Findings of Fact
1. Mohave is a coal-fired power plant located in Laughlin, Nevada that is subject to the terms of a Consent Decree entered into by Edison and the other Mohave co-owners in 1999, settling a federal civil lawsuit concerning various air quality violations at Mohave.
2. Under the terms of the 1999 Consent Decree, Edison must make necessary and appropriate expenditures on the Mohave Generating Station for pollution control equipment and other related capital investments in order to continue operations post year-end 2005.
3. Edison is the plant operator and owns a 56% undivided interest in the plant.
4. Edison projects that the pollution controls and related capital improvements will cost approximately $1.1 billion.
5. Mohave obtains all of its coal supply from the Black Mesa Mine and the coal is transported the 273 miles from the mine to the plant by way of a coal-slurry pipeline.
6. The water for the slurry 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.
7. The Hopi and Navajo oppose the further pumping of the N-Aquifer for coal-slurry purposes post 2005.
8. The only potentially viable alternative source of water to replace the N-Aquifer that has been identified to date is the C-Aquifer.
9. The Mohave co-owners, along with the Hopi and Navajo, signed a Memorandum of Understanding regarding the possible use of the C-Aquifer as a replacement for the N-Aquifer.
10. Edison and the other Mohave co-owners are funding a study, to be conducted by the Bureau of Reclamation (BOR), to determine if the C-Aquifer is available as a water source alternative for the N-Aquifer.
11. The BOR study will proceed in two phases: first a hydro-geological study that will take approximately nine months, and then if the results of the hydro-geological study are positive, an environmental study that could take up to two years.
12. The Mohave plant itself needs additional water for cooling purposes over and above the water extracted from the slurry mixture and Mohave's contract for this cooling water expires in 2026; there is no assurance that water will be available after the contract terminates.
13. The Black Mesa Mine is Mohave's only source of coal, and Mohave is the only purchaser of coal from the Mine through an agreement with Peabody.
14. The coal supply agreement between Peabody and the Mohave co-owners terminates at the end of 2005.
15. Parties have been negotiating the quantity, quality and price of coal post 2005, but no final resolution has been reached.
16. Until there is resolution of the water and coal supply and cost issues, this Commission does not have enough data to determine if the future functioning of Mohave as a coal-burning facility is in the public interest and that the necessary $1.1 billion investment will inure to the benefit of the Edison ratepayers.
17. The only determination this Commission can make at this point in time is to authorize Edison to continue funding the C-Aquifer studies, to fund a study of alternatives to Mohave, and to continue to work towards resolution of the water and coal issues so as to keep the "Mohave-open" option viable.
18. It is reasonable to limit Edison's recovery to 56% of any interim spending, reflecting Edison's ownership interest in Mohave, except that Edison should have the opportunity to recover all costs incurred in the study of Mohave alternatives, if the Mohave co-owners do not participate in that study.
19. Edison should investigate alternative resources to first allow for a meaningful comparison of Mohave's costs with other alternatives, including the WEC solar and the NRDC IGCC proposals, and also to replace the output from Mohave if the Commission ultimately determines that keeping Mohave open as a coal-burning plant is not in the public interest, or compliment the generation from Mohave if it returns to service.
20. Edison is to establish the MERMA to track limited worker protection benefit expenses that Edison may incur before January 1, 2006, in connection with the expected temporary shut-down of Mohave at the end of 2005.
21. Any worker protection benefit expenses Edison may incur from the Mohave shut-down after January 1, 2006, will be addressed in Edison's 2006 General Rate Case.
22. Edison should file an Advice Letter with the Commission's Energy Division establishing the MERMA mechanism and associated preliminary statement language.
23. If Mohave operations are ultimately extended, consistent with accounting conventions, Edison may capitalize its appropriate share (56%) of money already spent on preliminary retrofit work, on the C-Aquifer studies and on any other capital improvements made to the facility.
24. If Mohave is permanently closed, Edison may request abandoned plant recovery of its appropriate share (56%) of all expenses in a General Rate Case.
25. The future of Mohave as a coal-burning plant is a matter of economic life or death to the affected parties and it is reasonable to expedite the processing of Edison's application for full authorization to go forward with the environmental retrofits and other related capital expenditures so as to reduce any unnecessary or avoidable delay.
1. Edison's actual capital costs for the environmental upgrades, upgrades to the coal slurry pipeline and delivery of the new water supply, not including the 30-40% contingency for water and coal contract costs, are reasonable. Nothing herein prevents a review by the Commission of the costs of the plant in service in a General Rate Case.
