Summary of Parties' Positions

Edison's initial 2002 application was neutral as to whether Edison supported making the necessary expenditures for the pollution controls mandated by the Consent Decree and keeping Mohave operational, or instead supported planning for the permanent shut-down of Mohave post 2005. By the time Edison filed supplemental testimony in January 2003, Edison was not optimistic that Mohave could continue operation post 2005 because negotiations on the important coal and water issues were stalled. Instead, in early 2003 Edison focused on the costs and procedures necessary to shut the plant down. Significant movement was subsequently made on the coal and water issues, and by the time of the evidentiary hearings in June/July 2004, Edison was redirecting its efforts toward the continued operation of Mohave post 2005. Edison's position post-hearing is that the record does not support a finding that Mohave should be permanently shut-down, but until the water supply issue is resolved, the Commission cannot make the necessary public interest determination supporting the $1 billion investment in pollution controls.

While the Hopi, Navajo, and Peabody urge the Commission to issue a "Conditional CPCN," Edison advocates instead a "CPCN-plus-interim-funding" approach that would allow Edison to move forward with Mohave as quickly as possible once the key issues are resolved.10 From Edison's perspective, this CPCN-plus proposal would allow the Commission to have a clear idea of what it was approving before authorizing the $1 billion plus investment, but the interim-spending would ensure that there was no preventable delay in the start of the retrofit process.

Edison and the other co-owners have already spent approximately $9 million on preliminary engineering for the Mohave pollution controls and related plant improvements and have committed funding of $6 million for the C-Aquifer studies. Edison argues that it does not need to spend any additional money on the Mohave retrofit until the coal and water issues are resolved. In point of fact, Edison claims additional interim spending will not speed up the retrofit-only the resolution of the water and coal issues can speed up the time-line. Edison's witness, Mr. Phelan, testified that once Edison is given notice to proceed from the Commission, it will take 36 to 39 months to complete the necessary upgrades for Mohave's future operation. Mr. Phelan further testified that the "real large commitment of dollars occurs six to seven months in when significant orders of materials would be placed, in particular, as it relates to the dry scrubber and the baghouse."11 From Edison's perspective, it would be ill advised to commit to the purchases of such major equipment until the water and coal negotiations are completed.

In addition, Edison argues against any type of Conditional CPCN on several grounds: it could disadvantage Edison, and thereby harm Edison ratepayers, in the continued negotiations on prices, terms and conditions for water and coal commitments; provides no recognizable benefit; and injects confusion and uncertainty into the process.

Edison presented capital addition and other cost projections for the continued operation of Mohave totaling approximately $1.1 billion--exclusive of the water and coal contract costs. Because of the lack of finality on the water and coal issues, including the cost of both items, Edison was not able to project a cost estimate with precision. This cost estimate presented was based on a 20-year plant life following the installation of the pollution controls and other related investments because Edison does not have now, and has no assurance it will obtain later, a water source for the cooling of the plant post 2026. However, based on cost estimates for considered alternatives, Edison posits that Mohave, even with $1.1 billion in pollution controls and other upgrades, even with a multi-year shut down while the retrofit is being completed, even with potential additional water and coal supply costs and even with a shortened plant life till only 2026, is still cost effective.

In summary, Edison urges the Commission to authorize a CPCN-plus-interim-spending. In the meantime, Edison intends to press forward on reaching a resolution to the water and coal issues, and if and when these issues are adequately resolved, Edison will promptly file a CPCN application and seek interim funding for limited critical path work so as to minimize any delay pending the CPCN decision. However, under any scenario, Edison anticipates the shut-down of Mohave post 2005 pursuant to the Consent Decree and seeks authorization to establish the MERMA account to book the limited worker protection benefit expenses that will ensue. The creation of the MERMA account is necessary, from Edison's perspective, irrespective of the length of the shut-down, and does not prejudice the re-opening of the plant.

Edison does not believe the alternative proposals presented by other parties are viable. In its reply brief, Edison urges the Commission to reject the various "conditional CPCN" proposals advanced by the Hopi, Navajo and Peabody, as well as the alternative proposals of WEC, NRDC and TURN, and instead to allow the continuing and intense efforts that are being made to resolve the coal and water issues.

