Report 2022-115 Recommendation 9 Responses

Report 2022-115: Electricity and Natural Gas Rates: The California Public Utilities Commission and Cal Advocates Can Better Ensure That Rate Increases Are Necessary (Release Date: August 2023)

Recommendation #9 To: Public Advocates Office

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.

60-Day Agency Response

The Public Advocates Office has always implemented a risk-based approach for reviewing balancing accounts and will continue to do so as part of our work in rate case and other proceedings. Given our limited resources, we typically review the accounts that have the highest amounts. For example, while we might review a handful of accounts, those accounts comprise 80% of the utility's costs for that functional area. We will strive to develop a written plan that documents the work that we already perform by February 2024. However, in considering our resources and current and anticipated workload, we may need to look to the end of September 2024.

California State Auditor's Assessment of 60-Day Status: Pending

Although Cal Advocates states that it has always implemented a risk-based approach for reviewing balancing accounts, it did not provide us with documentation during the audit to demonstrate it employed such an approach. In fact, as we state on page 53 of the report, Cal Advocates explained that it bases its decision to review accounts on whether the electric utilities chose or were directed by the CPUC to include them in annual proceedings. Further, as we state on page 53, although inclusion in a formal proceeding may be a relevant factor for identifying accounts that could affect customers, we are concerned that using this as the only factor is to some extent allowing utilities to dictate which accounts Cal Advocates will review. We will assess whether the written plan that Cal Advocates claims it will develop by February 2024 implements our recommendation.

All Recommendations in 2022-115

Agency responses received are posted verbatim.