III. Need for the Proposed Project
The Viejo System Project would serve local, rather than system demand.1 Specifically, the Viejo System Project would serve the electrical needs of South Orange County, now connected to the Santiago System. The Santiago System serves approximately 250,000 metered customers. SCE states the area has experienced exceptional growth and projected peak demand is likely to exceed the operating limits of the transformers that currently serve the Santiago System by 2005. It states the Viejo System Project will relieve the strain on the existing facilities by (1) transferring load on the Santiago System to the Viejo System; (2) relieving load at the 66/12/kV Limestone substation; (3) reliving the San Onofre-Santiago and Barre-Ellis 220 kV transmission lines under abnormal conditions; and (4) allowing load transfers between the Viejo System and the Santiago System under both normal and abnormal system conditions.
As discussed, NOPE and Mission Viejo stated their common concern that SCE has not demonstrated a need for the project and has conducted no cost-benefit analysis. SCE replied that it is not required to provide such analysis under GO 131-D.2
The Commission's review of a project for which the utility seeks a permit to construct is normally limited to environmental impacts of the project. Although we are within our authority to review other aspects of a project for which a utility seeks a permit to construct, the circumstances in this case do not suggest a more intensive review is necessary. We are convinced by SCE's application that the project is required to accommodate growth in the South Orange County area. Although growth in Mission Viejo may have stabilized in recent years, demand in other areas to be served by the project continues to increase.
The Viejo System Project is not a major capital project. Consistent with our usual practice, we do not require a cost-benefit analysis at this time. We instead follow our usual policy for review of such projects, which provides that the utility assumes the risk for capital costs and an eventual finding by the Commission that the investment was reasonable. For projects like the Viejo System Project, this review is conducted in general rate cases at the time the utility seeks to include a project's costs in rate base. The Commission retains its authority to disallow all or a portion of project expenses in SCE's general rate case following project construction if it finds the project or associated costs are unreasonable.
1 Because the project serves local demand and its circuits are 66 kV, the project is considered a distribution facility by the Federal Energy Regulatory Commission. Accordingly, the California Independent System Operator has not analyzed the need for the project. 2 At the PHC and in response to the ALJ's inquiry, SCE stated the California Independent System Operator (ISO) had not identified a need for this project because the Federal Energy Regulatory Commission has defined projects of this size to be "distribution" and the ISO does not analyze the need for distribution projects.
