7. Assignment of Proceeding

Michael R. Peevey is the assigned Commissioner and Seaneen M. Wilson is the assigned ALJ in this proceeding.

1. The Agreements approved in D.07-09-010, authorized the construction of peakers by each of the Developers.

2. The Agreements were subsequently modified by D.09-03-033.

3. SDG&E's amended Petition for Modification of D.07-09-010 (as previously modified by D.09-03-033) was filed within one year of the issuance of the D.09-03-033.

4. The Amended Agreement 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.

5. SDG&E's proposed modification to Finding of Fact 8 in D.07-09-010 as previously modified by D.09-03-033) is not supported by the record.

6. The balance of SDG&E's proposed modifications to D.07-09-010 (as previously modified by D.09-03-033) are supported by the record, as set forth in Attachment A.

7. The modifications to the Amended Agreement and Modified PPA occur in the selected terms and conditions, as well as the online date and do not fundamentally change the nature of the original Amended Agreement.

8. The requested modifications to the Amended Agreement and Modified PPA have been reviewed by an independent evaluator (PA Consulting Group), and have been found to be reasonable and prudent.

9. SDG&E's Motion to File selected portions of its Petition Under Seal is consistent with the provisions of D.06-06-066.

1. SDG&E's Petition satisfies the requirements of Rule 16.4 regarding the proposed modifications related to the Amended Agreement.

2. SDG&E's proposed modification to Finding of Fact 8 in D.07-09-010 as previously modified by D.09-03-033) should not be adopted.

3. The balance of SDG&E's proposed modifications to D.07-09-010 (as previously modified by D.09-03-033) as set forth in Attachment A, should be adopted.

4. The requested modifications to the Amended Agreement and Modified PPA (Exhibit 2 to Petition, Filed under Seal, Dated September 4, 2008) should be granted.

This order should be effective immediately.

ORDER

IT IS ORDERED that:

1. Decision (D.) 07-09-010 (as previously modified by D.09-03-033) is further modified as shown in Attachment A. All other language in D.07-09-010 (as previously modified by D.09-03-033) shall be read and understood to conform to those modifications.

2. San Diego Gas & Electric Company's requested modifications to the Amended Wellhead Option Agreement and Power Purchase agreement between San Diego Gas & Electric Company and Wellhead Power Margarita, LLC, attached as Exhibit 2 to its Petition for Modification, dated September 4, 2008, are granted.

3. San Diego Gas & Electric Company's motion to file under seal is granted. The information shall be filed under seal and shall remain under seal for a period of two years after the date of this order. During this two-year period, this information shall remain under seal and shall not be viewed by any person other than the assigned Commissioner, the assigned Administrative Law Judge, the Assistant Chief Administrative Law Judge, or the Chief Administrative Law

Judge, except as agreed to in writing by San Diego Gas & Electric Company or as ordered by a court of competent jurisdiction.

4. Application 07-05-023 is closed.

This order is effective today.

Dated December 17, 2009, at San Francisco, California.

ATTACHMENT A

REDLINES TO D.07-09-010 (as previously modified by D.09-03-033)

Page 1-2: For each of these sets of agreements the J-Power agreements, SDG&E shall grant an options to lease its land to a developer (J-Power and Wellhead, respectively), who shall construct a gas-powered peaker generators (peakers) on the leased land. For the Amendments, SDG&E shall grant an option to locate the peaker on either SDG&E-owned property or other private property. The J-Power PPAs commits the output of those its peakers to SDG&E for a period of 25 years, after which the leases shall expire and title to the peakers shall transfer to SDG&E at no additional cost. The Wellhead PPA will terminate on December 31 of the year in which the 25th anniversary of initial delivery occurs, and so will be in effect for longer than 25 years, but less than 26 years. Since it has been confirmed that the Wellhead peaker is going to be located on private property, as opposed to SDG&E-owned property, the lease provisions regarding transfer to SDG&E are inapplicable.

Page 2 (add new paragraph before first full paragraph): Due to unforeseen delays associated with necessary permitting, the J-Power and Wellhead projects was were delayed. Nevertheless, because the J-Power and Wellhead projects continues to prudently meet demonstrated need at a reasonable cost, approval remains in the public interest.

Page 2 Because the public interest is served by these lease arrangements, this decision also finds that these leases of utility land to J-Power falls within the exceptions to the requirements of Pub. Util. Code § 851 found in Pub. Util. Code § 853(b). Since the option to lease SDG&E-owned land in the Amendment is no longer applicable, the provisions of Pub. Util. Code § 851 do not apply to the Amendment.

