5. Requirement to ensure payment for intervenors and DRA's consultants
If the proposed transmission line is not certificated by this Commission, we must also consider whether the Pub. Util. Code applies during the pendency of this proceeding. This is an issue of first impression, as previous applicants who have applied for CPCNs before being certificated as a public utility have either not addressed the question of financing for eligible intervenors or partnered with investor-owned utilities.9
Nevada Hydro maintains that there is no legal predicate to require it to post a bond or provide some other guarantee of payment for intervenor compensation or reimbursement of DRA consultant expenses. SCE and SDG&E contend that the Pub. Util. Code must be read in its entirety; i.e., if Nevada Hydro will become a public utility upon issuance of a CPCN, then it follows that the intervenor compensation statutes must also apply during the pendency of the proceeding. SCE and SDG&E argue that Nevada Hydro seeks to avoid intervenor compensation statutes by claiming that favorable Code provisions are applicable, while also claiming that unfavorable provisions do not apply. CBD, SAMTF and FOF&P, FRONTLINES, and Pecora concur and agree that a bond should be posted to assure payment to intervenors.
DRA's comments primarily address expert witness costs and request an assurance that all of those costs would be paid by Nevada Hydro. DRA estimates that a contract with an expert witness in this proceeding will cost approximately $450,000 but notes that the price may change depending on how issues develop throughout the proceeding. To reimburse its expert witness costs, DRA proposes that the contract be paid by Nevada Hydro consistent with the practices and procedures used in previous major transmission CPCN proceedings. DRA clarifies that these procedures consist of the following steps: 1) expert consultant performs work and submits invoices under the terms and conditions of the agreement approved by the Department of General Services; 2) DRA's contract manager, the Commission's Contracts Office, and the Commission's Fiscal Office approve the invoice for payment; 3) payment is delivered to the consultant; 4) contract officer invoices the CPCN applicant for payment; 5) applicant submits reimbursement payment to the Fiscal Office; and 6) fiscal office directs the reimbursement payment to the DRA budget. However, DRA does not oppose a bond or other guarantee of payment for the estimated cost of the contract.
At the time of filing, FRONTLINES estimated a total of $300,000 for intervenor compensation costs and recommended the Commission increase this estimate by 50% to accommodate potential future increases. FRONTLINES also suggests that in order to allow for consideration of complex issues raised in testimony served after initial intervenor compensation budgets were filed and to accommodate potential future litigation, that value should be increased an additional 50%. Thus, FRONTLINES recommends a minimum surety bond value of $675,000 plus DRA's costs. FRONTLINES maintains these costs are reasonable and in accordance with Public Utilities Code sections 1801, 1801.3, and 1807.
CBD, SAMTF and FOF&P filed joint comments (collectively referred to as CBD) in the Motion for Acceptance of Late Filed Comments on Phase 1 Scoping Memo Ruling.10 The CBD comments state that the amount of a surety bond provided for this case must ensure that the intervenors and DRA are fully compensated. They suggest a formula for calculating the total amount of the surety bond:
Total Amount of Surety Bond = ((Total Amount of Intervenor Request + Total Amount of DRA Request) x 1.25) x potential compensable litigation costs x 2))
The CBD comments further argue that a surety bond is both appropriate and necessary in this proceeding, because Nevada Hydro is attempting to become a public utility, but seeking to avoid associated fiduciary obligations. Furthermore, Nevada Hydro has repeatedly stated that it will not provide intervenor compensation if it does not receive a CPCN.11 Finally, the CBD comments request that if the Commission determines that a surety bond is not appropriate for this proceeding, then a determination should be made to pay out of a general intervenor compensation fund. SCE and SDG&E, however, do not support this proposal, because there is no such fund allotted in the Code. They also emphasize that neither SCE or SDG&E should be responsible for paying intervenors, as existing public utilities ratepayers should not be required to finance a failed third party CPCN application. Nevada Hydro rebuts CBD's allegations, arguing that CBD has mischaracterized and misquoted its source for these assertions.
