ALJ/CFT/hkr DRAFT Agenda ID #3313

Ratesetting

4/1/2004 Item 32

Decision PROPOSED DECISION OF ALJ TERKEURST (Mailed 3/2/2004)

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Order Instituting Investigation into Implementation of Assembly Bill 970 Regarding the Identification of Electric Transmission and Distribution Constraints, Actions to Resolve Those Constraints, and Related Matters Affecting the Reliability of Electric Supply.

Investigation 00-11-001 (Filed November 2, 2000)

(See Attachment A for List of Appearances.)

INTERIM OPINION ON TRANSMISSION NEEDS
IN THE TEHACHAPI WIND RESOURCE AREA

TABLE OF CONTENTS

Title Page

INTERIM OPINION ON TRANSMISSION NEEDS
IN THE TEHACHAPI WIND RESOURCE AREA 22

I. Summary 22

II. Procedural Background 44

III. The Tehachapi Wind Resource Area 66

IV. Possible Configurations of a Tehachapi Transmission Project 88

V. Application of § 399.25 and Funding
of Tehachapi Transmission Upgrades 1010

A. Positions of the Parties 1212

B. Discussion 1414

VI. Transmission Planning for the Tehachapi Area 1717

A. Positions of the Parties 1717

B. Discussion 2323

VII. Comments on Proposed Decision 3131

VIII. Assignment of Proceeding 3131

Findings of Fact 3131

Conclusions of Law 3434

INTERIM ORDER 3535

ATTACHMENT A........................LIST OF APPEARANCES

INTERIM OPINION ON TRANSMISSION NEEDS
IN THE TEHACHAPI WIND RESOURCE AREA

I. Summary

The Tehachapi area contains the largest wind resource in California and, if more fully developed, could meet a significant portion of the goals for renewable energy development in California. However, existing transmission constraints in the area currently prevent new wind installations. Large-scale transmission upgrades capable of transporting power from multiple wind projects would be needed to tap the Tehachapi area's renewable potential most economically. We find that "business as usual" transmission planning approaches, which would plan and size Tehachapi transmission upgrades based solely on transmission needs of generation projects that have submitted interconnection requests, is unlikely to achieve the most cost-effective size, configuration, or timing of Tehachapi upgrades.

We require that a collaborative study group be convened to develop a comprehensive transmission development plan for the phased expansion of transmission capabilities in the Tehachapi area. The California Independent System Operator (ISO) and Commission staff should coordinate the study group, with participation by Southern California Edison Company (SCE), Pacific Gas and Electric Company (PG&E), wind developers, and any other interested parties. We encourage the California Energy Resources Conservation and Development Commission (CEC) to participate in the collaborative study process.

Each phase of the planned Tehachapi upgrades should be a logical size and configuration based on the magnitude of the identified wind resource, engineering and cost considerations, and recognition of other factors including regional transmission needs. Consistent with Pub. Util. Code § 399.25¹ and Decision (D.) 03-07-033, the relevant utility would fund all Tehachapi-related network transmission facilities that the Commission finds necessary to facilitate achievement of renewable power goals. While we ask the study group to address this matter, we envision that construction of each phase may be triggered by acceptance of a threshold amount of bids through the Renewable Portfolio Standard (RPS) process.

We require that SCE, acting on behalf of the study group, file a report in this proceeding within six months of the effective date of this order containing the study group's findings and recommendations. Parties may file comments and reply comments on the study group report. Based on the study group results, SCE should pursue ISO review of Tehachapi transmission upgrades and should file an application seeking a certificate of public convenience and necessity (CPCN) for the first phase of Tehachapi transmission upgrades consistent with the study group recommendations, no later than six months following submission of the study group report, unless further action in this proceeding relieves it of this obligation.

We are concerned that the problems with current transmission planning approaches may extend to the RPS process. As transmission cost adders are developed in this proceeding, transmission costs for Tehachapi wind generation projects should be based on logical, cost-effective transmission expansions rather than upgrades that are limited to the needs of specific projects that may bid in a particular year's RPS auction. Once a comprehensive transmission expansion plan is developed, transmission cost adders should be based on that plan. Transmission costs should be reflected on a pro rata basis in the rank ordering of individual bids. This approach will improve the reasonableness of Tehachapi transmission cost adders, make the RPS results more consistent across resource areas and over time, and avoid "free rider" problems.