12. Comments on Proposed Decision
The proposed decision (PD) of the Administrative Law Judge (ALJ) in this matter was mailed to the parties in accordance with Section 311 of the Public Utilities Code and comments were allowed under Rule 14.3 of the Commission's Rules of Practice and Procedure. Comments were filed on November 23, 2009, by SCE, HEI, DRA and TURN. Reply comments were filed on November 30, 2009, by SCE, HEI, DRA and TURN.
12.1. Major Issues Raised in Comments on Proposed Decision
SCE's comments express broad support for the PD, stating that it "addresses the evidentiary record in detail, and reaches a well-reasoned decision on each of the issues and arguments raised by the parties in the proceeding."136 In addition to correcting minor factual errors, SCE, citing its Reply Brief, renewed its request that the Commission authorize "the State's investor-owned utilities (IOUs) to enter into joint discussions with HEI to negotiate the terms and conditions (including price, quantity and scheduling arrangements) for one or more power purchase agreements (PPA) for the power output from HECA; and, if appropriate , enter an agreement ..., subject to prior Commission review and approval."137 SCE argues that "Resolution E-4227 encouraged the two IOUs, PG&E and SCE, to become partners in the HECA feasibility study with SCE and HEI..."138 SCE argues that "the Commission may authorize collaboration between and among the IOUs and HEI, and thereby immunize such activities from any potential liability under the antitrust laws....'139
HEI's comments also support the PD, stating that "[t]he Commission should approve the PD as it is well reasoned and supported by the evidence, policy and precedent."140
In addition, HEI joins SCE in asking that the Commission urge "all utilities subject to its jurisdiction to enter into negotiations for HECA Project output subject to a determination of project feasibility."141 In Reply Comments, TURN and DRA oppose the requests of SCE and HEI for this authorization. TURN argues that "the Commission must reject it [the request] as being inadequately supported by the record and likely unnecessary in light of Resolution E-4227A."142
In general, DRA's comments strongly object to the PD, arguing that it commits both legal and factual error, and DRA "recommends that the Commission reject the PD."143 DRA argues that the PD commits legal error when it observes that SCE's testimony rises and falls on the testimony of its witness, Dr. Cortez. DRA charges that in stating this, "the PD delegates the Commission's authority to make a discretionary determination, entrusted to it by statute, to a third party."144 In addition, DRA notes that "The PD does not explain why the same records that it claims Dr. Cortez reviewed was [sic] not made available to the Commission and the parties in the proceeding for review and examination."145
DRA also argues that the basic judgment reached in the PD - that the unquantifiable benefits outweigh the costs of the project - is wrong and that "[t]he notion that the benefits listed in the PD accrue to ratepayers from the $30 million that SCE would invest in the feasibility study is disingenuous at best."146 DRA argues that "[t]he PD found the costs for Phase II of the feasibility study reasonable, even though SCE admitted at hearing that it has not presented any evidence on which the Commission could determine that those costs were reasonable. Surprisingly, the PD never addresses this admission." 147 DRA therefore objects to the PD and argues for its rejection.
DRA also argues that "there was no evidence to support the $10 million SCE paid in Phase I for the enhanced oil recovery study part of the report."148
DRA further argues that the PD misconstrues DRA's position on retroactive ratemaking.
Finally, DRA proposes implementation safeguards in the event that the decision is adopted. DRA argues that SCE must demonstrate it receives the reports described in the HECA feasibility study. This demonstration may be made by requiring SCE to file a Tier II Advice Letter within 45 calendar days after the workshops described in the public disclosure plan are completed. DRA makes a similar recommendation for the filing of a Tier II advice letter within 45 calendar days after all Phase II reports are received. In Reply Comments, HEI argues that "DRA never raised this suggestion in its testimony, at evidentiary hearings, or in any briefs, and there is thus no reference to this request in the PD."149 SCE argues that the safeguards proposed by DRA are not necessary because "SCE will be publicizing the study results pursuant to the Public Disclosure Plan approved in the PD, and SCE anticipates that DRA, TURN and Energy Division will be participating in the workshops."150
TURN argues that the PD fails "to address the undisputed factual evidence that runs counter to its findings."151 Specifically, TURN argues that the PD fails to address a statement identified in DRA's testimony in which a HECA manager uses the words "the project" to refer both to a project in Carson and a project in Elk Hills.152 Similarly, TURN argues that the PD is wrong in relying on SCE's rebuttal testimony which states that the CHPG project and the HECA project are different. TURN claims that "undisputed record evidence demonstrates that the two projects were largely identical in this way: As SCE's witness acknowledged, the vast majority of the labor costs set forth in the CHPG estimates covered non-SCE labor."153 Therefore, TURN desires that the budgetary information provided for HECA contain the same level of details as that for CHPG.
