5. Comments on the Proposed Decision

Comments were filed on December 8, 2008 by SDG&E, WPTF and IEP. Reply comments were filed by SDG&E, WPTF and IEP on December 15, 2008.

SDG&E generally supports the Proposed Decision (PD), but asked the Commission to emphasize that MEF II is the "product of unique and extraordinary [ordinary] circumstances,"¹⁵ and that the Commission should make more transparent its application of extraordinary circumstances to communicate clearly to the market that UOG is still a viable option available to a utility. Based on SDG&E's comments, the PD was augmented to give as clear a signal as possible that we are approving MEF II because it is needed for local reliability in its service territory, and that this constitutes the extraordinary circumstance exception to the preferred competitive solicitation protocol.

WPTF asks the Commission to reject MEF II on the same grounds that we granted motions to dismiss Pacific Gas and Electric Company's (PG&E) application for Tesla in D.08-11-004. In Tesla, PG&E did not hold a competitive RFO, and we found that PG&E did not "adequately establish that conducting a request for offer is infeasible; a central requirement to proposing utility owned generation outside of a competitive process, as required by Decision 07-12-052."¹⁶ As described in this decision, SDG&E's situation differs from the PG&E/Tesla situation in a number of ways (2009 local reliability need, CAISO requirements associated with the retirement of the South Bay project, the participation of an IE, etc.), so we decline to adopt WPTF's suggestion to reject MEF II at this stage of the proceeding.

IEP's comments focused on the decision's rationale for approving MEF II and suggest that the final decision identify the "extraordinary circumstance" that triggers the exceptional treatment afforded MEF II.¹⁷ IEP acknowledges that D.07-12-052 established a framework for procurement through a competitive solicitation, unless exceptional circumstances justified utility-owned generation, and that D.08-11-008 further clarified those exceptions: "certain extraordinary circumstances that are unpredictable in advance may necessitate utility ownership of generation at a particular site."¹⁸

D.08-11-008, in modifying D.07-12-052, gave the Commission flexibility to determine when a confluence of factors justified the Commission approving a UOG project chosen other than through a competitive solicitation. That is the situation that is facing SDG&E and the Commission: SDG&E did conduct an RFO that included soliciting bids for the Miramar site, no parties bid on this project, and other projects that SDG&E had in its procurement pipeline have experienced on-line date delays. This combination of factors led to a concern on the part of SDG&E that it might not have sufficient local area capacity in place by summer 2009 to meet its bundled customers' reliability needs. SDG&E then took the steps it outlined in its application to secure an EPC contract for its Miramar site that could be on-line by summer 2009.

We carefully reviewed and considered IEP and WPTF's comments and although we are approving MEF II, we are also admonishing SDG&E to have adequate procedures in place to ensure that they do not again find themselves in a reliability crisis without sufficient time to follow the procurement protocols set forth in D.07-12-052. Specifically, SDG&E must institute internal mechanisms that are triggered when projects run into unanticipated delays or cancellations so that the utility can conduct a "fast track" RFO and procure needed reliability resources through the competitive solicitation process. This is a subject that may be explored further in Phase II of the current 2008 LTPP, R.08-02-007, or in another appropriate proceeding.

¹⁵ SDG&E Opening Comments, p. 3.

¹⁶ WPTF Opening Comments, p. 4, citing D. 08-11-004, p. 2.

¹⁷ IEP Opening Comments, p. 4.

¹⁸ Id., p. 3, citing D.09-11-008, pp. 19-20.