4. Issues before the Commission
The critical issue before the Commission is whether to grant either the WPTF/AReM's Motion to Dismiss or IEP's Motion to Dismiss. If granted, the motions will bring this proceeding to a close and the Tesla Generating Station, in its current incarnation, will not receive a CPCN.
4.1. Postion of Parties
WPTF/ARem's Motion to Dismiss argues that:
The Commission has established clear and precise standards for an application for utility owned generation (UOG) acquired outside a competitive process in D.07-12-052 issued just last December in the Commission's Long-Term Procurement Plan (LTPP) proceeding, R.06-12-013. The PG&E Application asserts but fails to demonstrate to [sic] compliance with those standards.38
WPTF/AReM contends that "PG&E's application represents a fundamental departure from the procurement framework the Commission established in prior decisions."39 WPTF/AReM argues that PG&E fails to meet the "truly extraordinary circumstances"40 criterion set forth in D.07-12-052 and therefore "[p]roceeding with an Application that is unquestionably inconsistent with the policy the Commission adopted calling for competitive sourcing of utility long-term procurement is an inefficient use of Commission and party resources and undermines the credibility and robustness of the procurement practices the Commission has endorsed."41
More specifically, WPTF/AReM contends that the Application does not comply with Commission procurement policy because it meets neither the "unique opportunity"42 nor the "reliability needs"43 criteria set forth in D.07-12-052 for the development of UOG outside of a RFO process. WPTF/AReM also argues that the Application "fails to comply with Commission policy that an RFO must be demonstrated to be infeasible"44 and that PG&E fails to show that the power is "attractively priced."45 WPTF/AReM further claims that "[g]ranting PG&E's application will likely lead to the diminution of competition in the California generation market"46 and that the application "effectively constitutes a petition to modify D.07-12-052, for which parties have not received legally sufficient notice."47
Like the Motion of WPTF/AReM, IEP's Motion to Dismiss also discusses the policies set forth in D.07-12-052 and reasons that PG&E's Application "should be dismissed because it fails to meet the requirements the Commission has established for this type of request."48 IEP contends that PG&E "fails to show that holding a competitive RFO is infeasible"49 and that PG&E "fails to show that the Tesla project qualifies under the `extraordinary circumstances' exception."50
In reply to WPTF/AReM's Motion, PG&E states that "the Commission has set a high standard for a motion to dismiss an application."51 PG&E contends that the Commission should not dismiss this Application because: (1) "The Tesla Generating Station satisfies the unique opportunity requirement;"52 (2) "PG&E has demonstrated that there is a reliability need for the Tesla Generating Station;"53 (3) "PG&E has demonstrated that an RFO is infeasible;"54 and (4) "PG&E has demonstrated that the Tesla Generating Station is an attractively priced resource."55 PG&E argues that these assertions of WPTF/AReM are at best "disputed factual issues that warrant evidentiary hearings and Commission review on the merits."56 Finally, PG&E contends that "WPTF/AReM's policy arguments are not appropriate for resolution in a motion to dismiss;"57 and that its "asserted `other grounds' for dismissal demonstrate the need for hearings."58
Concerning the IEP Motion to Dismiss, PG&E argues that IEP's claims that PG&E failed to demonstrate that an RFO is infeasible and that extraordinary circumstances exist "ignore the evidence presented by PG&E and, at best, raise a disputed issue of material fact."59 PG&E asserts that "not only is there a triable issue of fact, but PG&E has demonstrated that these facts support its Application."60
In opposing the motions to dismiss, CUE/CURE presents a detailed and lengthy argument directly addressing the issue of whether a unique opportunity is limited to those that arise in a "settlement or bankruptcy" proceeding. CUE/CURE states that:
Although both WPTF and IEP argue that this category [unique opportunity] is limited only to those resources which are subject to a settlement or a bankruptcy proceeding, it is apparent that the Commission intended for this category to encompass all circumstances in which a unique opportunity exists to obtain "attractively priced resource."61
CUE/CURE supports its interpretation by analyzing the context of the discussion of unique opportunity contained in D.07-12-052. CUE/CURE argues that "each of the other four categories described [in the decision] contain general and inclusive language;" that the decision states that the Commission will consider UOG approval on a "case-by-case basis;" and the Commission states that "the needs highlighted in these five categories may change."62 CUE/CURE concludes:
