XXVI. Assignment of Proceeding
Michael R. Peevey is the Assigned Commissioner and Carol Brown is the assigned Administrative Law Judge in this proceeding.
1. Mountainview presents Edison with the opportunity to acquire a new, state-of-the-art combined cycle gas turbine generating station with an expected net electrical output of 1,054 MW with a low target heat rate of 7,100 Btu/kWh.
2. Edison has entered into an option agreement with MVL, Mountainview's current owner, for the right to acquire MVL in its entirety, as a wholly-owned subsidiary of Edison.
3. MVL has already received a license for the project from CEC, and the environmental review done by CEC as the lead agency for the license exempts this Commission from conducting further environmental review under CEQA.
4. When acquired by Edison, MVL will complete construction of the facility pursuant to construction contracts already in place, and when the facility comes on line in 2006, MVL will commit the output exclusively to Edison.
5. The output of Mountainview will be dedicated to Edison customers at cost-based rates.
6. Edison proposes entering into a PPA with MVL that gives Edison the responsibility for gas procurement, hedging, and plant dispatch.
7. The PPA will be subject to exclusive FERC jurisdiction and this is justified by the uncertainty of the regulatory climate and Edison's current financial situation.
8. We believe that it would be more advantageous to the ratepayers and customers of Edison to own Mountainview as a utility-owned facility under the historic, rate-based approach, but in today's financial and regulatory climate gave Edison the choice whether to proceed on Mountainview with the FERC jurisdictional PPA, or as a utility-owned facility.
9. If Edison does pursue direct ownership of Mountainview we can expedite the CPCN process since no further finding of need, or further environmental review under CEQA is required.
10. Edison has established a need for Mountainview to meet its immediate need for dispatchable peaking and intermediate capacity and its long-term need for baseload resources.
11. Edison has established that Mountainview is a cost-effective resource to meet its short-term and long-term resource needs because of its attractive purchase price, state-of the-art low heat rate of 7,100 Btu/kWh, environmental benefits, and location in its load center, irrespective of what year the entire output is needed.
12. Ratepayers will be better off with Mountainview than without it.
13. The MVL PPA purchase price is unique and reflects capital costs below that of the market.
14. Acquisition of Mountainview is consistent with the Energy Action Plan drafted by the CPUC, CEC, and CPA.
15. The modifications to the PPA proposed by Edison for Article I, Sections 6.03, 7.02, and 12.01 as shown in Exhibit 45 are adopted.
16. The modifications proposed by TURN to the PPA that we found reasonable and adopted are set forth herein.
17. MVL is not a regulated subsidiary exempt from the ATRs.
18. It is in the public interest to grant a one-time waiver of the following ATR rules: III.B; III.E; IV.B; V.C; V.D; V.E; V.F; V.G.1; V.G.2; and V.H.5.
19. Any transactions between MVL and unregulated affiliates are covered by the ATRs, should be reported in the annual affiliate rules report, and should be covered by the annual affiliate rules audit.
20. The affiliate prohibitions set forth in D.93-03-021 are not applicable to the Edison/MVL transaction.
21. It is in the public interest to grant a one-time waiver of the two-year moratorium on affiliate transactions established in D.02-10-062 so this project can go forward.
22. Although Edison established a need for Mountainview, in order to not over-burden ratepayers in the early years of the contract, we adopt TURN's proposal that all customers of Edison that are currently ineligible for direct access be obligated to pay for stranded costs for the first 10 years of Mountainview's life.
23. The Commission has sufficient regulatory authority, resources, and access to books and records of Edison and MVL to meet the PUCHA requirement.
24. The Mountainview project is in the public interest, and if the PPA is the only viable vehicle to acquire the facility, the PPA is in the public interest.
25. The PPA does not violate any state law or regulation.
26. The PPA does not confer any unfair competitive advantage on MVL since MVL is prohibited from competing with other wholesale providers and cannot make third-party sales.
27. The PPA will benefit consumers.
28. MVL should be allowed to recover AFUDC in accordance with the terms of the Mountainview PPA Sections 7.01 and 8.02.
29. The capital recovery charge treatment set forth in the PPA is reasonable, except we have made adjustments, as set forth herein, to the contingency allowance for the uncertain costs, and approved an expedited procedure by which Edison may request, justify, and obtain approval of an upwards adjustment to the Capital Costs Limit.
30. It is reasonable to allow Edison to recover fixed and variable O&M charges through a monthly service charge, subject to true-up for historic costs, at each future overhaul cycle.
31. It is reasonable to adopt the heat rate and availability incentives as described in the PPA and subject to the changes proposed by TURN.
32. It is reasonable to adopt TURN's proposal to require Edison to seek Commission authorization for any capital expenditure referenced in Section 8.09 that exceeds $10 million.
33. It is reasonable for Edison to recover the costs of operating Mountainview through the ERRA; the working cash component of the CRC through the GRC; and overhead costs through the GRC.
34. It is reasonable to transfer ownership of the Mountainview assets to Edison at cost at the termination of the Mountainview PPA.
