2. Nature of the Dispute
2.1. Parties
Tesoro and SCE are the only parties to this case. Tesoro is a wholly-owned subsidiary of Tesoro Corporation, an independent refinery and marketer of petroleum products headquartered in San Antonio, Texas. The Refinery obtains retail electric service from both SCE and LADWP. SCE is a public utility subject to this Commission's regulatory jurisdiction. LADWP, a municipal utility, is not a party and the Commission lacks regulatory jurisdiction to compel LADWP to participate here.
2.2. Relief Requested
Tesoro asks this Commission to find that SCE must provide the Refinery's full requirement for electric service, if requested to do so, and that prior to such request being made, SCE must perform, at Tesoro's expense, a retail service study, referred to as a Method of Service (MOS) study.
2.3. Underlying Factual Scenario
In May 2007, Tesoro acquired the Refinery, a 100,000 barrels-per-day petroleum refinery located in Southern California at a point where the cities of Carson, Wilmington and Los Angeles converge. The Refinery is said to "straddle" the utility service territories of SCE and LADWP, since the service territory border runs through and virtually bisects the real property on which the plant is located. The utilities do not provide service at the same voltage level and so the Refinery operates two separate electrical systems. The parties disagree about the precise breakdown, but SCE serves somewhere between 4% and 12% of the Refinery's retail electric load and LADWP serves the rest. Tesoro states, and SCE does not dispute, that LADWP currently provides power to most of the core refinery load, some of it physically located in SCE's service territory. SCE serves sulfur recovery facilities and other smaller operations and receives revenues of more than $1 million per year from this large industrial load.
Since the spring or summer of 2007, Tesoro has been developing plans for "expansion, upgrades, modernization and environmental compliance" which will include a major overhaul and integration of the Refinery's internal electrical infrastructure, including full replacement of existing boilers and cogeneration facilities.1 Tesoro alleges that the planned changes, anticipated to require a
$1 billion investment over five years, will affect Refinery operations for the ensuing 20 or 30 years. Further, these changes "will improve internal efficiencies and reliability, increase capacities, support production unit expansions, enhance safety, and allow the refinery to meet environmental requirements."2 Tesoro also is considering expansion of the Refinery's power generation capacity to meet the refinery's full demand, from the current peak of approximately 63 megawatts (MW) to approximately 80 MW. Tesoro states:
When the reconfiguration is completed, LAR's physical electrical layout and service requirements will be substantially different than what exists today. The new cogeneration plant should provide all of the power and steam needed to the entire LAR and much of the electrical system will be reconfigured. With this new cogeneration plant, LAR should require only standby service from a utility that meets the needs of the LAR for those periods when the cogeneration plant is idled for maintenance or repairs.3
According to Tesoro, "partial integrated service or dual connections to both LADWP and SCE are not practicable" and the reconfigured Refinery "will be wholly integrated and will therefore necessarily be at one voltage level."4
Tesoro alleges that it has asked both SCE and LADWP to prepare, at Tesoro's expense, the necessary retail service studies so that Tesoro can better assess its options, including assumption by one utility of the entirety of the Refinery's current, existing load. SCE has refused to prepare a MOS study and the status of the request to LADWP is unclear (but immaterial to the issues before us.) The answer states that SCE has declined to do the MOS study because "it would be a waste of resources to perform studies investigating the feasibility of an alternative service that is legally impermissible."5 The answer then states:
After discussion with Tesoro regarding their service requirement, SCE learned that LADWP had rejected Tesoro's request to allow SCE's performance of MOS studies for areas within LADWP's service territory. By letter dated November 5, 2007, SCE informed Tesoro that SCE would not perform MOS studies for any current or future load within LADWP's service territory without LADWP's consent.6
The complaint contends that LADWP's service to the Refinery has been unreliable and describes a rather strained customer/utility relationship over the past year or so. Shortly after Tesoro filed this complaint at the Commission, LADWP filed a complaint for declaratory and injunctive relief against Tesoro in Superior Court.7
A Commission-sponsored mediation conference attended by SCE and Tesoro, as well as LADWP, did not result in settlement.
1 Complaint at 4.
2 Id.
3 Tesoro Opening Brief at 3.
4 Tesoro Opening Brief at 4, 5.
5 Answer at 2.
6 Id.
7 See City of Los Angeles v. Tesoro Refining and Marketing Company, Case No. BC 382649, Superior Court of the State of California, County of Los Angeles, Complaint filed
Dec. 20, 2007, First Amended Complaint filed Jan. 16, 2008. Among other things, the superior court action seeks declarations that the portion of the Refinery located within LADWP's service territory may not receive retail electric service from SCE, that Tesoro may not reduce load in that portion of the Refinery, and that the law firm representing Tesoro in both that action and in this CPUC complaint has a conflict of interest stemming from its representation of the City in another matter.
