IV. Summary of Parties' Positions

Edison seeks Commission authorization to own and operate Mountainview as a utility wholly-owned subsidiary, dedicating all the output of the fully dispatchable facility to Edison customers in accordance with a cost-based, unit-contingent, gas tolling PPA. The PPA was drafted by Edison to provide security to the investors in light of Edison's financial health and the regulatory uncertainty in California. In support of the application, Edison requests that the Commission make the following findings:

· The PPA is reasonable.

· Required findings under Section 32(k) of the Public Utility Holding Company Act (PUHCA).

· The Commission's Affiliate Transaction Rules (ATR) are not applicable to the interactions between Edison and MVL.

· The Environmental Review done by the California Energy Commission (CEC) is sufficient to satisfy the requirements of the California Environmental Quality Act (CEQA).

· There is no requirement that MVL obtain a certificate of public convenience and necessity (CPCN).

· Edison may use Financing Authorization.

· The Qualifying Facilities (QFs) settlement adopted by D.93-03-021 does not apply.

· Edison may recover the Mountainview PPA costs through the Energy Recovery Resource Account (ERRA).

· Approve an Advice Letter process as proposed by Edison.

· Approve the inclusion of Mountainview decommission studies in the 2006 General Rate Case filing.

· Authorize the creation of a memorandum account as of July 21, 2003, to track option agreement costs.

· Give explicit Commission support for Edison's filing of the PPA at FERC.

If instead of pursuing the FERC jurisdictional PPA, Edison proceeds with a CPCN to own Mountainview, the following issues will no longer be relevant: Findings required under Secion 32(k) of PUHCA; FERC jurisdiction: Applicability of the ATRs; Applicability of the QF Settlement; Analysis of the PPA; and Modifications to the PPA. Most importantly, if Edison owns Mountainview, all Edison needs is this Commission's approval and the uncertainty of seeking FERC approval, on the truncated schedule dictated by the option expiration date of February 29, 2004, is obviated.

TURN finds many problems with Edison's application, not the least of which are the lack of a competitive process, the use of FERC jurisdiction with an unregulated utility subsidiary, dubious coordination with the utility's long-term planning process, and the compressed timeframe. Despite all of these "vexing weaknesses," TURN supports Edison's application so long as the Commission adopts the limitations, modifications, and conditions advanced by TURN.

In sum, TURN's proposed changes or conditions are designed to minimize the risk and maximize the economic and reliability benefits to Edison ratepayers. In particular, TURN argues that the risks related to future direct access loads, possible unilateral petitions for rate changes at FERC, and fixed cost responsibility (amounts, recovery schedule, future investments) need to be minimized.

ORA characterizes Edison's application as a "Frankenstein," made of ill-fitting and poorly defined chunks of FERC jurisdiction and ratemaking, and of federal court filed-rate interference with California regulation policy. Despite this colorful description, ORA's main opposition is that the Commission is being asked to delegate its ratemaking responsibilities to FERC. ORA argues this ceding of jurisdiction is unlawful, is bad policy, and puts California ratepayer protection at risk. To remove these impediments, ORA urges the Commission to direct Edison to finance, construct, and operate Mountainview as a pure utility project. If the Commission does not do that, ORA objects to any waiver of the Affiliate Transaction Rules (ATR), and questions the need and cost-effectiveness of the project.

The Navajo Nation's primary focus in this proceeding is the future of the Mohave Generating Station (Mohave). The Navajo Nation urges the Commission to reject Edison's application on the ground that Mountainview, when compared with Mohave, cannot be in the public interest. In point of fact, the Navajo Nation argues that there was an inadequate record developed in this proceeding because Mountainview was not compared with all reasonable alternatives, including Mohave. The Navajo Nation seeks specific findings from the Commission in this proceeding that Mohave surpasses Mountainview in terms of benefiting the public interest, and that nothing in this decision shall adversely affect the prospect of Mohave continuing as an Edison-owned utility asset after 2005.

IEP opposes the application primarily because it represents a new and dangerous level of utility "self-dealing," and through the mechanism created by Edison, Edison will gain all the benefits associated with a rate-based utility project yet avoid what it considers to be the risks of traditional utility ratemaking processes. IEP is concerned that the proposal does not comport with the ATRs, the required PUHCA findings cannot be made, and it was not aired in the Procurement OIR R.01-10-024). As an alternative to rejecting the application, IEP suggests that 12 conditions be imposed on the PPA before this Commission approves the deal, so that the conditions will be subject to the federal FRD. These conditions were drafted by IEP as the minimum constraints necessary due to the affiliate relationship between Edison and MVL to inject "a modicum of consumer and competitor protection in the PPA."³

EPUC urges the Commission to reject Edison's application on the following grounds: (1) the PPA avoids the jurisdiction of this Commission; (2) the PPA shifts risk from shareholders to ratepayers; (3) the PPA violates state and federal laws encouraging the promotion of cogeneration resources; (4) the utility-subsidiary setup presents unfair economic advantage to MVL and discriminates against other market participants; (5) the structure violates the ATRs since revenues will flow from MVL to Edison's parent; (6) the resource may not be needed; and (7) the facility may not be cost effective since there was no competitive bidding process. In sum, EPUC argues that the PPA is not in the public interest from a ratepayer perspective.

CAC also asks the Commission to reject the application. Specifically, CAC argues that the proposed special transactional structure: (1) is a violation of state and federal laws encouraging promotion of cogeneration resources; (2) gives unfair economic advantage to MVL and discriminates against other market participants; (3) will violate the ATRs, or if an exemption is granted, equal treatment should be afforded to all Edison affiliates; and (4) there has not been sufficient demonstration of need.

CCC advises rejection of Edison's application. Primarily, CCC is concerned for its members since Edison stated that it will not purchase power from QFs, unless a QF successfully bids in one of Edison's competitive resource solicitations. Many CCC member contracts have expired, or are due to expire, during the 30-year PPA period. CCC members do not want the approval of Mountainview to obviate Edison's need to purchase QF power in the future that could undermine the development of coherent long-term procurement policies and discourage independent power producers from investing in building generation in California. In the alternative, if the Commission is inclined to approve the application, CCC recommends that Edison not be allowed to skirt its obligation to purchase QF power and that the price Edison pays MVL doesn't discriminate against QFs.

CUE supports the application because it is convinced that the additional generation is needed for reliability beginning in 2006, the plant is cost-effective for ratepayers, and there is no need for a market test. CUE opines that even if Edison did not need Mountainview in 2006, and it was not cost-effective for ratepayers, ratepayers are better off securing generation now, rather than later.

Sequoia sees Edison's proposal as a good deal for ratepayers because development of Mountainview provides significant reliability and reserve benefits, fills a hole in Edison's portfolio, and does so on a cost-effective basis. Sequoia urges the Commission to stick to the schedule set forth in the scoping memo and support Edison's filing at FERC to approve the PPA, and to support Sequoia's filing at FERC to transfer Mountainview to Edison.