Improving the Safety of California's Energy System: An Important Step Forward

Before I was appointed to the CPUC, I worked for many years on environmental enforcement issues. When I joined the CPUC I found myself drawn to the many critically important safety related initiatives that it oversees. Of all the safety related proceedings I have worked on so far, the most significant and complex one, touching a wide spectrum of other important proceedings at the CPUC, is the Safety Model Assessment Proceeding or SMAP. The CPUC just adopted a ground-breaking decision in this proceeding that will significantly improve how California energy utilities weigh and prioritize spending on their safety risks.

The SMAP proceeding is as technically intricate as its title suggests. It is an ambitious, multi- year CPUC endeavor, the goal of which is to make utility decision-making about weighing and mitigating safety risks more thoughtful and transparent. The safety of utility operations obviously impacts the lives of millions of Californians. But utility decision-making about safety risks on their systems has always been something of a black box. Until now, utilities have made decisions about which risks to prioritize, and how many ratepayer dollars to spend on mitigating certain risks, by relying primarily on the judgment of subject matter experts. This introduces considerable subjectivity and variability into the decision-making process. And until now, the CPUC and the public have had very limited visibility into that process. This means that when the time comes for the CPUC to decide how much money utilities should be authorized to spend on safety risk mitigation - which happens every few years in General Rate Cases, in which utilities seek funding for the costs of running their business - parties and CPUC staff find themselves inadequately equipped to critically evaluate the utility's funding request. 

The decision that we voted out on Dec. 13, 2018, adopts, with some modifications, a settlement by a majority of parties to the SMAP proceeding, which will transform how California energy utilities make decisions about spending on safety risks. For one, utilities will be required to evaluate risks in a much more uniform and quantitatively rigorous way. They will also be required to publicly present their analysis identifying their top risks, seek input from interested parties and CPUC staff, and perform rigorous quantitative analysis to determine and compare risk reduction benefits from mitigation measures.  Ultimately, this will increase utility accountability for risk mitigation spending, benefiting ratepayers across California.

It is worth noting that the settlement sets out minimum standards; utilities may adopt processes that go further. It is the culmination of months of discussions by the parties, who participated in multiple pilots to evaluate competing risk assessment models, contributed to nearly a dozen workshops, and more than 20 technical group meetings. Importantly, the settlement was unopposed, and settling parties included not only the large investor-owned utilities that we regulate, but also consumer advocates. 

As you can imagine, SMAP is an overarching proceeding that feeds into, and informs, many other important proceedings dealing with risk management, such as General Rate Cases, wildfire safety proceedings, proceedings dealing with utility emergency preparedness, and physical security, and other CPUC processes.  Success in the SMAP proceeding translates into better outcomes across all these interconnected proceedings. That's why the new minimum standards that we just put in place are so significant.

There is much more that remains to be done. The SMAP proceeding will remain open. Early next year, we plan to issue a follow-up decision that will address issues such as performance metrics, reporting, and the application of these new rules to smaller utilities. Meanwhile, utilities will start implementing the new rules, and make necessary changes to their safety risk decision-making. I am looking forward to seeing how the new rules work in practice, and to hearing from utilities and other stakeholders on changes that have yielded positive outcomes, and gaps that we still need to address. Undoubtedly, the implementation of these new rules will offer utilities, other stakeholders, and the CPUC, important lessons about utility decision-making. The CPUC will consider these learnings in a new Rulemaking that will evaluate broader policy issues relating to utility safety risk management, which we plan to open in 2019.

I am pleased that we are ending 2018 on this positive note, and look forward to continuing to work with my colleagues at the CPUC on pressing safety related challenges in the new year.