Risk-Based Decision-Making Framework (RDF): R. 20-07-013
Upcoming Meetings
2024: R.20-07-013, Phase 4 Workshop #2: Overall Residual Risk, Risk Tolerance and Simple Optimization
- Wednesday, November 20, 2024
- Thursday, November 21, 2024
- Friday, November 22, 2024
- 10:00 pm to 12:30 pm
- Remote via Webex
- Meeting will be recorded
Webex and Call in Information:
Wednesday, November 20, 2024
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- Participant PASSCODE: 2482 468 4442
- Link: https://cpuc.webex.com/cpuc/j.php?MTID=m151a15a2186c23ea9fca803154411bb3
- Meeting passcode: EKqnV5h33SJ
- Conference call-In number: 1-855-282-6330
- Participant PASSCODE: 2497 169 5934
- Link: https://cpuc.webex.com/cpuc/j.php?MTID=m2a1d2c58fb44cc7059711e93486fcdf9
- Meeting passcode: D6qJiEkm4F6
- Conference call-In number: 1-855-282-6330
- Participant PASSCODE: 2482 316 7650
One or more decision makers may be present at this meeting, but no decisions will be made.
History and Background
The Risk-based Decision-making Framework, or RDF, regulates the way California’s large electric and natural gas investor-owned utilities (IOUs) assess and disclose risks that have safety, reliability, and financial consequences. The large IOUs include the following companies:
- Pacific Gas and Electric Company (PG&E)
- Southern California Gas Company and San Diego Gas & Electric Company (collectively, Sempra)
- Southern California Edison Company (SCE)
The goal of the RDF is to increase the transparency and accountability of how the utilities are prioritizing and mitigating safety risks. The RDF also provides Safety Policy Division staff with a guideline and process for evaluating whether the utilities follow the Commission’s expectations and requirements for making risk-based decisions.
For additional details on the foundational principles within the RDF, please see this Factsheet.
The California Public Utilities Commission (CPUC) opened this proceeding through an Order Instituting Rulemaking (OIR) adopted on July 16, 2020. This proceeding (R.20-07-013) will build on requirements for the utility risk assessment and mitigation framework adopted in the Safety Model Assessment Proceeding (S-MAP, A. 15-05-002 et al), and the Risk-Based Decision-Making proceeding (R.13-11-006). Three phases of this proceeding have been completed and detailed information about each phase can be found in the dropdown boxes below. The RDF Proceeding is tasked with refining the RDF and continues to be informed by the following Commission proceedings and reports.
Relevant Proceedings and Reports
Risk Assessment Mitigation Phase (RAMP) Filing
A risk disclosure report filed in a Commission proceeding. This report quantifies the likelihood and consequences of risk events, the benefit of risk reduction from investing in risk mitigations and cost-benefit ratios for risk mitigation investments.
General Rate Case (GRC)
A Commission proceeding used to address the costs of operating and maintaining the utility system and the allocation of those costs among customer classes.
Utility Verification Reporting
A series of reports that includes descriptions of how forecasted expenditure compares with actual spending, measurements of achieved safety improvements, among others.
Phase 4 of the RDF Proceeding intends to address the following priorities and definitional clarifications and corrections:
- Risk Tolerance Standard and Methodology
- Addressing Overall Residual Risk
- Mitigation Selection Optimization
- Definition of Scoped Work
- Risk Mitigation Accountability
- RAMP Data Template
- Additional Changes
- Renaming Cost Benefit Ratio to Benefit Cost Ratio,
- Clarifications to the definition of risk,
- Clarifications to the GRC Forecast Cost Thresholds for Supplemental Analysis
Phase 4 Scoping Memo was issued on September 13, 2024.
