II. DISCUSSION

A. PG&E's Claim Is Not Ripe For Review.

PG&E's claim that the Commission does not have the authority to determine need is not ripe.² The general test for ripeness is that there must be a substantial controversy between parties having adverse legal interests of sufficient immediacy and reality to warrant the issuance of relief. (See Abbott Laboratories v. Gardner (1967) 387 U.S. 136, 148-149; BKHN, Inc. v. Department of Health Services (1992) 2 Cal. App. 4^th 301, 308.) Thus, "[t]he legal issues posed must be framed with sufficient concreteness and immediacy so that the court can render a conclusive and definitive judgment rather than a purely advisory opinion based on hypothetical facts or speculative future events." (Hayward Area Planning Assoc., Inc. (1999) 72 Cal. App. 4^th 95, 103.)

PG&E argues we do not have the authority to "second-guess" the ISO's determination of need. (See D.01-05-059 at 19.) Because the Commission does not dispute the ISO's determination of need in the present case, there is not a substantial controversy between parties having adverse legal interests of sufficient immediacy and reality. Moreover, PG&E will not suffer a hardship if this issue is not addressed at the present time because, again, the Commission agreed with the ISO's need determination. Thus, PG&E's claims are not ripe for review. As further discussed below, however, we find PG&E's claims to be without merit and therefore deny rehearing.

B. Jurisdiction

1. The Commission's Basis For Jurisdiction.

a) Public Utilities Code Section 1001.

Public Utilities Code Section 1001 (Section 1001)³ gives the Commission authority to approve or disapprove a project based on whether it serves the public convenience and necessity. Thus, the Commission has an independent statutory duty pursuant to Section 1001 to ensure that this project is necessary.

b) California Environmental Quality Act.

In addition to the Commission's authority to make a determination of need pursuant to Section 1001, there are certain aspects of the California Environmental Quality Act⁴ (CEQA) that overlap with need. CEQA applies to discretionary government activities, which are defined as "projects." ⁵ PG&E's Section 1001 application created the need for a discretionary decision by the Commission. Applying the standard set forth in the CEQA definition of a "project," we find that each of the elements necessary to invoke Commission jurisdiction under CEQA for the Northeast San Jose Project existed. Once identified as a lead agency for CEQA purposes, CEQA prohibits the delegation of fulfilling CEQA functions despite any other related jurisdiction by another agency.⁶ Thus, the Commission cannot avoid its CEQA duties by unlawfully delegating the duty of the Commission to the ISO.

Under CEQA, the Commission must prepare an EIR whenever a project "may have a significant effect on the environment." (Cal. Pub. Resources Code §§ 21100, 21151.) Section 15126.6(e) of CEQA requires the EIR to contain analysis of a "No Project" alternative.⁷ Should the Commission could choose the "No Project Alternative," the Commission would, in effect, determine that the project is not needed. Therefore, the Commission also has authority to make a need determination under the "No Project" alternative of CEQA. Section 15126.6(e) of CEQA is not preempted by state or federal law.

c) Public Utilities Code Section 1005.5.

The Commission is required to impose a cost cap on the Project pursuant to Public Utilities Code Section 1005.5 (Section 1005.5).⁸ The project at issue exceeds the fifty million dollar requirement mandated by Section 1005.5, and therefore, the Commission is required to impose a cost cap. We determined in D.01-05-059 that PG&E's cost estimates are inadequate, and reaffirmed this position in D.01-12-017. Since we could not find PG&E's cost estimate to be reasonable, we complied with the statute by adopting a lower cost cap, at the same time allowing PG&E to refile with evidence of higher actual costs.

PG&E argues that there is a conflict between Section 1005.5 and AB 1890. PG&E claims that "Section 1005.5 was enacted prior to the adoption and codification of AB 1980, and relates to the Commission's former jurisdiction over

transmission ratemaking . . . [b]ecause the Commission no longer has authority over electric transmission ratemaking, the provisions of Section 1005.5(a) are no longer applicable to electrical transmission projects." (First App. for Rehearing at 14.) PG&E is mistaken. AB 1890 can be reconciled with Section 1005.5 under a concurrent jurisdiction theory.⁹ Furthermore, PG&E's argument would require the Commission to ignore its statutory mandate.

d) Public Utilities Code Section 762.

