II. Background

Electric utilities, under PU Code § 1001, are prohibited from constructing or expanding transmission lines without first obtaining from the Commission a certificate that the public convenience and necessity require such construction. This Commission "CPCN" process begins when the utility files an application, and includes review of the project under the California Environmental Quality Act.¹ Assembly Bill 1890 (Ch. 854, 1996, Brulte), the electric restructuring law, created the Independent System Operator (CAISO), a non-profit public benefit corporation. The CAISO is responsible for ensuring the efficient use and reliable operation of the transmission grid. (PU Code § 345.) At present, the CAISO is the first entity to review a proposed transmission project. Once it finds a project needed in accordance with its PU Code § 345 responsibilities, and that project is sponsored by a utility, the utility then files an application for a CPCN at the Commission. In accordance with our PU Code § 1001 responsibilities, the Commission reviews the need for the project, its impacts on utility capital structure and costs, ratepayer impacts, and performs CEQA review.

In May 2003, this Commission, the California Energy Resources Conservation and Development Commission (CEC), and the California Power and Conservation Financing Authority (CPA) adopted the Energy Action Plan (EAP). The EAP established shared goals and proposed specific actions to ensure that adequate, reliable, and reasonably priced electrical power and natural gas supplies are achieved and provided through policies, strategies, and actions that are cost-effective and environmentally sound for California's consumers and taxpayers. The EAP recognized the need to update and review current practices and processes for transmission planning in California. It states in relevant part:

The Public Utilities Commission will issue an Order Instituting Rulemaking to propose changes to its Certificate of Public Convenience and Necessity process, required under Public Utilities Code § 1001 et seq., in recognition of industry, marketplace, and legislative changes, like the creation of the CAISO and the directives of SB 1389. The Rulemaking will, among other things, propose to use the results of the Energy Commission's collaborative transmission assessment process to guide and fund IOU-sponsored transmission expansion or upgrade projects without having the PUC revisit questions of need for individual projects in certifying transmission improvements.

Acting upon the guidance provided in the EAP, the Commission's Division of Strategic Planning has undertaken a comprehensive assessment of the current transmission planning process, what is driving it, and the various factors that require coordination and improvement to achieve effective infrastructure planning. The analysis involved identifying the key problems impacting the current infrastructure landscape and making recommendations to remedy the inefficiencies and deficiencies in the current process. The Staff's report serves as the foundation for this Rulemaking and is attached for reference (see Attachment B).

Meanwhile, the CEC published its first Integrated Energy Policy Report, pursuant to SB 1389 (Ch. 568, 2002, Bowen). In this first CEC assessment of the major energy trends and issues facing the state, the CEC recommended that the state should consolidate the permitting process for all new bulk electricity transmission lines within the CEC, using the CEC's power plant siting process as the model.²

III. Preliminary Scoping Memo

Developing a comprehensive approach to transmission planning will require coordination among issues that are being addressed in various Commission proceedings as well as federal forums. To that end, the Staff's report identifies these issues and makes recommendations for a comprehensive approach for coordinating infrastructure development. While Staff puts forth 5 recommendations to foster a more effective transmission planning process, the focus of this Rulemaking is a proposed revision to General Order 131-D, which is intended to eliminate duplicative transmission need assessments that currently exist at the CAISO and the Commission³.

This Rulemaking provides a vehicle for the Commission to apply the universal economic methodology, which is being developed in the Commission's Transmission Investigation, for economic transmission projects, once it is adopted, in a way that eliminates duplicative transmission need determinations. To this end, the Commission proposes a revision to General Order 131-D intended to result in a more streamlined and efficient transmission assessment process. The cornerstone of this approach is adopting an economic methodology that the CAISO and utilities will apply to projects that come before the Commission for a CPCN application. The application of a Commission-approved economic methodology would allow the Commission to defer to the CAISO's assessment of need. That is, to the extent that the CAISO uses a Commission-approved methodology for determining need, the Commission will not revisit the question of need. The Commission would validate that the methodology was applied.

For context, Section IV of this Rulemaking outlines the framework of the new transmission planning and assessment process that the Commission believes will result in enhanced efficiencies and an overall improved process⁴. That is, the Commission highlights the basis for the proposed revision to the General Order that will implement this new approach. In the interest of facilitating a focused dialogue on the key issue of eliminating duplicative transmission need determinations, the Commission requests that parties focus responses to this Rulemaking on the proposed revision to General Order 131-D. We ask that parties that disagree with this approach and the specific proposed changes to G.O. 131-D, explain the points of disagreement and describe an alternative approach.

² This Commission responded negatively to this proposal in its comments on the Draft IEPR. (Letter to Members of the Integrated Energy Policy Report Ad Hoc Committee, October 20, 2003.) It is unclear from the IEPR what the CEC includes in its use of the term "bulk" electricity transmission lines.