Southern California Edison received approval to issue recovery bonds of more than $772 million to fund wildfire hardening and related costs.
The financing order approved by the California Public Utilities Commission on Feb. 23 allows SCE, in its third application, a total recovery of about $730 million in capital expenditures and about $42 million in related financing costs. Principal, interest and related costs will be recovered through the fixed recovery charge by all "existing and future" SCE electricity customers, except for those enrolled in the California Alternate Rates for Energy or Family Electric Rate Assistance programs.
The fixed recovery charges are both irrevocable and nonbypassable, "which assures recovery bond investors that the fixed recovery charges will not be interrupted, eliminated, or avoided by consumers in SCE's service territory," the proposed decision approved by the CPUC says.
The following components make up SCE's bond-recovery-related costs:
- $215.2 million in wildfire mitigation capital expenditures, approved in a decision related to SCE's covered-conductor program and other wildfire mitigation efforts [D21-08-036].
- $515.3 million in capital expenditures for costs in excess of 2018 general rate case-authorized amounts incurred in 2018-2020 to invest in SCE's covered-conductor program; expand tree-remediation programs; increase overhead infrastructure inspections in high-fire-risk areas and perform associated necessary remediations; expand vegetation-management programs; and support organizational improvement for SCE's wildfire mitigation efforts [D22-06-032].
- $42 million in related costs that include $35.2 million for pre-securitization debt financing costs—the cost of the debt that SCE will incur on the $730 million bonds until the bonds are sold—and $6.7 million in upfront financing costs.
Pacific Gas & Electric issued $983.4 million in recovery bonds in late 2022 to finance wildfire mitigation work characterized as "construction work in progress," a characterization that SCE sought to include in its issuance.
SCE also sought permission, as did PG&E, to create a wholly owned yet legally separate subsidiary, called a special-purpose entity, to issue the bonds, according to the Jan. 20 proposed decision from Administrative Law Judge Patrick Petersen [A22-09-014]. SPEs exist solely to issue recovery bonds.
The financing order adopts the "true-up mechanism" proposed by SCE through the use of an advice letter that will allow the fixed recovery charges to be adjusted annually for any over- or undercollection and, if necessary, to ensure that the charges "provide sufficient funds to timely pay principal and interest on the recovery bonds and other ongoing financing costs."
Despite the role the utility's equipment played in the 2018 Woolsey Fire, SCE was not criminally charged for its part in the blaze, which torched nearly 97,000 acres in southern California (California Energy Markets No. 1655).
Petersen's proposed decision said the financing order would save ratepayers about $493 million when compared with "traditional utility financing mechanisms on a net present value basis."
