XVII. Transmission Upgrades and Expansion

The present procedure for transmission expansion and upgrades is for the individual utilities (IOUs) to prepare annually a grid expansion plan, which looks five and ten years into the future. The plans forecast growth in load, the connection of new generation, the retirement of plants whose service lives have come to an end, new transmission facilities and interconnections with adjacent and out-of-state networks. The plans are the product of several iterations of work by engineers followed by stakeholder meetings at which preliminary results are presented and commented upon by the stakeholders. This is an open process in which the Commission staff participates. The plans are then finalized for the year and submitted to the California Independent System Operator (CAISO) for review. The CAISO approves, modifies or rejects individual projects. Projects costing up to $20 million are approved by CAISO staff, projects whose cost is greater than that amount require approval of the CAISO board of governors. The CAISO also participates directly in the planning of transmission between utilities and, in particular, transmission interconnections with other states.

In their direct testimony in this proceeding, the IOUs present sketchy information on their transmission plans. PG&E, in its LTPP, makes reference to its annual grid expansion plan, but does not list any specific transmission projects. However, both SDG&E and SCE identify major transmission projects in their LTPPs.

SDG&E's LTPP includes an explanation of the megawatt amount of local resource deficiency that could be met by additional transmission and proposes two 500kV lines, to come on line around 2010. Most notably, SDG&E requests that the Commission approve the 500 kV transmission expansion component of its LTPP.

SCE's LTPP includes transmission projects to access the Tehachapi wind area and transmission upgrades to access generation markets in Southern Nevada and Arizona (i.e., Devers-Palo Verde No. 2).

As discussed earlier, the utilities' LTPPs should more fully integrate generation and transmission planning. It would be helpful to the Commission's review of the LTPPs if they included scenarios of potential resource portfolios to fully meet future resource needs, and identified the transmission expected to be needed to make the potential resource portfolios feasible. It is not acceptable for IOUs to take a position of only responding to interconnection requests.

We do not endorse or in any way approve the transmission projects proposed in the utilities' LTPP. Specifically with regard to SDG&E's request, we do acknowledge the lengthy process that's needed to plan, license and construct transmission, so we encourage SDG&E to continue its planning efforts and move forward with evaluating these transmission alternatives for meeting a local resource deficiency by 2010.

Phase 2 of the RA portion of this proceeding will provide a determination on local capacity requirement and deliverability for resource adequacy in the early summer of 2005. Those requirements will inform and govern the utility transmission and procurement requirements going forward. Therefore, it is premature to address specific requirements in this proceeding or make a judgment as to the sufficiency of the instant filings. However, it is important to provide clarity on how the local capacity and deliverability requirements will come into play in future planning decisions. We expect that the ISO will work closely with the Commission to establish the local capacity procurement requirements based on deliverability of resources into load pockets and transmission constrained areas of the grid. We expect that once established, the ISO will work to update the criteria as changes, such as new transmission or generation, occur.

Once the local procurement and deliverability criteria are established we expect the criteria to be incorporated into and guide the long-term plans going forward. For example, if the a determination is made that "x"% of the supply to meet San Francisco load must come from within the local area given the transmission transfer capability into that area, the long-term plan should incorporate that criteria. In this example, the long-term plans should specify how the utility will meet the "x"% in-city supply criteria, including through approved demand side options, or the transmission upgrades the utility intends to build to increase the transfer capability and decrease the local procurement requirement. We recognize the importance of the ISO in helping us to establish the criteria and so that the Commission can apply them to the utilities' planning practices. The ISO core expertise in the area of transmission planning and grid operations is critical to inform the Commission's procurement decisions. This approach will assure that the long-term resource procurement meets the ISO short-term grid requirements. It will also assure that the resources the utilities procure pursuant to their resource adequacy requirements meet the ISO operational needs.