Southern California Edison files request to increase return on equity due to wildfire risk

Southern California Edison recently filed a request with the Federal Energy Regulatory Commission (FERC) to include an adjustment for the company’s “extraordinary wildfire risk” in the authorized return on equity (ROE) for the portion of its business regulated by FERC.

“The extraordinary risk stems from uncertainty about state policies for cost recovery and liability resulting from California’s devastating wildfires in recent years,” the company said in a news release. “The company’s overall request for an ROE of 17.12 percent, plus incentives consistent with past years, also reflects the challenges it faces to help implement the state’s clean energy policies. These include investments in new technologies and clean energy projects, which are helping the state meet its ambitious targets for reducing greenhouse gas emissions and combatting the climate change that exacerbates California’s catastrophic wildfires.”

The company said that once the company has certainty and stability regarding how wildfire-related costs are addressed, the adjustment to ROE due to wildfire risk could be reduced or removed from rates.

“We do not believe a higher return on equity is a long-term solution to the urgent situation utilities in California are facing,” Caroline Choi, senior vice president of Corporate Affairs for SCE and its parent company, Edison International, said. “However, this is what is needed in the near term in order to attract the capital required to provide safe, reliable electricity.”

The average residential customer would see an increase of about $2.20 per month on the FERC-regulated portion of their SCE bill if the request is approved, the company estimated. The proposed effective date of the new ROE is June 12.