Page 4: Under the Amendments, J-Power Wellhead would construct one simple cycle gas-fired peaker turbine with a capacity of about 44 MW, to be constructed on 1.68 acres of SDG&E's 19 acre Margarita substation site in Orange County, to which the generators would be connected. The commercial online date will for the Wellhead project was originally expected to be July 1, 2008, and the delivery term of the PPA is was expected to be from July 1, 2008 through December 31, 2033. However, unforeseen permitting delays associated with permits required by Orange County require a need to reschedule the on-line date. These unanticipated delays have also caused the need to re-locate the project to private property near SDG&E's El Cajon 69/12 kV substation on the corner of W. Main Street and N. Johnson Ave. in El Cajon, CA, to which the generators will be connected.

Page 4: At the end of each the J-Power lease, ownership of the peaker generators constructed on that site will transfer to SDG&E without cost. With respect to Wellhead, since the peaker will be located on privately owned land, ownership of the peaker will remain with Wellhead.

Page 7: While it would otherwise be appropriate to wait until determining the total LTPP needs of SDG&E in R.06-02-013 before reaching a decision on this application, the need to begin the process of construction of the peaker units in time to meet the projected need for the summer of 2008 requires that we make a determination without delay. Given SDG&E's current and unique situation, we are persuaded to approve these commitments prior to a final need determination in the LTPP proceeding, R.06-02-013. However, we note that the conclusions reached here today are based on a unique set of circumstances and should not be assumed to be applicable in a general sense. Moreover, in D.07-12-052, based on SDG&E' 2006 LTPP, the Commission authorized SDG&E to procure a total of 530 MW by 2015, including the approximately 130 MW represented by J-Power and Wellhead.

Page 8: The J-Power project will be built on SDG&E property, and therefore meets the requirement that IOUs give priority to generation projects on existing (brownfield) sites before using new (Greenfield) sites.

Page 9: (add sentence to end of third full paragraph): With respect to Wellhead, since a privately owned site has been selected, the option to lease SDG&E-owned property is inapplicable. Nevertheless, the agreement remains a least cost, best fit option for SDG&E's ratepayers.

Page 11: SDG&E will receive lease payment revenues from J-Power and Wellhead.

Finding of Fact No. 2: Originally, SDG&E has entered into an PPA and lease option agreement to enter into a PPA and lease with Wellhead to develop approximately 44 MW of gas-fired peaking generation on 1.68 of SDG&E's 19 acre Margarita substation in Orange County, to which the generators will be connected. The commercial online date will was expected to be July 1, 2008, and the delivery term of the PPA is was expected to be from July 1, 2008 through December 31, 2033. SDG&E has now entered into an amended option agreement to enter into an alternate PPA, pursuant to which Wellhead may locate the peaker on privately owned property. The amended option agreement and associated alternate PPA include an expected commercial operation date of July 1, 2010. The amended option, however, does not expire until November 1, 2010, which will allow for commercial operation as late as the second quarter of 2011. Moreover, Wellhead has now confirmed that it intends to locate the peaker on private property near SDG&E's El Cajon 69/12 kV substation on the corner of W. Main Street and N. Johnson Ave. in El Cajon, CA, to which the peaker will be connected.

Finding of Fact No. 4: At the end of each the J-Power lease, ownership of the peaker generators constructed on that site will transfer to SDG&E without cost. With respect to Wellhead, since the peaker will be located on privately owned land, ownership of the peaker will remain with Wellhead.

Finding of Fact No. 8: Delay in approval of peaking generation could result in shortfalls as early as 2008 2010.

Conclusion of Law No. 2: SDG&E's PPA amended option agreement with Wellhead and its associated lease option agreement alternate PPA should be approved, as they prudently meet demonstrated need at reasonable costs.

Ordering Paragraph No. 2: SDG&E's PPA and lease option agreement of May 2, 2007 amended option agreement and associated alternate PPA of September 4, 2008 with Wellhead Power Margarita, LLC is approved for the site on private property near SDG&E's El Cajon 69/12 kV substation on the corner of W. Main Street and N. Johnson Ave. in El Cajon, CA. SDG&E shall provide notice of the actual on-line date to the Commission as part of a future compliance advice letter filing, requiring no additional action by the Commission.

(END OF ATTACHMENT A)

Previous PageTop Of PageGo To First Page