VI. Palo Verde Nuclear Unit Incentive Procedure (NUIP)

The NUIP provides incentive rewards for those nuclear units that perform above an 80% capacity factor. If a reward is achieved, SCE's customers and shareholders share equally in the difference between the additional cost per kilowatt-hour (kWh) of nuclear fuel and the replacement power cost of the output above that capacity factor. In D.01-09-041, the Commission capped the replacement power cost at five cents/kWh and extended the ratemaking mechanism for Palo Verde Units 1, 2, and 3 until the effective date of SCE's next general rate case (GRC) or further order of the Commission.

In D.04-07-022, the Commission implemented SCE's 2003 GRC revenue requirement effective May 22, 2003. Hence, the NUIP rewards requested in this proceeding were calculated and prorated through May 21, 2003 as summarized in Table XIV-30 and detailed in Tables XIV-31 through Table XIV-33 of Exhibit 2. SCE calculated its NUIP based on the five-cent ceiling rate because its replacement power cost exceeded this ceiling rate.

DRA scrutinized SCE's NUIP reward calculation and concluded that the reward was properly calculated. Based on this independent analysis and conclusion, we find the $12.6 million NUIP reward applicable to SCE's Palo Verde Unit 3 reasonable and recoverable.