advice 3468-e, proposed sale of certain southern california

P.O. Box 800 8631 Rush Street Rosemead, California 91770 (626) 302-4177 Fax (626) 302-4829

Russell G. Worden Managing Director, State Regulatory Operations

September 7, 2016

ADVICE 3468-E (U 338-E)

PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA ENERGY DIVISION

SUBJECT: Proposed Sale of Certain Southern California Edison Company’s Distribution Assets to Pechanga Development Corp., a Tribal Corporation

PURPOSE

Pursuant to Section 851 of the California Public Utilities Code (“Section 851”) and General Order (“GO”) 173, Southern California Edison Company (“SCE”) respectfully requests the California Public Utilities Commission (“Commission” or “CPUC”) to grant SCE authority to sell and convey to Pechanga Development Corp., a Tribal corporation (“Pechanga” or “customer”), certain electric distribution facilities on the terms and conditions specified in the Distribution Facilities Purchase and Sale Agreement (“Agreement”) signed on June 23, 2016 between SCE and Pechanga attached hereto as Attachment 1. The total transaction amount, including the sale price of the assets and the amounts charged by SCE for the administrative and physical severance of the facilities to be sold, is $149,400. This transaction value of less than $5 million qualifies the transaction for advice letter handling by the Commission under Section 851, absent a Commission determination that other handling is warranted.1

1 This transaction meets all of the criteria of Section 851 and GO 173, Rule 3, for Commission approval via an advice letter: (a) the transaction does not require environmental review under CEQA; (b) the transaction will have no effect on SCE’s ability to provide safe and reliable service to its customers at reasonable rates, nor any other adverse effect on the public interest; (c) the assets to be sold have a fair market value under $5 million; (d) the transaction will not materially impact SCE’s ratebase; (e) the transaction will not result in any significant physical or operational change in the facilities that are being sold; and (f) there are no other aspects of the transaction warranting a more comprehensive Commission review through a formal Section 851 application.

ADVICE 3468-E (U 338-E) - 2 - September 7, 2016

BACKGROUND

Pechanga is the owner and operator of Pechanga Resort and Casino (“Resort” or “Pechanga Resort”), located in Temecula, California. 2 SCE provides electricity service to Pechanga Resort via SCE’s Luiseno 33 kV line from SCE’s Pechanga Substation, which is located approximately 3.5 miles away from the Resort. SCE transforms the service voltage from 33 kV to 12 kV at the Great Oaks Substation, which is a customer-owned substation on the customer’s property. Pechanga Resort takes service at 12 kV through its customer-owned primary meter panel. In addition to providing service to the Resort, SCE also provides several other electrical services to other Pechanga-owned businesses located on the Resort property such as the Pechanga gas station, office buildings, and a Recreational Vehicle Park via five (5) transformers and two (2) pad-mounted equipment (“PME”) switches. Pechanga is requesting to purchase the five (5) transformers and two (2) PME switches owned and used by SCE to serve the various businesses they own and operate at the Resort by Pechanga. If the CPUC approves the sale of these SCE facilities to Pechanga, Pechanga would then reconfigure the electrical system to be connected to their existing service and Pechanga would take ownership of the equipment. Pechanga believes that by removing these additional SCE services, and reconfiguring their electrical system, their businesses will benefit from Pechanga’s existing backup generation. The Description of Facilities and Bill of Sale, included as Exhibit A and Exhibit B, respectively, of the Agreement (provided in Attachment 1 hereto), are based upon SCE’s Field Engineering and Valuation Services as summarized below:

Structures with the equipment located at Pechanga Resort and Casino:

P5465004, 225 kVA transformer P5465003, 500 kVA transformer P5464998, 150 kVA transformer P5470305, 150 kVA transformer P5464999, 150 kVA transformer P5464997, PME-10 switch P5465002, PME-10 switch

Amount to be Paid by Pechanga to SCE:

Equipment $120,000 Physical Severance/Disconnection $ 23,400 Maps/Documents and other Records $ 6,000

