3. Need For The California-Only Project
3.1. The Prior Economic Need For The Project Does Not Apply To A California-Only Project
As described above, this Commission approved the Project contingent upon construction of both the California and Arizona portions because the Arizona portion of the Project was critical to delivering the economic benefits that justified approval of the line. Nevertheless, SCE's Petition provided insufficient information to confirm that the Arizona portion would ever be approved by the ACC and constructed. Consequently, the Joint Ruling ordered SCE to provide an updated economic analysis to explain the economic benefits of a California-only Project. SCE provided limited economic analysis in its Amendment and stated that it would complete a more detailed analysis by the end of the year to accompany an application to construct with either FERC or the ACC, and that analysis would be presented to the Commission.21
The issue of the economic benefits of the Project has been rendered moot by SCE's subsequent admission in the Supplemental Filing that the economic benefits of the Project have been reduced and that it will not be pursuing construction of the Arizona portion of the Project at this time.22 The Supplemental Filing points to SCE's May 15, 2009 letter to the ACC to explain that the economic benefits of the Project from Arizona to California have diminished since Commission approval:
[T]here has been a narrowing of the economic spread between the costs of California and Arizona generating resources, and a reduced load forecast due to changed economic conditions and the expansion and success of energy efficiency. As a result, the benefits to California consumers of SCE pursuing the Arizona portion have been reduced from the level forecast at the time of SCE's initial filing in [sic] with the ACC.23
On this basis, SCE informed the ACC in its May 15, 2009 letter that it would not pursue authorization to construct the Arizona portion of the Project at this time. SCE clarified that it might do so in the future if further interconnection studies establish the need for new transmission in western Arizona to interconnect generation resources to the CAISO system.24
SCE's decision at this time to pursue a California-only Project changes the nature of the Project approved by this Commission.
SCE does not seek to justify a California-only Project on purely economic grounds. Rather, SCE seeks to justify the California-only Project as "needed to interconnect significant amounts of new generation."25 Consequently, we analyze here that showing and whether it may be relied upon to justify construction of a California-only Project.
3.2. Interconnection Requests and Other Indicia of the Need for Transmission in the Blythe Area
SCE's Petition sought Commission approval to accelerate SCE's construction of the California portion of the Project on the basis that SCE had "received a large number of interconnection requests for new generation in the Blythe area."26 SCE stated that "[d]evelopment of these projects requires construction of the California portion of the DPV2 project if the power from these projects is to reach markets in Southern California."27
The size and number of interconnection requests associated with the Blythe area have changed during the pendency of SCE's Petition, and are likely to change again on December 1, 2009 when additional deposits will be required from certain generators in the CAISO interconnection queue. In the May 14, 2008 Petition, SCE reported 5,128 MW of renewable generation interconnection requests in the Blythe Area (including the Midpoint and Julian Hinds-Eagle Mountain Areas) and 1,210 MW of conventional gas-fired generation for a total of 6,338 MW seeking interconnection. SCE's more recent June 26, 2009 Supplemental Filing reports 11 interconnection requests comprised of 4,900 MW of renewable generation and the same 1,210 MW of conventional gas-fired generation for a total of 6,110 MW.28 While the interconnection request numbers have changed slightly over time, due in part to CASIO interconnection queue reform, they have not changed dramatically and generator interest in the Blythe area appears to remain constant and significant.
We do not approve construction of transmission lines based solely on the evidence of generator interconnection requests, which have most recently reflected a certain amount of speculation, rather than firm commitments to development. Consequently, SCE was compelled to provide additional information in support of its Petition.
In support of its claim that the California-only Project is needed to interconnect renewable generation, SCE points to the U.S. Department of Interior, Bureau of Land Management (BLM) "Solar Energy Applications list" to demonstrate that over 10,000 MW of solar projects are proposed to be located along the corridor of a California-only Project:
[A]s of August 7, 2008, [the Solar Energy Applications list] indicated that 10,850 MW of solar projects have requested rights-of-way through the California Desert District BLM office at Palm Springs, the office that oversees projects in the Blythe area. These 10,850 MW have proposed locations that are physically located along the DPV 2 Corridor. [Footnote omitted.] Out of the 10,850 MW of proposed solar project locations, 3,700 are expected to be solar thermal and 7,150 are solar photovoltaic and together they account for roughly 22% of all solar energy projects that have requested for [sic] rights-of-way with California's BLM offices. This shows that the Blythe area is an important area for California if solar resources are [sic] which could be used to serve California electric customers.29
SCE also provided a "snapshot" of a BLM map showing the locations of the Blythe-area solar projects along the Project corridor. SCE concludes that "[t]hese projects' proximity to the DPV2 corridor demonstrates that the California portion of DPV2, along with the Midpoint switchyard, is the most logical transmission line to be developed to help interconnect solar energy onto the California system."30 SCE concludes:
A close examination of the CAISO interconnection queue and the BLM right-of-way requests suggests that the total solar resources being planned and developed in the Blythe area may actually be greater than either of the queue sizes because some projects in the CAISO interconnection queue are being developed on privately-owned land and therefore do not require BLM application [sic] and some of the projects on the BLM list have not yet submitted CAISO interconnection requests. Thus, the total amount of solar energy being planned in the Blythe area exceeds 10,800 MW.31
SCE's Supplemental Filing points to RETI findings to justify the California-only Project as needed to interconnect renewable generation. Specifically, SCE cites to the RETI Phase 1B Final Report (RETI 1B Report) and the RETI Phase 2A Draft Report (RETI 2A Draft Report).32 Both of these RETI Reports are public documents of which we take official notice.
