COM/LYN/ajo/epg ALTERNATE DRAFT Agenda ID #3062

Alternate Agenda ID #2992

Ratesetting

56a 12/18/2003

Decision ALTERNATE PROPOSED DECISION OF COMMISSIONER LYNCH (Mailed 12/4/2003)

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 IN PART AND DENYING IN PART SOUTHERN CALIFORNIA EDISON COMPANY'S APPLICATION TO ACQUIRE MOUNTAINVIEW POWER COMPANY, LLC (MVL)

TABLE OF CONTENTS

Title PAGE

OPINION GRANTING IN PART AND DENYING IN PART SOUTHERN CALIFORNIA EDISON COMPANY'S APPLICATION TO ACQUIRE MOUNTAINVIEW POWER COMPANY, LLC (MVL) 2 2

I. Summary 2 2

II. Background 3 3

A. Proposed Project 3 3

B. Proposed Financing Mechanism 4 4

C. Concerns Raised by Application 4 4

III. Motions 7 7

A. IEP's Motion for Un-Redacted Copy of Application 7 7

B. Motion of The Utility Reform Network for Acceptance of Late-filed
Notice of Intent to Claim Compensation 9 9

C. Motion of the Nevada Hydro Company, Inc. and the Elsinor Valley Municipal Water District to Intervene as a Party and Submit
Comments 9 9

IV. Summary of Parties' Positions 11 11

A. Overview of Individual Parties' Positions 11 11

B. Discussion 16 16

V. FERC Jurisdictional PPA 17 17

VI. Affiliate Issues 22 22

VII. Issuance of a CPCN 23 23

A. Environmental Review 25 25

B. Need for New Plant 28 28

C. Cost Effectiveness 32 32

D. Cost Cap 36 36

VIII. Other Outstanding Issues 37 37

A. Cost Recovery 37 37

B. Recovery of Initial Capital Outlay 38 38

C. Recovery of Operating Costs 39 39

D. Incentive Mechanisms 39 39

E. Financing 40 40

IX. Comments on Proposed Decision 40 40

X. Assignment of Proceeding 40 40

Findings of Fact 40 40

Conclusions of Law 44 44

ORDER 45 45

OPINION GRANTING IN PART AND DENYING IN PART SOUTHERN CALIFORNIA EDISON COMPANY'S APPLICATION TO ACQUIRE MOUNTAINVIEW POWER COMPANY, LLC (MVL)

I. Summary

This opinion grants Southern California Edison Company (Edison) a certificate of public convenience and necessity (CPCN) authorizing it to acquire, develop, construct, own, and operate Mountainview Power Project (Mountainview) as a utility-owned generation project, and denies Edison's request to acquire Mountain 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. The granting of the CPCN authorizes Edison to exercise its option to purchase MVL in its entirety before the expiration of the option date of February 29, 2004.

In its application, Edison asks the Commission to find that that a CPCN is not required for Mountainview and that no further review under the California Environmental Quality Act (CEQA) is required by this Commission to approve the PPA. Instead, this decision finds that a CPCN is necessary and the project, as presented by Edison, tendered all of the elements required for a CPCN-need, cost-effectiveness, cost cap and environmental review, and the record addressed each element. We find that a CPCN is necessary, and we grant Edison a CPCN to acquire, develop, construct, own, and operate Mountainview as a utility-owned project. We also find, given these unique circumstances and equivalent CEC review, that no further CEQA review is necessary to grant the CPCN.