Ratemaking Issues

Construction Costs

The record in this proceeding establishes that the cost of the pollution controls and related capital improvements as put forth by Edison are reasonable. We therefore approve these costs subject to the conditions herein, and without limiting the Commission's ability to review the costs of the plant in service in a General Rate Case.

Edison has provided evidence and testimony on the costs of (1) engineering and design information; (2) a project implementation plan including contracting processes and construction tasks; and (3) "preliminary estimates of the costs of financing, construction, and operation" including fuel expenses. The construction costs that were the subject of the evidentiary hearing we find to be reasonable. However, the financing, operation, fuel and contingency costs are still inchoate and have not been vetted so we do not make a reasonableness finding at this time for those costs.³²

In Edison's application filed in May 2002, the utility requested "critical path" spending authority for 2002/2003 so the Consent Decree required retrofits might be in place either soon enough to prevent a shut-down of the plant in 2006, or to shorten any temporary shut-down. This request was made in the context that Edison assumed the water and coal issues would be resolved by 2003.

It is obvious from the record in this proceeding that we are still awaiting resolution of the water, coal and other issues. But we are also mindful that if we do nothing in the interim, the keep "Mohave-open" option could be compromised. We therefore find reasonable the following costs: (1) continued funding of the C-Aquifer studies; (2) funding of a study of alternative options; and (3) those specific design and construction costs that have been the subject of evidentiary hearings. Edison is also authorized to negotiate with contractors and vendors as necessary. We will borrow from TURN's proposal and limit Edison's recovery to 56% of any monies expended, except for the alternative options study where Edison may recover 100% of the costs incurred.³³ Edison should file an Advice Letter (A.L.) with the Commission's Energy Division (ED) setting forth with specificity line items it believes would be on the critical path to preserving the "Mohave-open" option. The A.L. should be served on the sub-service list, identified by A.02-05-046 as part of the service list for R.04-04-003 and should be updated as circumstances dictate.

Pending the outcome of the C-Aquifer studies, Edison is directed to continue to negotiate in good faith with the other stakeholders to reach a satisfactory resolution of all outstanding issues so Edison will be in a position to go forward with the environmental upgrades as soon as feasible. In the interim, Edison is to do whatever is possible within its control to advance the time line on the Mohave retrofit.

Edison prepared and filed a time-line for the Mohave retrofits, and it is referenced as the "Draft Gantt Chart: Mohave Life Extension (Interim Funding Approval)(Gantt Chart)."³⁴ This timeline indicates that if and when the retrofit takes place, the plant will have to be closed for a prolonged period of time. In its testimony and briefs Edison indicated that until the water issue is resolved, there are very few expenditures that could be made now that would shorten the shut-down period for the plant.

Numerous parties challenged this assertion, and opined that with a combination of proactive steps taken now, and with a simultaneous, rather than sequential, approach to the engineering, purchasing and construction steps, the Gantt time line could be shortened. Edison is ordered to revisit the Gantt Chart and make a good faith effort to shorten the time line in any and every way possible include these updates with its monthly report.

Edison should file monthly reports with the Commission's ED updating the Commission and the parties on progress in the coal and water negotiations, the C-Aquifer studies, the alternatives study and update on the Gantt Chart time-line. These reports should be served on the sub-service list for A.02-05-046 as part of the service list for R.04-04-003.

The Commission's decision at this time is made without prejudice to the ultimate resolution of whether Mohave should continue as a coal-burning plant. However, by authorizing Edison to make certain investments at this time we keep that question open, until such time as a definitive public interest judgment can be made.