The Hopi Tribe argues that the economic evidence it presents overwhelmingly supports the conclusion that Mohave should continue in operation as a coal-fired plant. To this end, the Hopi urge the Commission to approve a "Conditional CPCN" finding that it is in the public interest to preserve Mohave as a coal-fired power plant. The Hopi claim that the Conditional CPCN would allow Edison to spend a reasonable range of money for implementing the required plant upgrades and alternative water supply, subject to confirmation that the coal and water solutions are technically feasible.

Specifically, the Hopi urge the Commission to authorize Edison to proceed with the Mohave upgrades that are needed to obtain a replacement water supply for the N-Aquifer and to comply with the terms of the Consent Decree as long as the costs do not exceed $1.08 billion for the capital investment and the average cost for delivered fuel and water in nominal dollars for 2006 to 2025 is $1.57/MMBtu. In addition, the CPCN approval would be conditioned on satisfactory resolution of the technical issues associated with the new water supply and the required emission controls.

The Hopi argue that the case for keeping Mohave in operation is compelling. To begin, volatility in the supply and price of natural gas puts California consumers and ratepayers at risk the more they are dependent on gas as a fuel source for electricity. And coal, unlike liquefied natural gas (LNG) does not present geopolitical and/or national security risks. Also, coal supply agreements and prices can be locked into long-term contracts that bring supply and price stability as well as fuel diversity for consumers. The Hopi contend that its witness demonstrated that during the 2000-2001 California Energy Crisis, Mohave alone produced electricity cost savings that would have paid for the entire amount of the now required $1.1 billion in Mohave upgrades.

Next, based on the Hopi calculations, the long-term cost savings to ratepayers from the continued use of Mohave will be huge, even if environmental requirements for mercury emission controls are tightened. The Hopi witness, Judah Rose, testified that Mohave is economic even if capital costs were to rise to 179% of Edison's capital cost estimates, and even if the price of coal doubled. Rose also tested his theory against numerous scenarios, including a shortened life of 20 years because of the cooling water issue, and in all cases, Mohave remained highly economic. As Rose testified, the cost of upgrading Mohave is equivalent to the capital cost of a new natural-gas fueled combined cycle gas turbine plant (CCGT) in California, yet the fuel costs are more stable and lower.

In point of fact, the Hopi posit that even taking into consideration all of Edison's criticisms of Rose's testimony, Mohave is still economic and saves California ratepayers over $500 million.

Furthermore, addressing the environmental concerns that coal-burning plants raise, the Hopi witness testified that with all now required, and with some future "might-be-required" emission controls, Mohave can produce clean, economical power. Black Mesa coal has a very low mercury content, and the baghouses that will be installed at Mohave as part of the pollution controls can capture any stray mercury emissions. The Hopi argue that even if Selective Catalytic Reductions (SCR) are required, SCR implementation is possible and will not affect the positive economics of the plant.

And finally, when compared with any of the other feasible alternatives, the Hopi believe that Mohave compares favorably with all renewables and compliments demand side efficiency programs. The Hopi's argue that because Mohave is a baseload plant, demand side efficiency programs and renewable peaking resources cannot replace Mohave, but that the Mohave plant can work with these alternatives to augment and subsidize them.

No party to the proceeding failed to recognize the economic and social consequences that the shut-down of Mohave will have on the workers at the plant as well as on the Hopi and Navajo people and tribal governments. To address these concerns, WEC and NRDC suggested alternatives to Mohave that involved job opportunities on the reservations. WEC proposed replacing the economic and power benefits that flow from Mohave with two 500-megawatt solar installations on the reservations, and NRDC suggested constructing an integrated gasification combined cycle plant (IGCC) on the reservations or in Nevada.

The Hopi argue that WEC's proposal is not "realistic, practical or sensible."12 For a myriad of reasons, including the fact that WEC presented no source of financing for the project, no specific sites for the plants have been identified, and no contracts for the design, construction or operation of the plants were presented, the Hopi do not view the WEC proposal as one that would allow the Hopi to build an economy.

The Hopi also do not believe that IGCC is economic or proven and therefore should not be considered in this proceeding as a Mohave replacement. The Hopi argue that while there are uncertainties that surround the coal and water issues germane to Mohave's continued operation, coal-burning power plants are a known technology, whereas the uncertainties associated with either the solar system or the IGCC render them too unrealistic and speculative to be seriously considered as viable alternatives to Mohave at this point in time.

To summarize the Hopi position: the economic consequences of Mohave's shut-down are far-reaching and potentially devastating for the tribes and other stakeholders. In fact, the Hopi argue that preserving and protecting Mohave will "lead the way in implementing sound environmental practices, strengthen national energy security, and avert what would otherwise be a modern economic massacre of the Hopi Tribe and its people."13 The Hopi urge the Commission to order Edison to engage in all spending necessary to preserve Mohave.

