Background

Mohave is a two-unit, coal-fired power plant located in Laughlin, Nevada. Together the plant's generating units have an operating capacity of approximately 1,580 megawatts (MW). Edison is the plant operator and owns a 56% undivided interest in Mohave,² which is equivalent to approximately an 885 MW entitlement. Under the terms of the 1999 Consent Decree, if Mohave is to be operational as a coal-fired plant post 2005, certain pollution control equipment³ must be installed. In its application, filed May 17, 2002, Edison projected a total cost of approximately $1.1 billion for the required pollution controls and other capital investments necessary to extend Mohave operations post 2005. The cost includes (1) the required pollution control equipment itself; (2) other plant investments needed to accommodate the added pollution control equipment; (3) restoration of plant efficiency and capacity; (4) refurbishment of the coal-slurry pipeline to the plant; and (5) a water supply for the coal mine and slurry operation. In its application Edison requested that the commission either authorize it to spend up to $58 million in preliminary work in 2003, or authorize it to establish appropriate accounts for the shut-down of the facility.

Under the Consent Decree, even if the installation of the equipment is underway, but not completed, by the end of 2005, the plant will have to cease operations until the installation is completed. Any cessation of operations and the associated residual costs, when combined with the cost of the pollution controls, impacts the economics of continuing Mohave as a coal-fired plant. Edison projects a lead-time of 3-4 years for installation completion. This time could be lengthened or shortened by a wide variety of factors.

Mohave employs approximately 355 people at the facility, 285 who are represented by the Utility Workers Union of America (UWUA). Mohave obtains all of its coal supply from the Black Mesa coal mine (Mine), which is located approximately 273 miles east of Mohave in northeast Arizona. The Mine is operated by Peabody Western Coal Company (Peabody) on lands that belong to the Hopi Tribe and the Navajo Nation (Hopi, Navajo). The coal is transported from the mine to Mohave by way of a coal-slurry pipeline owned and operated by Black Mesa Pipeline, Inc. (Black Mesa Pipeline). The mine and pipeline, combined, employ approximately 270 people, 220 of whom are represented by United Mine Workers of America (UMWA). The pipeline requires that the coal be pulverized and mixed with water near the mine site to produce the slurry. Once the slurry mixture reaches Mohave, the water is extracted and the coal is dried. The water for the slurrying process and for all other water requirements of the mine comes from the N-Aquifer, a well that underlies the land of the Hopi and Navajo.

In addition to the time limitation of 2005 as set forth in the 1999 Consent Decree for the installation of the required pollution controls, Mohave's coal supply contract expires at the end of 2005, and the availability of water for use at the mine and for the pipeline is uncertain after 2005 because the Hopi and Navajo oppose further use of the N-Aquifer for slurrying purposes. Edison, and the other Mohave owners, have been, and still are, involved in negotiations for a continued supply of coal and water post 2005. Despite their efforts over the past three years, as of the writing of this decision the water and coal issues are still unresolved. The Mohave co-owners' agreement, whereby Edison, Salt River, LADWP and Nevada Power set forth the rights and obligations of the co-owners, also terminates at the end of 2005. While there are options for extension of the co-owners agreement, there is no obligation on the part of the owners to exercise the option.