Phase 4 Schedule
|
Phase 4 Issue |
Planning Questions Circulate |
Notification and Proposals |
Workshop Date |
Deadline for Parties to File Proposal |
Opening Comments |
Reply Comments |
|
Definition of Scoped Work |
Wednesday, October 9, 2024 |
Wednesday, October 16, 2024 |
Wednesday, October 30, 2024 |
Tuesday, November 5, 2024 |
Monday, November 25, 2024 |
Monday, December 2, 2024 |
|
Overall Residual Risk/ Risk Tolerance/Risk Optimization |
Wednesday, October 30, 2024 |
Wednesday, November 6, 2024 |
Wednesday & Thursday, November 20 & 21, 2024 (TBD Friday November 22, 2022) |
Wednesday, November 27, 2024 |
Tuesday, December 17, 2024 |
Tuesday, December 24, 2024 |
|
RMAR |
Wednesday, November 27, 2024 |
Wednesday, December 4, 2024 |
Wednesday, December 18, 2024 |
Monday, December 30, 2024 |
Monday, January 20, 2025 |
Monday, January 27, 2025 |
|
RAMP Data Templates TWGs |
N/A |
Friday, January 10, 2025 |
Friday, January 24, 2025 |
N/A |
N/A |
N/A |
Workshop #2: Overall Residual Risk, Risk Tolerance and Simple Optimization
Workshop discussing the need to require the utilities to report on overall residual risk, a process for establishing risk tolerance and approaches to optimizing portfolios of risk mitigations.
Workshop #2 Planning Questions (October 30, 2024)
Level 4 Final Report “Incorporating Risk Tolerance and Simple Optimization into the RDF” (November 1, 2024)
SPD Draft Staff Proposal on Overall Residual Risk, Risk Tolerance and Simple Optimization (November 6, 2024)
Workshop Recording
Workshop #1 Definition of Scoped Work
Workshop discussing the guiding principles for scoped work, which is a disaggregation of mitigation programs. The workshop also introduces the concept of the Risk Reporting Unit and how it could be integrated into the RDF.
Workshop #1 Planning Questions (October 9, 2024)
SPD Draft Staff Proposal on Definition of Scoped Work and the Risk Reporting Unit (October 16, 2024)
The Phase 3 Decision (D.24-05-064) modifies key elements of the RDF and related processes for utilities IOUs. Key changes include requiring cost-benefit ratios (CBR) for each general rate case post-test year, continuing the Transparency Pilot, and identifying best practices for tranche granularity and wildfire tail risk modeling. IOUs must prepare a Climate Pilot White Paper and integrate climate data into risk assessments. The decision also updates risk scaling and discount rate requirements for CBR calculations, and authorizes the continuation of the Technical Working Group to refine reporting templates for better transparency and consistency.
Phase 3 introduces SPD's tranche granularity approach, which is now recognized as a best practice for determining reporting tranches in IOU filings. This approach divides risks based on quintiles of Likelihood of Risk Event (LoRE) and Consequence of Risk Event (CoRE), ensuring each tranche consists of assets with similar risk profiles. IOUs are required to provide granular data in their filings, enabling more accurate targeting of risk mitigation efforts. This method improves transparency, allows flexibility, and ensures that the highest-risk assets are addressed first.
One priority of this phase is refining how IOUs calculate and forecast risks beyond the test year. The Commission will explore improved methods to ensure that long-term risks are adequately addressed in decision-making processes. In addition, the Commission developed additional requirements for the transparency pilot guidelines discussed in the Phase 1 Decision (D.21-11-009). The transparency pilot allows greater visibility into how IOUs calculate and prioritize risks. This transparency is crucial for regulators and stakeholders to make more informed decisions. The Phase 3 decision also focused on assessing the effectiveness of using the power law probability distribution to model tail risks related to wildfire risks. Tail risks are low-probability but high-consequence events that significantly affect the safety and resilience of California's infrastructure. Furthermore, the Commission established best practices for scaling risks across different contexts and provided guidance for using discount rates in cost-benefit analysis. This approach aims to gain clarity on the long-term benefits and costs of risk mitigations.
Phase 3 of the proceeding the IOUs to prepare and submit a Climate Pilot White Paper. Each IOU must outline its approach, data sources, and analysis, while reflecting on lessons learned. The timeline for filing the white paper is September 15, 2025, for PG&E and May 15, 2026, for SCE, SoCalGas, and SDG&E.