TURN also argues that the PD "commits legal error when it abandons cost-effectiveness as a necessary condition for ratepayer funding." 154
In addition, TURN joins DRA in charging that the PD has delegated decisionmaking to Dr. Cortez, and notes that Dr. Cortez "had a continuing employment relationship with one of the parties to the transaction and had been hired by the other party to the same transaction."155
Finally, TURN argues that "the fact that SCE's share of the HECA feasibility study cost is a small proportion does not make the share reasonable."156 TURN then cites the Commission's rejection of PG&E's participation in the California Solar Testing Center as a precedent that "limiting the utility share to 20 percent has no bearing on whether to permit rate recovery of the utility's share of the cost."157
12.2. Discussion of Comments
Concerning the comments of SCE, we have corrected the errors of fact that they have identified and documented.
Concerning the request of SCE and HEI that the Commission authorize negotiations between California IOUs and HEI concerning a potential PPA regarding the electric output of HECA, as TURN has pointed out, this matter was already extensively addressed in Resolution E-4227A and further action is unnecessary. Specifically, Resolution E-4227A states:
While this advice letter was filed by SCE, we encourage the two other investor-owned utilities (IOU), Pacific Gas and Electric Company and San Diego Gas & Electric Company, as well as the publicly-owned utilities to become partners in the HECA Study project and for all utilities to work together on commercializing carbon capture and storage (CCS) technology. We suggest that SCE seek out this involvement from the other IOUs. We do acknowledge general support for emerging technologies on the part of all three IOUs, but do encourage them to work together on this particular HECA project. If the California utilities work together, the costs and risks of this and other CCS projects can be shared broadly so that the benefits can be realized by all Californians. If shown to be technically feasible and commercially reasonable, the HECA facility, and potentially other generation utilizing CCS technology, will be low-carbon, baseload generation resources that will advance California's move towards reduced greenhouse gas emissions while producing reliable power within the state and with locally derived fuel sources.158
Since Resolution E-4227A has already asked SCE to seek cooperation on commercialization of HECA power, and because commercialization requires the sale and purchase of electricity, there is no need to address further the request for the authorization of cooperation by the utilities in this decision.
Concerning the comments of DRA, we note that the PD's observation that SCE's case rises or falls on the testimony of Cortez is just that - an observation. The Commission in no way has delegated its decisionmaking to Cortez. Instead, we are simply noting that Cortez is the principal witness providing testimony on the reasonableness of the project for SCE and its ratepayers, and therefore SCE's case rises and falls on the credibility of this witness.
Concerning DRA's charge that "PD does not explain ... why the records ... was [sic] not made available ... to the parties, "159 we point out that no discovery dispute was brought to the Commission for resolution during this proceeding by either DRA or TURN in which they requested access to this information. In this decision, the evidence presented by SCE was weighed and was deemed adequate to support ratepayer participation in this project at the level of $30 million. The Commission does not need access to more information at this time.
Concerning DRA's argument that the PD commits error in finding that this project's benefits outweigh costs, this is just a restatement of the argument contained in DRA's brief, which the PD considered and rejected. Concerning the issue of whether the Phase II costs are reasonable, DRA's misrepresents the PD. The PD does not find the Phase II costs reasonable. The PD finds that it is reasonable for the Commission to authorize SCE to incur the Phase II costs for later recovery, following a reasonableness review in a future ERRAM. This is what SCE requested, and it is what the PD authorized. Ordering Paragraph 2 of the PD, which is unchanged below, makes this very clear.
