San Diego Gas and Electric Risk Modeling

Synapse helped The Utility Reform Network (TURN) address aspects of San Diego Gas & Electric Company’s and Southern California Gas Company’s (together, Sempra) risk modeling and related cost-effectiveness calculations in its General Rate Case. Synapse identified three primary flaws in the Companies’ cost-effectiveness methodology:

1. Risk reduction and costs were not uniformly discounted.
2. Sempra did not correctly estimate or discount costs.
3. The discount rate selected by Sempra to discount risk reduction was insufficiently supported.

Synapse also discussed how to represent cost-effectiveness results in dollar terms in order to compare absolute costs with benefits (i.e., B-C ratios). This allows stakeholders to easily see whether a mitigation’s risk reduction benefits are greater than its costs, namely if the ratio calculated is greater than 1.0.