The RETI 1B Report analyzed potential Competitive Renewable Energy Zones (CREZs) to determine how they ranked in terms of economic and environmental factors. The RETI 1B Report indicates that the Riverside East CREZ, which includes the Blythe area, has the potential for 7,800 MW of large-scale solar projects.33
SCE explains that the RETI 2A Draft Report (which has subsequently been modified and adopted as a final report) identifies a Conceptual Transmission Plan for California "which includes major transmission lines and other facilities likely to be required not only to deliver renewable energy, but also provide important additional benefits to the grid."34 SCE goes on to explain that "[t]he California portion of the DPV2 is included as a component of this Conceptual Transmission plan. This project has the advantage of being before the Commission and can be completed in a timely fashion, provided the Commission acts quickly."35
The Supplemental Filing also includes the CAISO Letter at Attachment I which states that: "[t]he ISO's studies have determined that the interconnection of 1,030 MW of new full capacity generating facilities to the Devers-Palo Verde No. 1 line in the Blythe area near the Colorado River would trigger the need for construction of the new Midpoint to Valley transmission line in order for the generation from those facilities to be fully deliverable."36
3.3. Commission Standards for Determining Need
Historically, under California Pub. Util. Code § 1001, need for a transmission project is established based upon a project's contribution to reliability or the ratepayer savings it will produce. The Commission does not approve a new transmission line unless it is required for the "present or future public convenience and necessity."
More recently, with the advent of California's Renewable Portfolio Standard (RPS) and the adoption of Pub. Util. Code § 399.2.5,37 the Commission has recognized the necessity of approving new transmission projects in anticipation of future renewable energy projects to meet RPS goals. However, and significantly, while SCE has asserted that the Project will help California meet its RPS goals,38 SCE has not asserted that the California-only Project is necessary to meet those goals. SCE has also not requested retail rate recovery for the California-only Project pursuant to § 399.2.5.39 Rather, SCE has claimed that the California-only Project is needed to interconnect both renewable and conventional generation resources proposed to be located in the Blythe area. Nevertheless, because of the extensive renewable potential of the Blythe area, and the RETI 2A Draft Report's identification of the previously CPUC-approved Project as a potential transmission path for delivering those resources to Southern California load centers, we will consider the § 399.2.5-based need analysis applied in previous renewable transmission CPCN cases to determine the need for the California-only Project.
In D.07-03-012 and D.07-03-045, we considered the need for Segments 1, 2, and 3 of what has become known as the Tehachapi Renewable Transmission Plan (TRTP) to build transmission to the wind rich Tehachapi Wind Resource Area. In those decisions we established a three-part test for determining need under Pub. Util. Code § 399.25,40 requiring that a project proponent demonstrate: (1) that a project would bring to the grid renewable generation that would otherwise remain unavailable; (2) that the area within the line's reach would play a critical role in meeting the RPS goals; and (3) that the cost of the line is appropriately balanced against the certainty of the line's contribution to economically rational RPS compliance.
SCE has provided uncontested information that the California-only Project will be an essential component to delivering renewable generation in the Blythe area to California load centers. The RETI analysis confirms that the East Riverside CREZ, which includes the Blythe area, contains some of the most promising renewable resources in California, taking both economic and environmental considerations into account.41
Notwithstanding this unchallenged showing, SCE has failed to take the information to the next stage and make an argument of need for the California-only Project under the three part test established in D.07-03-012 and D.07-03-045.42 Instead, SCE asserts that the line is needed to respond to interconnection requests - requests that have not been formalized into Interconnection Agreements, and could be withdrawn at any time.
This Commission does not approve transmission lines based solely on interconnection requests, and we decline to do so here. Nevertheless, as set forth below, we find unique circumstances here that support approval of SCE's request to authorize construction of the California-only Project.
3.4. Prudent Decision Analysis Weighing All Factors
As described above, SCE's showing in support of the renewable need for the California-only Project is deficient. Nevertheless, the cumulative weight of the uncontested facts and the unique circumstances surrounding this transmission line lead us to conclude that construction of the California-only Project is required to meet future public convenience and necessity.
