XI. Project Costs

Pursuant to § 1005.5(a), we have jurisdiction and the responsibility to specify in the CPCN a "maximum cost determined to be reasonable and prudent" for the Jefferson-Martin project.³³ While FERC ultimately will decide how much of the costs for this project PG&E may recoup in transmission rates, we believe our maximum project cost has bearing on the amount PG&E may seek from FERC.

PG&E provided cost estimates for its Proposed Project and for several alternative routes considered during the proceeding. It also developed a cost matrix that allows cost estimates to be generated for full project routes by adding up the costs of various combined route segments in the cost matrix. PG&E's total cost estimates for some of the alternatives are as follow:

PG&E's Proposed Project $188.1 million

All-Underground Alternative (Route

Option 1B in south with Proposed

Project in north) $212.5 million

Proposed Project in south with

Collocation Alternative in north $244.7 million

PUA in south with Proposed Project

in north $226.7 million

Route Option 1B to Golf Course transition

to PUA to Proposed Project in north $213.5 million

Route Option 1B to Trousdale transition

To Proposed Project to Glenview Drive

transition to Proposed Project in north³⁴ $207.0 million

PUA to Trousdale transition to Route

Option 1B to Proposed Project in north $224.0 million

PG&E explains that much of the difference in its cost estimates for the PUA compared to the southern segment of its Proposed Project stems from biology mitigation-related costs that PG&E estimates it would incur if the PUA is selected. PG&E did not provide a cost estimate for the MPUA but maintains that it would likely cost more than the PUA because of greater biological impacts and because moving the underground portion further west would somewhat increase the length of the underground cables and related trenching.

280 CCC contests PG&E's conclusion that the PUA would cost more than Route Option 1B, and argues to the contrary that Route Option 1B is likely to be more expensive than the PUA and its variations. 280 CCC states that PG&E is asking the Commission to believe that a 27-mile project, of which only 15 miles is underground (the PUA with the Proposed Project in the north) will cost more than a 27-mile project, all of which is underground (Route Option 1B with the Proposed Project in the north).

280 CCC identifies several factors which, it contends, PG&E did not consider and which would increase the cost of Route Option 1B, including a deeper trench through Burlingame streets, additional splice vaults on Trousdale Drive, and removal and reconstruction of the El Camino Real median. PG&E responds that 280 CCC has not substantiated these claims. PG&E continues to believe that trenching at a depth of twelve feet in Trousdale Drive and El Camino Real will not be necessary. PG&E also contests the need for additional splice vaults on Trousdale Drive and 280 CCC claim that PG&E would have to remove and restore the median in El Camino Real.

280 CCC estimates that the MPUA in the southern segment with the Proposed Project in the northern segment would cost $203.3 million. It maintains that its methodology of estimating an all-in per-mile construction cost is more reliable than PG&E's "artificially detailed" cost estimates that have no engineering to back up the details. 280 CCC concludes that the MPUA would cost $9 million less than Route Option 1B, even if PG&E has not underestimated that cost. PG&E takes issue with 280 Citizen's "rule of thumb" approach and also contends that 280 CCC significantly underestimates biological mitigation costs of the MPUA.

We adopt a maximum project cost for the approved route based on the record developed in this case. PG&E's cost estimate for this route is based on preliminary design work, at least for the segments of the project that are part of PG&E's Proposed Project, and on detailed cost estimates for each component of the construction project. We recognize that detailed engineering estimates have not been completed for the project and that some of the adopted environmental mitigation measures may not have been considered when PG&E developed its cost estimate. The adopted project route includes Route Option 4B rather than PG&E's route Option 4A. However, we believe that PG&E included sufficient contingency factors in the estimating procedure so that its estimates are of a sufficient reliability so that we can adopt a maximum project cost. We have no reason to believe that PG&E cannot complete its project within the maximum project cost we adopt today.

We authorize a maximum project cost of $206,988,000 for the approved Jefferson-Martin project, as reflected in PG&E's detailed cost estimates contained in Exhibit 147, Attachment 134. If, upon completion of the final, detailed engineering design-based construction estimates for the approved project, PG&E concludes that the costs will be materially (i.e., 1% or more) lower than the maximum project cost we adopt, PG&E shall submit with the estimate an explanation of why we should not revise the maximum project cost downward to reflect the new estimate. If the final estimate exceeds the maximum project cost we have adopted, then PG&E is free to exercise its rights to seek an increase in the maximum project cost pursuant to § 1005.5(b). However, the maximum project cost will not automatically adjust upward even if the final detailed costs exceed the maximum project cost.