3. Standard of Review: The CPCN/CEQA Process

Two different regulatory schemes define this Commission's responsibilities in reviewing LGS' request for the approval of this application. Pub. Util. Code §§ 1001 et seq., require that before LGS can construct this project, the Commission must grant a CPCN on the grounds that the present or future

public convenience and necessity require or will require construction of the project. Public Resources Code §§ 21000 et seq. (CEQA) require that the Commission, as lead agency for this project, prepare an EIR assessing the environmental implications of the project for its use in considering the request for a CPCN. (See generally Re Southern California Edison Company, D.90-09-059, 37 CPUC2d 413, 421.)

Generally, the CPCN requirements in the Public Utilities Code include a determination of whether the project is necessary. Also, before granting a CPCN, the Commission generally considers an analysis of the financial impacts of the proposed project on the utility's ratepayers and shareholders. The Commission reviews the expected cost of the project and for those projects estimated to cost more than $50 million, it sets a cap, or the maximum amount which can be spent by the utility on the project without seeking further Commission approval. In the Gas Storage Decision and subsequent decisions, the Commission has modified some of these requirements as they apply to competitive gas storage providers under its "let the market decide" policy. These modifications are discussed more fully below.

In addition, under Pub. Util. Code § 1002, the Commission has a statutory obligation, even in the absence of CEQA, to consider the following factors in determining whether or not to grant a CPCN: (1) community values; (2) recreational and park areas; (3) historical and aesthetic values; and (4) influence on the environment.

CEQA requires the preparation of an EIR where there is substantial evidence that a project may have a significant effect on the environment. The lead agency determines whether or not to prepare an EIR, and prepares and certifies the EIR. The lead agency is the governmental body with primary authority over the proposed project which, for this application, is this Commission.

In preparing the EIR, the lead agency must consider alternatives to the proposed project, including the alternative that there be no new project at all. The lead agency must identify all significant and potentially significant impacts of the proposed project, must identify the mitigation measures available to lessen those impacts, and must determine whether those mitigation measures would reduce the impacts to less than significant levels. If the EIR concludes that the project will still have a significant impact on the environment even after all reasonable mitigation measures are applied, any CPCN must be accompanied by a statement of overriding consideration explaining why the project should still be approved. In any event, the lead agency cannot approve the CPCN until it has certified that the final EIR is complete. The permit that is finally issued must be conditioned on completion of any adopted mitigation measures.