On November 5, 2020, FERC approved Southern California Edison Company’s (“SoCal Edison”) request to utilize a May 2020 formula rate sales forecast rather than its April 2020 sales forecast, as required by Appendix IX of SoCal Edison’s Transmission Owner Tariff (“Tariff”). The updated sales forecast, which informs SoCal Edison’s wholesale and retail transmission rate-recovery and true-up calculations, reflects a decrease in sales revenues due to the COVID-19 pandemic. In a dissenting opinion, then-Commissioner James Danly opposed the waiver, citing previous criticisms that such FERC action violates the filed rate doctrine and the rule against retroactive ratemaking.
FERC has issued various COVID-related tariff waiver orders since the start of the pandemic, consistent with prior remarks by former Chairman Neil Chatterjee that FERC would not be second-guessing “good-faith actions taken by regulated entities in the face of this emergency” (see April 2, 2020 edition of the WER). In its waiver request, SoCal Edison explained that due to significant macro-economic shocks caused by the COVID-19 pandemic, SoCal Edison believed it would be prudent to run an updated forecast. By doing so, SoCal Edison could account for, among other things, Moody’s Analytics’ April 2020 Base Case Forecast, which includes COVID-19 economic impacts.
FERC noted the waiver request was unopposed and found that the typical elements for granting a waiver request were present. First, FERC determined that SoCal Edison acted in good faith because the company ran the requisite forecast in April and only requested to use the updated forecast to better reflect anticipated sales in light of the COVID-19 pandemic. Second, FERC concluded the request was limited in scope because it was a one-time waiver that would not alter SoCal Edison’s formula rate or true-up mechanism. Third, FERC reasoned that the waiver addressed a concrete problem because the original forecast did not reflect the exceptional impacts from the pandemic. Finally, FERC determined that the waiver would not have undesirable consequences, because it would provide more accurate transmission rates, and thus reduce rate impacts to customers when SoCal Edison’s true-up is filed.
Then-Commissioner Danly wrote separately in dissent, explaining his view that the waiver order exceeded FERC’s legal authority. In now-Chairman Danly’s view, the waiver violates both the filed rate doctrine and rule against retroactive ratemaking because it permits SoCal Edison to use a forecast that was completed after the date required by SoCal Edison’s formula rate. While he noted that he was sympathetic to the underlying request, then-Commissioner Danly explained that SoCal Edison could have requested approval to include proactive provisions to mitigate any harsh results instead of seeking “after-the-fact” flexibility.
A copy of the order is available here.
