II. BACKGROUND

The Decision resolves an Application filed by Southern California Edison Company (Edison). Edison requested that the Commission approve its plans to perform a steam generator replacement project (SGRP) at its San Onofre Nuclear Generating Station (SONGS). SONGS is jointly owned by Edison, San Diego Gas and Electric Company (SDG&E) and others.

The Decision evaluates the SGRP to determine its cost-effectiveness. The Decision's measure of cost-effectiveness is a calculation of the net present value of the project. If the SGRP has a positive net present value, its benefits outweigh its costs, i.e., the project is cost-effective. (Decision, at p. 9.) The Decision calculates the project's net present value under eight different scenarios. Each scenario's value was adjusted to reflect three different ownership shares for Edison.¹ The Decision found that the high-gas-cost scenario, "Scenario 3," should be used to evaluate the SGRP's cost-effectiveness. The Decision also noted that the net present value of the SGRP would be increased if a greenhouse gas (GHG) adder were used to quantify the SGRP's emission benefits. The Decision approved the SGRP based on Scenario 3's positive net present value, with or without the GHG adder.

In addition, the Decision addressed certain aspects of how the cost of the SGRP would be reflected in rates. Relevant here, the Decision concluded that any stranded cost issues caused by the resumption of direct access should not dealt with in isolation. Rather, stranded cost issues for all of Edison's generating facilities should be considered together if direct access resumes or similar market changes occur. The Decision also rejected a proposal to use this proceeding to cap Edison's recovery of operation and maintenance (O&M) costs and capital addition costs in future rate proceedings. Finally, the Decision approved an Environmental Impact Report (EIR) for the SGRP, pursuant to the California Environmental Quality Act (CEQA).

¹ If SONGS' other owners do not participate in the SGRP, their ownership share will decline. Edison's share will then increase correspondingly.