4. Discussion of the Requested Relief

The Amended Agreement between SDG&E and Wellhead, has been impacted by unforeseen delays in permitting of the Wellhead peaker at the original SDG&E-owned site, resulting in the relocation of the peaker project.

On November 7, 2007, the Orange County Planning Commission (OCPC) approved a site development permit and variance and issued a Negative Declaration for the Wellhead facility at the Margarita site, located on SDG&E-owned property. However, on January 2, 2008, the Ladera Hope group and six individual filed a petition for writ of mandate seeking to overturn OCPC's decision. On February 19, 2008, SDG&E, Wellhead, and Ladera Hope entered into a Memorandum of Understanding (MOU), in an effort to resolve Ladera Hope's issues. Subsequent to the expiration of the MOU, on May 8, 2008, Ladera Hope submitted a Revocation Request to OCPC in regards to the permit, variance, and declaration previously issued to Wellhead. On May 13, 2008, OCPC issued a Status Conference Statement, stating that it believed its original Negative Declaration was based on flawed information, and that a new environmental review would be necessary. Given this progression of events, Wellhead requested that OCPC rescind its previous approvals for the Margarita project, and started evaluating other suitable sites in the San Diego County area. Given the delays and permitting problems that had already occurred, and knowing that there would be opposition by Ladera Hope and others if another environmental review were performed for the same site, Wellhead and SDG&E's decision to find another location is appropriate.

The project as originally approved would have SDG&E lease land to Wellhead for 25 years for Wellhead to construct and operate the peaker unit and sell the output to SDG&E under defined terms, and then for SDG&E to assume ownership of the peaker unit upon expiration of the lease. Since the project has moved to a new location not on SDG&E property, the ownership of the peaker will not transfer to SDG&E at the expiration of the lease. SDG&E contends that the lost value from not taking ownership of the peakers in 25 years is less than the value that would be received by ratepayers by relocating the project to a non-SDG&E owned site.

Although most proposed changes to D.07-09-010 (as previously modified by D.09-03-033) are straightforward, one is not supported by any documentation in the petition. Specifically, SDG&E proposes to add the following language to Finding of Fact 8:

Also, the Wellhead project may make an important contribution to elimination of once through cooling units in the San Diego service territory as early as next year. Moreover, the Wellhead project is important for reliability in SDG&E's service territory and it should therefore qualify for expedited interconnection treatment under the California Independent System Operator (CAISO)'s generator interconnection procedures.

SDG&E has provided no documentation in support of these factual statements. Therefore, the Commission will not make this modification to Finding of Fact 8.

The amendment of the requested modifications to the Amended Agreement and Modified PPA,¹ resulting from the delays and site change, have been reviewed by an independent evaluator (PA Consulting Group), who found the modifications to be reasonable and prudent.

The Commission accepts SDG&E's proposed modifications to D.07-09-010 (as modified by D.09-03-033), as shown in Attachment A to this decision, authorizes the requested modifications to the Amended Agreement and Modified PPA as shown in Exhibit 2 to the petition for modification, and authorizes a change of the online date of the Wellhead project to July 1, 2010.

¹ Petition, Exhibit 2, Filed under Seal, Dated September 4, 2008.