As Chairman Taylor testified for the Hopi, "there is no question that the Tribe's economic security is fundamentally tied to the ongoing operation of [Mohave]. . . . [A]lmost 30% of our tribal budget is dependent upon [Mohave] derived revenues, a fact which impacts every aspect of Hopi life, including the education of our young people, health and social service programs, our infrastructure, and many other essential programs."14 To bolster this argument, Chairman Taylor detailed that 65% of the Hopi's total government budget is related to coal revenues, 30% of which is derived from Black Mesa coal sales to Peabody for delivery to Mohave.15

As Chairman Taylor further explained, unemployment on the reservation is pandemic, unemployment hovers at 50%, of those employed 35% earn below national poverty guidelines and 44% of Hopi families with children under 18 live in poverty.16 Almost 40% of Hopi homes lack complete plumbing and over 35% lack complete kitchen facilities.17

In its reply brief the Hopi suggest that if Edison finds that the other Mohave co-owners are refusing to proceed or are acting unreasonably to delay any necessary critical path expenditures, Edison should report back to the Commission and seek further guidance.

The Navajo Nation believes that the continued operation of Mohave as a coal-fueled generation facility is in the best interest of California ratepayers. The Navajo argue that Mohave is one of the lowest-cost, diverse and reliable energy sources serving California, and even when the costs of the environmental controls are considered, Mohave is competitive. From the Navajo vantage point, if Mohave is closed, some 260 mine workers who are Navajo and live and work on the reservation will either be out of work or be forced to relocate off the reservation. This loss of employment will put a significant burden on the Navajo Nation and its ability to provide services to over 8,000 Navajo families, and will seriously impact local communities and businesses. When this cost is added to the loss of royalty and tax revenue for coal and water, it is obvious that the closure of Mohave will have a devastating impact on the workers and Navajo community.

As Navajo witness Ashley testified, the Navajo revenue from the Black Mesa mine provides 10-13% of the Navajo Nation's General Fund revenues, and the total amount for royalties and taxes received from Peabody's operation of the Black Mesa mine was $19,178, 092 in 2002 and $16,783,977 in 2003.18

Navajo Nation President Shirley, Jr. testified that the Navajo Nation's ability to assist laid-off mine workers was severely limited because of the already existing unemployment problem. Specifically, President Shirley testified that the Navajo Nation already provides general assistance to 8,000 plus families. If the mine closure adds workers to the list of those needing assistance, that will coincide with when the Navajo Nation's revenue sources from the mine to provide such benefits will be reduced.19

The Navajos recommend that the Commission issue a Conditional CPCN or a conditional spending order authorizing Edison to make expenditures necessary to prevent a temporary or permanent shutdown of Mohave and to bring the plant in compliance with the 1999 Consent Decree. The Navajo condition this proposal on the resolution of the water supply issue and on a set cost cap on the cost of as-delivered energy. The Navajo believe that this Conditional CPCN would allow the stakeholders to resolve the water issue in a manner ensuring that California ratepayers benefit from the continued operation of Mohave.

In the view of the Navajo Nation, the appropriate future course of action requires: (1) the C-Aquifer supply study must be completed, including a demonstration that the water supply source is in compliance with the Endangered Species Act; (2) the Navajos must resolve and dismiss their claims relating to the Black Mesa Mine Leases; and (3) Edison must certify that there is agreement on all of the above enumerated conditions and that the all-in-cost of Mohave generated electricity will not exceed $46 MWh.

As a caveat, the Navajos remind the parties that the Navajos have every incentive to help craft a resolution to the water and coal issues as their very economic existence depends on the continued operation of Mohave.

However, the Navajos also argue that California ratepayers will benefit from Mohave as a power source. Mohave has historically delivered low-cost power to California. Now with the installation of the pollution controls, Mohave will deliver clean, coal-fired generation at a cost the Navajo claim is lower than the cost of energy from a natural gas fired facility. In addition, coal provides fuel diversity and supply and cost stability-especially important in light of today's volatile natural gas market.

The Navajos contend that all of the alternatives to Mohave that were proposed are advanced renewable technologies, some of which are still in the research and development stages. While these resources may have potential value, experimentation with them should not be at the expense of the welfare of the Hopi and Navajo people. Therefore, the Commission should commit to Mohave's continued future, while allowing the utilities and other parties to research and develop other alternatives.

