5. Mohave Sulfur Credits
On January 11, 2006, the Just Transition Coalition (Coalition)16 filed a petition to intervene in this proceeding. At the same time, the Coalition filed a Motion for a "Just Transition" in Response to the Closure of the Mohave Generating Station. The Coalition states that SCE's decision to close Mohave on December 31, 2005, requires the Commission to immediately consider and grant the Coalition's motion for a "Just Transition" for the Hopi Tribe and the Navajo Nation in response to that closure. The Coalition proposes a Just Transition Plan, the purpose of which is to allocate funds derived from the closure of Mohave to enable the Navajo and Hopi communities to invest in sustainable economic alternatives, including renewable energy options. According to the Coalition, the Just Transition Plan offers opportunities for the nations, ratepayers, and the environment to benefit by shifting from an older, dirty source of electricity to cleaner energy alternatives.
The Coalition proposes that a separate Mohave Just Transition Phase be instituted in this consolidated proceeding with a proposed schedule that includes a final Commission decision on either May 11, 2006 or June 15, 2006, depending on whether evidentiary hearings are required.
The Coalition requests that the Commission (1), direct and authorize SCE to create a new Mohave Sulfur Credit Sub-Account in its Energy Resource Recovery Account (ERRA) tariff and to separately track as a credit entry in that sub-account sales of SCE's sulfur allowances created by Mohave's closure, effective December 31, 2005; (2) direct SCE to secure funds resulting from the sales credited to this new sub-account in an escrow account and to distribute those funds to the Hopi Tribe and the Navajo Nation upon receipt by SCE of annual investment plans adopted by a majority of Navajo Chapters in the Black Mesa Region and by a majority of all Hopi Villages that reflect priority conditions for the use of those funds; and (3) direct that such distributions by SCE be recorded as debit entries to the new Mohave Sulfur Credit Sub-Account and that this sub-account be continued in effect through 2026 when Mohave will otherwise stop operating due to loss of the plant's rights to use Colorado River water for generating electricity.
According to the Coalition, its request is an appropriate and timely response to SCE's decision to close Mohave and is urgently needed to make restitution to, and provide investment opportunities for, the Hopi Tribe and Navajo Nation to mitigate the adverse economic and social impacts of that closure upon these communities. Such restitution is further required to compensate the Hopi Tribe and Navajo Nation for subsidizing decades of coal mining and burning that has allowed SCE and its customers to benefit from a supply of cheap power from Mohave. Further, the relief requested by this motion will ensure that this "just transition" funding to the Hopi Tribe and Navajo Nation will continue until the end of Mohave's electric generating claims on Colorado River water in 2026.
Since the Motion might have been of interest to parties to the service list for the "Mohave" proceeding, A.02-05-046, which was closed with D.04-12-016, an ALJ ruling was issued on January 19, 2006 stating that any party wishing to respond to the Motion may do so in A.04-12-014/I.05-05-024 without filing a motion to intervene. Responses to the Motion were due on January 27, 2006 and were filed by SCE, the Navajo Nation,17 the Hopi Tribe, DRA, and TURN.
Among other things, SCE states that the Motion is untimely; the ratemaking proposal is contrary to established Commission precedent which returns allowance proceeds to SCE's customers; the Motion is an attempt to relitigate issues already decided in SCE's favor; the Tribes' compensation under the coal leases has been fair and reasonable; and SCE intends that Mohave return to service. It is SCE's position that the Commission should deny the Motion summarily, without embarking on any of the six-month procedure proposed by the Coalition.
The Navajo Nation states that because it is doing all in its power to keep Mohave operational, the Commission should deny the Motion as premature or
refrain from deliberating on it until the Mohave stakeholder negotiations18 are concluded. It also noted that the Coalition is acting on behalf of small special interest groups, not the Navajo Nation or the Hopi Tribe.
The Hopi Tribe requests that the Commission adopt that portion of the Motion which requires SCE to track its sales of sulfur credits from Mohave, indicating that this step preserves the Commission's options to the extent that the current Mohave negotiations fail. The Hopi Tribe requests, however, that the Commission postpone any decision regarding the disposition, timing and amount of any payments of sulfur credits to the Tribes as just compensation for Mohave's closure, until such time as the parties involved in the current negotiations advise the Commission regarding the outcome of such negotiations. The Hopi Tribe also recommends that the Commission give further consideration to the question of the proper forum for consideration of the Motion, noting there are several outstanding Mohave issues, including this motion, the Mohave Alternative/Complementary Study, the continuing Mohave negotiations, and certain requests made by Edison relating to Mohave. It may make sense to consider all of these issues in a separate or sub-docket.
DRA agrees that SCE should track sales and revenues, if there are any, associated with sulfur allowances that may ultimately be recovered through the closure of the Mohave plant. However, it is DRA's position that any revenues that may ultimately be generated by sulfur allowances created by Mohave's closure should flow directly to ratepayers. DRA also states that if the Commission is inclined to consider the Coalition's request, then the merits of the proposal should be subject to a full hearing process in an appropriate forum after it is determined that such sulfur allowances are actually being generated on a permanent basis by Mohave's closure. Also, all interested parties should be provided with notice and an ample opportunity to address the issues related to the request; and such a process should be developed only after the Commission makes a determination that the Mohave facility will be permanently shutdown.
