XVIII. Capital Additions and Betterments

Under Section 8.09 of the PPA, MVL is permitted, but not required, to seek Edison's approval for capital additions, such as betterments, compliance work, and facility refurbishments. Some parties argued that this provision could result in MVL passing runaway costs through to Edison ratepayers. Edison presented testimony that if MVL did work not approved by Edison, MVL would not be eligible for recovery under the monthly capital recovery charge or as a preauthorized charge. Although MVL could recover such expenditures through the O&M charge, MVL would have to write-off any such expenditures until the next overhaul cycle, in effect creating a regulatory lag disincentive for MVL to engage in such behavior.

Edison attempts to reassure critical intervenors and the Commission that this Commission still exerts oversight over Edison through its review of expenses in the ERRA. Edison also opines that if MVL sought advance approval of an expenditure from Edison, that Edison would have an incentive to then seek approval from this Commission prior to the expenditure to avoid disallowance in the ERRA. To address this issue, we find that the amendment proposed by TURN to require MVL to seek Commission pre-approval for any capital expenditure referenced in Section 8.09 that exceeds $10 million unless emergency conditions require immediate action, is in the public interest and we adopt that provision.