Roadmap of Topics for Phase 3 issued on March 13, 2023
Prehearing Conference held on April 11, 2023
Phase 3 Scoping Memo issued on May 31, 2023
Phase 3 Proposed Decision issued on April 26, 2024
Phase 3 Final Decision D.24-05-064 issued on May 30, 2024
Phase 3 Schedule
Workshop #6 Tail Risk: Non-Wildfire Risks and Granularity of Tranches
Workshop to address Phase 3 Scoping Memo issues, focusing on non-wildfire tail risks. Workshop 6 discussed the use of tranches in RAMP and GRC filings for both test and post-test years.
Workshop #6 Planning Questions (November 15, 2023)
Sempra Companies Party Whitepaper on Tail Risk (November 22, 2023)
Joint Utility Whitepaper on Tail Risk (November 22, 2023)
TURN Party Proposal on Granularity of Tranches (November 22, 2023)
Joint Utility Proposal on Granularity of Tranches (November 22, 2023)
Workshop #5 Discount Rates and RAMP Reporting Templates
Workshop discussing possible adoption of Risk Mitigation reporting templates and varying discount rates for mitigation costs and benefits.
Workshop #5 Planning Questions (October 5, 2023)
CalAdvocates Party Proposal on Risk Mitigation Reporting Templates (October 11,2023)
CalAdvocates Draft Reporting Template (October 11,2023)
TURN Party Proposal on Discount Rates (October 11,2023)
SPD Party Proposal on Discount Rates (October 11,2023)
CalAdvocates Final Version of Reporting Template (October 31, 2023)
Workshop #4 Risk Scaling
Workshop discussing issue of risk scaling and how it operates within RDF.
Workshop #4 Planning Questions (September 14, 2023)
TURN Party Proposal on Risk Scaling (9/22/2023)
PG&E Proposal on Risk Scaling – A market-based Approach (9/22/2023)
PG&E Proposal Risk Scaling Model (9/22/2023)
Workshop #3 Climate Change
Workshop discussing any changes needed for CAVA framework and climate change issue with regards to RDF.
Workshop #3 Planning Questions (August 23, 2023)
SPD Staff Proposal on Climate Change and the Risk-based Decision-making Framework
PG&E Whitepaper on Integrating Enterprise Risk Modeling and Climate Vulnerability Assessment to Enhance IOU Resilience
Workshop #2 Tail Risk: Consequence Modeling
Workshop discussing issue of wildfire tail risk events.
Workshop #2 Planning Questions (July 5, 2023)
Mussey Grade Road Alliance Tail Risk Pre-Workshop White Paper (July 13, 2023)
Workshop #1 Evaluation of Post-Test Years & Uncertainty: Transparency
Workshop discussing merits of presenting calculations of cost-efficiency for GRC post-test years and structure of Transparency Pilot from PG&E proposal.
Workshop #1 Planning Questions (June 21, 2023)
SPD Post-Test Years Pre-Workshop Proposals (June 28, 2023)
SPD Transparency Pilot Key Observations Pre-Workshop Report (June 28, 2023)
The issues to be determined in Phase II of this proceeding will be revisited at the conclusion of Phase I and may be further outlined in a second Scoping Memo. The issues to be considered will broadly include refining the RDF, considering a risk tolerance standard, and developing next steps.
Table A: Use of MAVF Approach to Calculate a Risk Score
|
Attributes |
Natural |
Value |
Lower |
Upper |
Percent of |
Scaling |
Scaled |
Weight |
Weighted |
|
Safety |
Fatalities |
20 |
0 |
100 |
20% |
Linear |
20 |
50% |
10 |
|
Reliability |
CMI |
500 million |
0 |
2billion |
25% |
Linear |
25 |
25% |
6.25 |
|
Financial |
Dollars ($) |
$1billion |
$0 |
$2billion |
50% |
Linear |
50 |
25% |
12.5 |
|
Total Weighted Risk Score |
28.75 |
||||||||
Table B: Use of Cost-Benefit Approach to Calculate a Monetized Risk Value
|
Attributes |
Natural |
Valuea |
Scaling Function |
Dollar |
Monetized |
|
Safety |
Fatalities |
20 |
Linear |
$10 M/fatality |
$200 M |
|
Reliability |
CMI |
500 million |
Linear |
$2.50 /CMI |
$1.25 B |
|
Financial |
Dollars ($) |
$1billion |
Linear |
$1 |
$1B |
|
Total Monetized Risk Value |
$2.45 B |
||||
* The Dollar Value of Attributes is also referred to as the Trade-off Value.
