III. A Description of the Accounts at Issue

A. The Palo Verde NUIP provides rewards for the operation of Palo Verde units that perform above an 80 percent average gross capacity factor for a given fuel cycle. NUIP is part of the Palo Verde Incremental Cost Mechanism that provides for costs to be passed through to customers. In Decision (D.) 01-09-041, the Commission authorized SCE to continue the present rate recovery methodology for Palo Verde incremental costs and the NUIP rewards until the effective date of SCE's 2003 Test Year General Rate Case, or until further order of the Commission.

B. The FOIMA permits SCE to recover the carrying costs and net losses on the sale of its fuel oil inventory.

C. To provide SCE an incentive to voluntarily divest its fossil generation capacity, D.95-12-063 authorized an increase in the return on common equity of up to 10 basis points for each 10 percent of fossil generating capacity that SCE divests. The IROEDMA authorizes SCE to track the differential between the reduced return that applied to SCE's fossil generating plants prior to divestiture and the increased return allowed when they were divested. Recovery of the differential is subject to Commission order.

D. SCE established the STGCMA to track the costs and revenues associated with the lease and operation of the Riverside Canal Generation Station. SCE leased the plant to provide reserve generating capacity to reduce the likelihood of Stage II and Stage III Emergencies: e.g., rotating outages.