It follows that the reference to settlement and bankruptcy proceedings within the "unique opportunity" category is not meant to be exclusive, but is rather intended merely to highlight or provide examples of certain "attractively priced resources."63 Finally, had the Commission intended to categorically exclude every unique and "attractively priced" opportunity for UOG that did not stem from a settlement or bankruptcy proceeding - no matter how attractively priced, and no matter how unique the opportunity - it would have said so explicitly.64
In addition, CUE/CURE argues that there is an open issue as to whether the facts alleged in the Application may lead to a situation that "may compromise reliability."65 CUE/CURE concludes by arguing that neither IEP nor WPTF/AReM have met the applicable legal standards for a motion and "should be denied."66
4.2. Ruling and Rationale of ACR
The ACR evaluated PG&E's assertion that the proposed project meets the criteria warranting UOG in two of the five exception categories identified in D.07-12-052 because it "provides a unique opportunity or is needed to meet specific, unique reliability needs."67
The ACR determined that concerning these two categories, D.07-12-052 states as follows:
· Unique Opportunity - an attractively priced resource resulting from a settlement or bankruptcy proceeding (we anticipate that these opportunities will diminish over time); and
· Reliability - resources needed to meet specific, unique reliability issues (particularly under circumstances in which it becomes evident that reliability may be compromised if new resources are not developed, and the only means of developing new resources in sufficient time is via UOG).68
Furthermore, in a summary of its approach, D.07-12-052 states: "We shall consider these unique circumstances for UOG approval outside of a competitive solicitation on a case-by-case basis via an IOU application."
In considering whether to grant the motions to dismiss, the ACR sought to determine whether, even if PG&E's factual assertions were to be proven true, Commission policy would still require denial of the application. The ACR found that PG&E had asserted facts in its application that would, if proven true, indicate that holding an RFO to solicit power is not possible in this current situation.
The ACR first examined the set of facts pertaining to the "unique opportunity" offered by this Application. The ACR noted that PG&E does not assert that this "unique opportunity" arises from a settlement or a bankruptcy. Still, the facts pertaining to the advanced position in regulatory reviews and the facts pertaining to the order status of the turbine generators are clearly unique. The ACR then cited the argument of CUE/CURE, which stated that the goal of the Commission is to permit a utility to acquire "attractively priced resources" and the words "resulting from a settlement or bankruptcy"69 are illustrative of the type of situation that produces an "attractively priced resource,"70 not qualifying conditions.
The ACR observed that the Commission may be persuaded by this argument in light of the strong commitment articulated in D.07-12-052 to a case-by-case approach to examining proposed UOG projects. The ACR concluded that the Commission may wish to clarify whether D.07-12-052 has set a policy that would limit its examination of unique circumstances to only those situations that arise from a settlement or from a bankruptcy. Thus, the ACR concluded there were insufficient grounds for dismissing PG&E's application.
The ACR also analyzed the issue of whether the Tesla Generating Station could qualify as a UOG project under the reliability exception. The ACR noted that PG&E has pointed out that without this project, it will fail to meet the Commission-adopted Planning Reserve Margin in 2013.71 The ACR further noted that PG&E asserts that the Tesla Generating Station is the "most viable alternative to meet customer needs."72 If PG&E were to prove that there is a reliability issue, then the project would clearly qualify for the "reliability" exception created in D.07-12-052.
Turning now to IEP's Motion to Dismiss, the ACR found unpersuasive IEP's arguments that the Application should be dismissed because "PG&E fails to show that holding a competitive RFO is infeasible"73 and that "PG&E fails to show that the Tesla project qualifies under the `extraordinary circumstances' exception."74 The ACR held, PG&E has made factual claims that, if determined to be valid, "would show that an RFO is infeasible"75 and that the project does meet the "extraordinary circumstances" exceptions.
Based on all these considerations, the ACR concluded that the Commission should have the opportunity to evaluate the evidence presented in the Application. The motions to dismiss of WPTF/AReM and IEP were therefore denied.
