D0911007 Attachment 1
D0911007 Attachment 2
D0911007 Attachment 2 (Appendices B-C)
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ALJ/VSK/eap Date of Issuance 11/24/2009

Decision 09-11-007 November 20, 2009


In the Matter of the Application of Southern California Edison Company (U-338-E) for a Certificate of Public Convenience and Necessity Concerning the Devers-Palo Verde No. 2 Transmission Line Project.

Application 05-04-015

(Filed April 11, 2005)


On May 14, 2008, Southern California Edison Company (SCE) filed a petition for modification of Decision (D.) 07-01-040 in Application 05-04-015. D.07-01-040 grants a certificate of public convenience and necessity to SCE to construct the Devers-Palo Verde No. 2 Transmission Line Project (Project). Most significantly, SCE seeks modifications to the Decision that will permit SCE to construct only the California portion of the Project. This decision grants the requested relief, as adjusted herein, and modifies D.07-01-040 as set forth in Attachment 1.

1. Background

The Commission granted an application for a certificate of public convenience and necessity (CPCN) for the Project in D.07-01-040 (the Decision) dated January 25, 2007. The Commission granted the CPCN on the basis, among other things, that the Project would generate significant economic benefits to California ratepayers.

The Project approved in the Decision was originally comprised of two major transmission lines, one of which is intrastate, and one of which is interstate. Together, the elements of the Project were intended to increase the transfer capability between load centers in Southern California and electrical resources in Arizona by 1,200 megawatts (MW). This would allow Southern California ratepayers to access competitively priced electrical resources in Arizona, as well as reduce congestion on existing transmission lines, thus providing significant ratepayer benefits in the form of lower energy prices and reduced congestion charges. These ratepayer savings were estimated to be well in excess of the annual ratepayer costs of the Project.1 As a result of these findings, the Decision conditioned construction of the California portion of the Project upon approval for construction of the Arizona portion of the Project.2

The intrastate portion of the Project is a 41.6-mile transmission line known as the "Devers-Valley No. 2" transmission line, a second 500 kilovolt (kV) transmission line between SCE's Devers substation in North Palm Springs, Riverside County, and SCE's Valley substation in the unincorporated portion of Riverside County. The interstate line is an approximately 230-mile 500 kV line known as the "Devers-Harquahala" transmission line, which would connect Devers substation in California to a location 102 miles inside Arizona near the Palo Verde nuclear generating plant.3

On June 6, 2007, the Arizona Corporation Commission (ACC) denied SCE's application to construct the Project in Arizona.4

On May 14, 2008, SCE filed the Petition for Modification (Petition) requesting modifications to the Decision to allow SCE to construct the Project in phases. Specifically, SCE sought authority to construct all of the California portions of the Project, up to and including the proposed Midpoint Substation east of Blythe, about 15 miles west of the California/Arizona border. SCE sought to access "potential new renewable and conventional gas-fired generation in the Blythe, California area" and the Petition stated that "[s]uch authorization will help enable California to meet its renewable energy goals."5 The Petition stated that "SCE is committed to constructing the DPV2 facilities in Arizona" notwithstanding ACC denial, and claimed that phasing the construction "does not change the cost-effectiveness of the DPV2 project. ... DPV2 will still provide net benefits."6

The Commission's Division of Ratepayer Advocates (DRA) and The Utility Reform Network (TURN) filed separate responses to the Petition on June 13, 2008. TURN filed in support of SCE, arguing that it had resolved any environmental concerns with SCE. DRA raised objections to SCE's proposal, arguing that a new cost-effectiveness study was necessary and that without the Arizona portion of the Project, the California portion might be unnecessary.

In response to the concerns raised by DRA, assigned Commissioner Dian Grueneich and Administrative Law Judge (ALJ) Timothy J. Sullivan issued a joint ruling on July 17, 2008 (Joint Ruling). The Joint Ruling found that SCE had not provided sufficient information to allow the Commission to grant the Petition. It found:

SCE's Petition fails to provide facts to demonstrate that ratepayer benefits accrue: (1) if only the California portion of DPV2 is constructed, or (2) if construction of the Arizona portion of DPV2 is constructed far beyond the time frame estimated in the original CPCN decision.7

Consequently, the Joint Ruling ordered SCE to amend the Petition "to provide this missing information and therefore demonstrate that construction of the California portion of DPV2 will serve the public interest."8

ALJ Victoria S. Kolakowski was co-assigned to the proceeding on August 14, 2008.

In response to the Joint Ruling, SCE filed an amendment to the Petition (Amendment) on September 2, 2008 and a supplement on September 12, 2008. The Amendment included additional information regarding the renewable resources in the Blythe area, as well as updated information regarding the costs and benefits of the Project. No party filed comments on the Amendment or the supplement.

