13. Assignment of Proceeding
Michael R. Peevey is the assigned Commissioner and Timothy J. Sullivan is the assigned ALJ in this proceeding.
1. SCE filed this application on April 3, 2009 to request authorization to recover up to $30 million in costs stemming from SCE's co-funding of the HECA feasibility study.
2. Resolution E-4227A granted SCE a memorandum account, called the HECAMA, to track costs up to $17 million for Phase I of the HECA Study and up to an additional $13 million to fund Phase II of the HECA Study.
3. The Carson Project is cancelled, but was to be located in an urban area close to centers for electricity demand.
4. The HECA project remains viable. It is located in a rural part of Kern County, far from electricity demand centers in Southern California.
5. The HECA project is different from the Carson Project.
6. The CHPG is a 500 MW coal-fed project, without EOR, in Utah, and the carbon sequestration will involve an as yet uncharacterized saline formation - not a depleted oil and gas reservoir.
7. If built, HECA will be a 250 MW facility designed for EOR at a specific site in Kern County, California and will determine the viability of these oil and gas geological formations for carbon sequestration.
8. The HECA project is different from the CHPG project.
9. The HECA project is different from the Carson project.
10. The HECA project is a unique, first-of-a-kind project that is designed with technology elements that are unlike any project under development.
11. Since legislation makes green house gas reduction a requirement of California energy policy, the HECA project helps California comply with this requirement because it produces electricity with only modest increases of green house gas.
12. IGCC and carbon capture and sequestration technologies are at a stage where a project presents unique technical and design challenges depending on the nature of the fuel and the geology of the site, which affect both the recovery and use of fuel and the sequestration of carbon.
13. Pursuant to D.08-04-038 and D.06-05-016, neither the feasibility studies conducted in Phase I nor the FEED study conducted in Phase II constitutes project development. Furthermore, none of the activities proposed for analysis in either Phase I or Phase II constitutes project development as discussed in D.06-05-016 or D.08-04-038.
14. There is no evidence in the record that SCE's co-funding of the HECA studies will result in a transfer of funds to Edison Mission Group.
15. SCE did not enter into an agreement with HEI until after the Commission authorized this action in Resolution E-4227A.
16. SCE did not acquire access to the HECA feasibility studies until it provided financial support to HEI for that information.
17. Dr. Cortez is a recognized expert on IGCC projects throughout the nation and was retained by SCE to determine whether SCE should invest in the HECA Study.
18. Of the other IGCC feasibility studies going forward throughout the nation, every one of the feasibility studies has been funded by ratepayers.
19. SCE's funding of the HECA project will constitute only 20 percent of the costs of the feasibility study.
20. SCE's funding of the HECA feasibility studies represents fair and good value for its investment.
21. Because the use of IGCC technology with carbon capture and sequestration holds the promise of reducing GHGs from the generation of electricity, a feasibility analysis offers benefits to ratepayers and to SCE.
22. The United States Department of Energy has awarded $308 million to support the HECA project.
23. It is reasonable to defer incurring Phase II costs for the HECA project until after an assessment of the feasibility studies conducted in Phase I is complete.
24. The proposed payment plan for Phase II costs is tied to the achievement of particular milestones in the HECA project.
25. Phase II of the HECA project includes the development of an FEED study to determine the technical, operational, environmental and commercial issues associated with the project.
26. The HECA FEED costs are not project development costs as set forth in D.06-05-016.
27. SCE has proposed a sufficiently detailed and comprehensive disclosure plan for the information that it will acquire from participating in the HECA project.
28. No party has objected to any aspect of SCE's proposed disclosure plan.
29. SCE's participation in the HECA feasibility analysis advances SCE's efforts to develop a generation and procurement strategy that provides low-carbon baseload generation.
30. The clean characteristics of the electricity that the HECA project will produce, if built, is consistent with state policy objectives.
31. SCE projects that it will need at least 250 MW of baseload resources by 2015.
32. SCE has explained in its application how the HECA proposal fits into its overall procurement strategy as directed by D.08-04-038 and Resolution E-4227A.
33. SCE has provided notice and service of this application to all parties to D.06-05-016 and D.07-12-052, as required by Resolution E-4227A.
34. The budget submitted for the HECA project by SCE contains sufficient detail for the Commission to determine that the costs associated with this project are reasonable.
35. The level of detail provided in its budget for the CHPG application is not analogous to that of the HECA budget because in the CHPG project, SCE had full responsibility for all costs, whereas for the HECA project, SCE has a 20% share of the costs. In addition, the CHPG budget contained data on SCE's own labor costs, while in the HECA project HEI and third-party vendors provide many of the services.
36. The detail provided in SCE's HECA budget, as supplemented by the testimony during the hearing, is sufficient.
37. SCE's contribution to the costs of the feasibility studies of the HECA project is far less than 50% of the total costs of the studies and SCE's HECA budget has demonstrated such.
38. The record demonstrates by the preponderance of the evidence that the costs that SCE will incur from participating in the funding of the HECA project are reasonable and total less than 50% of total costs of the studies.
39. Participation in the HECA feasibility study by SCE will provide SCE with a better understanding of this promising technology.
40. It is reasonable to require SCE to submit progress reports to the Energy Division every six months over the course of the HECA project and attach the available feasibility studies as appendices.
1. Authorizing SCE to recover Phase I costs booked into the HECAMA, established pursuant to Resolution E-4227A, does not constitute retroactive ratemaking.
