Alternatives Study

TURN suggests that the Commission open a companion proceeding to explore alternative resources until Mohave's coal and water issues can be resolved to the point that accurate and reliable cost comparison's can be made. TURN argues that none of the possible alternatives presented during this proceeding were adequately researched and did not provide reliable cost data. TURN urges the Commission to initiate this companion proceeding to both serve as the forum in which to review specific generation alternatives to Mohave and examine options for creating alternative sources of revenues for the Navajo and Hopi in the event Mohave closes permanently.

TURN reminds us that Edison's witnesses indicated that Edison had not investigated any alternatives because Edison focused exclusively on keeping Mohave in operation. TURN recommends that whether or not the Commission adopts TURN's companion proceeding proposal, Edison should seriously investigate options and include a comparison in its subsequent filing for Mohave. The alternatives should include proposals that would replace the income from the plant, mine and pipeline for the Hopi and Navajo, as well as choices that utilize energy efficiency and renewables. TURN suggests that Edison investigate further the WEC solar proposal and the NRDC IGCC suggestion.

Our present record contains two proposals for alternatives to Mohave power: the WEC solar and the NRDC IGCC proposals, but neither proposal is more than conceptual in nature. However, based on the stated priorities of this Commission and the state, both proposals merit further consideration. NRDC proposes to replace Edison's share of Mohave's output with a combination of renewable energy on the Mesa, additional efficiency investments in California, and an IGCC at the Black Mesa Mine. WEC suggests that a massive array of solar thermal electric generators could be deployed on the Mesa, eventually totaling 1,000 MW of peaking-capacity renewable power.

We will pursue both of these proposals, and others that may be appropriate, in a focused manner to determine their technical and economic feasibility. In so doing, we will integrate this analysis into the long-term planning process in our Procurement rulemaking, which is the proper forum for consideration of supply, demand and resource-specific considerations.

Edison is hereby directed to undertake a feasibility study of the options for replacing its share of Mohave's output if Mohave closes, or to be used in conjunction with Mohave if it returns to service, from sources that will provide the fullest possible benefit to the Hopi and Navajo while protecting the interests of Edison's ratepayers. Edison is to involve any interested party in this proceeding work together with those parties to design this study and to jointly determine the independent consultants, contractors and supervisors on the study. One aspect of this study should consider the IGCC options at the Black Mesa Mine, including water use issues and an assessment of the feasibility and cost associated with the sequestration of carbon emitted from the plant. Cost assessments should include an analysis of federal funds available for IGCC development. Edison should also analyze the feasibility of renewable energy projects on reservation land, including but not limited to the proposed solar thermal facilities identified by WEC.

Both the IGCC and renewable energy projects should include consideration of any enhancements to the transmission system that may be necessary to bring power into California. The final plan should be sufficiently detailed, including cost components, proposed counterparties and generation on-line dates, to allow this Commission to affirm a specific resource plan during Edison's next long-term planning process. Ownership arrangements involving the Hopi and Navajo should be given consideration in the feasibility study.

Within 90 days of the issuance of the order, Edison shall file an initial study plan, including anticipated costs to ratepayers in preparing and conducting the study. Parties will have an opportunity to comment on Edison's filing and the study plan contained in it, including proposed additional projects or options that should be considered. Edison should include updates on the alternatives study in conjunction with the required updates regarding progress in the C-Aquifer study. Any costs incurred by Edison in conducting this study will be recovered in the manner established below.

Our understanding of the timing of events in the ongoing Mohave negotiations leads us to adopt the following schedule for the feasibility study process. It is anticipated that the C-Aquifer hydro-geological study will be completed by October 2005. This corresponds well with the timing of both the coal and water supply questions and the duration of the proposed alternatives feasibility study.

Edison's CPCN

No party argued that a CPCN was necessary. Basically the only arguments concerning a CPCN urged the Commission to issue one now--if one was necessary. Edison does not think it needs a CPCN, and numerous other parties opined that under Pub. Util. Code § 1001 Edison may proceed with the pollution upgrades without one. We agree. Edison is not required by law to seek a CPCN for the Mohave pollution controls.

In point of fact, the parties arguing against the Peabody/Hopi/Navajo request for a conditional CPCN, did not argue that a CPCN is required by law. Instead, they opposed the granting of a conditional CPCN on general principal because of the inchoateness of the cost estimates and the fact that the Commission has no record before it to decide if the expenditure of $1.1 billion or more is in the ratepayer and public interest.

