ALJ/CAB/sid DRAFT Agenda ID #2992

Ratesetting

12/18/2003 Item 56

Decision PROPOSED DECISION OF ALJ BROWN (Mailed 11/18/2003)

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

In the Matter of the Application of Southern California Edison Company (U 338-E) for Approval of a Power Purchase Agreement under PUHCA Section 32(k) Between the Utility and a Wholly-owned Subsidiary and for Authority to Recover the Costs of Such Power Purchase Agreements in Rates.

Application 03-07-032 (Filed July 21, 2003)

(See Appendix A for a list of appearances.)

OPINION GRANTING SOUTHERN CALIFORNIA EDISON COMPANY'S APPLICATION TO ACQUIRE MOUNTAINVIEW POWER COMPANY, LLC (MVL) AS A WHOLLY OWNED SUBSIDIARY AND TO ENTER INTO A POWER PURCHASE AGREEMENT WITH MVL FOR ELECTRICITY FROM THE MOUNTAINVIEW POWER PROJECT

TABLE OF CONTENTS

Title Page

OPINION GRANTING SOUTHERN CALIFORNIA EDISON COMPANY'S APPLICATION TO ACQUIRE MOUNTAINVIEW POWER COMPANY, LLC (MVL) AS A WHOLLY OWNED SUBSIDIARY AND TO ENTER INTO A POWER PURCHASE AGREEMENT WITH MVL FOR ELECTRICITY FROM THE MOUNTAINVIEW POWER PROJECT 2

I. Summary 2

II. Background 2

III. Motions 6

A. IEP's Motion for Un-redacted Copy of Application 6

B. Motion of The Utility Reform Network for Acceptance of Late-filed Notice of Intent to Claim Compensation 8

C. Motion of the Nevada Hydro Company, Inc. and the Elsinor Valley Municipal Water District to Intervene as a Party
and Submit Comments 8

IV. Summary of Parties' Positions 9

V. FERC Jurisdictional PPA 14

VI. Affiliate Issues 23

VII. Cost Effectiveness and Need 29

VIII. Cost Effectiveness 33

IX. PUHCA Section 32(k) Findings 37

X. CPUC Regulatory Authority 39

XI. The PPA Does Not Violate Any State Law 40

XII. The PPA Does Not Confer Any Unfair Competitive Advantage 41

XIII. Public Interest and Benefit to Consumers 43

XIV. Cost Recovery 44

XV. Recovery of Initial Capital Outlay 44

XVI. Recovery of Operating Costs 46

XVII. Incentives 47

XVIII. Capital Additions and Betterments 48

XIX. Ratemaking Issues 48

XX. Decommissioning Costs 51

XXI. Expedited Advice Letter Process 52

A. Capital Additions/Betterments 52

B. Reclassification of Charges 53

XXII. Financing 54

XXIII. CPCN and CEQA Issues 55

XXIV. Comments on Proposed Decision 56

XXV. Assignment of Proceeding 56

Findings of Fact 57

Conclusions of Law 60

ORDER 62

APPENDIX A - List of Appearances

OPINION GRANTING SOUTHERN CALIFORNIA EDISON COMPANY'S APPLICATION TO ACQUIRE MOUNTAINVIEW POWER COMPANY, LLC (MVL) AS A WHOLLY OWNED SUBSIDIARY AND TO ENTER INTO A POWER PURCHASE AGREEMENT WITH MVL FOR ELECTRICITY FROM THE MOUNTAINVIEW POWER PROJECT

I. Summary

This opinion authorizes Southern California Edison Company (Edison) to acquire Mountainview Power Company, LLC (MVL) as a wholly-owned subsidiary of Edison and to enter into a power purchase agreement (PPA) with MVL for the purchase of electricity from Mountainview Power Project (Mountainview), subject to the conditions and modifications set forth herein. Although the Commission approves Edison's application for a Federal Energy Regulatory Commission (FERC) jurisdictional Power Purchase Agreement (PPA), with modifications, as the most expeditious way to build the facility in light of Edison's financial situation, we would prefer it if Edison sought authorization to purchase and own Mountainview as a utility owned generation project. If Edison pursues that option, the Commission will expedite the approval of a certificate of public convenience and necessity (CPCN) before the expiration of the option date of February 29, 2004. This would obviate the need for Edison to seek FERC approval by that date.