2. GHG reduction is a policy goal of California utilities law.
3. The costs of Phase I of the HECA Study - up to $17 million - that SCE has incurred or will incur are reasonable.
4. Resolution E-4227A authorized SCE to book up to $30 million into the HECAMA to cover Phase I and Phase II costs and to seek recovery of these costs in an application.
5. It is inconsistent with Resolution E-4227A to defer consideration of Phase II costs to a subsequent proceeding.
6. D.08-04-038 determined that FEED study costs are not project development costs as set forth in D.06-05-016.
7. California statutes, including Assembly Bill (AB) 32 (Stats. 2006, Ch. 488), AB1925 (Stats. 2006, Ch. 47-1), Senate Bill (SB) 1368 (Stats. 2006, Ch. 598) and Executive Orders S-7-04 and S-3-05, call for greenhouse gas reduction.
8. It is reasonable to authorize SCE to recover up to $13 million - to be incurred by SCE in Phase II of the HECA Study, subject to a reasonableness review in a future ERRA reasonableness proceeding, if such expenditure is justified by the results of the Phase I analysis.
9. SCE's disclosure plan meets the requirements of Resolution E-4227A.
10. The HECA project meets the requirements of Resolution E-4227A and D.08-04-038 because the project, if built, will be consistent with SCE's overall procurement strategy.
11. SCE has fulfilled the notice requirements set forth in Resolution E-4227A.
12. The detail provided in SCE's HECA budget, as supplemented by the testimony during the hearing, meets the requirement set forth in Resolution E-4227A.
13. To determine the reasonableness of SCE's HECA project costs, it is not necessary to determine whether ratepayer funding was critical to DOE's decision to award $308 million to the HECA project.
14. It is reasonable to authorize SCE to recover the costs of the HECA project up to a total of $30 million.
IT IS ORDERED that:
1. Southern California Edison Company is authorized to recover up to $17 million for Phase I costs of the Hydrogen Energy California feasibility study recorded or to be recorded in the Hydrogen Energy California Memorandum Account.
2. Southern California Edison Company is authorized to recover up to $13 million in costs for Phase II costs of the Hydrogen Energy California feasibility studies recorded or to be recorded in the Hydrogen Energy California Memorandum Account, subject to a reasonableness review in a future Energy Resource Recovery Account reasonableness proceeding.
3. Southern California Edison Company's Public Disclosure Plan, as described in its application, is approved.
4. Southern California Edison Company shall submit progress reports to the Energy Division every six months over the course of the Hydrogen Energy California project and attach the available feasibility studies as appendices to its progress reports. The submission of a progress report to the Energy Division does not reopen this proceeding.
5. Application 09-04-008 is closed.
This order is effective today.
Dated December 3, 2009, at San Francisco, California.
I will file a concurrence.
/s/ TIMOTHY ALAN SIMON
Commissioner
Concurrence of Commissioner Timothy Alan Simon
Item 33: Decision Approving Application of Southern California Edison Company for Authorization to Recover Recover Costs necessary to Co-Fund a Feasibility Study of a California IGCC with Carbon Capture and Storage
I firmly support this Decision, which approves up to $30 million in funding for Phase I and Phase II feasibility, engineering, and economic studies associated with this critical Hydrogen Energy California (HECA) Integrated Gasification Combined Cycle (IGCC) project.1 This project has the potential to advance some of California's Energy Action Plan objectives as one element of our expanding low-carbon resource portfolio. Finally, the HECA project is compatible with my core regulatory philosophies of investing in cost-effective clean tech energy resources, increasing energy independence, and maximizing economic stimulus opportunities through our energy policies.
This proposed project is unlike other efforts in IGCC development in the U.S., and stands apart from other emerging resources from both a technical and financial standpoint. The U.S. Department of Energy award of $308 million in federal funding given to Hydrogen Energy International (HEI) in July of this year is a significant and compelling financial endorsement.2 Furthermore, the HECA project supports policy objectives that are high priorities at the federal level, including carbon sequestration, clean tech energy investments, job stimulus, and energy independence and security. I support all research and development efforts that could incrementally reduce our reliance on foreign energy supplies.
If ultimately deemed feasible for commercialization, the HECA project will provide a source of baseload electricity by gasifying petroleum coke from oil refineries. The project will also avoid greenhouse gas (GHG) emissions that would otherwise occur by exporting this petroleum coke to other nations for use as feedstock in their electricity production processes.3 Another benefit of the HECA project is its potential to address growing demand in the Kern County area, with the ability to serve up to 150,000 homes.4
Finally, I am encouraged by the measure of economic stimulus that a project of this magnitude will offer to Kern County and surrounding communities. It is important to highlight the approximately 100 permanent professional operational positions and up to 1500 new construction jobs that the potential HECA facility could generate as California faces continued unemployment in this faltering economy. Accordingly, we should continue to incorporate green jobs and stimulus opportunities into our cost-benefit analyses as we shape policy going forward.
Dated: December 9, 2009.
/s/ TIMOTHY A. SIMON
Timothy Alan Simon
1 Decision Approving Application of Southern California Edison Company for Authorization to Recover Costs Necessary to Co-Fund a Feasibility Study of a California IGCC with Carbon Capture and Storage (D.09-12-014), November 3, 2009.
2 D.09-12-014 at 7.
3 See project benefits at http://www.hydrogenenergycalifornia.com/resources/documents/heca-project-factsheet-June09.pdf
4 Id.