Total $149,400

2 Pechanga Resort and Casino: 45000 Pechanga Pkwy, Temecula, CA 92592


The sale of these SCE facilities currently located on Pechanga’s property, per Pechanga’s request for purchase, will allow the services to be consolidated with Pechanga’s existing primary voltage service to the Pechanga Resort and Casino. Pechanga has indicated that it intends to request that SCE remove its facilities from the property in any event because it wishes to serve its property using its own equipment. The approach proposed here would be the most cost effective approach, for both SCE and Pechanga, rather than SCE removing the facilities from the property, and Pechanga replacing the SCE facilities with newly-acquired customer-owned equipment from another source. SCE will receive appropriate financial compensation for the equipment , while avoiding it becoming idle, while Pechanga will be able to continue with its intended plan in the most economical manner. PROPOSED SALE

In accordance with the requirements of GO 173, Rule 4, SCE provides the following information regarding the proposed sale.

(a) The Parties: The seller is SCE, an investor-owned electric utility serving portions of southern and central California. SCE’s service territory is further described in Attachment 2 hereto. Any notices or communications to SCE related to this advice letter should be addressed as stated below within the “Notice” section. The buyer is the Pechanga Development Corp., PECHANGA DEVELOPMENT CORP., a Tribal corporation, a government entity3. Any communications to the buyer related to this advice letter should be sent to Pechanga and addressed as follows:

Pechanga Development Corporation President 45000 Pechanga Pkwy Temecula, CA 92592

(b) The Property:

The property to be sold consists of certain SCE distribution facilities located on Pechanga Resort property at 45000 Pechanga Pkwy, Temecula, CA 92592, which are described in Exhibit A “Description of Facilities” included as part of Attachment 1, attached hereto and which are also summarized below:

Description of Facilities: Account Number 367 - Underground Conductors and Devices 2 each Switch Cab, 15 KV, 600A

3 http://www.pechanga-nsn.gov/


1 Lot Miscellaneous underground conductors and devices Account Number 368 - Transformers 4 each Transformer, 120/208V, 12KV

Serial numbers: 5465004, 5465003, 5464998, and 5470305 1 each Transformer, 277/480V, 12KV

Serial number: 5464999 A map showing the approximate locations of these assets is attached hereto as Attachment 3. The assets do not serve any other SCE customers.

(c) The Reasons for the Transaction: As mentioned above, Pechanga desires to acquire the existing equipment necessary to assume responsibility of operations and to allow consolidation of Pechanga’s existing primary voltage service to the Resort service. This approach would be more cost effective for both SCE and Pechanga than the alternative approach of SCE removing and idleing the facilities from the property, followed by Pechanga replacing the facilities with customer-owned equipment purchased from another source. SCE will receive appropriate financial compensation for the equipment and be able to satisfactorily accommodate Pechanga’s request.

(d) Financial Terms of the Transaction: The sale price for the property is One Hundred Nineteen Thousand Nine Hundred Ninety Seven Dollars ($119,997). The general severance cost charged by SCE (for accounting, mapping, and related costs) is Six Thousand Dollars ($6,000). The physical severance cost is Twenty-Three Thousand Three Hundred Ninety-Eight Dollars ($23,398). The resulting total transaction amount is One Hundred Forty-Nine Thousand Three Hundred Ninety Five Dollars ($149,395). The Purchase and Sale Agreement is attached hereto as Attachment 1.

(e) Distribution of the Gain on Sale: See Attachment 4 for a table showing sales price, associated expenses, and tax effects of the proposed sale. The table also provides the gain on sale and decrease in ratebase calculations. The pre-tax gain-on-sale is calculated to be $80,993 and the after-tax gain-on-sale is $45,673. The $45,673 after-tax gain on sale from this transaction should be allocated to SCE shareholders consistent with CPUC D.89-07-016, as affirmed by D.06-05-041. The Commission set forth the standard for when gain on sale of distribution assets accrue to


shareholders in D.89-07-016, commonly referred to as “Redding II.”4 The Commission subsequently affirmed Redding II gain on sale treatment in D.06-05-041 (OIR on Allocation of Gain on Sale).