In evaluating the costs involved with the continued operation of Mohave, the Navajos allege that the requirements of a Conditional CPCN have been met because Edison has presented an "appropriate cost estimate" of what is required to keep Mohave operational post-2005. These costs as presented by Edison include the costs of a temporary shutdown, undepreciated book costs, pollution control and life-extension upgrades, refurbishment of the coal slurry pipeline, the C-Aquifer costs and a generous contingency sufficient to cover any cost uncertainties. Given these cost estimates, the Navajos contend that energy from Mohave is still cheaper than the most likely alternative-a CCGN plant, and obviates the vagaries associated with the supply and price of natural gas.

In summary, the Navajo urge the Commission to authorize Edison to expend the money necessary to keep Mohave operational by issuing the conditional CPCN, since the continued operation of Mohave is inextricably intertwined with the continued fiscal solvency of the Navajo Nation. In its reply brief the Navajo argue against Edison's proposal of a CPCN-Plus approach as the Navajo view that as a tactic that "engenders undue and prolonged delay."20

Black Mesa Pipeline is the owner of the 273-mile long, 18-inch coal-water slurry pipeline originating on the Black Mesa in the Northeastern part of Arizona that delivers coal from the Peabody mine to Mohave. Under its current contract with Edison, Peabody has the responsibility for shipping the coal from its mine to the generating station. However, as of January 1, 2006, Peabody will no longer have that contractual obligation, and it will be the responsibility of the Mohave owners to arrange for the transportation of the coal.

Black Mesa favors the continued operation of Mohave as a coal-burning facility, not only for its own employees' sake, but for the fuel diversity it provides California. However, the pipeline company is concerned about the necessary temporary shutdown. The cost of even a temporary shutdown would include severance pay, outplacement services, retraining and other related employee expenses. In addition, the pipeline company estimates that the cost to overhaul the slurry pipeline in 2009 could be $165 million, or even higher. Of primary concern to Black Mesa Pipeline is the uncertainty surrounding the coal and water issues, as well as the length and cost of even a temporary shutdown of Mohave for the pollution controls.

While cognizant of the uncertainties surrounding the coal and water issues, Black Mesa advances a proposal that it hopes would induce the parties to reach closure on the open issues: offer a deadline-based cost savings sharing mechanism whereby if participants complete their projects at below estimated costs they would receive a share of the difference between the cost and the estimate, while participants who do not reach agreement as of that date would not be entitled to such an incentive.

In sum, Black Mesa urges the Commission to reach a decision concerning the future of Mohave to provide closure to California consumers on their electricity supply, and more particularly to provide a greater degree of certainty to the employees, and their families, of Black Mesa Pipeline, Peabody and Mohave.

Salt River Project favors the continued operation of the Mohave facility and has been involved, as a co-owner of Mohave, in the negotiations, and subsequent MOU, concerning the C-Aquifer water feasibility study. From their understanding of the work to be performed by the BOR, it will take at least until spring of 2007 for the well field and environmental studies to be complete. However, even once the BOR completes its study, Salt River argues that there are still a myriad of issues that need resolution. Specifically, the following items must be negotiated with the Hopi and Navajo: rights-of-way and leases associated with the pipeline route and well fields; a royalty rate for water withdrawn from wells on the reservation; water rights issues related to the C-Aquifer; and selection of an entity to operate the water system.

Salt River argues that it would be premature for the Commission to issue any kind of a CPCN before three crucial issues are resolved: (1) the completion of the C-Aquifer study; (2) unavailability of water for cooling Mohave post 2026; and (3) the tribes' challenges in court to the validity of Peabody's coal leases. While Salt River does not anticipate that water for cooling Mohave post 2026 will materialize, Salt River argues it is important that any cost benefit analysis of Mohave recognize the potential shortened plant life. Once the water and coal issues are resolved, Edison should file an application for a CPCN.

Salt River does not share Peabody and the tribes' position that a Conditional CPCN now will assure the continuation of Mohave. As a co-owner, Salt River asserts that it is important that it, Nevada Power and LADWP, as well as Edison, know that the coal and water issues are resolved before committing additional spending. In fact, Salt River is concerned that the issuance of a Conditional CPCN might interfere with the continued water and coal negotiations. Salt River again repeated these concerns in its reply brief.