The Navajo Nation proffered numerous Commission authorities in support of the proposition that the Commission has the authority to grant a CPCN-with conditions. Whether or not the granting of a CPCN with conditions that must be satisfied, such as environmental mitigation resulting from a CEQA review, is something the Commission has done or can do does not need to be resolved in this decision. In the cited cases, new or expanded generation facilities triggered the CPCN process.

Here, a CPCN is not necessary under the circumstances presented in this case. But most importantly, even if we agreed that we could torture the concept of a CPCN and twist it into a new creature known as a "conditional" CPCN, we do not see how it would satisfy Edison's concerns for cost recovery or the Hopi and Navajo and Peabody's desire for "certainty."

The record is clear that what Edison wants is an assurance that if it makes the investment, it has a reasonable opportunity to recover return on its investment through rates. This, however, only addresses Edison's appropriate share (56%) of the cost for the required environmental improvements. The remaining 44% of Mohave is owned by the other co-owners, and Salt River, the next largest owner with a 20% interest, has indicated that it, Nevada Power and LADW&P will not commit to funding their share of the $1.1 billion until the results of the C-Aquifer water supply study, environmental review, and negotiations between the parties on the other related and important issues are complete.²⁸ This Commission does not have jurisdiction over the other co-owners. Therefore, even if we were inclined to issue a "conditional" CPCN now, it would not provide the security that the Hopi and Navajo and Peabody would like to receive.

In addition, except for the Hopi and Navajo and Peabody, every other party weighing in on the "conditional" CPCN concept argues that it would thwart, not facilitate, the parties' continued negotiations on the other unresolved issues-most importantly the cost of coal and water. In point of fact, Salt River posits that although it intends to negotiate aggressively to achieve the best price for coal and water, if a "conditional" CPCN with a price cap of $46/MWh is granted now, "[the Mohave co-owners] will still be negotiating with one arm tied behind their back."²⁹

There is one other troubling aspect to the requested "conditional" CPCN and that is that there is a lack of consensus among the "conditional" CPCN proponents as to whether, if the Commission authorizes the $1.1 billion for environmental upgrades as long as the "all-in levelized cost" for energy from Mohave is $46 MWh, the Commission ever has a subsequent opportunity to review the expenditures. It is unclear whether the Hopi and Navajo and Peabody want the Commission to give a "blanket immunity" to Edison for all expenditures, or whether there is an opportunity for the Commission, and interested stakeholders, to review Edison's expenditures, prior to allowing recovery in rates, to determine whether the costs are "reasonable and prudent." ³⁰

For all of these enumerated reasons, the Commission finds that the statutes do not require a CPCN and the record does not support the granting of one even if it was required.

We are convinced by the arguments posited by the Navajo, Hopi, and Peabody, that if they receive some assurance from the Commission that we are committed to preserving a "Mohave-open" option, that that will help make the continued operation of Mohave as a coal- fired plant a self-fulfilling prophecy. To that end, we address the reasonableness of the firm construction costs which have been the subject of a robust evidentiary hearing.³¹

Future Procedural Steps

With 885 MW of energy, Mohave is a valuable resource and will factor in as a key component in Edison's Long Term Procurement Plan (LTPP). However, unless all issues concerning water and coal are resolved by the time Edison files its 2006 LTPP, Edison will have to prepare two resource scenarios: one with Mohave in, and one with Mohave out.

We initially considered having all issues concerning Mohave's future vetted in the 2006 LTPP. However, in response to comments from numerous parties, we clarify the procedures Edison is to follow to obtain Commission authorization to proceed with the environmental retrofits and other capital improvements. We still intend to close this proceeding once this decision is final. The procurement docket, R.04-04-003, however, will remain open. Instead of having Mohave considered as part of Edison's total resource package, we now clarify that Edison is to file a separate application in R.04-04-003, using the sub-service list identified under A.02-05-046, so that the authorization for the retrofits can be considered and determined separate and distinct from Edison's other issues in the LTPP proceeding. Issues litigated in this proceeding and subject to findings herein will not be relitigated.

To expedite the application process, we direct Edison to prepare such an application in advance, with only the costs associated with water and coal missing, so that once those costs are determined, Edison can file the application forthwith.

In this decision we find that the determination of the future fate of Mohave is a matter of economic life or death to the affected parties and inform the future Commission faced with the ultimate decision in Mohave that any steps it can take to expedite the proceeding will inure to reduce the human suffering created by delay and dealing with the unknown.