XVI. Recovery of Operating Costs

The PPA provides for certain categories of operating and maintenance (O&M) costs, costs over which Edison has no discretion or control, to be passed directly from MVL to Edison as "pre-authorized." The largest O&M cost is the Contractual Services Agreement with the service provider for maintenance of the facility. Edison provided testimony that that contract was vigorously negotiated to provide maintenance for the facility at a fair and reasonable cost. Other pre-authorized O&M costs are insurance, property taxes, and interconnection costs. As Edison argues, intervenors' concerns that by "pre-authorizing" these costs, MVL will lose any incentive for cost-control, are misplaced: MVL has no discretion or control over these costs. In point of fact, Edison feels that this ensures that MVL is indifferent to Edison's dispatch decisions.

The PPA also allows MVL to recover fixed and variable O&M charges through a monthly charge. The initial values for these charges were derived from forecasts of actual costs, subject to adjustment at each overhaul cycle, expected to be between three and four years in duration. As Edison's witness testified, the reset will be based on historic recorded O&M values.

We find that the record supports Edison's proposal to recoup fixed and variable O&M charges through a monthly service charge, subject to true up for historic costs, at each next overhaul cycle, and we adopt the proposal.