Southern California Edison says it will need to shut down the 1,580 MW coal-fired Mohave Generating Station in 2005, at least temporarily. But two Indian tribes have called for the plant to continue operating, saying the temporary shutdown is just an excuse to abandon the plant.

The California Public Utilities Commission ultimately will decide the fate of Mohave, which needs new sources of fuel and water, and complete environmental reviews [A02-05-046]. The plant's operating permit expires in 2005.

Even if the water and fuel issues are resolved soon, Edison is looking at a temporary, "multi-year shutdown" of the plant, Edison attorney Sumner Koch said February 9 at a prehearing conference.

Administrative Law Judge Carol Brown called parties to the proceeding to Monday's prehearing conference to ask them how she and presiding Commissioner Loretta Lynch could "get a handle on getting this moving forward." Brown asked parties whether the Mohave proceeding should be categorized as a Certificate of Public Convenience and Necessity (CPCN) proceeding in which evidentiary hearings would be held.

A CPCN is unnecessary, Koch said. Edison does not plan to expend the money and effort needed to operate Mohave past 2005 unless the commission decides it would "serve ratepayers' interest," he said. He added that the commission should not decide now whether Mohave should continue operating past 2005, because "critically important information about Mohave's post-2005 fuel costs . . . is completely lacking."

In particular, the issues of future coal and water supplies for the plant, and a question as to whether the plant should be converted to a gas-fired plant, are outstanding, Edison said in a February 9 prehearing conference statement, reiterating concerns it has stated previously. Because of constraints on the aquifer that currently supplies Mohave with water, Edison has looked into using water from an alternative source, called the C aquifer. The US Department of the Interior's Bureau of Reclamation will complete a study of the C aquifer-which Mohave's owners will pay for-to see if it has sufficient water to supply the Black Mesa pipeline that sends coal to Mohave through a slurry process.

A CPCN for the continued operation of Mohave is necessary, Mark Fogelman, an attorney with the Navajo Nation, said at the prehearing conference. Absent definitive information on fuel-supply costs, among other issues, the commission should order Edison to provide its best estimate for the cost of needed plant upgrades, Fogelman said. If exact costs are not known, Edison could use cost forecasts, he suggested. "A range of costs is all you need to determine whether Mohave is more cost-effective than an alternative," Fogelman said. He also asked that the commission order Edison to submit an updated statement of Mohave operating costs, and that the record for the CPUC's proceeding for Edison's Mountainview power plant-which the commission approved-be added to the Mohave proceeding.

On ALJ Brown's orders, parties to the proceeding participated in mediation last October to craft an agreement on the water study. Edison; coal transporter Black Mesa Coal Pipeline Inc.; coal supplier Peabody Western Coal Co.; the Navajo Nation; the Hopi Tribe and Mohave co-owner Salt River Project drafted a memorandum of understanding that all parties have signed except Edison.

Under the MOU, Edison, Salt River Project and the Los Angeles Department of Water & Power-a minority owner-have agreed to pay for the Bureau of Reclamation's hydro-geological study of the C aquifer, which will be followed by an environmental review. Edison has estimated the studies will cost about $6 million and take more than two years to complete.

But Edison has refused to sign the MOU-and write checks for the studies-until Peabody provides "written assurance" that it will not file future legal claims against Mohave owners.

"This issue needs to be resolved so we can move forward," Lynch said. She ordered Edison and Peabody to schedule a closed-door meeting with her to resolve the issue by close of business February 20.

Edison and Peabody are also locked in negotiations over renewal of their current coal-supply agreement.

Lynch asked whether those negotiations could be done this year. Edison attorney Ann Cohn said there was "not a high degree of probability." Questions regarding the quality of the coal, additional environmental assessments that might be needed and a "complicated set of issues and negotiations with the owners and Peabody" have yet to be resolved, she said.

To operate Mohave in the future, the plant's owners also must renew their current contract, which expires in 2006.

The coal quality problem has been solved and other outstanding issues are on their way to resolution, countered Paul Glaser, an attorney with Peabody. "This project is so economically feasible, we could move forward without knowing all the details," he told Lynch and Brown. "There is a way to do this conditionally. If you do it another way, as Edison prefers, you will face shutdown and there is a cost to that."

Despite agreement by Edison and the tribes that the commission should issue a proposed decision on Mohave by this summer, they are sharply divided over what to do with the plant pending a final decision on its fate. Edison says the plant must be shut down-at least temporarily-in 2005. The tribes say there is no reason the plant cannot continue operating pending a final decision.

"The commission's authorization of preparations [for a shutdown in 2005] would not in any way pre-determine the commission's decision on Mohave" for the long term, said Koch.

But the Navajo Nation's Fogelman was not convinced. "We believe Edison has continually dragged its feet," Fogelman said. "I believe there's been a decision made to shut down the plant, at a cost not just to the tribe, but to California ratepayers."

ALJ Brown asked whether it might be possible to keep a part of Mohave operating past 2005, to avoid shuttering the entire plant. Koch said the plant would have to be shut down because of a consent decree Mohave's owners signed with the Sierra Club and the Grand Canyon Trust in 1999 to settle litigation over pollution controls. Under the agreement, the plant owners agreed to spend hundreds of millions of dollars to install smokestack scrubbers, a filter system and new, low-nitrogen oxide burners in the Mohave boilers-by the end of 2006. The environmental groups had sued in federal court in Las Vegas under the Clean Air Act to force the emissions cleanup [CVS9800305-LDG (RJJ)].

The environmental groups would have to agree to a postponement of the emissions-control installations, Koch said.

Harris Sherman, an attorney with the Hopi Tribe-which also is pressing to keep Mohave running-said he had contacted the environmental groups to request a postponement, but had not yet heard from them. "We're hoping if we can show them we've made real progress, they may grant an extension," Harris told Brown and Lynch.

The Hopi Tribe also is pressing for the commission to pursue a CPCN for Mohave. The commission could solve the current impasse over Mohave by adopting a CPCN that placed cost caps on the plant's continued operation, said Jim Ham, a Hopi attorney. "If, under the circumstances, we can reach certain numbers, we're approaching a reasonable solution," Ham said at the prehearing conference. "The proposal is good for ratepayers and the economic survival of . . . the Hopi Tribe." He asked that the commission "prevent the death of this extremely valuable plant."

The Utility Reform Network and the Office of Ratepayer Advocates want the commission to consider Mohave as part of Edison's overall long-term power procurement plan, due this summer in the commission's procurement proceeding, representatives of the groups said Monday [R01-10-024].

Lynch agreed, and said Edison should be working on its long-term procurement plan, including analysis of a portfolio with Mohave and without Mohave, as the commission directed in its January decision on procurement [D04-01-050].

Lynch gave Edison 30 days to update the record with cost estimates of keeping Mohave running, shutting it down, and lining up alternatives to the plant. Parties will have 30 days after Edison's filing to submit comments, with rebuttals due 10 days later. Any party that did not file prehearing conference statements or would like to update its statement can do so by February 13.

Lynch said the commission would get "as much information as possible as soon as possible" to determine whether it could go ahead with the Mohave proceeding without the water study. "My goal is to get as much refreshment on the subject as possible . . . and make sure no party is advantaged in dragging their feet," she said [Cassandra Sweet].