In addition, Salt River does not agree with the concept that a price cap offers protection to ratepayers. To the contrary, Salt River argues that predetermining the price that Mohave co-owners would have to pay for coal and water would eliminate any possibility that the Mohave co-owners could negotiate the best price for ratepayers.

TURN does not believe that Mohave is more cost-effective as a power source than other non-gas options available to Edison. TURN focuses on the uncertainties that surround Mohave, including the cost of retrofitting the facility and the necessary down-time to accomplish that task, and the water and coal supply and cost issues and questions whether Mohave can produce coal-based power any cheaper than other non-gas options. TURN is also concerned about the additional costs that might beset the Mohave facility if there are new requirements from the Environmental Protection Agency (EPA) concerning mercury emissions.

In addition, TURN questions the need for Mohave's baseload power generation in the face of renewed direct access to the noncore users and the resultant costs to ratepayers if the plant is restarted and there is an exodus of customers due to direct access, core/noncore, or community choice aggregation. TURN's witness estimated that in 2010, when Mohave is likely to return to service, Edison will only need 23% of Mohave's capacity. Instead of more baseload, TURN's witness opines that Edison will need more peaking power. As TURN argued, even the Edison witness indicated that "we don't have it [energy] when we need it the most and we have an excess when we don't need it."21

Earlier in the proceeding, TURN expressed a concern that if the Commission commits to the continued operation of Mohave before all the critical water and coal issues are resolved, parties could view Edison as having a "blank checkbook," and the ratepayers could be prejudiced.

However, TURN is not insensitive to the devastating effects Mohave's closure will have on many stakeholders, including the Navajo Nation and Hopi Tribe. In its post-hearing brief, TURN recommends that the Commission encourage Edison and other negotiating parties to continue working towards resolution of the water and coal issues; authorize limited critical path expenditures by Edison-with the understanding that Edison is limited to recovery of its 56% ownership share; assume Mohave will close in 2026; require Edison to quantify potential future compliance costs associated with mercury and carbon dioxide emissions at Mohave; give bundled ratepayers protections for possible stranded costs from refurbishments for Mohave; and open a parallel proceeding to explore alternatives to Mohave that rely on energy efficiency and renewable fuels and will also generate revenue for the Hopi and Navajo people.

What TURN does not recommend is granting any type of Conditional CPCN. TURN argues that granting a CPCN now "leaves out an important step by failing to bring together all the cost elements that are typically considered and examining all feasible alternatives."22 In addition, TURN is not convinced that if a Conditional CPCN was issued, even with a price cap as advocated by the Navajo and Hopi, that ratepayers would get the best negotiated price.

TURN advocates continuing with the C-Aquifer studies, water and coal negotiations, authorizing limited critical path expenditures so that the possibility of continuing with Mohave as a coal-fired plant is not foreclosed, but also TURN urges exploration of other alternatives that could bring similar economic benefit to the Hopi and Navajo, yet would be less risky and more environmentally sound. TURN believes this course of action is in the best interest of the California ratepayers.

TURN's suggestion about a companion proceeding to study alternatives to Mohave does suggest that the WEC solar option as well as the NRDC IGCC facility be reviewed. Both of these alternative proposals would produce cleaner power, but most importantly could potentially be a source of economic viability on the reservations for the Hopi and Navajo. In its reply brief, TURN again stresses the need for this study, because even if the shut-down of Mohave is temporary, the Hopi and Navajo will need some way to generate meaningful revenues during the 2006-2009 period. TURN is mindful of the impact this shut-down will have on so many people, particularly the Hopi and Navajo and the union workers, and nothing the Commission might do will prevent this required shut-down. TURN characterizes the proposed "Conditional CPCP" concept as a "half-baked"23 proposal, and suggests a better course of action would be for the parties to explore an array of short-term and long-term options that benefit ratepayers and the Hopi and Navajo.

ORA questions the "need" for the power from Mohave, and argues that a decision on the future disposition of Mohave is premature and inappropriate until the threshold issues concerning water and coal are resolved. From ORA's perspective, absent resolution of these concerns, ratepayers should not be burdened with financing any critical path spending.

In light of the Commission's recent decision (D.03-12-059) approving Edison's application to acquire the Mountainview facility, a 1,054 MW, baseload facility, located within Edison's load center, ORA is concerned that the output from Mohave might not be needed by California ratepayers. In addition, ORA is concerned that with the uncertainties about Edison's customer base in view of core/non-core, community choice aggregation, municipalization, direct access, distributed generation and expanded energy efficiency and demand reduction programs, committing ratepayers to pay for the necessary upgrades to Mohave may leave ratepayers with redundant costs and unneeded resources. Instead, ORA encourages the Commission to focus on new investments in energy efficiency, demand response and renewable generation to meet any anticipated demand growth, rather than continuing with the Mohave baseload facility.