D.89-07-016 held that where:

(1) a public utility sells a distribution system to a governmental entity; (2) the distribution system consists of part or all of the utility operating system located within a geographically defined area; (3) the components of the system are or have been included in the rate base of the utility, and (4) the sale of the system is concurrent with the utility being relieved of, and the government entity assuming, the public utility obligations to the customers within the area served by the system, then the gains or losses from the sale of the system should be allocated to utility shareholders, provided that the ratepayers have not contributed capital to the distribution system and remaining ratepayers are not adversely affected by the transfer of the system.5

(f) Impact of the Transaction on SCE Ratebase, and Any Other Effect on

SCE Ability to Serve or other Adverse Effect on the Public: The transaction will result in a decrease in SCE’s ratebase of $52,579. This decrease will have no material impact on SCE’s total ratebase. The transaction will have no effect on SCE’s ability to provide safe and reliable utility service to its customers at reasonable rates, nor any other adverse effect on the public. The property to be sold is not needed or used by SCE to serve any other customers and the transfer of the ownership and operation of the property will have no effect on SCE’s service to any other customers. As soon as the transaction is completed, the operation and maintenance of the transferred assets will be taken over by Pechanga.

(g) Original Cost, Present Book Value, and Fair Market Value: The property to be sold has an original cost of $78,200 and a current net book value of $39,005. The present fair market value of the property is $119,997. This fair market value was determined using the Replacement Cost New Less Depreciation (RCNLD) methodology. This methodology takes into account: the replacement value of the subject assets; their depreciation; the salvage value of the existing assets; and the costs of removal and disposal of the existing assets.

4 Order Instituting Rulemaking Concerning the Ratemaking Treatment of Capital Gains Derived from the Sale of a Public Utility System Serving an Area Annexed by a Municipality or Public Entity (“Redding II”), D.89-07-016, 32 CPUC 2d 233, 234. 5 OIR for the purpose of considering policies and guidelines regarding the allocation of gains from sales of energy, telecommunications, and water utility assets, D.06-05-041.


(h) Recent or Anticipated Future Transactions Related to the Sale: There are no other recent or anticipated future transactions related to this sale. The total sale price stated in this Advice Letter, $149,395 including SCE severance costs constitutes the full, fair market value of the assets to be sold in this transaction.

(i) CEQA Compliance: This transaction is only for the sale of existing facilities, with no intended or foreseeable physical change in the use or operation of the facilities, and the transaction therefore will have no significant effect on the environment. The ownership transfer will necessitate certain minor “severance” work on facilities where the transferred assets meet the SCE-retained system, to allow the two systems to be operated and maintained independently of each other, but all of these modifications will be to existing electrical systems, with no significant environmental impact. The transaction therefore is not subject to CEQA because (a) it is not a “project” triggering CEQA applicability, Cal. Pub. Res. Code § 21065; and (b) even if regarded as a “project,” the transaction falls clearly under the “general rule” that an activity is not subject to CEQA where “it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment….” CEQA Guidelines § 15061(b)(3). See also, Commission Decisions D.10-10-017; D.07-03-037; D.06-02-032 (all finding sales of existing electric utility facilities to be exempt from CEQA under CEQA Guidelines Section 15061(b)(3)). In addition, even if the transaction were not exempt from CEQA under this general rule, the transaction is categorically exempt from CEQA under the “Existing Facilities” exemption, as it consists of (at most) a “minor alteration” of an existing facility (i.e., an ownership change and related minor severance work) and it “involves negligible or no expansion of an existing use” of the facility. CEQA Guidelines § 15301. See also, County of Amador v. El Dorado County Water Agency (3d Dist. 1999) 76 Cal. App 4th 931, 966-67 (ownership change of hydroelectric facilities, with no change in the facilities’ use, would be categorically exempt from CEQA under CEQA Guidelines § 15301). For all of these reasons this sale transaction is not subject to CEQA with no Commission environmental review of the transaction required. No cost information is required for this advice filing. This advice filing will not increase any rate or charge, cause the withdrawal of service, or conflict with any other schedule or rule. TIER DESIGNATION Consistent with GO 173, Rule 7, SCE submits this advice letter with a Tier 2 designation.


