2. Procedural Background
Southern California Edison Company (SCE) owns a 48% share in Four Corners Generating Station Units 4 and 5 (Four Corners), an operational coal-fired generation plant operated by the Arizona Public Service Company (APS) and located in New Mexico, pursuant to ownership agreements which expire in mid-2016. SCE entered into an agreement to sell its share in Four Corners to APS, and filed this application for an order from the Commission approving the proposed sale and sale terms, approving its request to make certain capital expenditures in the plant, and authorizing its proposed ratemaking treatment. In addition, SCE sought a finding that the sale does not require environmental review or, in the alternative, asked the Commission to issue a negative declaration, pursuant to the California Environmental Quality Act (CEQA).1
The Utility Reform Network (TURN) filed a timely protest, and Sierra Club, the Environmental Defense Fund (EDF), and the Commission's Division of Ratepayer Advocates (DRA) subsequently moved for and were granted party status by ruling of the Administrative Law Judge (ALJ).
On February 8, 2011, President Peevey issued an assigned Commissioner's scoping memo and ruling (scoping memo) which identified the issues to be determined in resolving the application and set a schedule for addressing those issues. The scoping memo provided that the sale would be subject to environmental review pursuant to CEQA, and determined the issues in this proceeding as follows:
1. Is SCE's ownership of its interest in Four Corners no longer necessary or useful in the performance of its duties to the public, under Pub. Util. Code § 851?
2. Will divestiture of SCE's interest impair the reliability of the electric supply? (See Pub. Util. Code § 362.)
3. Is the divestiture pursuant to the Purchase and Sale Agreement reasonable? This issue includes consideration of whether the value of the agreement is reasonable and whether the divestiture is consistent with Senate Bill (SB) 1368 mandating a greenhouse gas emissions performance standard (EPS) for certain investments in baseload power plants and Commission decisions establishing and implementing the EPS for SCE.
4. Are SCE's proposed 2012 capital expenditures in Four Corners reasonable? This issue includes consideration of whether such expenditures are consistent with the EPS and Commission decisions establishing and implementing the EPS for SCE.
5. What is the appropriate ratemaking treatment of the gain on sale? This issue includes consideration of SCE's ratemaking proposal to credit the entire after-tax, above-book value gain for Four Corners, grossed up to a revenue requirement, to SCE ratepayers through the Base Revenue Requirement Balancing Account.
6. What are the unavoidable significant environmental impacts of the proposed project or, in the alternative, is there substantial evidence that, with the incorporation of identified mitigation measures, all project-related environmental impacts can be reduced to less than significant levels?
7. If there are significant environmental impacts, are there potentially feasible mitigation measures or project alternatives that will avoid or lessen them?
8. If there are significant environmental impacts that cannot be avoided then, as between the proposed project and the project alternatives, which is environmentally superior?
9. Are the mitigation measures or environmentally superior project alternatives infeasible?
10. If the proposed project or project alternative results in significant and unavoidable impacts, are there overriding considerations that nevertheless merit Commission approval of the proposed project or project alternative?
11. Was the environmental review document completed in compliance with CEQA, did the Commission review and consider it prior to approving the project, and does it reflect the Commission's independent judgment and analysis?
The scoping memo set a schedule for evidentiary hearing on Issues 2 through 5 based on the assumption that the Energy Division would prepare a negative declaration or a mitigated negative declaration (recognizing the potential need to take additional evidence in the event that the environmental review document resulted in additional project costs), and a time for filing briefs on all issues based on the assumption that the environmental review document would have issued in time for the parties to address issue no. 11 in their opening briefs (recognizing the potential need for supplemental briefing in the event that the environmental review document was not issued in time).2
Evidentiary hearing on Issues 2 through 5 was held May 23, 2011,3 at which time the draft environmental review document had yet to issue. Pursuant to the agreement of the parties, SCE, Sierra Club, TURN, and DRA filed interim opening briefs on Issues 1 through 5 on June 14, 2011, and SCE, TURN and DRA filed interim reply briefs on those issues on June 24, 2011 (subject to the need to take additional evidence in the event that the environmental review document resulted in the additional project costs, as provided in the scoping memo and ruling). (Tr. 184-185.)
The Commission's Energy Division issued a draft Initial Study/Negative Declaration (IS/ND) on September 27, 2011, which preliminarily found that the Four Corners sale would not have any significant adverse environmental impacts. Energy Division issued the final IS/ND on January 26, 2012.4
SCE, Sierra Club, and EDF filed opening briefs on Issues 6 through 11 on February 6, 2012, and SCE and Sierra Club filed reply briefs on those issues on February 13, 2012, upon which the record was submitted.
1 Public Resources Code Section 21000, et seq.
2 The scoping memo and ruling provided for further process in the event that the Energy Division ultimately prepared an environmental impact report rather than a negative declaration or mitigated negative declaration.
3 TURN's unopposed June 15, 2011, motion for transcript corrections is granted.
4 By ruling dated January 26, 2012, the administrative law judge admitted the final IS/ND into evidence.