More than eight months later, on May 15, 2009, SCE filed an ex parte notice with two attachments. The first attachment was a copy of a letter to the Commissioners, dated May 15, 2009, referring them to the attached letter to the ACC of the same date and informing them that SCE intended to discontinue pursuit of ACC approval of the Arizona portion of the Project at this time, and stating SCE's intention to pursue the California portion of the Project.9 The second attachment was a copy of the letter to the ACC dated May 15, 2009, stating that SCE had updated its economic analysis and that the benefits of the Project are "significantly lower as a result of recent developments." The letter stated that SCE would not be refiling with the ACC at this time for authorization of the Arizona portion of the Project.10 Consistent with these notices, SCE withdrew its May 16, 2008 pre-filing request to initiate Federal Energy Regulatory Commission (FERC) preemption of the ACC denial in Docket No. PT08-1-000 in a May 18, 2009 letter to FERC. SCE had submitted the FERC request as an initial step in obtaining a FERC permit for the Arizona portion of the Project pursuant to Section 216 of the Federal Power Act.

In response to the May 15, 2009 ex parte notice, ALJ Kolakowski issued a ruling on June 3, 2009, directing SCE to supplement the record for what had become a California-only Project.11 The ruling directed that SCE supplement the Petition regarding four matters: (1) the current status of the California-only Project, including any changes to cost estimates, applications before other agencies and the California Independent System Operator Corporation (CAISO), power purchase agreements between SCE and generation developers served by the Project, projections of renewable energy resources identified by the Renewable Energy Transmission Initiative (RETI),12 and any other relevant information; (2) information regarding the status of the CAISO's approval of the California-only Project; and (3) information regarding the status of the Blythe Energy Project Phases I and II generation facilities.

SCE filed its supplemental information on June 26, 2009 (Supplemental Filing). The Supplemental Filing provides as Attachment I a June 19, 2009 letter from the CAISO to the ALJ setting forth the conditions for CAISO approval of a California-only Project (CAISO Letter).13 The CAISO Letter explains that, given a California-only Project, "the economic justification for the project ... is no longer applicable."14 However, the CAISO Letter suggests that "the California portion of the project continues to provide operational and reliability benefits, and the ISO has identified the anticipated need for the project as a generation interconnection facility, which provides the basis for the ISO's agreement to the construction of the California portion of the project, should the requirements below be met."15 The CAISO Letter provides a summary of the status of generator interconnection requests in the Blythe area, where the California-only Project would terminate, and states that "[t]he ISO anticipates that the California portion of the project will be an important facility in furtherance of state goals regarding the long-term acquisition of power from renewable energy resources."16 In summary, the CAISO Letter explains that the CAISO's approval of the California-only Project is contingent upon the execution of a sufficient number of Large Generator Interconnection Agreements for interconnection to the California-only Project.17 SCE estimates CAISO approval of the California-only Project by as early as December 2009 or as late as January 2011, depending upon the successful execution of large generator interconnection agreements in the near term, or a much later determination of need based upon certain clusters of interconnection requests.18

In response to the Supplemental Filing, DRA filed a response on July 6, 2009 (DRA Response) arguing that "[t]here is nothing in the record that demonstrates that the California portion of this transmission project is needed; no such determination has yet been made by the CAISO, and any determination is at least six months away."19 DRA seeks denial of the Petition, without prejudice to a later SCE filing.

1 Decision at 104, Findings of Fact 2-4, and 6.

2 The Decision states that approval is conditioned upon construction according to the approved route, which encompassed the entire Project. Approval for the Arizona portion would have to be obtained from another agency, which would either be the Arizona Corporation Commission (ACC) or the Federal Energy Regulatory Commission (FERC).

3 The exact location of the Arizona terminus of the Devers-Harquahala transmission line was subject to ongoing negotiations at the time of the Decision. The environmental document certified in the Decision studied three routing alternatives with different termination points for the Project. The Decision concluded that SCE should seek to terminate the Project at a new Harquahala Junction, subject to ACC approval and any other needed authorizations. Decision at 65-67.

4 Arizona Corporation Commission Decision No. 69638 (June 6, 2007), docket No. L-00000A-06-0295-00130.

5 Petition at 1.

6 Petition at 4-6.

7 Joint Ruling at 2.

8 Joint Ruling at 2.

9 The May 15, 2009 letter to the CPUC Commissioners was included in the Supplemental Filing as Attachment A.

10 The May 15, 2009 letter to the ACC was included in the Supplemental Filing as Attachment B.

11 "California-only Project" is used herein to describe a modified version of the original Project wherein only the California segments west of and including the Midpoint Substation are constructed, and the segments east of the Midpoint Substation are not constructed.

12 RETI is a collaborative study effort among California stakeholders seeking to develop renewable generation and associated transmission. The RETI effort is overseen by a Coordinating Committee composed of the Commission, the California Energy Commission, the CAISO, the Southern California Public Power Authority, the Northern California Power Agency, and the Sacramento Municipal Utility District. The Stakeholder Steering Committee is comprised of investor-owned utilities, publicly owned utilities, renewable developers, federal land use agencies, environmental organizations, consumer organizations, local government organizations, and others. Additional information about RETI is available at http://www.energy.ca.gov/reti.

13 The letter was also delivered to the ALJ on June 19, 2009, and the CAISO filed a concurrent ex parte notice with the letter attached.

14 Supplemental Filing, Attachment I, CAISO Letter at 2.

15 Supplemental Filing, Attachment I, CAISO Letter at 2.

16 Supplemental Filing, Attachment I, CAISO Letter at 2.

17 Supplemental Filing, Attachment I, CAISO Letter at 2.

18 Supplemental Filing at 15.

19 DRA Response at 4.

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