Internal Market Mechanism

Edison first introduced an Internal Market Mechanism in 1998:

The three-year average provides a better forecast because in 1998, SCE implemented an internal market mechanism (IMM) process throughout the company.¹⁸ Beginning in 1998, procurement costs charged to SONGS 2&3 were increased to include support personnel located at the corporate office.¹⁹ This additional allocation increased Nuclear Support/FERC Account 532 costs beginning in 1998. The five-year average includes 1996 and 1997 which don't reflect these increased cost allocations and therefore do not provide full funding of known allocated costs. We therefore adopt SCE's proposal to use a three-year average.²⁰

We know that Account 532 was used to develop the estimate included in D.04-12-015 (ALJ's Proposed Decision) so we must see whether SDG&E has demonstrated an error. SDG&E asserts that the Commission's estimate "excluded" IMM costs, and SDG&E relies on the Worden Declaration.²¹ Worden states that the Edison forecast in the Results of Operations (RO) model was "net" of SDG&E's share, which is as it should be, because Ex. 409 only calculated a forecast for Edison's revenue requirement. But Worden cannot know how the Commission derived the SDG&E estimate in D.04-12-015 when we used Ex. 409. We therefore discount his speculative opinion on our development of the SDG&E forecast. We will only consider - and apply appropriate weight to - those statements by Worden dealing with specific actions or ratemaking proposals by Edison that were under his control as project manager for A.02-05-004.

SDG&E does not show how it calculated $2.486 million in excluded IMM costs. There is nothing to compare with the O&M allowance in D.04-12-015. We therefore find SDG&E has not met its burden of proof and we do not adjust our forecast of SONGS 2 & 3 O&M costs to include IMM costs. Edison's FERC Account 532 included IMM costs and this Edison account was considered in the D.04-12-015 estimate for test year 2004. SDG&E has not shown how the estimate in D.04-12-015 is in error.

¹⁸ Exhibit 283, pp. 18 and 19. (Footnote 19 in D.04-07-022.)

¹⁹ Id.

²⁰ D.04-07-022, mimeo., p. 51.

²¹ Ex. 170, pp. MRO-8 - MRO-10.