** Monetized Risk Value = Value x Dollar Value of Attributes.
This shift from the MAVF to the Cost-Benefit Approach provides for greater clarity and transparency when assessing risks and mitigations. D.22-12-027 requires the IOUs to implement the modified RDF to assess and rank risks and mitigations in their RAMP and GRC filings, starting with PG&E’s 2024 RAMP filing.
The RDF introduces standardized methods for valuing safety, injury prevention, and electric and gas reliability risks, based on current federal and industry standards. Key elements include the use of the U.S. Department of Transportation’s value of a statistical life (VSL) for estimating safety consequences and the Lawrence Berkeley National Laboratory’s Interruption Cost Estimate (ICE) Calculator for estimating electric reliability consequences. The RDF also removes the previous requirement for assigning weights to attributes, including the minimum 40% safety weighting.
A significant focus of Phase 2 is on Environmental and Social Justice (ESJ). The investor-owned utilities (IOUs) must conduct ESJ Pilot Studies, with particular attention to Disadvantaged and Vulnerable Communities (DVCs). These studies involve seven specific action items:
- Action Item #1: Consider equity in the evaluation of consequences and risk mitigation within the RDF, using the most current version of CalEnviroScreen to assess how risks disproportionately impact certain communities.
- Action Item #2: Explore investments in clean energy resources within the RDF as a means to improve safety, reliability, and mitigate risks in DVCs.
- Action Item #3: Integrate mitigations that improve local air quality and public health in DVCs, supported by data collection efforts tied to Assembly Bill 617 (community air protection program).
- Action Item #4: Evaluate how selected mitigations within the RDF impact climate resiliency, especially in DVCs.
- Action Item #5: Assess whether wildfire smoke impacts disproportionately affect DVCs, as part of the RDF evaluation.
- Action Item #6: Estimate the extent to which risk mitigation investments benefit DVCs relative to non-DVCs in each utility’s service territory.
- Action Item #7: Enhance outreach and public participation opportunities for DVCs to engage in risk mitigation and climate adaptation efforts, aligning with Decision 20-08-046.
After completing the ESJ Pilot Studies, the IOUs must file a White Paper within two months of their next RAMP filing deadline. These White Papers should address the following:
- Identify areas for further exploration and challenges encountered when incorporating environmental and social justice considerations into the RDF.
- Discuss how to better target mitigations that enhance local air quality.
- Explore strategies for better targeting mitigations that improve climate resilience in disadvantaged and vulnerable communities.
Lastly, any new definitions and terms introduced by this decision will supersede previous conflicting definitions.
Roadmap of Topics for Phase 2 issued on February 16, 2022
Phase 2 Scoping Memo issued on April 13, 2022
Phase 2 Staff Proposal issued on August 8, 2022
Phase 2 Proposed Decision issued on November 3, 2022
D.22-12-027 issued on December 21, 2022
Technical Working Group 5
August 18, 2022,The main purpose of this Technical Working Group session is to provide a platform for PG&E and SCE to present and discuss concerns regarding Phase II Staff Proposal recommendations.
Level 4 Ventures White Paper (as referenced during meeting)
Workshop 2 SPD Draft Staff Proposal
June 29, 2022, Technical Working Group Safety Policy Division (SPD) staff will present an initial draft set of Staff Proposal recommendations to the parties regarding the Phase II subset of issues in (R.)20-07-13.
Technical Working Group 4
June 16, 2022 Technical Working Group Presentation and Discussion where parties developed the details of implementation for the Level 4 Recommendation identified as “Risk Modeling 3,” and parties discussed the following scoping memo question: “Should the Commission consider impacts on environmental and social justice communities, including the extent to which action in this proceeding impacts the achievement of any of the nine goals of the Commission’s Environmental and Social Justice (ESJ) Action Plan?”