Concerning DRA's argument to exclude $10 million from Phase I costs because DRA believes that these costs support EOR and are not supported by an evidentiary showing, we note that the PD reached its result by evaluating the costs and benefits for participation in a single project, and that EOR is part of that project. The record in this proceeding justifies ratepayer participation in the entire project.
Concerning DRA's argument that the PD misconstrues DRA's position on retroactive ratemaking, we note that we have quoted DRA's brief to represent its position in the presentation above.
Concerning DRA's request that we order an Advice Letter review process for the interim steps in the HECA project, we find persuasive SCE's argument that such a process is not necessary because it will publicize its progress consistent with the Commission approved Public Disclosure Plan. Instead, to enable the Commission to track the progress of the HECA project, we will require SCE to provide the Commission with progress reports every six months during this phase of the HECA project and with the HECA feasibility reports. As part of these progress reports, SCE should attach the feasibility reports that it has received as appendices to its report.
TURN's argument that the CHPG project and HECA are the same project and that the PD ignores evidence that they are the same is in error. A project of the scale and complexity of HECA must differ in response to the local challenges and opportunities that arise from the access to refining byproducts, the state of depletion in oil fields, access to the electricity transmission grid, and with the local permitting environment. An IPGG project is not like a consumer product that can be moved from place to place - it is a specially designed project tied to local conditions. The testimony of the HEI witnesses and the Commission's own experience overwhelmingly support this conclusion.160
Moreover, the statement cited by TURN as evidence that the Carson project and the HECA project are the same is also readily explained in the testimony cited previously - things would have been learned at Carson that are generally applicable to an IGCC facility, but at this stage in the technological development of IGCC facilities, characteristics that vary with the location make the projects very different.161 Based on the evidence presented, we find the reference in a press release calling the Carson Project and the HECA project the same is outweighed by the direct testimony under oath in this proceeding by the same person.162
Concerning TURN's argument that the Commission must use a quantifiable cost-benefit calculus, we disagree. First, there are clear precedents for deciding this way. For example, in granting SCE the authority to determine the feasibility of the CHPG project, D.08-04-038 approved the funding of the study without a quantification of benefits and costs. Second, TURN's position that the Commission requires a precise quantification of costs and benefits would preclude funding promising but uncertain technologies. This would harm ratepayers and is not in the public interest.
Furthermore, although we do indeed note that SCE's share of the costs of the study is small, that is only one factor in our assessment and does not drive our conclusion. We do find that benefits to SCE ratepayers are likely to exceed costs. Moreover, gaining full access to the study results for this modest commitment of funds supports our conclusion on the cost-effectiveness on reasonableness of this project, for it compares favorably with projects in other states, cited in the record, where ratepayers have commonly provided the full funding.
Finally, we note that to the extent that we have not discussed specific objections of parties that we have summarized above, it is because these objections have repeated arguments that we have previously addressed. In addition, we have reviewed all the comments and replies filed in this proceeding and have revised the decision as deemed reasonable.
136 SCE, Comments on PD at 1.
137 Id. at 3.
138 Id. at 4.
139 Id. at 5.
140 HEI, Comments on PD at 2.
141 Id. at 6.
142 TURN, Reply Comments on PD at 5.
143 DRA, Comments on PD at 1.
144 Id. at 3.
145 Id. at 4.
146 Id. at 6.
147 Id. at 8.
148 Id. at 11.
149 HEI Reply Comments on PD at 5.
150 SCE Reply Comments on PD at 5.
151 TURN Comments on PD at 1.
152 Id. at 3.
153 Id.
154 Id. at 4.
155 Id. at 8.
156 Id. at 8.
157 Id. at 9.
158 Resolution E-4227A.
159 DRA Comments on PD at 4.
160 See the exchange at TR 180:22 to TR 181: 17 cited above in section 5.1.2.
161 We note that at one level, TURN is raising a philosophical issue about when things are the same and when they are different. Both projects are called IGCC facilities, but this common name belies many differences that distinguish the projects.
162 This exchanged is in included in section 5.1.2 above.
