Comments on Draft Decision

Public Utilities Code § 311(g)(1) requires this item to be served on all parties and subject to at least 30 days' public review and comment before the Commission may vote on it. Section 311(g)(2) and Rule 77.7(f)(9) provide that the 30-day period may be reduced or waived by the Commission upon a finding of public necessity. The comment period on this item is being shortened under this authority. This matter will be considered on the Commission's March 16, 2004 agenda.

The Commission invites parties to file comments on this issue and any other FERC-required modification that parties believe has the potential to create any detrimental or beneficial rate impact for Edison customers. Comments are limited to ten pages and are due by close of business on Tuesday, March 9, 2004. No reply comments will be accepted. Service should follow the electronic service protocols adopted for the proceeding.

Comments to the draft decision (DD) were received on March 9, 2004, from Edison, Office of Ratepayer Advocates (ORA), The Independent Energy Producers Association (IEP), and the Navajo Nation.

ORA opposes the draft decision, in part, because ORA opposes the underlying decision, D.03-12-059 and has an application for rehearing² pending before the Commission.³ In addition, ORA expresses concern that the FERC required changes undermine this Commission's regulatory control over Edison's administration of the Mountainview PPA-a fear that ORA expressed during the evidentiary hearings and in its briefs. Without Commission control, ORA is worried that the California ratepayers will not be protected. In addition, ORA opines that without hearings and evidence on the FERC changes to the PPA, there is no way to know the impact on ratepayers.

IEP opposes the DD as being procedurally and substantially improper, in large part because Edison has not presented a new contract, with the FERC required modifications, to the Commission for review. IEP argues that until Edison takes this affirmative step of submitting a new PPA, there is no way to review the language Edison will put forth to comply with the FERC order. IEP suggests that the draft decision be withdrawn until Edison makes its filing.

The Navajo Nation opposes the DD either on the ground that Edison did not exercise the option to purchase MVL before expiration of the option on February 29, 2004, and therefore the issue is moot, or if Edison did execute the option, Edison was in violation of D.03-12-059. In addition, the Navajo Nation argues that it is improper for the Commission to approve the FERC changes without the Commission first having resolved the outstanding applications for rehearing of D.03-12-059.

Edison supports the DD and presents additional support for the DD's finding that the proposed changes by FERC do not have a negative impact on ratepayers. Edison sets forth each one of the FERC proposals and discusses why it does not affect rates. On the FERC required change of the fixed and variable O&M charge mechanism, Edison discusses why the change should not impact rates. The change requires Edison to bill actual recorded costs, instead of forecasting costs and then having a true-up to recorded costs. Fixed O&M costs are forecasted by Edison to be $7.6 million, and variable O&M costs are forecast to be $2.6 million. A significant portion of the fixed costs cover staff and labor-costs that should not vary much from forecasted costs to actual costs, and not more than 10-15% in any year. Based on the forecasts, the overall impact on PPA charges would be in the order of $1 to 1.5 million out of the $142 million estimated for the PPA charges for 2007.

The opposition comments of ORA, IEP, and the Navajo Nation raise many of the same substantive arguments the same parties presented to the DD of D.03-12-059, and they advanced in their applications for rehearing of D.03-12-059. Those arguments will be considered in the pending applications for rehearing.

Edison has represented that it executed the purchase agreement for MVL before the expiration of the option on February 29, 2004. The Commission has not seen proof of this consummation, but will proceed on the assumption that it is true. If the option was exercised, the Navajo Nation's arguments about the expiration of the option can be dismissed.

The only other issues of concern raised by parties opposing the DD, that Edison has not submitted a modified PPA that reflects the FERC required changes and the change to the fixed and variable O&M charge mechanism might impact ratepayers, have been addressed to the satisfaction of the Commission. In its comments, Edison explains in detail, paragraph by paragraph, all of the FERC required changes, including the O&M charge. While Edison did not submit a new PPA that includes the language changes, it appears to us that FERC gave specific enough instructions to Edison, even down to correcting typographical errors, to give us sufficient information to infer the changes Edison will make to the PPA. In regards to the O&M charge changes, Edison provided information about the actual dollars that could be involved in the change from forecasted amounts to actual costs to satisfy us that the change is not likely to have a material impact on rates.