Mountainview Financials Vex Stakeholders; Edison Admits It Could Buy the Plant Outright

By Published On: December 13, 2003

While the California Public Utilities Commission?s hearings on Southern California Edison?s proposed Mountainview project are wrapping up, the expected costs of finishing construction of the project are among figures that remain under wraps. CPUC members have access to confidential cost data, but market participants do not?a situation they maintain stifles their ability to scrutinize the merits of the proposed 1,054 MW plant or develop lower-cost alternatives. Without project details, developers can?t divine ?what the utility wants, why it chose the [project] winners, and they don?t have the opportunity to know if there is a more cost-effective project available to them,? said Steven Kelly, policy director for the Independent Energy Producers (IEP). The generator group is among a chorus calling for a competitive bidding process. Competitive bids in this case are an idea rejected by assigned commissioner Michael Peevey?however, he can access the financial data. ?We don?t have anything new other than published testimony? on cost-effectiveness after two weeks of hearings, said Scott Logan, analyst for the Office of Ratepayer Advocates. On top of this, attempts by the venerable <i>Wall Street Journal</i> to obtain confidential project details have so far been thwarted. The CPUC?s legal division rejected the newspaper?s Public Records Act request. In pending cases such as Mountainview, administrative law judges and assigned commissioners are the ones to release?or not release?financial data, according to the CPUC?s counsel. The complicated deal calls for Sequoia to sell Mountainview to an Edison affiliate after financially distressed AES has sold the partially built plant to Sequoia. Gerald Loughman, Edison?s director of business development, did acknowledge in hearings that AES sold Mountainview to Sequoia ?at a loss? and that Sequoia would reap a tiny profit from the transaction. IEP says the deal shifts financial risks to consumers by loading capital cost recovery in the first few years instead of spreading it over the 30-year term of the plant-owning affiliate?s contract with Edison. To avoid pushing up rates, The Utility Reform Network proposed that the revenue requirement for return and income taxes be spread over 10 years, with a recalculation if income tax rates change over that period. Edison ownership would mean Mountainview remains under state regulation. Edison?s plan to run the plant as a subsidiary is ?riskier for ratepayers,? according to ORA?s Scott Logan. With ?cost issues that come up down the road, FERC [Federal Energy Regulatory Commission] jurisdiction puts it out of control of state regulators,? said Logan. But Edison wouldn?t have to keep Mountainview at arm?s length through a utility if it was bought outright. Edison acknowledged it likely has enough equity through retained earnings to finance Mountainview as a utility-run plant. ?What I am trying to say is we wouldn?t have to go out and float additional debt or equity instruments,? said John Jurewitz, Edison director of regulatory policy. If Edison were to directly buy and run Mountainview, it would be under direct CPUC regulation. That way, stakeholders say, it would assuage concerns that the deal could violate affiliate transaction rules. In hearings, ORA attorney Robert Cagen pointed to a $250 million penalty slapped on Edison in 1993 in a settlement on affiliate violations. The Coalition of California Union Employees, which backs Mountainview, responded that the Mountainview contract has safeguards against such violations, ?which deters Edison from cheating.? Mountainview is on a fast track at the CPUC; a proposed decision is expected sometime next month.

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