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Primer
on Mohave Generation Station
The Mohave generation station is a two-unit, coal-fired power plant located
in Laughlin, Nevada. Each unit has the operating capacity of nearly 790
MW, for a total generation capacity of approximately 1,580 MW. Edison
and three other entities jointly own Mohave .
The other parties in the ongoing proceeding at the California Public Utilities
Commission (A.02-05-046) include the Navajo Nation and Hopi Nation (“Tribes”),
Peabody Western Coal Company, the Office of Ratepayer Advocates (“ORA”),
TURN, the Centerfor Energy and Economic Development, and the Coalition
of California Utility Employees. The Administrative Law Judge (“ALJ”)
is Carol Brown and the Assigned Commissioner is President Loretta Lynch.
A Prehearing Conference is scheduled for October 11, 2002 in Tuba City,
AZ.
I. OVERVIEW OF EDISON’S APPLICATION
The following section provides an overview of Edison’s application.
Numerous unresolved issues surround this case, matched only by the number
of competing interests involved. Several parties participating in the
proceeding also have an interest in the related coal and water supply
negotiations.
A. What is Edison Asking The Commission To Do?
The application asks the Commission to choose between two specific courses
of action: 1) authorize shutting down the facility by the end of 2005,
or 2) authorize the expenditure for pollution control and other capital
expenditures. Ultimately, Edison requests that the Commission address
one central, foremost topic: determine if continued operation of Mohave
past 2005 is in ratepayer interest.Following Edison’s line of reasoning,
resolving this issue will, in effect, decide the course of action. If
the Commission finds that ratepayers benefit from Mohave’s continued
operation then it should approve Edison’s request for $58 million
to begin preliminary pollution control installation procedures, including
engineering studies, equipment design, and relatively small-scale implementation.
Then in 2003, Edison will apply for a Certificate of Public Convenience
andNecessity(“CPCN”) to fund the balance of pollution control
upgrades and other plant upgrades. (This topic is discussed in greater
detail below.) Alternatively, if the Commission finds that Mohave’s
continued operation past 2005 is not in ratepayer interest, then it should
authorize Edison to prepare for plant decommissioning after 2005.
Edison does not indicate a preference regarding how the Commission should
judge its request. Edison discusses at length the problems related to
the coal and water supply contract renegotiations between Peabody, the
Mohave co-owners, and the Tribes. According to the application, this standoff
threatens the future of Mohave, such that Edison cannot determine the
benefits to ratepayers until the coal and water supply issues are resolved.
While Edison claims that it has worked in good faith to reach an agreement—to
no avail—it punts the problem to the Commission, asking it to decide
the fate of Mohave’s future.
B. Issues Related to Edison’s Request
1. Coal Supply Renegotiations
Mohave obtains its coal from the Black Mesa mine, located on Hopi and
Navajo Nation tribal land. Peabody leases Black Mesa mine from the Tribes;
the 1976 Amended Coal Supply Agreement (“CSA”) dictates the
terms by which Peabody will supply coal toMohave; the CSA’s term
ends December 31, 2005. The only source of coal for Mohave is from Black
Mesa mine and the only buyer of coal from Black Mesa mine is Mohave. The
coal supply problem: Edison and the other Mohave co-owners and Peabody
and the Tribes cannot reach an agreement to supply coal to Mohave of sufficient
quality and quantity at the right price.
2. Water Supply Renegotiations
A slurry pipeline delivers the Black Mesa coal to Mohave. Black Mesa Pipeline
Company owns the slurry pipeline, which is a distinct and separate company
from Peabody and Black Mesa Mine. The slurry pipeline draws water from
the Hopi and Navajo Nation controlled underground N-Aquifer. The water
supply problem: the Hopi Nation objects to the continued use of the underground
aquifer to supply water for the slurry pipeline. Resolution of the water
supply problem is necessary to obtain a mining permit from the Department
of the Interior.
3. Past Royalty Payments
The Navajo Nation has sued Peabody and the Mohave co-owners over past
royalty payments for the coal itself. The Navajo Nation insists that there
can be no resolution of the coal supply issue without prior resolution
of the coal royalty litigation. The parties have not settled the past
coal royalties litigation.
4. The Consent Decree
Signed in 1999 by the Mohave co-owners, the Grand Canyon Trust, Sierra
Club, and the National Parks and Conservation Association, the Consent
Decree requires the Mohave co-owners to install certain pollution control
equipment and meet certain pollution emission levels by the end of 2005.
If the Mohave co-owners do not fulfill their obligations, the Mohave plant
will cease operations until the conditions are met. According to Edison,
the currently anticipated duration of downtime for Mohave in 2006 is 6-12
months, as the schedule to install the pollution c ontrol equipment by
the end of 2005 cannot be met at this time.
C. The Timing Of The Request
Adding to the complexity of the issues in this case is the urgency with
which Edison claims the Commission must act. If the Commission determines
that continued operation of the Mohave plant is in ratepayer interest,
then receiving authorization to begin the necessary preliminary pollution
control installation by the end of 2002 is crucial. According to Edison,
if the Commission does not issue a decision by the end of 2002 then there
will be insufficient time to perform the complete set of pollution control
upgrades by the end of 2005, and the plant will shut down pursuant to
the 1999 Consent Decree. Furthermore, Edison claims that Commission authorization
for the majority of the plant upgrades falls under the application process
for a CPCN, which includes environmental reviews whereas this application
proceeding does not. Edison also maintains that it cannot apply for a
CPCN until all outstanding coal and water supply issues are resolved.
This is the reason why it is applying for only $58 million now to begin
the upgrade process. Thus, as Edison has framed the issue, if the Commission
does not act promptly the possibility for the Mohave plant to remain off-line
after 2005 grows from the anticipated 6-12 to two years and more. Edison
states that this scenario will likely cause the Mohave plant to become
uneconomical to ratepayers for multiple reasons.
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