Technical Working Group 3
June 2, 2022, Technical Working Group Presentation and Discussion to develop the details of implementation of Level 4 Recommendation identified as "MAVF 3"
Technical Working Group 2
May 20, 2022 Technical Working Group Presentation and Discussion to develop the details of implementation of Level 4 Recommendation identified as "MAVF 2"
Technical Working Group 1
April 20, 2022, Technical Working Group Presentation and Discussion of Level 4 IOU Baseline Assessment Revised Recommendations
Level 4 Recommendations Report
Workshop 1 IOU Baseline Assessment
March 3, 2022, Presentation of the Level 4 IOU Baseline Assessment
Risk Spend Efficiency Assessment - IOU Baseline Assessment
Workshop Model: Risk Spend Efficiency Model
Workshop Model: Randarray
Workshop Model: Dynamic Array RSE
Workshop Model: RSE Multiple Libraries
Workshop Model: Filtered Risk Rollup
Workshop Model: Wheels of Misfortune
Phase 1 issues are divided into four tracks, each addressing specific challenges. Track 1 focuses on clarifying technical requirements of the Risk-Based Decision-Making Framework (RDF), ensuring consistency in terminology and methodology. Track 2 concentrates on refining and developing new safety and operational performance metrics, with particular attention to PG&E's post-bankruptcy reorganization plan. Track 3 seeks to improve procedural requirements for the Risk Assessment and Mitigation Phase (RAMP) and General Rate Case (GRC) filings, aiming to reduce redundancies and enhance tracking of safety expenditures. Track 4 addresses the needs of Small and Multi-Jurisdictional Utilities (SMJUs), considering refinements to their voluntary agreements and examining whether RAMP and RSAR requirements should be extended to these utilities.
Track 1 emphasizes refining the Safety Model Assessment Proceeding (S-MAP) Lexicon to improve clarity and consistency across safety evaluations. It also makes minor technical adjustments to prior decisions, including clarifications to D.18-12-014. Drawing on experiences from earlier proceedings, Phase 1 takes a comprehensive approach to ensure that safety metrics are better aligned with operational goals and that reporting processes are more streamlined across different utilities.
Track 2 of the RDF Proceeding outlines critical steps to enhance utility safety and operational performance across the IOUs. It adopts 32 new Safety and Operational Metrics (SOMs) for PG&E as part of its post-bankruptcy plan, requiring the utility to report on its progress every six months. New Safety Performance Metrics (SPMs) are also implemented for all major IOUs, refining metrics previously adopted in earlier decisions and streamlining the reporting process. Additionally, SCE is instructed to test Transparency Guidelines proposed by PG&E, with results to be shared with the wider regulatory community (see discussion of Transparency Pilot in Phase 3).
Track 3 and 4 Decision (D.22-10-002) refines reporting requirements for Risk Spending Accountability Reports (RSAR) for investor-owned and small/multi-jurisdictional utilities, focusing on improving safety risk management. It updates requirements for Risk Assessment and Mitigation Phase (RAMP) reports and clarifies rules for General Rate Case (GRC) applications. D.22-10-002 also eliminates separate gas safety reporting requirements from previous rulings, merging these into RSARs and other publicly available reports. The changes apply to major utilities, with specific implementation timelines and additional requirements for small and multi-jurisdictional utilities regarding cost tracking, reporting units, and variance explanations. Appendix A of the Track 3 Decision adopted a list of RSAR, RAMP and GRC Requirements, such as requiring a graphic of historical risk reduction progress in RAMP reports and mandating the IOU to specify forecast assumptions and errors in RSAR.
