ALJ/CAB/hl2 Mailed 1/29/2007

Decision 07-01-041 January 25, 2007

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

In the Matter of the Application of SOUTHERN CALIFORNIA EDISON COMPANY (U 338-E) for Approval of Results of Summer 2007 Track of its New Generation Request for Offers and for Cost Recovery.

Application 06-11-007 (Filed November 15, 2006)

OPINION ON SOUTHERN CALIFORNIA EDISON COMPANY'S APPLICATION FOR AUTHORIZATION TO ENTER INTO A POWER PURCHASE AGREEMENT FOR ENERGY FROM LONG BEACH GENERATION FACILITY

I. Summary

This decision authorizes Southern California Edison Company (SCE) to enter into a 10-year power purchase agreement (PPA) with Long Beach Generation LLC (LBG), a wholly-owned subsidiary of NRG Energy, Inc. (NRG) for 260 megawatts (MW) of natural gas-fired peaking capacity from Long Beach Generation Facility Units, 1, 2, 3 and 4, for delivery from August 1, 2007 through July 31, 2017. Furthermore, SCE is to apply the cost sharing mechanism from Decision (D.) 06-07-029 and allocate the benefits and costs of the LBG PPA to all benefiting customers. The Commission is approving this resource to ensure electric reliability for summers 2007 through 2009 in light of the unprecedented record-breaking demand on the system during the heat storm of summer 2006 and the tight reserves in the Southern California service territory. The expense of this PPA is measured against the benefits in increased capacity for SP26¹ and the cost of interruptions in service to businesses and residences in a Stage 3 crisis.

¹ SP26 and SP15 are used interchangeably to refer to the CAISO's description of the Southern California electric grid control area, part of which includes SCE's service territory.