Settlement Agreement

After reviewing the Settlement Agreement in its entirety and taking into consideration arguments presented by IEP, CARE, EPUC, MID, and CCSF, we find that the Settlement Agreement as a whole, but for the 30-year cost recovery provision of Paragraph 11, is reasonable in light of the whole record, consistent with law, and in the public interest.

The record supports CC8 as a low-cost and low-risk project that meets PG&E's long-term procurement needs and that will provide an additional 530 MW of electricity that will contribute to grid reliability. The Settlement, but for the 30-year NBC, meets the requirements of Rule 51 et al.

In its application, PG&E demonstrated that the capital cost per kilowatt of the CC8 plant compares very favorably to Southern California Edison Company's Mountainview Project, Sempra's Palomar Project, and the market price referent used by the Commission to implement the Renewable Portfolio Standard (RPS). (PG&E Application, p. 1-3.)  PG&E also notes that the project furthers the Long-Term Procurement Plan adopted for PG&E in 2004, which found that new capacity is needed in northern California in 2008 and 2010.  PG&E states that "because the facility is already substantially permitted and partially completed, CC8 could provide northern California with an additional 530 MW of generation as soon as summer 2008."  (PG&E Application, p. 1-4.)  Finally, PG&E points out that " [t]his close-in Bay Area location is beneficial for serving the heavy load concentration in the Bay Area." (PG&E Application, p. 1-2.)

No party disputed these facts.

As discussed above, the 30-year NBC is not consistent with Commission decisional precedent and the record does not support extending the NBC beyond the established 10-year period. We therefore modify Paragraph 11 to allow for a 10-year NBC. We base this modification on the entire record, including the evidentiary record developed in this case.

In addition, the record supports a finding that the Settling Parties do not wish to delay approval of the CC8 facility. The record indicates that CC8 is a beneficial for ratepayers, but that any delay that extends the resumption of construction past September 2006 will significantly increase the cost of the project. After September, PG&E's cost estimates increase almost $1 million a month, and PG&E's revenue requirement will correspondingly increase by $250,000 per month. Delays and increased costs are not in the interest of the ratepayers.

The Settlement Agreement also proposes cost recovery and ratemaking mechanisms related to the acquisition, completion, and operation of CC8. No party presented any opposition to these proposals. We find that the cost recovery and ratemaking mechanisms are reasonable in light of the record as a whole, consistent with law, and in the public interest and we adopt them.