COM/LYN/epg * Mailed 4/8/2002 Decision 02-04-016 April 4, 2002 BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA Application of Southern California Edison Company (E 338-E) for Authority to Institute a Application 00-11-038 Rate Stabilization Plan with a Rate Increase and (Filed November 16, 2000) End of Rate Freeze Tariffs. Emergency Application of Pacific Gas and Application 00-11-056 Electric Company to Adopt a Rate Stabilization (Filed November 22, 2000) Plan. (U 39 E) Petition of THE UTILITY REFORM NETWORK Application 00-10-028 for Modification of Resolution E-3527. (Filed October 17, 2000) (See Appendix D for a list of appearances.) OPINION ADOPTING REVENUE REQUIREMENTS FOR UTILITY RETAINED GENERATION 119579 - 1 - A.00-11-038 et al. COM/LYN/epg * TABLE OF CONTENTS Title Page OPINION ADOPTING REVENUE REQUIREMENTS FOR UTILITY RETAINED GENERATION.......................................................................................... 1 I. Procedural Background........................................................................................3 II. Organization...........................................................................................................3 III. Scope........................................................................................................................5 IV. Standard of Review and 2002 Interim URG Revenue Requirements............6 V. PG&E .......................................................................................................................8 A. Total Operating Expenses.............................................................................11 1. PG&E .......................................................................................................... 11 2. TURN ......................................................................................................... 12 3. ORA ............................................................................................................ 12 4. Aglet ........................................................................................................... 13 5. Discussion.................................................................................................. 13 B. Rate Base..........................................................................................................14 1. PG&E .......................................................................................................... 14 2. ORA ............................................................................................................ 16 3. TURN ......................................................................................................... 16 4. Discussion.................................................................................................. 17 C. Diablo Canyon................................................................................................19 1. PG&E .......................................................................................................... 19 2. Aglet ........................................................................................................... 20 3. TURN ......................................................................................................... 20 4. ORA ............................................................................................................ 21 5. Discussion.................................................................................................. 21 D. 2001 Plant Additions .....................................................................................23 1. PG&E .......................................................................................................... 23 2. Aglet ........................................................................................................... 24 3. TURN ......................................................................................................... 24 4. Discussion.................................................................................................. 24 E. Return on Rate Base.......................................................................................25 F. Purchased Power Costs.................................................................................25 1. PG&E .......................................................................................................... 25 2. ORA ............................................................................................................ 27 3. TURN ......................................................................................................... 28 4. Aglet ........................................................................................................... 30 - i - A.00-11-038 et al. COM/LYN/epg * 5. CAC ............................................................................................................ 30 6. Discussion.................................................................................................. 31 G. Electric Energy Transaction Administration .............................................33 H. Table 1 – Adopted URG Revenue Requirement for PG&E .....................34 VI. Edison....................................................................................................................35 A. Summary .........................................................................................................35 B. Non-Nuclear Generation ..............................................................................37 1. Edison......................................................................................................... 37 a) Mohave .................................................................................................38 b) Four Corners........................................................................................38 c) Hydro....................................................................................................39 d) Catalina.................................................................................................39 2. ORA ............................................................................................................ 39 a) Operating Expenses............................................................................39 b) Depreciation.........................................................................................40 3. TURN ......................................................................................................... 40 a) Operating Expenses............................................................................40 b) Rate Base...............................................................................................40 c) Depreciation.........................................................................................41 4. Aglet ........................................................................................................... 41 a) Operating Expenses............................................................................41 b) Rate Base...............................................................................................41 c) Depreciation.........................................................................................42 5. Discussion.................................................................................................. 42 a) Operating Expenses............................................................................42 b) Rate Base...............................................................................................43 c) Depreciation Lives ..............................................................................44 C. Nuclear Generation........................................................................................44 1. Edison......................................................................................................... 44 a) SONGS..................................................................................................44 b) Palo Verde............................................................................................44 2. ORA ............................................................................................................ 45 3. TURN ......................................................................................................... 46 a) Initial Revenue Requirement ............................................................46 b) Elimination of ICIP .............................................................................47 4. Aglet ........................................................................................................... 49 5. Discussion.................................................................................................. 49 D. Purchased Power............................................................................................51 1. Edison......................................................................................................... 51 - ii - A.00-11-038 et al. COM/LYN/epg * a) QF Payments........................................................................................51 b) Bilateral Contracts...............................................................................51 (1) Interutility Contracts ...................................................................51 (2) Bilateral Forward Contracts .......................................................53 2. ORA ...........................................................................................................