II. Background
A. Procedural History
SCE filed this application pursuant to Ordering Paragraph 8 of D.04-06-010, which required SCE to "file an application seeking a certificate authorizing construction of the first phase of Tehachapi transmission upgrades consistent with its 2002 conceptual study and the study group's recommendation within six months of the effective date of this order."6 That order was premised on Finding of Fact 18 of D.04-06-010 which found that the magnitude and concentration of renewable resources identified in the CEC Report justified a "first phase of Tehachapi transmission upgrades" to facilitate achievement of the renewable power goals established in Cal. Pub. Util. Code § 399.11 et seq.
SCE states that based on its obligation under §§ 210 and 212 of the Federal Power Act (16 U.S.C. § 824(i) and (k)) and §§ 3.2 and 5.7 of the California Independent System Operator (ISO) Tariff, it has determined that the project is needed to interconnect and integrate additional generation from several potential generators north of the Antelope Substation. The addition of a single 300 MW project northwest of Antelope would result in thermal overload of the existing Antelope-Mesa 220 kV transmission line. Segment 2 would prevent that overloading. In addition, Segment 2 would improve overall system reliability by increasing capacity between the Antelope and Vincent Substations, particularly in light of continued load growth in the Antelope Valley.7
SCE states that its request for a CPCN for Segments 2 and 3 of the Tehachapi Renewable Transmission Project is conditioned on the establishment of clear cost recovery mechanisms in advance of construction.
SCE sought a declaratory order from the Federal Energy Regulatory Commission (FERC) that the costs of Segment 2 and 3 are eligible for recovery in transmission rates. FERC found Segment 2 eligible for rolled-in rate treatment, but found that Segment 3 is not a network upgrade, but rather appeared to be a gen-tie, which under FERC precedent is not eligible for rolled-in rate treatment.8
Accordingly, SCE requests that the Commission find that the prudently incurred costs of Segments 2 and 3 of the Tehachapi Renewable Transmission Project (that are not approved for recovery in network transmission rates by FERC) qualify for recovery in retail rates under § 399.25(b)(4).
The Commission stated in D.04-06-010 that "the need for Tehachapi upgrades has been developed sufficiently to allow us initially to determine for purposes of § 399.25(b)(1) that the first phase of Tehachapi network upgrades would provide benefit to the transmission network." (D.04-96-010, mimeo. at pp. 16-17.) However, the Commission stated that:
... the need determinations in individual CPCN proceedings will relate to the particular projects and upgrades associated with that specific proceeding. In this decision, we are making an initial need determination overall with respect to the necessary contribution of Tehachapi wind in general to meeting RPS [Renewables Portfolio Standard] goals. Thus, these need determinations are separate and severable. (D.04-06-010, mimeo. at p. 17.)
The Commission also stated that "[t]he exact nature of the upgrades and the resource potential must still be established to determine if all of the resources can be developed in a way that is cost-competitive, taking into account transmission costs, and that Tehachapi projects are consistent with a best-fit procurement strategy." (Id., p. 16.) The Commission further stated that, "when a utility files a certificate application for Tehachapi upgrades, we will consider at that time the exact ratemaking treatment contemplated under § 399.25 and will also address project financing, as well as any additions to the record regarding need, as necessary." (Id., p. 18.)
SCE filed its application on December 9, 2004. PPM Energy submitted a response to the application, expressing general support for the project. Palmdale Hills Property and Anaverde, Inc., submitted protests, both addressing specific routes being considered for the project. On April 7, 2005, the Division of Ratepayer Advocates (DRA; at the time, it was called the Office of Ratepayer Advocates) filed motions for leave to late file protests to A.04-12-007 and A.04-12-008, with the protests attached. The Administrative Law Judge (ALJ) appropriately granted DRA's request.
However, because the environmental studies in SCE's Proponent's Environmental Assessment (PEA) were not complete, SCE submitted an Amended Application and PEA on September 30, 2005. Palmdale Hills Property and Anaverde submitted responses to the Amended Application.
Opening Briefs were filed by SCE, DRA, Palmdale Hills Property, Anaverde, and Oak Creek Energy Systems, Inc. Reply Briefs were filed by SCE, DRA, and Oak Creek.