ORA recommends that the Commission not grant a CPCN, or a Conditional CPCN, at this time, as the need for and cost-effectiveness of Mohave have not been proven. ORA believes California ratepayers might be better served from pursuing alternatives such as in-state energy efficiency, in-state natural gas combined cycle plants and in-state and out-of-state central grid renewables, instead of committing to finance the continued operation of Mohave in view of the unknowns and unresolved issues.

The Unions predict that if Mohave is shut down, most of the 285 Mohave union employees, plus approximately 65 non-union workers, would lose their jobs. Basically, there is no alternative employment available in the Laughlin area, and no employment opportunities that would come close to duplicating the salary and benefits that the plant provides. Displaced workers too young to retire would most likely have to relocate and "bump" other represented employees at another Edison facility. Since the average age of the union members who work at Mohave is mid-forties to late forties, very few of the employees can retire.

The Unions argue that the situation is not much better for 230 mine and pipeline workers who would lose their jobs with Peabody and Black Mesa Pipeline if Mohave ceased to function as a coal-burning plant. In addition to loss of jobs at the mine and pipeline, the entire Hopi and Navajo communities would be affected by the end of coal mining. The Union's economic expert estimates that the shutdown of the plant, mine and pipeline would result in a loss of 1,190 jobs, $54.9 million in personal income, and $162.2 million in business income.24 As it is, the Hopi and Navajo have approximately 50% unemployment.

In addition, royalties from the mines are an important source of income for the Hopi and Navajo, and with those monies the communities have modernized and improved the standard of living for the residents. In 2002 alone, the Unions claim that coal royalty payments to the Hopi and Navajo, including bonus payments, exceeded $40 million. Peabody also pays water use fees to the Hopi and Navajo in the range of $3 to $4 million per year.

The Unions urge the Commission to consider the devastating impact the closure of Mohave as a coal-burning plant would have on the plant, mine and pipeline employees, their families and the Hopi and Navajo communities. But the Unions also acknowledge that while the Commission should be mindful of the impact the closure of Mohave will have on the Hopi and Navajo communities, the Commission's primary focus must be on ratepayers. Even given this mandate, the Unions argue that the continued operation of Mohave will provide fuel diversity that will provide electricity at a reasonable cost. The Unions are confident that even after paying for the investments needed to upgrade Mohave, Mohave is superior cost wise to a new CCGT facility, especially because of the lower operating costs of Mohave, and because decommissioning costs must be added to the total cost estimate of any alternative.

The Unions do not oppose the Commission's consideration of any of the other alternatives, such as those proffered by WEC and NRDC, but contend that the solar and IGCC proposals suffer from high production costs, inability to provide dependable power at times of peak demand or reliance on untested technology.

In summary, the Unions urge the Commission to do what is possible to see that the C-Aquifer feasibility and environmental studies are completed, and if the C-Aquifer proves a satisfactory water source, have Edison seek full approval to go forward with the retrofit of Mohave and get interim funding for all critical path issues. Until such time as Edison can file such an application, the Unions suggest that the Commission require Edison to report every two months on the progress being made toward these goals.

In its reply brief, the Unions summarize the positions of all the parties and find that there is consensus on the most important issue: Mohave should not be shut-down now. To insure that Mohave can continue as a coal-fired plant if the water and coal issues are resolved, the Unions urge the Commission to assure Edison that it will recover prudent investments made in Mohave. As a corollary, the Unions suggest that if Edison shuts Mohave down prematurely, Edison will not recover any unamortized plant balances unless it can demonstrate that it took all such steps and that the shutdown is due to factors outside of Edison's control.

Laughlin, Nevada is the site of the Mohave facility and through testimony submitted by the Chamber of Commerce and the Town, Laughlin very much supports the continued operation of Mohave. The plant has a minimum $60 million annual impact on the community, and even a temporary shutdown of the plant will have devastating financial implications for the area. In addition to the 355 employees at Mohave, Laughlin opines that an additional 300 people are employed in the environs to provide goods and services to the 355 plant employees and their families. From Laughlin's perspective, Mohave's continued operation is crucial to the continued health and viability of Laughlin.