EFFECTIVE DATE Consistent with GO 173 (see especially GO 173, Rule 7(a)(5)), SCE respectfully requests Commission approval by October 7, 2016, which is 30 days after the date filed. NOTICE Anyone wishing to protest this advice filing may do so by letter via U.S. Mail, facsimile, or electronically, any of which must be received no later than 20 days after the date of this advice filing. Protests should be submitted to:

CPUC, Energy Division Attention: Tariff Unit 505 Van Ness Avenue San Francisco, California 94102 E-mail: [email protected]

Copies should also be mailed to the attention of the Director, Energy Division, Room 4004 (same address above). In addition, protests and all other correspondence regarding this advice letter should also be sent by letter and transmitted via facsimile or electronically to the attention of:

Russell G. Worden Managing Director, State Regulatory Operations Southern California Edison Company 8631 Rush Street Rosemead, California 91770

Telephone (626) 302-4177 Facsimile: (626) 302-4829 E-mail: [email protected] Michael R. Hoover Director, State Regulatory Affairs c/o Karyn Gansecki Southern California Edison Company 601 Van Ness Avenue, Suite 2030 San Francisco, California 94102 Facsimile: (415) 929-5544 E-mail: [email protected]


With a copy to:

Jack P. Horne, Jr. Principal Advisor, Regulatory Affairs Southern California Edison Company 2244 Walnut Grove Avenue, 3rd Floor Rosemead, California 91770 Facsimile: (626) 302-1926 Email: [email protected]

There are no restrictions on who may file a protest, but the protest shall set forth specifically the grounds upon which it is based and must be received by the deadline shown above. In accordance with General Rule 4 of GO 96-B, SCE is serving copies of this advice filing to the interested parties shown on the attached GO 96-B list and, in accordance with Resolution ALJ-244, on the Energy Division, the Commission Office of Ratepayer Advocates, the Commission CEQA Team ([email protected]; [email protected]; [email protected]). Address change requests to the GO 96-B service list should be directed by electronic mail to [email protected] or at (626) 302-4039. For changes to all other service lists, please contact the Commission’s Process Office at (415) 703-2021 or by electronic mail at [email protected]. Further, in accordance with Public Utilities Code Section 491, notice to the public is hereby given by filing and keeping the advice filing at SCE’s corporate headquarters. To view other SCE advice letters filed with the Commission, log on to SCE’s web site at https://www.sce.com/wps/portal/home/regulatory/advice-letters. For questions, please contact Jack P. Horne, Jr. at (626) 302-4828 or by electronic Mail: [email protected].

Southern California Edison Company /s/ Russell G. Wordenn Russell G. Worden

RGW:jh:jm Enclosures

CALIFORNIA PUBLIC UTILITIES COMMISSION

ADVICE LETTER FILING SUMMARY ENERGY UTILITY

MUST BE COMPLETED BY UTILITY (Attach additional pages as needed)

Company name/CPUC Utility No.: Southern California Edison Company (U 338-E)

Utility type: Contact Person: Darrah Morgan

ELC GAS Phone #: (626) 302-2086

PLC HEAT WATER E-mail: [email protected]

E-mail Disposition Notice to: [email protected]

EXPLANATION OF UTILITY TYPE

ELC = Electric GAS = Gas PLC = Pipeline HEAT = Heat WATER = Water

(Date Filed/ Received Stamp by CPUC)

Advice Letter (AL) #: 3468-E Tier Designation: 2

Subject of AL: Proposed Sale of Certain Southern California Edison Company’s Distribution Assets to Pechanga Development Corp., a Tribal Corporation

Keywords (choose from CPUC listing): Compliance

AL filing type: Monthly Quarterly Annual One-Time Other

If AL filed in compliance with a Commission order, indicate relevant Decision/Resolution #:

Does AL replace a withdrawn or rejected AL? If so, identify the prior AL:

Summarize differences between the AL and the prior withdrawn or rejected AL:

Confidential treatment requested? Yes No

If yes, specification of confidential information: Confidential information will be made available to appropriate parties who execute a nondisclosure agreement. Name and contact information to request nondisclosure agreement/access to confidential information:

Resolution Required? Yes No

Requested effective date: 10/7/16 No. of tariff sheets: -0-

Estimated system annual revenue effect: (%):

Estimated system average rate effect (%):

When rates are affected by AL, include attachment in AL showing average rate effects on customer classes (residential, small commercial, large C/I, agricultural, lighting).

