Report 2022-115 Recommendations

To ensure that the utilities' projected costs are not overstated, Cal Advocates should first obtain information that the CPUC requires utilities to provide, including their actual rate-of-return calculations and the major cost categories in which utilities achieved significant cost savings. Cal Advocates should then use this information in subsequent rate case proceedings to assess the risk that projections in these cost categories may be overstated, and it should scrutinize the projections accordingly.

To ensure the appropriateness of the activities that utilities include in their cost recovery applications and to reduce the risk of utilities' attempting recovery of costs for work they did not complete, Cal Advocates should develop a process by the beginning of February 2024 to gain additional assurance that utilities actually performed the work claimed. This process should include the following steps:

Evaluate available reports and the work completed by other CPUC divisions and by other agencies to determine whether further verification of a utility's work is necessary.

Obtain additional information from utilities to verify completion of the work if it determines that further verification is necessary. For example, Cal Advocates could require utilities to provide photographs of work completed for a selection of costs.

Leverage the audit work that the CPUC performs to avoid duplication of effort.

To ensure that utilities can support the rate changes they request, Cal Advocates should verify whether balancing account balances and the resulting rate changes are accurate and comply with CPUC rules. Specifically, Cal Advocates should by February 2024 develop a review plan that outlines a risk-based approach for selecting a specific number of electricity and natural gas balancing accounts to review. This plan should specify the criteria that Cal Advocates will use to select the balancing accounts that will have the most impact on rates.

To ensure that utilities can support the rate changes they request, Cal Advocates should consult with the CPUC when developing its review plan to ensure that it is not reviewing the same balancing accounts that the CPUC is reviewing and that it is most effectively using its resources to identify and review higher-risk accounts.

To ensure that it consistently and appropriately executes its protests of general rate case applications and advice letters, Cal Advocates should develop written policies and procedures by February 2024 that provide staff with direction on the steps staff must take when reviewing and filing protests on general rate case applications.

To ensure that it consistently and appropriately executes its protests of general rate case applications and advice letters, Cal Advocates should develop written policies and procedures by February 2024 that provide staff with direction on the steps staff must take when documenting their analyses of incoming advice letters. Each analysis should include the rationale for protesting or not protesting a letter.

To promote transparency, the CPUC should by February 2024 institute a process that requires utilities to periodically publish actual rate-of-return calculations, using a methodology acceptable to the CPUC and to Cal Advocates.

To promote transparency, when the actual rate of return significantly exceeds the authorized rate of return, the CPUC should require that the utilities identify the major costs categories where projected costs exceeded actual costs and provide supporting documents. The CPUC's Energy Division should then publish this information so that it is available to Cal Advocates and to other interested parties, and it should objectively analyze the information for the CPUC.

To ensure the appropriateness of the activities that utilities include in their cost recovery applications and to reduce the risk of utilities' attempting recovery of costs for work they did not complete, the CPUC should by the beginning of February 2024 develop a process to ensure that it reviews available reports and work completed by other divisions within the CPUC and by other state agencies to determine whether further verification of a utility's work is necessary.

To ensure the appropriateness of the activities that utilities include in their cost recovery applications and to reduce the risk of utilities' attempting recovery of costs for work they did not complete, the CPUC should by the beginning of February 2024 develop a process to include an audit procedure that requires, on a sample basis, verification that work was completed as claimed in the utility's cost recovery application. Such verification could involve, for example, site visits, photographic evidence of work completed, or satellite imagery.

To ensure that customers can readily identify the factors that contribute to energy rate increases when rates change, the CPUC should by the beginning of February 2024 provide to the public a summary of energy rate increases. Although the CPUC should determine the exact approach for communicating these increases, this approach should—at a minimum—identify the previous rate, the new rate, and the expected impact on the average customer's bill, and it should explain the CPUC-approved cost components that are driving the rate increase.

To ensure that customers can readily identify the factors that contribute to energy rate increases when rates change, the CPUC should by the beginning of February 2024 post all summaries on its webpage in a timely fashion. The CPUC should also require utilities to reference these summaries on their websites within a reasonable time frame.