Finally, SCE filed a motion on January 15, 2007 to reopen the record to provide new information concerning SCE's contracts for windpower in the Tehachapi area, and additions to the ISO's interconnection queue in the region. No parties objected to the motion, which is hereby granted.9
B. Scope of the Proceeding
Consistent with the direction provided in D.04-06-010, in this proceeding we consider whether the proposed Tehachapi-Vincent Transmission Project is necessary to facilitate achievement of RPS goals based, in part, on the results of the RPS procurement process and the General Order (GO) 131-D considerations of alternatives to the proposed project. Pursuant to § 399.25(b)(1), we must determine whether the transmission project will provide benefits to the transmission network.
In this proceeding, we also address the requirements of §§ 1001, 1002 and CEQA. Section 1002 provides, in pertinent part, that the Commission, as a basis for granting any CPCN pursuant § 1001, shall give consideration to the following factors: (1) community values, (2) recreational and park areas, (3) historical and aesthetic values, and (4) influence on environment.
Pursuant to CEQA, the Final EIR that was prepared for the proposed project identifies the significant effects on the environment of the project, identifies alternatives to the project, and indicates the manner in which significant environmental effects can be mitigated or avoided. Under CEQA, the Commission cannot approve the proposed project or an alternative unless it mitigates or avoids any significant effects on the environment and makes specific written findings pursuant to Public Resources Code § 21081 (see Attachment B). Where the Commission finds that specific economic, legal, social, technological or other conditions make infeasible the mitigation measures or alternatives identified in the Final EIR, it may not approve the project or an alternative unless it finds that such effects are outweighed by the overriding economic, legal, social technological or other project benefits.
GO 131-D further prescribes that prior to issuing a CPCN, the Commission must find that the project is necessary to promote the safety, health, comfort, and convenience of the public. In addition, Section X of GO 131-D requires that the applicant describe the measures taken or proposed by the utility to reduce the potential exposure to electric and magnetic fields (EMFs) generated by the proposed facilities.
Issues surrounding general project cost-effectiveness, cost estimates and tradeoffs for alternative routes, right of way-acquisition costs, mitigation costs, and adoption of a cost cap are within the scope of this proceeding. In addition, SCE requests that the Commission issue a conclusion of law stating that, if the FERC determines that the facilities are ineligible to be "recovered through general transmission rates," then the prudently incurred costs are eligible for recovery under § 399.25(b)(4). Therefore, the ratemaking mechanisms and procedures that the Commission may use to implement § 399.25 are also within the scope of this proceeding.
The assigned Commissioner required SCE to serve additional testimony addressing whether the Tehachapi-Vincent Transmission Project is a reasonable investment for California's, and SCE's ratepayers. Although the CEC Report indicates that Kern County (Tehachapi) wind alone may satisfy much, if not all, of RPS demand, the study did not address the operational cost of integrating Tehachapi wind resources into the system, the cost-effectiveness of wind resources compared to other renewable resources, or the likelihood of wind projects succeeding in the utilities' RPS solicitations.
In order to grant a CPCN in the instant application, we must make an affirmative finding that the Tehachapi-Vincent Transmission Project is necessary to facilitate the achievement of the RPS goals. In order to make such a finding, we must, at a minimum, consider the results of the RPS process to date.
Accordingly, the assigned Commissioner appropriately required supplemental testimony from SCE. This testimony addressed the progress of the RPS Program, including the number of offers or bids submitted by Tehachapi area wind developers, the number and content of informal requests or proposals received by the utilities prior to or between competitive solicitations, and whether any of the Tehachapi wind projects were successful bidders in the RPS or interim solicitations.
6 By Ruling dated October 21, 2004, in Investigation (I.) 00-11-001, the assigned Commissioner directed SCE to file two separate CPCN applications for the Tehachapi upgrades: one CPCN application for Segment 1 and one CPCN application for Segments 2 and 3.
7 SCE Proponent's Environmental Assessment (PEA), Volume 1, at page 2-2.
8 SCE Opening Brief, p. 4, citing 113 FERC ¶ 61,143 (2005). SCE also argues that because FERC deferred ruling on SCE's request for advance prudence, SCE may still be at risk for some costs for Segment 2, in addition to having no assurance of cost recovery for Segment 3.
9 Anaverde LLC filed comments in response to the motion, but did not oppose the motion, except to the extent that the new evidence would be used to support a route other than the Proposed Route. As the new evidence does not impact the route of the project, and no party challenged the accuracy of the evidence, we hereby grant SCE's motion.