Tariff schedules affected:

Service affected and changes proposed1:

Pending advice letters that revise the same tariff sheets: None

1 Discuss in AL if more space is needed.

Protests and all other correspondence regarding this AL are due no later than 20 days after the date of this filing, unless otherwise authorized by the Commission, and shall be sent to:

CPUC, Energy Division Attention: Tariff Unit 505 Van Ness Avenue San Francisco, California 94102 E-mail: [email protected]

Russell G. Worden Managing Director, State Regulatory Operations Southern California Edison Company 8631 Rush Street Rosemead, California 91770 Facsimile: (626) 302-4829 E-mail: [email protected] Michael R. Hoover Director, State Regulatory Affairs c/o Karyn Gansecki Southern California Edison Company 601 Van Ness Avenue, Suite 2030 San Francisco, California 94102 Facsimile: (415) 929-5544 E-mail: [email protected] With a copy to: Jack P. Horne, Jr. Principal Advisor, Regulatory Affairs Southern California Edison Company 2244 Walnut Grove Avenue, 3rd Floor Rosemead, California 91770 Facsimile: (626) 302-1926 Email: [email protected]

Attachment 1

Distribution Facilities Purchase and Sale Agreement

Attachment 2

Incorporated Cities and Counties Served by SCE

Southern California Edison Revised Cal. PUC Sheet No. 53902-E Rosemead, California (U 338-E) Cancelling Revised Cal. PUC Sheet No. 45848-E*

INDEX OF COMMUNITIES Sheet 1

(Continued) (To be inserted by utility) Issued by (To be inserted by Cal. PUC) Advice 2990-E Megan Scott-Kakures Date Filed Dec 30, 2013 Decision Vice President Effective Jan 29, 2014 1C8 Resolution

Community Baseline Region Community

Baseline Region

Acton 14, 16 Bell 8 Adelanto 14 Bell Canyon 9 Agoura 6, 9 Bell Gardens 8 Agoura Hills 6, 9 Bellflower 8 Agua Dulce 9, 14, 16 Benton 16 Aguanga 10, 14, 15, 16 Beverly Hills 9 (D) Alberhill 10 Big Bear Lake 16 Alhambra 9 Big Creek 16 Aliso Viejo 6, 8 Big Pine 16 Alpaugh 13 Bishop 16 Alta Loma 10 Bloomington 10 Altadena 9, 16 Blue Jay 16 Amboy 14, 15 Blythe 15 Anaheim 8 Bodfish 16 Angelus Oaks 16 Boron 14 Anza 10 Bradbury 9 Apple Valley 14 Brea 8 Arcadia 9, 16 Bridgeport 16 Argus 14 Bryn Mawr 10 Armona 13 Buena Vista 13 Arrowbear Lake 16 Buena Park 8 Artesia 8 Auberry 16 Cabazon 15 Avalon 6 Cadiz 15 Azusa 9, 16 Calabasas 6, 9 Caliente 16 Baker 14 California City 14 Bakersfield 13, 16 California Hot Springs 13, 16 Balboa 6 Calimesa 10 Balboa Island 6 Camarillo 6, 9 Baldwin Park 9 Camp Nelson 13, 16 Banning 10, 15, 16 Canoga Park 9 Bardsdale 9 Cantil 14 Barstow 14 Canyon Country 9, 16 Beaumont 10, 15 Canyon Lake 10



(Continued)

(Continued) (To be inserted by utility) Issued by (To be inserted by Cal. PUC) Advice 2512-E Akbar Jazayeri Date Filed Sep 23, 2010 Decision Vice President Effective Oct 23, 2010 2C10 Resolution