Discussion
We agree with SCE and SDG&E: given that Nevada Hydro will become a public utility if a CPCN is issued, we must conclude that the requirements of the Pub. Util. Code will apply during the pendency of this proceeding. We must apply the law in a way that harmonizes the various statutory requirements of the Code. The intervenor compensation statutes were enacted to apply to all electric, gas, water, and telephone utilities and the Commission is required to administer these regulations in a way that "encourages the effective and efficient participation of all groups that have a stake in the public utility regulation process."12 A transmission line proceeding often has many interested parties and intervenors who "have a stake" in the outcome of this matter. It would have a chilling effect on effective participation, if there is not some guarantee that funding will be available to pay those eligible intervenors who are determined to have made a substantial contribution to this proceeding, whether or not a CPCN is issued to Nevada Hydro. In addition, this approach treats all applicants for a transmission CPCN similarly; to hold otherwise would be to impose more stringent requirements on utility CPCN applicants than on non-utility applicants without any justification for this differential treatment.
We order Nevada Hydro to post a surety or performance bond with a face value of $550,000, or approximately 1.5 times the current budgets estimated by the three eligible intervenor groups in this proceeding.13 This is a reasonable amount that should be sufficient to provide funding for the intervenors, including potential costs related to judicial review. We note that Lodi Gas Storage was ordered to post a surety or performance bond in the amount of $20 million to cover its obligations under the CPCN issued in D.00-05-048.14 The bond requirement shall remain in effect until the proceeding is completed and Nevada Hydro has compensated all intervenors that the Commission determines have made a substantial contribution to the proceeding. While there is a fund within the Commission's budget to pay intervenors in broad policy rulemakings where there are either numerous or unnamed respondents, this proceeding does not meet the requirements for paying intervenors from this fund.15
Section 631 requires every electrical and gas corporation that proposes to construct plant costing more than $100 million to reimburse the Commission for consultants and advisory services for the processing of an application for the certification of the plant. While we acknowledge that Nevada Hydro has readily funded the environmental review process required by CEQA, we observe that this action supports Nevada Hydro's interests, i.e., the application cannot move forward without such funding. In Phase 2, DRA may argue against the need for the transmission line and may dispute certain cost estimates. DRA recommends that the Commission order Nevada Hydro to comply with the reimbursable contract process that is already in place and to cooperate with the Commission's officers and agents for these purposes. We agree that this is a reasonable approach and direct Nevada Hydro to enter into a progressive invoicing and reimbursable contract arrangement with DRA to fund DRA's consultants in this matter.
We conclude that the costs of providing a performance or surety bond and entering into a progressive invoicing and reimbursable contract arrangement with DRA are reasonable costs of doing business for an entity proposing to be certified as a public utility and proposing to build a project now estimated to cost $684 million.16
9 For example, in the Lodi Gas matter, no intervenors were found to be eligible for the intervenor compensation program. In D.03-05-038, the Commission authorized Pacific Gas & Electric Company (PG&E) to withdraw A.01-04-012, based, in part, on PG&E's partnership with the Western Area Power Association and Trans-Elect to construct the Path 15 Upgrade.
10 Motion granted by ALJ Ruling dated April 25, 2011.
11 CBD Comments at 4.
12 Section 1801.3(d).
13 Based on updated filings, the intervenors estimate budgets of approximately $400,000 to participate in this proceeding. (CBD estimates a budget of $233,125; FRONTLINES estimates a budget of $80,750; SAMTF/FOF&P estimate a budget of $80,190.)
14 Lodi Gas decision, 6 CPUC 3d at 245. The decision further notes that such a requirement is not unusual and that other utilities have voluntarily agreed to surety bonds to cover events that may not be covered by insurance policies.
15 D.00-01-020 established a fund within the Commission's budget for intervenor awards in quasi-legislative proceedings in which there are either numerous respondents or respondents are not named.
16 November 30, 2010 Testimony of Nevada Hydro Witness Drzemiecki, Exhibit 2 indicating Gross Plant Beginning of Year. Gross plant includes costs associated with construction of physical plant, acquisition of rights-of-ways and easements, and financing costs during the construction period.
