BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA SOUTHERN CALIFORNIA EDISON COMPANY (U 338-E) NOTICE OF EX PARTE COMMUNICATIONS

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA Application of San Diego Gas & Electric Company (U 902 E) for Authorization to Recover Costs Related to the 2007 Southern California Wildfires Recorded in the Wildfire Expense Memorandum Account (WEMA) Application 15-09-010 (Filed: September 25, 2015) SOUTHERN CALIFORNIA EDISON COMPANY (U 338-E) NOTICE OF EX PARTE COMMUNICATIONS Pursuant to Rule 8.4 of the California Public Utilities Commission s (Commission or CPUC) Rules of Practice and Procedure, Southern California Edison Company (SCE) hereby gives notice of the following three ex parte communications in this proceeding: The communications were in-person meetings that took place on October 17, 2017 at the Commission s office located at 505 Van Ness Avenue, San Francisco, California, including a meeting at approximately 1:00 pm lasting approximately 30 minutes with David Peck, Advisor to President Michael Picker; a meeting at approximately 3:00 pm lasting approximately 35 minutes with David Gamson, Advisor to Commissioner Martha Guzman Aceves; and a meeting at approximately 3:35 pm lasting approximately 30 minutes with Travis Foss, Advisor to Commissioner Clifford Rechtschaffen. The first and second meetings were initiated by SCE and the last meeting was initiated by Pacific Gas and Electric Company (PG&E). Attendees for SCE at each of these meetings were J. Eric Isken, SCE Assistant General Counsel, David Heller, Edison International Enterprise Risk Manager and General Auditor and Laura Genao, SCE Managing Director for Regulatory Affairs. Also attending the meeting with Travis Foss were Meredith Allen, PG&E Senior Director Regulatory Relations, Janaize Markland, 1

PG&E Director Enterprise Risk Management and Kevin Dasso, PG&E Vice President Electric Asset Management. A handout was provided at each meeting, a copy of which is attached as Appendix A. SCE covered the points discussed below at each of the meetings. PG&E joined in the discussion of these points at the meeting with Mr. Foss. SCE discussed the legal foundations for the inverse condemnation doctrine and how California s courts assume all costs incurred by a utility resulting from inverse condemnation claims will be recovered from customers in rates. SCE noted that in SDGE s WEMA (A.15-09-010), the proposed decision has not allowed such recovery and is thus creating a system where utilities are by law strictly liable for unlimited damage and unlawfully prevented from recovering such costs. SCE explained that California s recent history of catastrophic events has severely affected utilities ability to get insurance. It explained that its own premiums for insurance have increased nearly 10 times what they were in 2007 and that ratepayer advocates have challenged full recovery of the costs of insurance. SCE also explained that while the CPUC does have to ensure that rates are just and reasonable, reviewing an IOU s system operation and management prudence as a condition to the recovery of inverse condemnation-related costs is inappropriate and that the Commission s authority under that statute as applied to inverse condemnation costs is limited to determining if such costs are reasonable. Specifically, the CPUC is limited to determining if the amounts paid to settle inverse condemnation claims and the defense costs incurred by the utility are reasonable. SCE pointed out the Commission has other tools to address prudence by the utility in the operation and management of their electrical systems, principally the authority to initiate enforcement proceedings and levy penalties under Public Utilities Code Section 2107. Mr. Isken pointed out an enforcement proceeding was conducted related to the 2007 San Diego wildfires raising virtually the identical arguments about San Diego Gas & Electric Company s (SDG&E s) imprudence being raised here. That proceeding was resolved by a settlement involving a substantial payment, acknowledgements of violations and other substantial commitments by SDG&E. That settlement resolved all issues and it is inappropriate and unlawful to conduct another prudence review here. 2

Finally, in each meeting, SCE explained that the inverse condemnation issue is one that affects all of the utilities, and that the utilities previously tried to address methodologies for addressing the issue in the 2009 Wildfire Expense Balancing Account application, which was denied. SCE noted that proposals similar to those set out in that application should be discussed as the CPUC attempts to determine how recovery of wildfire expenses will be addressed in the future. Respectfully submitted, J. ERIC ISKEN FRANK MCNULTY /s/ J. Eric Isken By: J. Eric Isken Attorney for SOUTHERN CALIFORNIA EDISON COMPANY 2244 Walnut Grove Avenue Post Office Box 800 Rosemead, California 91770 Telephone: (626) 302-3141 Facsimile: (626) 302-6795 E-mail: j.eric.isken@sce.com Dated: October 20, 2017 3