2. The record supports finding reasonable the funds Edison has spent on the C-Aquifer studies and preliminary engineering, while Edison continues to work towards a resolution of the water and coal issues and to allow Edison to recover 56% of these expenses as capital expenses reflecting Edison's ownership share of Mohave, subject to a showing that Edison did not prematurely cause the facility to shut-down due to action, or in-action, within Edison's control.
3. It is reasonable to defer the Commission's final decision on the future of Mohave as a coal-fired plant until the Bureau of Reclamation completes the hydro-geological and environmental studies to determine if the C-Aquifer is a viable alternative source of water to slurry the coal from the mine to Mohave.
4. If the C-Aquifer is a viable alternative source of water, and if there is resolution on the issues relating to the quantity, quality and price of coal, Edison will be able to recover its reasonably incurred procurement costs.
5. To insure that the Commission has a complete range of alternatives to compare Mohave to, the Commission directs Edison to investigate and collect data on alternatives to Edison's Mohave share of, including proposals presented by WEC and NRDC, and to work with other stakeholders to design this study and to jointly determine who should conduct the study. It is reasonable to allow Edison to recover 100% of the cost of the study if the other Mohave co-owners do not participate in the study.
6. It is reasonable to authorize Edison to establish the Mohave Employee-Related Memorandum Account (MERMA) to track limited worker protection benefit expenses that Edison may incur before January 1, 2006, in connection with the expected shut-down of Mohave at the end of 2005.
7. It is reasonable that Edison recover limited worker protection benefit expenses that Edison may incur after January 1, 2006, in connection with the expected shut-down of Mohave at the end of 2005, in a General Rate Case.
8. It is reasonable that if Mohave operations are ultimately extended that Edison capitalize its 56% of money spent on preliminary retrofit work, on the C-Aquifer studies and any other critical path spending along with all other capital improvements made to the facility, consistent with accounting conventions.
9. It is reasonable that if Mohave is permanently closed that Edison recover its appropriate share of all expenses for abandoned plant recovery in a General Rate Case.
IT IS ORDERED that:
1. Southern California Edison Company (Edison) may spend necessary and appropriate funds on critical path investments at Mohave as defined herein, including the C-Aquifer studies and an alternatives feasibility study, while Edison continues to work towards a resolution of the water and coal issues.
2. Edison is authorized to recover as a capital expense 56% of any expenses already made on the initial engineering and design plans for the pollution control and retrofit work and any monies expended on the C-Aquifer studies, and 100% of monies spent on the alternatives feasibility study (if the other Mohave co-owners do not participate in the study) and any money Edison spends pursuant to this decision on interim critical path items subject to the limitations established herein.
3. Edison is to explore alternatives to Mohave continuing operation as a coal-fired plant. The focus of this study should be on exploring the specifics of these possible options so they may either be compared with Edison's Mohave share of in a subsequent proceeding, or considered as alternatives to replace the power from Mohave in the scenario where the plant is permanently closed or compliment the generation from Mohave if Mohave returns to service. The alternatives investigated should include options that provide economic stability to the Hopi Tribe and Navajo Nation, and where appropriate, utilize renewable resources for generation. Edison is directed to work with other stakeholders to design this study and to jointly determine who should conduct the study.
4. Edison is to file monthly reports with the Commission's Energy Division updating any progress made on the coal and water negotiations, the C-Aquifer studies, the alternatives' investigation and shortening the Gantt Chart time-line.
5. Edison is authorized to establish a Mohave Employee-Related Memorandum Account (MERMA) to track limited worker protection benefit expenses that Edison incurs before January 1, 2006, and to file an advice letter establishing the MERMA mechanism and associated preliminary statement language.
6. Edison is authorized to recover any costs incurred for limited worker protection expenses incurred after January 1, 2006, in Edison's General Rate Case.
7. Edison may file advice letters, or tariffs, as appropriate and necessary to implement the orders, conclusions and results reached in this decision.
8. If Edison determines that the other Mohave co-owners are not cooperating with the steps and spending established to preserve the keep "Mohave-open" option, Edison shall report this fact to ED and the Commission's General Counsel, so that the Commission may provide further guidance.
9. Edison is to prepare an application for authorization to go forward with the environmental retrofits and other capital expenditures, with the costs for water, coal and other environmental controls, so once the water and coal issues
are resolved, Edison can file the application forthwith. Capital costs found reasonable in this decision will not be re-litigated.
This proceeding is closed.
This order is effective today.
Dated December 2, 2004, at San Francisco, California.
MICHAEL R. PEEVEY
President
CARL W. WOOD
LORETTA M. LYNCH
GEOFFREY F. BROWN
SUSAN P. KENNEDY
Commissioners
APPENDIX A
LIST OF APPEARANCES
************ APPEARANCES ************ |
Paul M. Seby |
Janet K. Place |
Mark Fogelman |
