7. Background

This proceeding began in 1989 as an application of Edison for a certificate of public convenience and necessity for construction of 38 miles of 220-kilovolt (kV) transmission line connecting Edison's Kramer Substation and Victor Substation and related facilities.

The new line and substation improvements became known as the Kramer-Victor Project. The project was needed to deliver electricity to Edison's load centers from two types of qualifying facilities: geothermal power from the California Energy Company (Cal Energy) and solar thermal power from Luz International Limited (Luz). In D.90-05-059, the Commission granted a certificate and allocated costs among Cal Energy, Luz and Edison's ratepayers. TURN did not participate in the certification proceedings.

Edison's expected operating date for the 220-kV line was December 1992. However, Cal Energy and Luz sought a December 1991 operating date. To expedite the operating date, Edison and Luz signed agreements under which Edison would build the substation facilities, Luz would build the transmission line, and each party would pay the other in advance of construction work. Edison began construction. Luz did not. In July 1991, Luz suspended development of its solar projects, and Edison suspended construction activity. Edison and Cal Energy agreed that power from Cal Energy would be delivered over an upgraded 115-kV transmission line. In November 1991, Luz declared bankruptcy. The Kramer-Victor Project was never completed.

On November 23, 1993, Edison and Cal Energy filed a petition for modification of D.90-05-059, asking that Cal Energy and Luz be relieved of cost responsibility for the project and that Edison be allowed to treat the project as abandoned plant for ratemaking purposes. On July 14, 1994, the Division of Ratepayer Advocates (DRA) filed a protest, later amending its filing to agree to rate recovery of $17.1 million in project costs.

On February 17, 1995, TURN filed a petition to intervene in order to protest the petition for modification. TURN participated in June 1995 hearings on the petition. In D.96-09-039, the Commission relieved Cal Energy, but not Luz, of cost responsibility for the Kramer-Victor Project and granted Edison's request for abandoned plant ratemaking.

Ratemaking for the project became an issue in Edison's test year 1996 general rate case, which was settled. The settling parties agreed to return Kramer-Victor issues to this proceeding. (See D.96-01-011, 64 CPUC2d 241, 359.)

TURN filed a timely application for rehearing of D.96-09-039, making three arguments: (1) the decision to relieve Cal Energy of its share of project costs was not supported by the record; (2) Commission precedent did not allow abandoned plant ratemaking treatment, and (3) the finding that costs incurred by Edison were reasonable lacked record evidence. In D.97-01-047, the Commission rejected the first two arguments but granted rehearing on the reasonableness of Edison's costs. The Commission stated that the record was "devoid of any factual basis upon which we can rationally conclude that the costs that Edison seeks to recover in rates `were reasonably and prudently incurred' . . . " (D.97-01-047, 70 CPUC2d 743, 745.)

Administrative Law Judge (ALJ) William Stalder scheduled further hearings. Edison and TURN were the only parties to litigate the reasonableness of Kramer-Victor Project construction costs. Edison requested recovery of $17.1 million in project costs. DRA (and its successor organization, the Office of Ratepayer Advocates) did not submit testimony and did not cross-examine on construction costs. TURN engaged James Weil, a former Commission ALJ, as its witness and advocate. TURN conducted discovery, served four rounds of testimony and filed several procedural motions. TURN recommended disallowance of $7.6 million of project costs. Hearings commenced on August 17, 1998, were suspended, were restarted on April 19, 1999, then were again suspended on April 27, 1999, to allow TURN time for additional discovery.

During the course of hearings, TURN alleged that Edison had violated Rule 1, and Edison alleged that TURN and Weil had violated Rule 1 and may have violated Government Code § 87406, one of the "revolving door" provisions of the Political Reform Act. Supplemental filings on this matter were submitted by TURN and by Edison. On August 20, 1999, TURN moved to withdraw its testimony regarding Rule 1 allegations, and Edison on August 25, 1999, moved to withdraw its testimony regarding Rule 1. On September 15, 1999, ALJ Stalder granted the motions and withdrew the TURN and Edison exhibits dealing with Rule 1.

On October 4, 1999, Edison and TURN filed a joint motion for approval of a settlement agreement that resolved all outstanding issues. The two parties agreed that Edison would reduce its request for recovery of Kramer-Victor Project costs by $2.15 million and that Edison would credit ratepayers for 50% of any proceeds from the Luz bankruptcy proceeding. In D.00-06-054, the Commission approved the settlement and confirmed the withdrawal from the record of exhibits relating to Rule 1 allegations.