Discussion

Plant Upgrade Costs

While parties certainly brought different perspectives and philosophies to this proceeding, there are numerous areas of agreement, mixed in with the competing proposals and positions. To begin, all agree that the Consent Degree requires Edison to install identified pollution controls and that there are corresponding capital upgrades to the facility that are also necessary to maximize the life of the plant. The estimate put forth by Edison for the upgrades and new equipment is approximately $1.1 billion. In general terms, this includes $720 million for the equipment and upgrades, $200 million for upgrades to the coal slurry pipeline, and $160 million for costs associated with delivery of the new water supply. Edison's witness also confirmed that this figure includes a 30 to 40% contingency factor. Except for the contingency factor, there was little disagreement as to Edison's representation of the projected costs for the itemized categories.

Different parties cross-examined the Edison witnesses on aspects of these cost estimates, but there appears to be somewhat of a consensus that these figures are sufficient for the purpose of assessing the cost of compliance with the Consent Decree.

Water and Coal Costs

What is not known, and therefore Edison could not include in its application, are the costs of the future operation of Mohave as a coal-burning plant because of the on-going negotiations on critical water and coal issues that involve not only the cost of the commodity, but also the supply and quality. No matter what viewpoint each party brought to the proceeding, all of the parties universally agreed that first and foremost there must be resolution on the water issue. Mohave's future as a coal-burning plant using coal from the Black Mesa Mine, slurried by pipeline from the mine to the plant, requires large amounts of water. These coal and water supply issues must be resolved for this Commission to determine if the future functioning of Mohave is reasonable for AB57 purposes.

To this resolution, Edison and the other co-owners, pursuant to the MOU signed March 4, 2004, are funding the C-Aquifer hydro-geological study, and if that study proves that the aquifer is a viable water source, they will fund the subsequent environmental study. No party suggested that there is anything that can be done at this time to expedite this C-Aquifer study, and it appears that BOR has already commenced the first phase of the study. This hydro-geological phase takes approximately nine months and the environmental study takes approximately two years. Based on these time estimates, all of the C-Aquifer studies will be complete sometime in late 2006/early 2007.

While the Hopi, Navajo and Peabody profess complete optimism that if the C-Aquifer is determined to be a feasible water source alternative that all other issues will be quickly and satisfactorily resolved, at a fair cost, other parties are not as convinced that the other issues will be serendipitously resolved if the C-Aquifer study reaches positive results. Similarly, while the supply and price of coal is still also unresolved, in the post-hearing briefs almost all of the parties indicated that significant progress has been made on these issues and there is more universal optimism that if the water source issue is resolved, a satisfactory outcome will also be reached on the coal issues.