13. Uncontested Costs

SCE identifies a number of costs that were uncontested and requests they be found reasonable for the record period.

13.1. Generation

SCE presented testimony on the operations of its hydroelectric generation, coal generation and Catalina diesel generation. SCE states that, while ORA requested additional information be included in future ERRA filings, ORA did not recommend that any aspects of the generation operations be found unreasonable or that any associated costs be disallowed. SCE therefore requests a finding that its hydro, coal and Catalina generation operations were reasonable during the record period.

13.2. Special Contracts

SCE did not request recovery of specific costs, but did request the Commission to find that its administration of special contracts was reasonable. SCE asserts that each contract produced sufficient revenues to meet the positive contribution to margin standard, and ORA did not challenge the administration of the program.

13.3. Cost of Collateral

SCE states that during the record period it was required to post collateral to transact for power through the ISO and with other counterparties. Letter of credit commission fees, letter of credit issuance fees, letter of credit commitment and participation fees and ISO escrow fees were incurred. Based on its testimony and the fact that ORA did not contest the fees, SCE requests a finding that these costs were required for SCE to post collateral to transact for power, and that they were reasonably incurred.

13.4. ISO-Related Costs

SCE identifies the following ISO related costs: (1) Grid Management charges of $149.4 million to support the ISO's operating costs associated with control area services, interzonal scheduling, real-time markets and ancillary services markets; (2) Market Costs of $163.3 million allocated by the ISO, which are associated with ancillary services, imbalance energy, congestion, and firm transmission rights; (3) Federal Energy Regulatory Commission fees of $5.9 million allocated to ISO participants in accordance with the ISO's filed tariffs; and (4) a net credit of $16 million in various true-ups and adjustments.

SCE states that the majority of ISO-related costs incurred during the record period were unavoidable, and for those costs that SCE had limited discretion to control, such costs were managed consistent with the Commission's least-cost economic dispatch requirement. Also, ORA did not contest the costs. For these reasons, SCE requests a finding that the costs are reasonable.

13.5. Fuel Oil Inventory Carrying Costs

The monthly fuel oil inventory costs recorded during the record period are addressed in SCE's testimony. SCE states that, due to its financial condition, it could not issue commercial paper after December 20, 2000. From September 2001 through February 2002, SCE recorded the actual interest rate that it paid on its outstanding commercial paper. As part of its refinancing, SCE retired the commercial paper on March 1, 2002. As a proxy for cost of short term funds, the carrying costs for fuel oil inventory were based on the weighted average interest rate related to three specific instruments that were issued to finance SCE's PROACT. Based on its testimony and the fact that ORA did not contest the costs, SCE requests a finding that these costs are reasonable.

13.6. Electric Vehicle Costs

SCE has presented testimony in support of its expenditures of $7.379 million in electric vehicle costs during the record period. The Commission has reviewed SCE's Low-Emission Vehicle program on six previous occasions, in ECAC and Revenue Allocation Proceeding proceedings. SCE has included the reasonableness showing for the seventh period (August 1, 2001 through June 30, 2003) in this ERRA proceeding. Based on its testimony and the fact that ORA did not contest the costs, SCE requests a finding that these costs are reasonable.

On July 16, 2004, after the close of the record in this proceeding, the Commission issued D.04-07-022 in SCE's Test Year 2003 General Rate Case (GRC). In that decision, the Commission approved SCE's proposal to include its electric vehicle expenses in base rates, effective May 22, 2003, the effective date of the GRC decision. Since electric vehicle expenses from May 22, 2003 forward are now included in base rates, they are not subject to reasonableness review in the ERRA. The review period that should be considered in this proceeding should therefore be modified to August 1, 2001 through May 21, 2003.

13.7. Discussion

As noted by SCE, ORA did not contest the reasonableness of the costs indicated above. We have considered SCE's testimony and find it to be persuasive in justifying the uncontested costs. We therefore find these costs reasonable, as requested by SCE.