REPLY OF SOUTHERN CALIFORNIA EDISON COMPANY (U 338-E) TO PROTEST OF DIVISION OF RATEPAYER ADVOCATES

Carol A. Schmid-Frazee Senior Attorney Carol.SchmidFrazee@sce.com May 1, 2006 Docket Clerk California Public Utilities Commission 505 Van Ness Avenue San Francisco, California 94102 RE: A.06-03-020 Dear Docket Clerk: Enclosed for filing with the Commission are the original and five copies of the REPLY OF SOUTHERN CALIFORNIA EDISON COMPANY (U 338-E TO PROTEST OF DIVISION OF RATEPAYER ADVOCATES in the above-referenced proceeding. We request that a copy of this document be file-stamped and returned for our records. A self-addressed, stamped envelope is enclosed for your convenience. Your courtesy in this matter is appreciated. Very truly yours, Carol A. Schmid-Frazee CAS:sbw:1278881 Enclosures cc: All Parties of Record (U 338-E P.O. Box 800 2244 Walnut Grove Ave. Rosemead, California 91770 (626 302-1337 Fax (626 302-1935

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA Application of Southern California Edison Company (U 338-E for Authority to Add City of Anaheim s Share of San Onofre Nuclear Generating Station Unit Nos. 2 & 3 (SONGS 2 & 3 to SCE s Rates and Associated Relief. A.06-03-020 (Filed March 14, 2006 REPLY OF SOUTHERN CALIFORNIA EDISON COMPANY (U 338-E TO PROTEST OF DIVISION OF RATEPAYER ADVOCATES Pursuant to Rule 44.6 of the California Public Utilities Commission s (Commission Rules of Practice and Procedure, Southern California Edison Company (SCE hereby files its Reply to the Protest of the Division of Ratepayer Advocates (DRA, dated April 13, 2006 (DRA Protest. SCE requests that the Commission deny DRA s request to present testimony in response to SCE s application and to find that evidentiary hearings are not necessary in this proceeding. There are no significant factual issues raised by this application that have not already been recently addressed by the Commission in other proceedings, including A.04-02-026, on SCE s application for authorization to go forward with San Onofre Nuclear Generating Station Unit Nos. 2 and 3 (SONGS 2 & 3 Steam Generator Replacement Project (SGRP. As a result, testimony and evidentiary hearings on this application are unnecessary and a waste of valuable Commission resources. In DRA s protest, DRA states its intention to focus its discovery and analysis primarily on the appropriate valuation of the proposed acquisition, the appropriate valuation of procurement cost savings, and the need to coordinate policy and other decisions in this 1278881-1 -

proceeding with other related Commission proceedings... 1 While SCE agrees with DRA that these are appropriate issues for Commission consideration in this proceeding, SCE does not see a need for DRA to present testimony on these issues as SCE s proposal in this application is straightforward, based on other recent Commission decisions, and does not require detailed analysis. DRA does not need to perform any detailed analysis of the appropriate valuation of the proposed acquisition (i.e., purchase price, or the appropriate valuation of procurement cost savings. The estimated purchase price is, as set forth in SCE s application, $10.4 million, which is based on Anaheim s book value of certain assets. SCE based the valuation of procurement cost savings on readily verifiable measures of near-term electricity prices. SCE estimates the net benefits resulting from early transfer of Anaheim s share of SONGS 2 & 3 to be $29.5 million on a net present value basis. Finally, SCE proposes an advice letter filing process that will assure SCE s ratepayers will pay a 3.16% share of Commission-adopted SONGS 2 & 3 operating and decommissioning costs for Anaheim s former share of SONGS 2 & 3 just as they pay 75.05% of Commissionadopted SONGS 2 & 3 operating and decommissioning costs for SCE s share of these costs today. This advice letter filing process will coordinate other decisions in other related Commission proceedings. Moreover, the Commission can readily review DRA s position on how to coordinate policy and other decisions in this proceeding with other related Commission proceedings through briefs. These are not factual issues that would require preparation of testimony and review of facts for the Commission to decide. The DRA Protest asserts that DRA must review potential O&M and capital expenditure overrun at SONGS. 2 The Commission just issued a decision, D.05-12-040, in December 2005, for A.04-02-026 on SCE s SGRP application, that addresses, in detail, potential O&M and 1 DRA s Protest, p. 2. 2 DRA s Protest, p. 2. 1278881-2 -

capital expenditure overruns at SONGS 2 & 3 for the period 2005-2022. 3 The Commission does not need to revisit this issue again in this docket. The Commission can appropriately rely on D.05-12-040 to evaluate the risk of potential O&M and capital expenditure overruns. Moreover, the risk of potential O&M and capital expenditures overruns is much smaller in this application than in SCE s SGRP Application, A.04-02-026, which D.05-12-040 resolved. The four-year benefit period for early transfer of Anaheim s share of SONGS 2 & 3 is 2007-2010. Two of these years (2007-2008 are in the Test Year 2006 General Rate Case (GRC triennial period. So, O&M costs are fixed within that period at a level no higher than that estimated in this application. Capital expenditures will be trued up in the Test Year 2009 GRC, but are unlikely to significantly exceed Test Year 2006 GRC estimates. In 2010, benefits of early transfer are only measured for one unit. So, over half of benefits from early transfer occur within the Test Year 2006 GRC cycle (2007-2008. This means that the ability of O&M and capital expenditure overruns to impact cost-effectiveness is limited. 3 D.05-12-040, pp. 12-17. 1278881-3 -

WHEREFORE, for the reasons stated above, SCE respectfully requests that the Commission establish a schedule to provide for briefing of issues in this docket, but no testimony and no evidentiary hearings. Such a schedule will assure that ratepayers can receive the maximum benefit from early transfer of Anaheim s share of SONGS 2 & 3 to SCE and will avoid unnecessary relitigation of issues already resolved in other dockets. For each additional month of Commission review of this application, SCE ratepayers will lose $1.4 million of benefits from this early transfer. SCE urges the Commission to act expeditiously to assure maximum ratepayer savings from this application. Respectfully submitted, DOUGLAS K. PORTER CAROL A. SCHMID-FRAZEE By: Carol A. Schmid-Frazee Attorneys for SOUTHERN CALIFORNIA EDISON COMPANY 2244 Walnut Grove Avenue Post Office Box 800 Rosemead, California 91770 Telephone: (626 302-1337 Facsimile: (626 302-1935 E-mail:Carol.SchmidFrazee@sce.com May 1, 2006 1278881-4 -

CERTIFICATE OF SERVICE I hereby certify that, pursuant to the Commission s Rules of Practice and Procedure, I have this day served a true copy of REPLY OF SOUTHERN CALIFORNIA EDISON COMPANY (U 338-E TO PROTEST OF DIVISION OF RATEPAYER ADVOCATES on all parties identified on the attached service list(s. Service was effected by one or more means indicated below: Transmitting the copies via e-mail to all parties who have provided an e-mail address. First class mail will be used if electronic service cannot be effectuated. Placing the copies in sealed envelopes and causing such envelopes to be delivered by hand or by overnight courier to the offices of the Commission or other addressee(s. Placing copies in properly addressed sealed envelopes and depositing such copies in the United States mail with first-class postage prepaid to all parties. Directing Prographics to place the copies in properly addressed sealed envelopes and to deposit such envelopes in the United States mail with first-class postage prepaid to all parties. Executed this 1st day of May, 2006, at Rosemead, California. Sara Carrillo Project Analyst SOUTHERN CALIFORNIA EDISON COMPANY 2244 Walnut Grove Avenue Post Office Box 800 Rosemead, California 91770