Phase 1 Scoping Memo issued on Nov 2, 2020
Phase 1 Track 1 & Track 2 Staff Proposal issued on June 4, 2021
Phase 1 Track 1 & Track 2 Proposed Decision issued on September 17, 2021
D.21-11-009 issued on November 4, 2021
Phase 1 Track 3 Staff Proposal issued on April 13, 2021
Phase 1 Track 4 Staff Proposal issued on May 12, 2022
Phase 1 Track 3 & Track 4 Proposed Decision issued on July 18, 2022
D.22-10-002 issued on October 6, 2022
Track 1: Clarifying Risk Decision Framework (RDF) Technical Requirements
Track 1 considered whether there are discrete technical questions regarding the RDF that the Commission should clarify in the short term (larger, more substantive revisions to the RDF were delegated to Phase II).
August 18, 2021 Technical Working Group
Technical Working Group allowing members to present feedback on the 2021 Joint Utilities’ Proposal on Foundational Element and discussing on the baseline year for RDF filings.
July 28, 2021 Technical Working Group
Technical Working Group giving utilities the opportunity to present their joint proposal regarding the treatment of foundational risks and mitigations with regards to costs in the RDF.
Joint IOU's Slide Presentation
CalAdvocates' Slide Presentation
July 16, 2021 Technical Working Group
Technical Working Group informing SPD on PSPS RDF topics that could be addressed in Phase II, Track 1 of R. 20-07-013.
Joint IOU's Slide Presentation
Cal Advocates' Slide Presentation
June 22, 2021 Technical Working Group
Technical Working Group discussing SPD’s preliminary recommendations on the Phase I Track 1 foundational elements issue outlined in Commissioner’s Scoping Memo and Ruling issued in R.20-07-013.
May 6, 2021 Technical Working Group
Technical Working Group presenting SPD’s preliminary recommendations on Phase I Track 1 issues outlined in Commissioner’s Scoping Memo and Ruling issued in R.20-07-013.
April 14, 2021 Technical Working Sub-Group
Technical Working Sub-Group discussing PG&E’s proposal on standard workpaper and risk templates.
March 10, 2021 Technical Working Group
Technical Working Group discussing transparency guidelines for assumptions and estimates for risk-based decision-making framework (“RDF”) filing.
February 3, 2021 Technical Working Group
Technical Working Group discussing applicability of Power Law Probability Distribution for Wildfire Risk Modeling and uncertainties in RDF.
December 15, 2020 Workshop
Workshop discussing development and intended outcomes of SMAP with perspectives from both intervenors and utilities and concluding with next steps for SMAP II.
Track 2: Safety and Operational Metrics
Track 2 considered safety and operational performance metrics and their application broadly. This work included refining metrics adopted in D.19-04-020 and developing new metrics as needed. Work on metrics addressed D.20-05-053, which approved PG&E’s reorganization plan and directed the development of safety and operational metrics for PG&E linked to an Enhanced Oversight and Enforcement Process.
August 19, 2021 Technical Working Group
Technical Working Group meeting to discuss SOMs, gas storage baseline assessments, revised safety performance metrics, and other technical issues.
Revised Safety Performance Metrics
May 4, 2021 Technical Working Group
Technical Working Group addressing questions from members on SPD’s Draft Staff Proposal on the Phase I Track 2 SOMs issues outlined in Commissioner’s Scoping and Ruling issued in R.20- 07-041.
Secondary Master Table Slide Presentation
April 1, 2021 Technical Working Group
Technical Working Group informing members on the upcoming workplan and schedule to address Phase I Track 2 SOMs issues outlined in AC Scoping Memo.
January 28, 2021 Workshop
Workshop presenting PG&E’s proposed SOMs and getting feedback from intervenors and other utilities.
Track 3: Refining RAMP and Related Procedural Requirements
Track 3 focused on whether there are RAMP, GRC, and Risk Spending Accountability Reports (RSAR) procedural or definitional requirements that the Commission should refine or clarify.
February 9, 2021 Workshop
Workshop dedicated to improving the integration of RAMP into the GRC and GRC-related reporting into the RSAR as well as standardizing the organization and format of GRC and RAMP fillings.
Track 4: Small and Multi-Jurisdictional Utilities (SMJUs)
Track 4 will consider questions unique to the SMJUs - To occur at a future date
Agenda
Workshop Recording
Master Slide Presentation