Appendix A

SDG&E WEMA PD SCE COMMENTS ON INVERSE, COST RECOVERY AND PRUDENCE REVIEW 1. Wildfire is a statewide problem and everyone should be aligned on the goal of reducing the occurrence and mitigating the impacts of these unwanted events. 2. Inverse condemnation is applied to IOUs in California by the state courts, notwithstanding vigorous opposition by the IOUs 3. Inverse condemnation in California imposes a strict liability standard, meaning that there is no standard of care. IOUs are liable without regard to fault. a. Inverse in California also allows for plaintiffs to recover attorney s fees, which are often a significant part of wildfire costs, and would not apply to IOU s in a negligence trial. 4. Most states do not permit recovery of unintentional property damage in an inverse condemnation action, and those that do require proof of negligence. CA is the only state that allows an inverse condemnation claim based on strict liability. 5. When the inverse condemnation doctrine is applied to a liability case, it is premised on the idea that the strict liability is paid for by socializing costs, via the governments taxing or other authority 6. The socialization of costs under the inverse condemnation doctrine is not subject to a negligence or prudency test. 7. IOUs are caught between the court imposed strict liability of inverse condemnation with no standard of care, premised on the socialization of costs, and the CPUC s prudency requirements a. This State created conflict and incongruence needs to be resolved as it is unlawful as applied to IOUs, and may constitute a taking b. Arguments by intervenors that socialization of costs creates a so called moral hazard should be made to the Legislature or in a request to the Courts to overturn the inverse doctrine. The courts, by applying inverse, have already decided the costs are to be socialized. 8. We agree costs must be just and reasonable. The Commission meets this standard by determining the costs were the result of the inverse doctrine and if IOUs were financially prudent in resolving the inverse cases (e.g., were settlement amounts prudent). Cite to Monterey Peninsula Water Mgmt District v. PUC (2016) 62 Cal. 4 th 693 (California Supreme Court holds Commission lacks authority to independently review costs legitimately assessed on a utility by another government agency). 9. We also agree the Commission must regulate the prudence of a utility s system management and operation. The Legislature has prescribed a path for such regulation, Public Utilities Code Section 2107 which authorizes the Commission in appropriate circumstances and in accordance with standards established by the Commission to fine a utility for failure to comply with applicable laws and rulings of the Commission, including setting fines of up to $50,000 per day and the authority to seek other relief. 10. The Commission can exercise its power under Section 2107 in at least two ways. It can initiate an enforcement proceeding (an OII ), something it has done on a number of occasions. Or it can exercise authority under the Electric Safety Citation Program, which authorizes the Safety and Enforcement Division to levy fines in certain circumstances without a formal proceeding subject to a utility s right to appeal. 11. Imposing a prudency requirement on a utility s ability to collect fees imposed via the inverse doctrine unlawfully conflates the Commission s obligation to socialize inverse related costs and the A 1

Commission s obligation to regulate prudency, which should be done via the above enforcement regime. A 2

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA Application of San Diego Gas & Electric Company (U 902 E) for Authorization to Recover Costs Related to the 2007 Southern California Wildfires Recorded in the Wildfire Expense Memorandum Account (WEMA) Application 15-09-010 (Filed: September 25, 2015) CERTIFICATE OF SERVICE I hereby certify that, pursuant to the Commission s Rules of Practice and Procedure, I have this day served a true copy of SOUTHERN CALIFORNIA EDISON COMPANY (U 338-E) NOTICE OF EX PARTE COMMUNICATIONS on all parties identified on the attached service list(s) A.15-09- 010. Service was effected by one or more means indicated below: Transmitting the copies via e-mail to all parties who have provided an e-mail address. A true copy was also sent via e-mail to President Michael Picker, Commissioner Martha Guzman Aceves, Commissioner Clifford Rechtschaffen, David Peck, David Gamson and Travis Foss at: Picker.Exparte@cpuc.ca.gov Rechtschaffen.Exparte@cpuc.ca.gov david.gamson@cpuc.ca.gov Guzman_Aceves.Exparte@cpuc.ca.gov david.peck@cpuc.ca.gov travis.foss@cpuc.ca.gov Placing the copies in sealed envelopes and causing such envelopes to be delivered by hand or by U.S. Mail to the offices of the Assigned ALJ(s) or other addressee(s), and by U.S. mail to those on the service list without an email address. ALJ S. Pat Tsen ALJ Sasha Goldberg. CPUC 505 Van Ness Ave. San Francisco, CA 94102 Executed October 20, 2017, at Rosemead, California. /S/ Laura Velarde Laura Velarde, Legal Administrative Assistant SOUTHERN CALIFORNIA EDISON COMPANY 2244 Walnut Grove Avenue Post Office Box 800 Rosemead, California 91770