WEC represents the Black Mesa Trust and To' Nizhoni Ani' and advocates a solar dish option as being more cost effective than refurbishing and re-powering Mohave. WEC bases its analysis on assumptions it makes concerning the water royalty payment for water from the C-Aquifer, right-of-way costs for the 120 mile pipeline from the C-Aquifer field to the mesa, costs associated with the analysis and development of the C-Aquifer, cost of a back-up water supply, costs for a coal-washing facility, penalties for emissions from Mohave, payment of coal royalty payments to the Hopi and Navajo and the projected price of coal. In sum, WEC finds that "the Mohave refurbishment teeters on the edge of cost effectiveness." From WEC's perspective, if its assumptions about the costs enumerated are true, Mohave is not cost effective. However, WEC reasons that the solar dish option it prefers is a cost effective resource addition, is more environmentally compatible, and poses no risk to California ratepayers.

Most importantly, WEC argues against the continued operation of Mohave because it is a terrible waster of water and a huge pollution emitter. As WEC states, "[I]n the desert, water is life."25 WEC reminds parties that the N-Aquifer is not available for slurry purposes post 2005, and questions why fresh water should be used for slurry purposes-especially when water is such a valuable commodity in the southwest. In addition, many of WEC's clients are concerned that the pumping of water from the N-Aquifer is drying up the springs that are important for religious ceremonies and purposes. WEC suggests exploring the use of "brackish" water, or dry cooling, instead of being totally reliant on aquifer water.

WEC posits that no matter what analysis is undertaken to compare the costs of a refurbished Mohave to any other alternative, including WEC's solar dish option, Mohave fails to meet the cost-effectiveness test. WEC urges the Commission to forego issuing any type of Conditional CPCN, and instead order Edison to negotiate with the Hopi and Navajo on the solar dish option.

In its reply brief, WEC argues that Mohave "was" a valuable generating resource for California-but only because it had no pollution controls, had unconscionable low coal prices, used prodigious amounts of pristine ground water, and had access to lots of Colorado River water for cooling. While that may have worked for the last century, WEC claims that using precious water to ship coal from Arizona to Nevada is a "dumb idea"26 and it is time to take advantage of new electric generation technologies that are cost effective, don't impact the environment and don't use precious desert water.

NRDC presents the Commission with a number of options beginning with the recommendation that Edison be authorized to spend the necessary money on the coal and water issues to keep the possibility of the continuation of Mohave a viable alternative. NRDC is concerned with not only the power supply to California if Mohave closes, but also with the economic future of the Hope Tribes and Navajo Nation and the workers at Mohave. Specifically, NRDC urges the Commission to not allow, by decision or inaction, Edison to cease operations at Mohave without making provisions for environmentally superior and cost effective alternatives and for revenue sources for the Hopi and Navajo. Approval or denial of Edison's original application does not resolve these concerns.

NRDC advances an alternative that it believes addresses the interests of most of the parties and that is to expend limited funds on Mohave on only critical path items and simultaneously examine an alternative resource plan to replace Mohave's output-with the collaborative input of other parties including the Hopi and Navajo. NRDC identifies the C-Aquifer water study, a coal-washing study and a coal washing environmental study as the only critical path expenditures that should be authorized now.

NRDC wants the Commission to direct Edison to do a study on alternatives that compares the cost of Mohave's compliance with the Consent Decree with renewable options on the reservations, an IGCC sited on Black Mesa, various energy efficiency programs, and possible power purchase agreements with third parties.

NRDC devised its own ideal alternative resource plan to replace Mohave's output as follows: 1/3 with energy efficient investments; 1/3 with renewable investments including resources constructed on or near the reservations in cooperation with the Hopi and Navajo; and 1/3 with a new IGCC power plant designed for carbon dioxide capture, located at or near Black Mesa mine. NRDC suggests that this proposal would address the needs and concerns of the California consumers, the Hopi and Navajo, the unions and the environmental groups. NRDC opines that its output replacement proposal is more cost effective than even a successful retrofit of Mohave because it is probable that Mohave will become subject to new pollution control requirements and the water supply at Laughlin expires in 2026, without any probable replacement source, rendering the lifetime of the plant shorter than normally assumed.

