XIV. Cost Recovery

Edison opines that the PPA should be approved because it provides reasonable cost recovery mechanisms, reasonable cost control mechanisms, adequate regulatory oversight, and provides numerous benefits for Edison ratepayers. Specifically, Edison claims that the PPA approximates key features of traditional utility ratemaking: "straight-line depreciation of book investment, return on capital with a Commission-authorized rate of return and capital structure, a mark-up for tax liabilities, and recovery of operating expenses subject to a regulatory lag incentives."

Edison urges the Commission to ignore intervenor concerns or criticisms that ask the Commission to compare the PPA to commercially negotiated contracts with merchant generators, cogenerators, or QF contracts because the PPA should be evaluated against a paradigm of traditional regulation. The 30-year term, certainty of cost recovery and ability to recover unforeseen capital expenditures makes the PPA more parallel to utility regulation.