Baseline Region

Carpinteria 6, 9 Daggett 14 Carson 6, 8 Death Valley Junction 15, 16 Castaic 9, 16 Delano 13 Cathedral City 15 Desert Center 14, 15 Cedar Glen 16 Desert Hot Springs 15 Cedar Pines 16 Diamond Bar 9, 10 Cerritos 8 Dinkey Creek 16 Chatsworth 9 Dinuba 13 Cherry Valley 10 Downey 8, 9 China Lake 14 Duarte 9, 16 Chino 10 Ducor 13 Chino Hills 8, 10 Cima 14 Eagle Mountain 15 Claremont 9, 10, 16 Earlimart 13 Colton 10, 16 Earp 15 Commerce 8, 9 East Highland 10, 16 Compton 8 Eastvale 10 (N) Corcoran 13 Edwards Air Force Base 14 Cornell 6, 9 El Mirage 14 Corona 10 El Monte 9 Corona Del Mar 6 El Segundo 6 Costa Mesa 6,8 El Toro 8 Coto De Caza 8 Essex 14, 15 Covina 9 Etiwanda 10 Cowan Heights 8 Exeter 13 Crest Park 16 Crest Peak 16 Fallbrook 10 Crestline 16 Fallsvale 16 Crowley Lake 16 Farmersville 13 City Of Commerce 8, 9 Fawnskin 16 Cucamonga 10 Fenner 14, 15 Cudahy 8 Fillmore 9, 16 Culver City 6, 8, 9 Flintridge 9, 16 Cuyama Valley 16 Fontana 10 Cypress 8



(Continued)

(Continued) (To be inserted by utility) Issued by (To be inserted by Cal. PUC) Advice 2590-E Akbar Jazayeri Date Filed Jun 9, 2011 Decision Vice President Effective Jul 1, 2011 3C7 Resolution


Baseline Region

Foothill Ranch 8 Hesperia 14, 16 Forest Falls 16 Highland 10, 16 Fountain Valley 6, 8 Hinkley 14 Frazier Park 16 Homeland 10 Fort Irwin 14 Huntington Beach 6 Fullerton 8 Huntington Lake 16 Huntington Park 8 Garden Grove 6, 8 Gardena 6, 8 Idyllwild 16 Gilman Hot Springs 10, 16 Independence 16 Glendale 16 Indian Wells 15 Glendora 9, 16 Indio 15, 16 Glenville 16 Industry 9 Goleta 5, 6 Inglewood 6, 8 Gorman 9, 14, 16 Inyokern 14, 16 Goshen 13 Irvine 6, 8 Grand Terrace 10 Irwindale 9 Green Valley Lake 16 Ivanhoe 13 Guasti 10 Guyama 16 Johannesburg 14 Johnson Valley 14 Hacienda Heights 9 Johnsondale 16 Hanford 13 Joshua Tree 14 Harbor City 6 June Lake 16 Havasu Lake 14, 15 Juniper Hills 14 Hawaiian Gardens 8 Jurupa Valley 10 (N) Hawthorne 6, 8 Helendale 14 Kaweah 13 Hemet 10, 16 Keeler 16 Hermosa Beach 6 Keene 16 Kelso 14, 15 Kernville 16

Attachment 3

Map

Attachment 4

Southern California Edison Company

Facilities Sale to Pechanga

Gain on Sale and Decrease in Rate Base Calculations

(Dollars)

1 SALES PROCEEDS Sale Price 119,997 Less: Disposition Costs - Net Sale Proceeds 119,997

2 NET BOOK VALUE Historical Plant Depreciation Net Book Value Electrical Distribution Property 78,200 39,195 39,005

3 GROSS GAIN / (LOSS) ON SALE Sales Proceeds Net Book Value

Pre-Tax Gain/ (Loss)

Electrical Distribution Property 119,997 39,005 80,993

4 INCOME TAX EXPENSE Federal State

Total Tax Expense or

(Benefit) Net Tax Basis - - Current Tax Expense 41,999 6,895 48,894 Accumulated Deferred Taxes (13,574) - (13,574) Total Tax Liability 35,320

5 RATE BASE CHANGES Historical Plant (reduce plant) 78,200 Less: Depreciation Reserve 39,195 Less: Deferred Taxes (13,574) Decrease in Rate Base 52,579

6 AFTER-TAX GAIN ON SALE Pre-Tax Gain 80,993 Less Tax Liability (net of deferred taxes) 35,320 After-Tax Gain 45,673

(Dollars)

Facilities Sale to the PechangaGain on Sale and Decrease in Rate Base Calculations

Attachment 4Southern California Edison