6. Generation Expenses - Four Corners
Generating Station

SCE requests that the Commission authorize SCE to file a "Variable Overhaul Outage Schedule" advice letter for the Four Corners Generating Station (Four Corners), which would be part of the Post-Test Year Ratemaking advice letter, to enable SCE to recover the O&M expenses associated with the Unit 5 overhaul. This mechanism is similar to that used for nuclear refueling outages. SCE believes this mechanism will enable appropriate maintenance of Four Corners to be conducted while allowing SCE to recover the expenses associated with that overhaul when they actually occur. The forecasted cost is $4,580,000 and includes incremental costs for overhaul of the turbine/generator, scaffolding, inspecting and repairing the Unit 5 boiler, and overhauling other plant equipment.

Aglet opposes the request, indicating there is no Commission precedent for such adjustments at fossil plants. Also, the amount at issue is not large. Aglet states the scale and timing of overhaul costs at one coal plant do not justify a new mechanism that would shift risks to ratepayers without any offsetting benefit.

6.1 Discussion

While a similar mechanism has been established for the SONGS related refueling outages, the forecasted costs of those outages are approximately 10 times the estimated cost of the Four Corners overhaul. The amount of money at risk related to the anticipated 2008 outage at Four Corners does not justify establishing a new ratemaking mechanism. We will therefore deny SCE's request to do so.

Our action however may result in SCE not recovering outage costs that are anticipated in 2008. In forecasting test year expenses, SCE adjusted recorded expenses to exclude past overhaul costs. Therefore, consideration of overhaul costs is not reflected in SCE's test year forecasts for Four Corners. Extension of the test year level through post-test year 2008, as proposed by SCE and adopted by this decision, will result in no specific recovery for the overhaul. It is not clear how Four Corners outage costs have been accounted for in the past. However, SCE owns a share of two units and the outages occur on an approximate six-year cycle. It would be reasonable to assume one overhaul will occur during this three-year rate case cycle. We will therefore spread the forecasted cost of the anticipated 2008 overhaul, which amounts to $4,580,000, over the three-year GRC cycle to normalize the anticipated cost. The adopted expenses for Four Corners are increased by $1,526,000 over the unopposed test year level proposed by SCE. Absent detail on overhaul accounting, that amount will be split evenly between Accounts 512 and 513.