9. Has SCE Provided a Detailed Budget for the HECA Project in its Application, as Required by Resolution E-4227A?
Resolution E-4227A requires that:
12. In any future application for approval of costs related to the HECA study, SCE should include a detailed budget for the HECA study.114
9.1. Positions of Parties
The parties to this proceeding vigorously dispute whether SCE has provided a budget for the HECA studies in sufficient detail to meet this requirement.
SCE states that concerning the budget, "the narrative detail provided identified precisely the scope of HECA feasibility activities that SCE's minority contribution covers, and the scope of value that SCE will be obtaining."115
SCE further contends:
In response to DRA's and TURN's objections regarding the sufficiency of budget details provided, SCE and HEI provided a narrative description of the cost categories in Exhibit SCE-2 in order to provide further detail and explanation on the scope of the feasibility work included in the budget. As explained in Exhibit SCE-2, this is the greatest level of detail that HEI is able to provide publicly, consistent with its existing third party confidentiality obligations and retaining commercial flexibility and optionality in third party negotiation related to property, commodity and other commercial options.116
To support SCE's argument that the budget and the level of budget detail is adequate, SCE's witness testified that "the HECA budget was consistent with what he would expect within the industry for this type of study."117 SCE also points out the DOE has selected the HECA project to receive $308 million in co-funding from DOE and concludes its argument that "[t]he additional budget detail provided, plus Dr. Cortez's and the DOE's independent confirmation that HEI has the organization in place to implement the study plan, are sufficient to determine the reasonableness of SCE's total costs."118
HEI argues that:
The HECA Feasibility Study budget provided by SCE and HEI contains a breakdown of costs between Phases I and II. Detailed descriptions of the activities represented have also been provided.119
In contrast, DRA argues that:
SCE's argument for not including the detailed budget that Resolution E-4227A ordered SCE to include in this application is untenable.120
DRA argues that the narrative description of the cost categories that SCE provided in AL 2274-E is not convincing.121 In addition, DRA argues that the Commission should be able to "verify that the HECA budget is in fact what SCE claims it is going to be ..."122
9.2. Discussion
We find that the budget submitted for this project to the Commission contains sufficient details for the Commission to determine that the costs associated with this project are reasonable.
Specifically, from the qualitative and quantitative information submitted by SCE, we know that SCE will be required to pay up to $17 million to participate in Phase I, and up to $13 million to participate in Phase II, and that SCE's contribution will represent less than 20% of the projected Phase II costs. SCE provides a budget that details the costs of the Phase I and Phase II studies by cost categories, including Administrative and General, Equipment and Plan, Third Party Vendors, and Permitting Feasibility costs.123
Although TURN's testimony showed the SCE provided a greater level of budgetary detail concerning the CHPG application (A.07-05-020), 124 that project is very different than the project before us today. Most importantly, SCE had full responsibility for the CHPG project, while on the HECA project, SCE will be responsible for only 20% of the costs of determining project feasibility.125 In addition, SCE notes that the details in the CHPG budget included SCE's own labor hours and costs, while in the HECA project, many of the budget cost categories cover service provided by third-party vendors that is subject to confidentiality agreements.126 Since the costs associated with the HECA project do not consist of SCE's own labor and materials costs and SCE's responsibility for these costs involve only 20% of the overall costs, we find that the budgetary information provided by SCE is of sufficient detail to meet the requirements of Resolution E-4227A and, as noted above, is sufficient to permit the Commission to determine that funding the HECA studies is a reasonable use of ratepayer funds.
Within the overall context of California energy policy as enshrined in legislation, the HECA project is consistent with California policies to produce energy in ways that do not increase the production of GHGs. Moreover, since this project is at this time only a study, further details concerning Phase II costs require the completion of Phase I. We note that, if Phase I fails to provide data supporting continued investigation, then Phase II will not take place.
114 Resolution E-4227 A at Finding 12.
115 SCE Opening Brief at 20.
116 Id. at 18-19, footnotes omitted.
117 Id. at 19.
118 Id. at 20.
119 HEI Reply Brief at 26.
120 DRA Reply Brief at 7.
121 Id. at 8.
122 Id. at 9.
123 Ex. SCE-1 at 10.
124 Ex. TURN-3 Attachment 1.
125 Ex. SCE-2 at 14.
126 Ex. SCE-2 at 14.