35. It is reasonable for Edison to include decommissioning estimates for the Mountainview assets in its GRC.
36. It is reasonable to have Mountainview financed at the utility level, with Edison using existing debt financing and equity, and there is no anticipated cost-savings if financing was done at the project-level.
37. It is reasonable for Edison to provide guarantees on behalf of MVL in connection with the construction, operation, and maintenance of Mountainview.
38. It is appropriate that MVL maintain a capital structure and earn a Return on Equity equal to Edison's Commission-authorized ROE and capital structure.
39. Edison has another application, A.02-05-046, pending before this Commission concerning the future disposition of the Mohave Generation Plant in Laughlin, Nevada.
1. A certificate of public convenience and necessity is not required for the Mountainview project.
2. A CEQA review by this Commission is not required for the Mountainview project.
3. We have made the required findings under Section 32(k) of the Public Utility Holding Company Act to warrant approval of the PPA.
4. PPA Section 9.04(c) and Pub. Util. Code § 314(b) gives the Commission sufficient regulatory authority, resources, and access for books and records of Edison and MVL.
5. The transaction between Edison and MVL will benefit customers.
6. The transaction between Edison and MVL does not violate any state laws.
7. The transaction between Edison and MVL does not provide MVL with any unfair competitive advantage.
8. The transaction between Edison and MVL is in the public interest.
9. It is in the public interest to grant Edison a one-time waiver of the Affiliate Transaction Rules in regards to the MVL transaction.
10. It is in the public interest to allow Edison a one-time waiver of the two-year moratorium on affiliated procurement transactions.
11. The provisions of D.93-03-021 do not apply to transactions between Edison and wholly-owned subsidiaries of the regulated utility.
12. Financing for the acquisition of MVL and the funding of construction and operation of Mountainview at the utility level using existing debt financing is consistent with D.98-02-104 and D.00-10-063 and more advantageous than having the financing done at the project level.
13. Edison may provide guarantees on behalf of MVL under Pub. Util. Code § 701.5.
14. It is reasonable for this Commission to support Edison's filing of the Mountainview PPA, as approved herein with modifications, at the FERC pursuant to Section 205 of the Federal Power Act.
15. Nothing done by the adoption of this decision concerning the acquisition of Mountainview prejudges the Commission's determination of the future of the Mohave Generating Plant in A.02-05-046.
16. Because the MVL PPA purchase price reflects capital costs significantly below that of any comparable new facility and is substantially below market price, it is not relevant to and cannot be adopted as the market price referent used in any solicitation conducted pursuant to the California Renewable Portfolio Standard (RPS) Program established by Senate Bill (SB) 1078.
IT IS ORDERED that:
1. This Commission will intervene at Federal Energy Regulatory Commission (FERC) in support of Southern California Edison Company's (Edison) filing of the Mountainview Power Company, LLC's (Mountainview) Power Purchase Agreement (PPA), as approved herein with modifications.
2. Edison may execute the Mountainview PPA upon receipt of a FERC decision approving the Mountainview PPA, without modification, or making a modification with no potential rate impacts. If FERC proposes any modifications, with potential rate impacts, Edison must seek the approval of this Commission prior to accepting any modifications that have potential rate impacts.
3. If Edison acquires MVL as a wholly-owned subsidiary and enters into a FERC jurisdictional PPA with MVL, and legislation is enacted that secures cost recovery of a utility generation investment over the life of the asset Edison is ordered to file an application, within 60 days of the effective date of the legislation, to terminate the PPA and put Mountainview in rate base under the jurisdiction of this Commission.
4. Edison may proceed to acquire Mountainview as a utility owned generation facility with no further CPCN or CEQA review required.
5. Edison is authorized to recover the costs of operating Mountainview through the Energy Recovery Resource Account.
6. Edison is authorized to recover the working cash components of the capital recovery charge in its next General Rate Case (GRC).
7. Edison is authorized to recover overhead costs through the GRC.
8. Edison is authorized to include decommissioning costs in its GRC.
9. Edison is authorized to make guarantees for MVL pursuant to Pub. Util. Code § 701.5.
10. Edison is authorized to use the expedited advice letter process as set forth in this decision for discretionary actions under the PPA.
11. Edison's Motion to recover options payments from ratepayers if the Mountainview transaction is not approved or consummated before the expiration of the option is denied.
12. This proceeding is closed.
This order is effective today.
Dated December 18, 2003, at San Francisco, California.
MICHAEL R. PEEVEY
President
CARL W. WOOD
GEOFFREY F. BROWN
SUSAN P. KENNEDY
Commissioners
I will file a concurrence.
/s/ GEOFFREY F. BROWN
Commissioner
I reserve the right to file a concurrence.
/s/ CARL W. WOOD
Commissioner
I dissent.
/s/ LORETTA M. LYNCH
Commissioner
APPENDIX A
(List of Appearances)
************ APPEARANCES ************ |
Jonathan Teague |
Carolyn M. Kehrein |
William V. Manheim |
Andrew Ulmer |
Matthew Freedman |
CPA Counsel Office |
Alan Lofaso |
Maria E. Stevens |
Cassandra Sweet |
Norman A. Pedersen |
Peter W. Hanschen |
Roger T. Pelote |
(END OF APPENDIX A)