4.3. Analysis: Motion of WPTF/AReM and IEP Warrants Dismissal of Application
Typically the Commission does not consider interlocutory appeals or re-examine rulings issued in a proceeding. However, PG&E's request for an interim decision granting recovery of any project termination costs that it may incur should the Commission decline to grant a CPCN for the Tesla Generating Station would, if approved, place ratepayers at risk of approximately $59 million in termination costs before the issue of the reasonableness of the project came before the full Commission.76 In light of this fact, it is reasonable for the Commission to examine on its own motion whether to reverse the ACR that denied the motions to dismiss.
In D.07-12-052, the Commission established standards for an application for utility UOG acquired outside a competitive process. In that decision the Commission stated that a utility, in its application seeking approval for a UOG resource procured outside of a competitive procurement, must demonstrate that conducting an RFO is not feasible.
As the WPTF/AReM Motion states:
. . . PG&E fails to comply with Commission policy that an RFO must be demonstrated to be infeasible. As noted in the joint WPTF/AReM protest of the application filed August 20, 2008, D.07-12-052 provides: "Because the Commission has a strong preference for competitive solicitations, in all cases, if an IOU proposes a UOG outside of a competitive RFO, the IOU must make a showing that holding a competitive RFO is infeasible." Further, in allowing the possibility that UOG could be built under any of the five categories, the Commission again emphasized that "we firmly believe that all long-term procurement should occur via competitive procurements, except in truly extraordinary circumstances," and specified that "while we do not explicitly disallow utility ownership options in the generation market we continue to look unfavorably on this procurement option but realize that in extraordinary times this may be the optimal method for meeting the needs of California's ratepayers. Here, however, PG&E makes no showing that holding a competitive RFO was (or is) infeasible, thus again failing to comply with explicit Commission policy in that regard.77
On this same issue, the IEP Motion to Dismiss states:
As IEP points out in its protest, the time between the issuance of an RFO and the commercial operation date of a winning plant has been as little as a year. PG&E notes but then ignores the fact that Southern California Edison Company's Fast Track RFO will take about four years from issuance of the RFO to commercial operation.78
We agree with WPTF/AReM and IEP that PG&E fails to meet the threshold requirement of showing that holding a RFO is infeasible or that the Tesla project meets the truly extraordinary circumstances criterion as required by D.07-12-052. In particular, PG&E did not show how the specific resource needs it projects for years in the future could not be met in other ways. While we have examples of other utilities filling needs by way of repowering projects or a series of peaker units, we are not suggesting that PG&E had to support its application in any particular way. What PG&E did not do is produce facts showing that the short term, short fall identified in the application could only be met with the Tesla resource procured outside of any competitive process.
In summary, PG&E did not meet the standards articulated in D.07-12-052 that would allow us to consider Tesla as a UOG resource chosen outside of a competitive solicitation. This supports granting the motions to dismiss.
38 WPTF/AReM Motion at 4.
39 Id. at 5.
40 D.07-12-052 at 209.
41 WPTF/AReM Motion at 5.
42 Id. at 6.
43 Id. at 7.
44 Id. at 8.
45 Id. at 9.
46 Id. at 10.
47 Id. at 12.
48 IEP Motion to Dismiss at 3.
49 Id.
50 Id. at 4.
51 PG&E Reply to WPTF/AReM Motion at 2.
52 Id. at 4.
53 Id. at 5.
54 Id. at 6.
55 Id.
56 Id. at 4.
57 Id. at 7.
58 Id. at 8.
59 PG&E Reply at 21.
60 Id.
61 CUE/CARE Opposition at 6.
62 Id.
63 Id.
64 Id., emphasis in original.
65 Id. at 8, emphasis in original.
66 Id. at 12.
67 PG&E Reply to WPTF/AReM Motion at 3.
68 D.07-12-052 at 212.
69 Id.
70 Id.
71 Application at 17.
72 Id. at 18.
73 IEP Motion to Dismiss at 3.
74 Id. at 4.
75 ACR at 16.
76 Application at 8.
77 WPTF/AReM Motion at 8-9, footnotes omitted.
78 IEP Motion to Dismiss at 3.