CPUC - Service Lists - A1509010 https://ia.cpuc.ca.gov/servicelists/a1509010_83298.htm Page 1 of 5 10/20/2017 CPUC Home CALIFORNIA PUBLIC UTILITIES COMMISSION Service Lists PROCEEDING: A1509010 - SDG&E - TO RECOVER C FILER: SAN DIEGO GAS & ELECTRIC COMPANY LIST NAME: LIST LAST CHANGED: OCTOBER 19, 2017 Download the Comma-delimited File About Comma-delimited Files Back to Service Lists Index Parties DONALD KELLY EDWARD MOLDAVSKY EXE DIR UTILITY CONSUMERS ACTION NETWORK LEGAL DIVISION 320 West 4th Street Suite 500, CA 00000 Los Angeles, CA 90013 FOR: UTILITY CONSUMERS' ACTION NETWORK FOR: ORA DIANE CONKLIN MARIA C. SEVERSON, ESQ. SPOKESPERSON ATTORNEY MUSSEY GRADE ROAD ALLIANCE AGUIRRE & SEVERSON LLP PO BOX 683 501 WEST BROADWAY, STE. 1050 RAMONA, CA 92065 SAN DIEGO, CA 92101-3591 FOR: MUSSEY GRADE ROAD ALLIANCE FOR: RUTH HENRICKS MICHAEL SHAMES, ESQ. SHIVANI N. BALLESTEROS SAN DIEGO CONSUMERS' ACTION NETWORK REGULATORY CASE MGR. 6975 CAMINO AMERO SAN DIEGO GAS & ELECTRIC COMPANY SAN DIEGO, CA 92111 8330 CENTURY PARK COURT, CP31F FOR: SAN DIEGO CONSUMERS' ACTION NETWORK SAN DIEGO, CA 92123 FOR: SAN DIEGO GAS & ELECTRIC COMPANY THOMAS J. LONG APRIL ROSE SOMMER ATTORNEY AT LAW EXE DIR - LEAD COUNSEL THE UTILITY REFORM NETWORK PROTECT OUR COMMUNITIES FOUNDATION 785 MARKET ST., STE. 1400 1547 PALOS VERDES MALL NO. 196 SAN FRANCISCO, CA 94103 WALNUT CREEK, CA 94598

CPUC - Service Lists - A1509010 https://ia.cpuc.ca.gov/servicelists/a1509010_83298.htm Page 2 of 5 10/20/2017 FOR: THE UTILITY REFORM NETWORK FOR: PROTECT OUR COMMUNITIES FOUNDATION Information Only CASE COORDINATION, CA 00000 CENTRAL FILES SEMPRA ENERGY UTILITIES CENTRAL FILES, CA 00000 CHRISTA LIM DAVID PAZ ATTORNEY AT LAW UTILITIES AND POWER RESEARCH SAN DIEGO GAS AND ELECTRIC COMPANY WOLFE RESEARCH, CA 00000, CA 00000 JANE KRIKORIAN JENNIFER BETTS SUPERVISOR, ADVOCACY & ADMINISTRATION SAN DIEGO CONSUMERS' ACTION NETWORK UTILITY CONSUMERS' ACTION NETWORK, CA 00000, CA 00000 MAGGIE CHAN, CA 00000 MATTHEW PLUMMER STATE AGENCY REGULATIONS, CA 00000 MRW & ASSOCIATES, LLC, CA 00000 JESSICA TELLEZ, CA 00000-0000 JIM KOBUS CASE ADMINISTRATION D. E. SHAW & CO. SOUTHERN CALIFORNIA EDISON COMPANY 1166 AVENUE OF THE AMERICAS, 8TH FL. 8631 RUSH STREET NEW YORK, NY 10036 ROSEMEAD, CA 91770 FRANCIS A. MCNULTY FRANK A. MCNULTY DIR & MANAGING ATTORNEY DIR & MANAGING ATTORNEY SOUTHERN CALIFORNIA EDISON COMPANY SOUTHERN CALIFORNIA EDISON COMPANY 2244 WALNUT GROVE AVE. / PO BOX 800 2244 WALNUT GROVE AVE., / PO BOX 800 ROSEMEAD, CA 91770 ROSEMEAD, CA 91770 J. ERIC ISKEN STACIE ATKINSON ATTORNEY REGULATORY CASE ANALYST SOUTHERN CALIFORNIA EDISON COMPANY SAN DIEGO GAS & ELECTRIC COMPANY 2244 WALNUT GROVE AVE. / PO BOX 800 8330 CENTURY PARK COURT ROSEMEAD, CA 91770 SAN DIEGO, CA 92056