NRDC is confident that its alternative resource proposal will be successful for the following reasons:

In summary, NRDC's proposal would (1) continue the coal mining jobs; (2) provide income to the Hopi and Navajo communities from lease payments for land, property taxes and royalties for coal; (3) provide a plant with a longer life than Mohave; (4) have much lower environmental impacts; (5) use less water; (6) provide employment, including union jobs; and (7) protect California electric users. However, NRDC does advocate that the Commission direct Edison to make necessary expenditures on the identified critical path issues to preserve the option of the Mohave retrofit while Edison is exploring NRDC's proposal with the Hopi and Navajo.

NRDC also wants the Commission to order Edison to conduct a study, while the critical path items are on-going, to examine an alternative portfolio of resources to replace Edison's share from Mohave. NRDC again argued for this in its reply brief suggesting that if the study was done now, it would reduce the time pressure during the CPCN proceeding.

Peabody favors the continued operation of Mohave as it believes the plant is superior to any real world alternative and meets the needs of most of the stakeholders. From Peabody's perspective, Mohave is important enough that the Commission should take a proactive role, not a laissez-faire attitude, and grant Edison a conditional CPCN now.

To begin, Peabody argues that Mohave supports the Hopi and Navajo tribal economic communities, in contrast to what would happen if Mohave closes. Many economic and health issues are inextricably intertwined with the jobs that are directly and tangently related to Mohave. Next, Peabody supports the continuation of Mohave because the plant supplies electricity to California without the volatility of the price and supply issues associated with natural gas. In conjunction with this point, if Mohave closes, that will increase California's over-reliance on gas-fueled electricity by approximately 5%. Because of the natural gas concern, Peabody advocates avoiding, or minimizing, the shut-down of Mohave especially during the 2006-2008 period when Peabody predicts the natural gas shortage will be the most severe. Peabody bases its prediction on the following data: (1) gas production is down; (2) off-shore well production is down; (3) the cost of new well exploration is prohibitive so there are no new sources of gas; (4) companies are expanding their ownership interests through acquisitions, mergers and consolidations-and not through new sources; (5) companies are spending less money on development; (6) there is no congressional support for expanding gas reserves; (7) congress has not extended tax credits for gas investments; (8) there is no support for the Alaskan pipeline; and (9) there has been little progress on liquefied natural gas (LNG).

Peabody sees the only real impediments to the future success of Mohave as the feasibility of the C-Aquifer and the resolution of the pending litigation brought by the Navajo Nation, and joined in by the Hopi Tribe, against Peabody concerning the viability of the existing coal leases and related royalty issues.

Peabody suggests that the Commission determine that the continued operation of Mohave is in the public interest and order Edison to take all feasible steps to resolve the water rights issue so that the environmental upgrades can begin at the plant as soon as possible. In conjunction with these steps, Peabody urges the Commission to view Mohave as an "emergency" situation and take all steps possible to avoid or minimize closure of the plant. From Peabody's perspective, if its predictions about the higher prices and reduced supply of gas come true, Mohave may be what saves California from an electricity crisis.

The Commission should find, Peabody proposes, that there is certainly a need for Mohave's power, especially since it is scheduled to come back on line when base load is again needed. And, from Peabody's analysis, no matter how you run the numbers, Mohave is economic as compared to any viable alternative. Mohave is good for ratepayers, good for the California economy, and vital to the livelihood of the Hopi and Navajo tribes. To this end, Peabody recommends that the Commission issue a Conditional CPCN authorizing the continued funding of the C-Aquifer feasibility and environmental studies, allow Edison to spend up to $58 million on preliminary design and engineering work and allow Edison cost recovery.

In its reply brief, Peabody again cautions the Commission about the true consequences to Edison ratepayers if we take a "wait and see" attitude and do not take a proactive posture.

10 Edison does not argue that a CPCN is required for the plant upgrades but urges that if the Commission determines one is necessary that it be a "CPCN-plus-interim-funding" approach. 11 Edison post-hearing brief, p. 31, from Tr. 991-995. 12 Hopi post-hearing brief, p. 19. 13 Hopi post-hearing brief, p. 1. 14 Hopi opening brief, pp. 26-27. 15 Hopi opening brief, p. 27. 16 Id. 17 Hopi opening brief, pp. 27-28. 18 Navajo opening brief p. 12. 19 Navajo opening brief, pp. 12-13. 20 Navajo reply brief, p. 10. 21 TURN opening brief, p. 27, quoting from RT Vol. 4, 456-57. 22 TURN opening brief, p. 9. 23 TURN reply brief, p. 3. 24 Union opening brief, p. 8. 25 WEC opening brief, p. 6. 26 WEC reply brief, p. 4.

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