ALJ/CFT/jva Mailed 6/14/2004

Decision 04-06-013 June 9, 2004

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Order Instituting Investigation into Implementation of Assembly Bill 970 Regarding the Identification of Electric Transmission and Distribution Constraints, Actions to Resolve Those Constraints, and Related Matters Affecting the Reliability of Electric Supply.

Investigation 00-11-001 (Filed November 2, 2000)

INTERIM OPINION
ADOPTING METHODOLOGY FOR CONSIDERATION OF
TRANSMISSION COSTS IN RPS PROCUREMENT

Table of Contents

Title Page

INTERIM OPINION ADOPTING METHODOLOGY FOR CONSIDERATION OF TRANSMISSION COSTS IN RPS PROCUREMENT 22

I. Summary 22

II. Procedural Background 44

III. Interim Methodology for Identification and
Consideration of Transmission Costs 66

A. Reliance on Existing Transmission Studies 66

B. Treatment of Shared Transmission Facilities 77

1. Positions of the Parties 88

2. Discussion 1010

C. Network Benefits 1212

1. Positions of the Parties 1313

2. Discussion 1515

D. Curtailment as a Means to Reduce Transmission Costs 1818

1. Positions of the Parties 1818

2. Discussion 2222

E. Dynamic Line Ratings 2323

F. Generation or Consumption of VARs 2424

1. Positions of the Parties 2525

2. Discussion 2626

G. Coincident Generation 2626

H. Phasing of Transmission Additions 2727

1. Positions of the Parties 2828

2. Discussion 2929

Table of Contents

Title Page

I. Transmission Costs for Projects Whose Output May Be Sold
to Another Entity 3030

1. Positions of the Parties 3131

2. Discussion 3232

J. Preparation of the Transmission Ranking Cost Reports 3333

K. Bids for which Transmission Costs Have Not Been Estimated 3434

L. Consideration of Transmission Costs in Rank Ordering of Bids 3535

M. Confidentiality 3838

N. Dispute Resolution 3838

III. Comments on Draft Decision 3939

IV. Assignment of Proceeding 4141

Findings of Fact 4141

Conclusions of Law 4444

INTERIM ORDER 4444

Attachment A Methodology for Development and Consideration of
Transmission Costs in Initial Renewable Portfolio
Standard Procurement

INTERIM OPINION
ADOPTING METHODOLOGY FOR CONSIDERATION OF
TRANSMISSION COSTS IN RPS PROCUREMENT

I. Summary

This decision adopts guidelines for the development and use of transmission costs in assessing Renewable Portfolio Standard (RPS) bids in the initial RPS procurement to be undertaken pursuant to Pub. Util. Code § 399.14.¹ This initial procurement, to begin by July 1^st of this year, represents the first step in a multi-year effort under the RPS program to substantially alter the electric generation resource mix in California, with the goal of achieving a resource portfolio that is at least 20% renewable. The Commission is strongly committed to achieving this goal - more quickly, in fact, than is required by the RPS statute, as expressed in the Joint Agency Energy Action Plan.² These guidelines will facilitate the first RPS solicitation.

Forward-looking transmission policies are key to the success of the RPS program. Critical issues such as the planning process for large-scale transmission upgrades needed to transport power from areas with significant renewable resource potential, funding policies for new transmission facilities that are necessary to facilitate achievement of the renewable power goals, and assessment of economic benefits that may accrue from transmission upgrades are under consideration in other phases of this proceeding. We expect that those efforts, along with the valuable experience to be gained through this initial RPS procurement, will allow us to refine the methodology adopted today for use in consideration of transmission costs in subsequent RPS procurements.

In today's order, we require that Pacific Gas and Electric Company (PG&E), Southern California Edison Company (SCE), and San Diego Gas & Electric Company (SDG&E) each prepare and file a Transmission Ranking Cost Report prior to the initial RPS procurement solicitation. In its Transmission Ranking Cost Report, each utility should identify and provide cost information regarding transmission upgrades needed for potential RPS projects, based on conceptual transmission studies submitted previously in this proceeding, other conceptual transmission studies, and System Impact Studies and Facilities Studies prepared for projects that have initiated the California Independent System Operator (ISO) interconnection process. Potential RPS bidders should use the information regarding expected transmission upgrades in developing their bids in response to the initial RPS procurement solicitation.

The utilities should also use the transmission cost estimates in the Transmission Ranking Cost Reports in evaluating RPS bids. We adopt guidelines for the utilities' use of the identified transmission costs in ranking the bids, including the calculation of transmission cost bid adders and the assignment of these adders to specific RPS projects. Each utility should use the adopted iterative method in determining the combination of projects that will meet its approved renewable procurement goals in a least-cost, best-fit manner.

It is important to note that the estimates of transmission costs in the Transmission Ranking Cost Reports will not be definitive and will not establish the ultimate cost of connecting a renewable resource to the grid. Renewable projects that have not already done so will need utilize the ISO System Integration Study and Facility Study process to determine these costs. The reported estimates will be used solely to evaluate bids one against another, and may prove to be quite rough estimates of actual transmission upgrade costs. If the methodology adopted today is applied uniformly, however, renewable bidders should not be disadvantaged by this approximation and the utilities can make an informed judgment as to the relative merits of RPS bids.