TURN offers general support for the Motion subject to several clarifications. According to TURN, the Commission should approve the Coalition request to establish an ERRA sub-account both to formalize the practice of having such revenues returned to customers, and to enable tracking of funds available for alternative economic development on tribal lands. However, TURN is concerned that the Motion does not adequately explain the process for disbursing funds from this memorandum account, and could even be read to imply that there would be no Commission review and approval of any such awards. Given the potential magnitude of ratepayer funds tracked by this account, TURN recommends that the Commission should review, circulate for public comment, and ultimately approve any proposals which would involve financial disbursements. TURN also recommends that priority be given to any investment plan which would provide benefits both to the Tribes and to California ratepayers and expressed its interest in participating in the development of guidelines governing the eligibility of tribal investment plans and the evaluation criteria which would be applied to determine funding awards.
The Coalition filed its reply on February 3, 2006. It is the Coalition's position that none of the arguments offered in opposition to the Motion have merit, and both the Motion and the Coalition's petition for leave to intervene in this proceeding should be granted promptly by the Commission. The Coalition notes that while SCE, the Navajo Nation, and DRA oppose the Motion in whole or part, the responses of TURN and the Hopi Tribe, which reflect a better understanding and appreciation of the intent and merits of the Motion, support its core requested relief with recommended conditions or refinements.
Furthermore, the Coalition believes that TURN's recommendations have merit and should be incorporated in the process and schedule proposed by the Coalition in its motion. For this reason, the Coalition has amended its requested relief to incorporate, in particular, the development of guidelines to be applied to any investment plan by which funds from the Mohave Sulfur Credit Sub-Account are to be distributed and to ensure ongoing Commission oversight of this sub-account and revenue distribution.
5.1 Discussion
According to the Coalition, sale of the Mohave sulfur credits would yield approximately $65,000,000 annually, of which SCE would receive 56% based on its ownership share. The amount of money potentially at stake is therefore substantial. Whether such funds should be credited to SCE's ratepayers, used to fund the Coalition's proposed Just Transition Plan, or disbursed in some other manner is a matter that must be considered carefully. We feel such consideration to be premature at this time. As pointed out in responses to the motion, the future operating status of Mohave is not known. SCE states that it intends that Mohave would return to service. However, SCE and the other Mohave co-owners have not yet been able to reasonably commit to the large investments required for the pollution controls, because of critical issues impacting Mohave's post-2005 supply of coal and, especially, slurry water. Mohave co-owners, the Hopi Tribe and the Navajo Nation, Peabody and others -- have been engaged in prolonged and intensive efforts to resolve the Mohave water and coal issues so as to allow the Mohave pollution controls to go forward. Such efforts are still continuing among them now and are summarized every month in the Mohave monthly status reports that SCE serves on the Commission's Energy Division and on the service list for the Mohave proceeding, A.02-05-046, which is now a sub-service list within R.04-04-003.19
The long-term effects on ratepayers as well as the Hopi Tribe and the Navajo Nation will vary depending on whether Mohave returns to service or is permanently shut down. We prefer to decide this issue when the future operating status of Mohave is more certain. We therefore deny that part of the Coalition's motion that would expeditiously decide, as part of this consolidated proceeding, if and how proceeds from the sale of sulfur credits would be distributed to the Hopi Tribe and Navajo Nation. We will preserve the Coalition's rights for consideration of this part of its motion by granting the part of the motion that would establish an ERRA sub-account to accumulate revenues from the sale of any sulfur credits created by the December 31, 2005 Mohave closure. Funds should not be disbursed from this sub-account without specific Commission authorization to do so.
With respect to where the Coalition's proposal for disbursement of funds should be addressed, Ordering Paragraph 9 of D.04-12-01620 states, "Edison is to prepare an application for authorization to go forward with the environmental retrofits and other capital expenditures, with the costs for water, coal and other environmental controls, so once the water and coal issues are resolved, Edison can file the application forthwith. Capital costs found reasonable in this decision will not be re-litigated." If Mohave is to return to service, the issue of the distribution of revenues from the sale of Mohave sulfur credits should be addressed as part of that SCE application and litigated in that proceeding. If Mohave is shut down or a resolution of the future operating status is delayed, SCE should file an application, no later than January 1, 2007, for authority to disburse funds accumulated in the Mohave sulfur credit sub-account along with a proposal for such disbursement.
16 The Coalition is composed of the following non-governmental organizations: Indigenous Environmental Network, Black Mesa Trust, Black Mesa Water Coalition, To' Nizhoni Ani, Grand Canyon Trust, and the Sierra Club.
17 The Navajo Nation filed its response on January 20, 2006 accompanied by a petition to intervene.
18 On March 4, 2004, SCE, the other Mohave co-owners, Peabody Coal, the Hopi Tribe, and the Navajo Nation signed a memorandum of understanding (MOU) whereby the parties agreed that SCE would fund a feasibility study to determine if the C-Aquifer would provide a suitable water source to supply the coal slurry process. In addition, the signatories to the MOU agreed to continue negotiations on water and coal issues. Negotiations are still ongoing.
19 Ordering Paragraph 4 states, "Edison is to file monthly reports with the Commission's Energy Division updating any progress made on the coal and water negotiations, the C-Aquifer studies, the alternatives' investigation and shortening the Gantt Chart time-line."
20 Issued in the Mohave proceeding, A.02-05-046.