The California-only Project will allow access to significant potential renewable resources, particularly proposed large-scale solar projects in the Riverside East CREZ. We do not have significant specific information about these resources, and they may not be needed to meet the current 20% RPS mandates. However, information in the RETI 2A Draft Report reflects that resources from the Riverside East CREZ would be desirable for reaching the 33% by 2020 levels set forth in California policy.43 RETI anticipates that the East Riverside CREZ will be comprised exclusively of large solar resources. Because such resources are more expensive than other technologies, the economic score for this CREZ is worse than average.44 However, the East Riverside CREZ has a significantly better than average environmental score, potentially reflecting fewer obstacles to developing resources in the East Riverside CREZ.
Two other factors unique to this Petition clearly weigh in favor of a California-only Project. First, the transmission lines would be built within existing high-voltage transmission rights-of-way containing towers similar to those proposed, thus significantly minimizing the environmental impact of the line. The 500 kV towers for the California-only Project would be placed adjacent to the existing 500 kV towers of the Devers-Palo Verde No. 1 and Devers-Valley No. 1 transmission lines. Second, almost all of the planning and environmental siting review has been completed. The Commission has already certified the Final Environmental Impact Report (Final EIR) for the Project. The final engineering and economic evaluations are underway.
No other transmission project could access the Riverside East CREZ without significant time delays in terms of environmental review and significant cost. In addition, in order to reach the 33% goal, California will likely need to construct significant new transmission resources in SCE's service territory, and delay could make it more difficult for both SCE and the Commission to pursue development of these projects simultaneously. Further, and significantly, there is no environmental opposition to this line. Hence, there is a benefit to completing a project, like this one, that faces no environmental challenges and for which construction can begin imminently.
This is clearly a unique and unprecedented opportunity to construct a transmission line project that has already undergone environmental review to support a large and desirable RETI-identified CREZ. We should not pass up this opportunity to quickly and efficiently, with little environmental damage, expand the transmission grid to support this CREZ.
Given the potential for renewable resources in the Riverside East CREZ, the substantial work and study already completed on the Project - including certification of the Final EIR - the constrained environmental impacts of building in an existing corridor, the lack of environmental opposition, and the uncertainty in terms of delay and cost in considering an alternative project to access this CREZ, we find that it is necessary, reasonable, and prudent to construct the California-only Project.
However, because construction of the Arizona portion of the Project would potentially reduce the California-only Project's ability to transmit energy from the Riverside East CREZ, we require SCE to seek Commission approval prior to resuming pursuit of the Arizona portion of the Project in the future.
21 Amendment at 13.
22 Supplemental Filing at 3-4.
23 Supplemental Filing at 3.
24 Supplemental Filing, Attachment B, SCE Letter to ACC, at 1.
25 Supplemental Filing at 4 citing SCE Letter to ACC at 2.
26 Petition at 5.
27 Petition at 5.
28 Supplemental Filing at 13 (emphasis added).
29 Amendment at 5.
30 Amendment at 7.
31 Amendment at 8.
32 Supplemental Filing at 8-11. All of these RETI reports are available at: http://www.energy.ca.gov/reti/documents/index.html
33 RETI 1B Report, Economic Analysis of CREZ, Table 4-9 at 4-16. The RETI 1B Report divided the Riverside East CREZ into two CREZs - A and B. The CREZs were consolidated in the RETI 2A Draft Report.
34 Supplemental Filing at 8.
35 Supplemental Filing at 8.
36 CAISO Letter at 3.
37 Formerly Pub. Util. Code § 399.25.
38 See, e.g., Petition at 12 "Granting SCE's request will allow California to access potential new renewable and conventional gas-fired generation in the Blythe area, which will help California achieve its renewable goals and the RPS goals for the state of California."
39 See, e.g. Amendment at 20 ("... SCE is not requesting in this petition that the Commission authorize cost-recovery under Pub. Util. Code Section 399.25. However, SCE is not waiving its statutory right to seek such recovery in the future.")
40 The relevant provisions of Pub. Util. Code § 399.25 were not modified when the statute was recodified as § 399.2.5.
41 See, e.g., RETI 2A Draft Report at Figure 2-4, Phase 2 CREZ Economic and Environmental Scores, Bubble Chart.
42 Nothing in this decision is intended to change any part of the three part test established in D. 07-03-012 and D.07-03-045.
43 The Energy Action Plan, adopted by the Commission and the California Energy Commission in May 2003, accelerated the compliance date to 2010. SB 107, passed in 2006, codified that policy. The Governor's Executive Order S-14-08 (issued on November 17, 2008) promotes the 33% renewable goal and identifies adequate transmission for renewable energy an issue of critical importance. More recently, the Governor's Executive Order S-21-09 (signed on September 15, 2009) orders the California Air Resources Board to adopt regulations implementing a 33% renewable resources by 2020 RPS program consistent with the California Global Warming Solutions Act of 2006, codified at California Health and Safety Code §§ 38500-38599.
44 See, e.g., RETI 2A Draft Report at Figure 2-4, Phase 2 CREZ Economic and Environmental Scores, Bubble Chart.
