7. Assignment of Proceeding

Michael R. Peevey is the assigned Commissioner and Darwin E. Farrar is the assigned Administrative Law Judge in this proceeding.

1. PG&E and Contra Costa negotiated a modification to the Oakley Project PSA, extending the delivery date of the project from June 2014 to June 2016.

2. In D.10-07-045, the Commission directed PG&E to submit an application if future consideration and approval of the Oakley project was desired.

3. Oakley is a highly viable project if the Commission acts today. Financing for this project may no longer be available if the project is not approved in 2010.

4. Oakley is highly efficient (it has a very low heat rate) and will enable California to meet increasingly stringent GHG reduction goals.

5. Oakley would allow for the retirement of peaking resources with high heat rates.

6. Oakley would allow for renewable integration by providing load following capabilities. The combination of this generation attribute with a low heat rate is uncommon in the current generation fleet.

7. Oakley reduces risk that California will have an insufficient supply of generating resources due to lack of available financing for capital projects and regulatory lag.

8. The Commission has in the past approved projects that exceed, in their first couple of years of operation, the Commission's projections of the number of MW needed for reliability.

9. There has been no LTPP needs determination since D.07-12-052, creating a risk of capacity shortfall in 2016 and beyond.

10. The revised Oakley Project would help mitigate the risk of any capacity shortfall in 2016 and beyond that has been created by the time lapse between LTPP needs determinations.

1. Rule 16.4(b) requires that allegations of fact be supported by evidence that is in the record or that is judicially noticeable, and that new or changed facts are supported by a declaration or affidavit.

2. Providing the source for existing facts and documentation for new facts as required by Rule 16.4(b) is necessary to allow these facts to be appropriately weighed and considered when reviewing the PFM.

3. PG&E complied with the Rule 16.4(b) requirements for a PFM through the filing of the Declaration of Marino Monardi in support of the PFM.

4. Establishing different guaranteed delivery date criteria for the Oakley Project is a unique opportunity.

5. PG&E's PFM should be denied because it is an improper procedural vehicle for the Commission to consider approval of the Oakley Project.

6. On the Commission's own motion, it may consider the request for approval of the Oakley Project as an application.

ORDER

IT IS ORDERED that:

1. The petition of the Pacific Gas and Electric Company for modification of Decision 10-07-045 is denied.

2. Pacific Gas and Electric Company's Purchase and Sales Agreement with Contra Costa Generating Station LLC for the Oakley Project is approved subject to the condition that Pacific Gas and Electric Company may not take ownership of the plant under the Purchase and Sales Agreement prior to January 1 of 2016; or, alternatively, Pacific Gas and Electric Company may take ownership only on the condition that its shareholders absorb the associated revenue requirements from the date of purchase until January 1 of 2016.

3. Application 09-09-021 is closed.

This order is effective today.

Dated December 16, 2010, at San Francisco, California.

I reserve the right to file a dissent.

/s/ DIAN M. GRUENEICH

DISSENT OF COMMISSIONER DIAN M. GRUENEICH

DECEMBER 16, 2010 BUSINESS MEETING, AGENDA ID #9924, ITEM #53a

On July 29th of this year, I voted in favor of Decision (D.) 10-07-045 on the results of Pacific Gas and Electric Company's (PG&E) Long-Term Request for Offer (LTRFO) process. The decision approved PG&E's procurement of 719 megawatts (MW) of new generation from the marsh landing natural gas powerplant and denied approval of PG&E's procurement of 586 MW from the Oakley gas-fired powerplant.

During that vote I expressed deep concern that the basis for the determination of PG&E's need for new resources was made in 2007, using data that predated the worst economic downturn since the great depression. I cited the California Energy Commission's revised 2010 State of California load forecast which predicts a 10% reduction in load from the 2008 forecast as evidence that the range of need PG&E was arguing for was overly large. I also cited this Commission's aggressive funding of energy efficiency, demand response, distributed generation, and advanced metering programs as further evidence that PG&E's need was vastly overstated.

This Commission unanimously approved D.10-07-045, which determined that Oakley was not needed for reliability. At the same meeting this Commission also adopted D.10-07-042 which approved PG&E's novation of two Department of Water Resources contracts only on the condition that PG&E's procurement from Oakley was denied.

Today we have before us an opportunity to reaffirm our July decision as we consider PG&E's petition for modification of D.10-07-045 that denied PG&E's procurement from the $1.5 billion dollar Oakley gas-fired powerplant. PG&E's petition attempts to argue that pushing back the commercial availability date for Oakley to 2016 somehow justifies wasting $1.5 billion of ratepayer money. This petition ignores the fact that, according to our own internal analysis, PG&E has a 69% reserve margin in 2020 without Oakley. I repeat, PG&E has a 69% reserve margin in 2020 without Oakley. There was no need for the Oakley plant six months ago and there is no need for it today.

Make no mistake, there is only one outcome which we can be proud of as stewards of ratepayer funds.

The well-reasoned proposed decision from Administrative Law Judge (ALJ) Farrar rejects the arguments made by PG&E and identifies numerous inconsistencies and errors within PG&E's petition for modification.

In contrast, the alternate proposed decision grants PG&E's petition for modification on the basis of a revised commercial availability date which in itself violates the scope of PG&E 's own LTRFO process. Furthermore, the alternate proposed decision:

· Looks past the fact that approval of Oakley would authorize PG&E to over-procure 356 MW even based on the outdated need I referenced before.

· Looks past the fact that D.10-07-042 conditionally approved transactions between the Department of Water Resources and PG&E on the basis of rejecting Oakley in order to keep authorized procurement within the specified range of need.

The legal and factual basis for this alternate is so uncertain that only one week ago the alternate was revised, in the face of blistering comments, to treat PG&E's petition for modification as an application, practically inventing process on the fly to satisfy the direction given in D.10-07-045.

If all of this were not enough, a delay in this Commission's vote on the Oakley plant is clearly warranted to address a recently unearthed material factual discrepancy in the case.  PG&E claims in its petition for modification that it has agreed with the plant developer, Contra Costa Generating Station, that Oakley will not come on-line until 2016.  This is the entire factual basis for PG&E's petition for modification of D.10-07-045.  

However, in a December 3, 2010 filing with the California energy Commission, the plant developer requested expedited treatment of the Oakley construction permit application so that construction can start by May 2011.  This request with the energy commission was filed months after PG&E had filed its petition for modification at this Commission.  

Given a typical, two-year construction schedule, this means that Oakley will be completed in 2013, three years prior to PG&E's alleged on-line date.  In other words, the flimsy factual justification used by the alternate proposed decision to reverse an existing, unanimous Commission decision and approve the squandering of 1.5 billion of ratepayer dollars, is highly likely to be untrue.

This alternate proposed decision does not require PG&E to address this material discrepancy in the factual record - and any potential Rule 1 violations, but instead ignores this issue.

This is not how to approve procurement for $1.5 billion of new fossil generation.

I urge you to vote in favor of ALJ Farrar's proposed decision.

I reserve the right to file a dissent.

Dated December 17, 2010, at San Francisco, California.

/s/ DIAN M. GRUENEICH

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