CPUC - Service Lists - A1509010 https://ia.cpuc.ca.gov/servicelists/a1509010_83298.htm Page 3 of 5 10/20/2017 FOR: SOUTHERN CALIFORNIA EDISON COMPANY (SCE) JOSEPH W. MITCHELL, PHD MICHAEL J. AGUIRRE M-BAR TECHNOLOGIES AND CONSULTING, LLC AGUIRRE MORRIS & SEVERSON LLP 19412 KIMBALL VALLEY RD. 501 W. BROADWAY, STE. 1050 RAMONA, CA 92065 SAN DIEGO, CA 92101-3591 FOR: RUTH HENRICKS ESTHER NORTHRUP JAMES F. WALSH STATE REGULATORY AFFAIRS ANDREWS LAGASSE BRANCH & BELL, LLC COX CALIFORNIA TELCOM, LLC 4365 EXECUTIVE DRIVE, STE. 950 5887 COPLEY DRIVE, STE. 300 SAN DIEGO, CA 92121 SAN DIEGO, CA 92111 BRADLEY S. CARTER CHRISTOPHER M. LYONS REGULARTORY CASE MANAGER, II SR. COUNSEL SAN DIEGO GAS & ELECTRIC COMPANY SAN DIEGO GAS & ELECTRIC COMPANY 8330 CENTURY PARK COURT, CP32F 8330 CENTURY PARK CT., CP32D SAN DIEGO, CA 92123 SAN DIEGO, CA 92123 ALLISON A. JOHNSON CATHERINE C. ENGBERG SHUTE MIHALY & WEINBERGER LLP SHUTE, MIHALY & WEINBERGER, LLP 396 HAYES STREET 396 HAYES STREET SAN FRANCISCO, CA 94102 SAN FRANCISCO, CA 94102 SHELLY SHARP SUZANNE TOLLER ATTORNEY 77 BEALE STREET, MAIL CODE B9A DAVIS WRIGHT TREMAINE LLP SAN FRANCISCO, CA 94105 505 MONTGOMERY STREET, STE. 800 SAN FRANCISCO, CA 94111-6533 FOR: COX COMMUNICATIONS CALIFORNIA LLC AND COX CALIFORNIA TELCOM, LLC (COX) CALIFORNIA ENERGY MARKETS MICHAEL R. KLOTZ 425 DIVISADERO ST STE 303 ATTORNEY SAN FRANCISCO, CA 94117-2242 77 BEALE STREET, MS B30A, ROOM 3105B SAN FRANCISCO, CA 94120 FOR: CONOR DOYLE IGOR GRINBERG REGULATORY AFFAIRS REGULATORY AFFAIRS PO BOX 770000, MC B23A 77 BEALE ST., MC B10B / PO BOX 770000 SAN FRANCISCO, CA 94177 SAN FRANCISCO, CA 94177 State Service

CPUC - Service Lists - A1509010 https://ia.cpuc.ca.gov/servicelists/a1509010_83298.htm Page 4 of 5 10/20/2017 NILS STANNIK SASHA GOLDBERG ORA ALJ PRO TEMP CALIFORNIA PUBLIC UTILITIES COMMISSION CALIFORNIA PUBLIC UTILITIES COMMISSION, CA 00000, CA 00000 SCOTT LOGAN CHLOE LUKINS CALIFORNIA PUBLIC UTILITIES COMMISSION 505 VAN NESS AVE. ENERGY SAFETY & INFRASTRUCTURE BRANCH SAN FRANCISCO, CA 94102 ROOM 4102 505 VAN NESS AVENUE SAN FRANCISCO, CA 94102-3214 ELAINE LAU LEUWAM TESFAI MARKET STRUCTURE, COSTS AND NATURAL GAS LEGAL DIVISION AREA 3-F ROOM 5125 505 VAN NESS AVENUE 505 VAN NESS AVENUE SAN FRANCISCO, CA 94102-3214 SAN FRANCISCO, CA 94102-3214 NIKA ROGERS NIKI BAWA ENERGY COST OF SERVICE & NATURAL GAS BRA LEGAL DIVISION ROOM 4101 ROOM 5038 505 VAN NESS AVENUE 505 VAN NESS AVENUE SAN FRANCISCO, CA 94102-3214 SAN FRANCISCO, CA 94102-3214 NILS STANNIK ROBERT M. POCTA ENERGY SAFETY & INFRASTRUCTURE BRANCH ENERGY COST OF SERVICE & NATURAL GAS BRA AREA ROOM 4205 505 VAN NESS AVENUE 505 VAN NESS AVENUE SAN FRANCISCO, CA 94102-3214 SAN FRANCISCO, CA 94102-3214 S. PAT TSEN TRAVIS FOSS DIVISION OF ADMINISTRATIVE LAW JUDGES COMMISSIONER RECHTSCHAFFEN ROOM 5005 ROOM 5026 505 VAN NESS AVENUE 505 VAN NESS AVENUE SAN FRANCISCO, CA 94102-3214 SAN FRANCISCO, CA 94102-3214 TRUMAN L. BURNS ENERGY COST OF SERVICE & NATURAL GAS BRA ROOM 4205 505 VAN NESS AVENUE SAN FRANCISCO, CA 94102-3214

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