded 2018 Request

18

2016-2020 Request: $174 million

Key Activities

o Meter forecast (maintenance, replacements,

customer growth)

o Meter diagnostic devices and technician

tool kits

o Meter Shop

o Energy Centers

Significant Changes

o AMI Cell Relay Replacement Program

o AMI meter warranty reduction

SCE-03: Customer Service – Capital CPUC Jurisdictional nominal $ millions

Specialized

Equipment

$3 Structures and

Improvements

$8

Meters

$163

19

Enterprise Architecture, $12Cybersecurity &

Compliance, $18

Grid

Services &

Rents, $48

Business

Integration &

Delivery, $47

Service Management

Office & Operations,

$87

Hardware/Software

License &

Maintenance, $71

OpX Savings,

-$152018 Request: $268 Million

Key Activities

o IT service desk

o Application development and maintenance

o Hardware and software licenses and

maintenance agreements

o Telecommunication network maintenance

o Cybersecurity

Significant Changes

o IT operating model

o CS Replatform

o Network and telecommunication

maintenance

o Growth in licenses and maintenance

agreements

SCE-04: Information Technology - O&MTotal Company 2015 constant $ millions

2015 Recorded 2018 Request

20

Operating Software,

$124Cybersecurity &

IT Compliance,

$309

OU & Corporate

Software, $376CS Replatform,

$209

Servers,

Storage,

Data

Center,

$200

Computing

and Data &

Voice

Networks,

$116

Grid Telecom, $158

$81 $105 $94 $97 $97

$152

$213 $203 $136 $105

$58 $71

$76

$3

2016 2017 2018 2019 2020

Hardware Capitalized Software CS Replatform

SCE-04: Information Technology – Capital CPUC Jurisdictional nominal $ millions

2016-2020 Request: $1,491 million

Key Activities

o Hardware installation and maintenance

• Servers, storage and IT networks for business

computing needs

• Telecommunication to enable critical grid

operations and communications that are not

project specific

o Capitalized software

• Cybersecurity

• Support SCE core business processes

• Grid Planning & Analytics

o Customer Service Replatform

• New customer relationship and billing system to

perform critical customer service related functions

Significant Changes

o Cybersecurity for Grid Modernization

o CS Replatform

21

2018 Request: $190 million

Key Activities

o Oversight costs for Palo Verde Units 1-3

o Energy procurement management activities

o Operations, maintenance, and support

activities for SCE-owned generating facilitieso Hydroelectric

o Mountainview (gas)

o Peakers (combustion turbines)

o Catalina

o Solar Photovoltaic and Fuel Cell Programs

Significant Changes

o Increased volume and complexity of

procurement activity

o New Contract Services Agreement (CSA) for

Mountainview

o Operational efficiencies

SCE-05: Power Supply - O&MTotal Company 2015 constant $ millions

192 190

(2)

2015 Recorded

Palo Verde

$77

Energy

Procurement

$32

Hydro O&M

$41

MountView

Peakers

&Mohave $31SPVP and Fuel Cells

$4

Catalina $4

22

2016-2020 Request: $523 million

Key Activities

o Generator Stator Rewind for Palo Verde Units

o Communication equipment related to

contracted generating resources

o Maintenance and replacement of equipment

for hydroelectric generating facilities

o Projects to comply with Safety &

Environmental objectives and station reliability

for Mountainview and Peaker plants

o Catalina Generation operations and Pebbly

Beach Generation Automation

Significant Changes

o Completed combustion turbine upgrade

projects driving reduced maintenance

overhauls and improved plant performance

Palo Verde

$188

Energy

Procurem

ent

$8

Hydro Capital

$227

Mountainview,

Peakers,

Mohave

Closure

$80

SPVP and

Fuel Cells …

Catalina

$19

SCE-05: Power Supply – Capital CPUC Jurisdictional nominal $ millions

23

2018 Forecast: $583 Million

Key Activities

o HR Operations

o Pensions and Benefits

o Variable compensation

Significant Changes

o Pension & benefit changes

o Increase in Medical program costs

o Operational efficiencies

SCE-06: Human Resources - O&MTotal Company 2015 constant $ millions

HR O&M

$65

Benefits and

Other

Compensation

$518

24

SCE-07: Operational Services - O&MTotal Company 2015 constant $ millions

2018 Forecast: $113 Million

Key Activities

o Business resiliency and emergency

management

o Facility maintenance and leases

o Safety and environmental services

o Corporate security services

o Supply management and supplier diversity

Significant Changes

o New Seismic Assessment and Mitigation

program

o Building lease exits ($14M savings)

o Transition to service provider model for real

estate maintenance and project management

127

113

(14)

Business

Resiliency

$8

Corporate

Environmental

Services $12

Corporate Real

Estate

$51

Corporate

Heath and

Safety $6

Corporate

Security

$27

Supply Mgmt

& Supplier

Diversity $9

25

SCE-07: Operational Services – Capital CPUC Jurisdictional nominal $ millions

2016-2020 Forecast: $1,126 Million

Key Activities

o Seismic Assessment and Mitigation

o Corporate Real Estate projects, including:

o Service center modernization

o Substation maintenance and test building

improvements

o Facility repurpose projects

o Capital maintenance

o NERC-CIP compliance*

o Physical security systems

o Vehicle and helicopter maintenance, upgrades

and lease buy-outs

Significant Changes

o New Seismic Assessment & Mitigation Program

o Facility upgrades and maintenance

*Costs to comply with NERC CIP requirements are also forecast within T&D and IT

$156

$209

$263 $259 $238

2016 2017 2018 2019 2020

Business

Resiliency …

Corporate

Environmental

Services $3

Corporate Real Estate

$870

Corporate

Security

$105

Supply Mgmt &

Supplier

Diversity $2Transportation

Services $28

26

2018 Forecast: $429

Key Activities

o Ethics and compliance

o Local public affairs, corporate

communications, regulatory

affairs

o Finance, audit services &

Enterprise Risk Management

o Law, claims, worker’s

compensations and disability

o Corporate property & liability

insurance

Significant Changes

o Operational Excellence

o Capitalized A&G and P&B

expenses

o Liability insurance

SCE-08: Administrative & General (A&G) – O&MTotal Company 2015 constant $ millions

$429$415