The Commission has the authority to order PG&E to construct the Project pursuant to Public Utilities Code Section 762 (Section 762).¹⁰ The Commission has conducted several hearings on the Project, and the Commission, the ISO and PG&E agree that this Project is needed in order to ensure electric reliability in the Northeast San Jose area for the public. (See D.01-12-017 at 5.) Therefore, pursuant to Section 762, the Commission has the authority to order PG&E to construct the Project in the manner and within the time specified in the order, including setting a reasonable cost cap pursuant to Section 1005.5.

2. PG&E's Claims That Federal Law Preempts the Commission From Interfering With the ISO's Determination of Need, From Imposing a Cost Cap and From Ordering PG&E To Construct the Project.

PG&E contends that the California Legislature's adoption of AB 1890 creating the ISO and its order to submit to the Federal Energy Regulatory Commission's (FERC) jurisdiction transferred all jurisdiction over California's transmission system to FERC. (First App. for Rehearing at 6; see also Second App. for Rehearing at 15.) As a result, PG&E argues that conflict and field preemption prohibit the Commission from deciding whether a project is needed to ensure transmission system reliability, to impose a cost cap on the Project or to order PG&E to construct the Project. (First App. for Rehearing at 6, 11; Second App. for Rehearing at 15-16.)

According to California law, in order for conflict preemption to apply, there must first be an attempt to harmonize federal and state law in order to avoid any actual conflict. (See Peatros v. Bank of America NT&SA (2000) 22 Cal. 4^th 147, 167-168 (Peatros).) "Conflict preemption of state law by federal law does not automatically and necessarily result in the complete displacement of state law by federal law in its entirety [but] [r]ather, it does so insofar . . . as there is conflict." (Peatros at 172 (italics in original).) Field preemption applies where Congress makes it clear that state law is regulating conduct in a field that Congress intended the Federal Government to occupy. The state and federal laws that PG&E claims preempt the Commission from making its own determination of need and from capping costs can be reconciled with the statutory bases for the Commission's authority.

Neither conflict nor field preemption prevent the Commission from making a determination of need. Conflict preemption does not apply because the ISO and the Commission have concurrent jurisdiction to make a need determination pursuant to their statutory mandate.¹¹ Thus, Section 1001 and CEQA can be reconciled with AB 1890. As discussed below, siting is reserved to the states. Therefore, field preemption does not apply either. It is clear that PG&E is cognizant of the fact that it must comply with Section 1001 because it submitted A.99-09-029 for a CPCN. PG&E contends, however, that the Commission must rubberstamp the ISO's determination of need when reviewing an application for a CPCN for a transmission project.¹² PG&E's position ignores the fact that the Commission also has a duty to make a need determination pursuant to Section 1001, and may do so pursuant to CEQA. In this order, we modify our earlier decisions to clarify our jurisdiction under CEQA, which arises from our approval of this discretionary project.

Nor does federal law preempt Section 1005.5 and Section 762. The passage of AB 1890, and the legislative grant of the operational control over California's electrical transmission grid to the ISO operating under FERC authorization did not explicitly remove the Commission's authority under Sections 1005.5 and 762, and Sections 1005.5 and 762 can be reconciled with the ISO tariff. ¹³

3. PG&E's Contentions That the Commission Lacks Authority to Make a Determination of Need, Impose a Cost Cap Or Order PG&E To Construct the Project.

PG&E argues that even if the creation of the ISO had not submitted California's transmission grid to exclusive FERC control under the Federal Power Act (FPA), the Commission still would not have the authority to make a need determination, impose a cost cap or order PG&E to build the Project under state law. We disagree. AB 1890 did not revoke our authority pursuant to CEQA, Section 1001, Section 1005.5 and Section 762. In the absence of explicit Legislative intent to repeal operative sections of CEQA, Section 1001, Section 1005.5 and Section 762, we will continue to enforce these statutes.

a) Cost Cap

The Commission correctly asserted its jurisdiction under Section 1005.5 and ordered PG&E to show cause why the cost cap should not be lowered. PG&E argues that when jurisdiction over transmission rates was transferred to the FERC, the Commission lost the ability to impose cost caps as well. PG&E contends that FERC's authority over transmission rates completely occupies the field preempting all state regulation that intrude even indirectly into this sphere. PG&E also claims that even if Section 1005.5 were applicable to the Project, "the Commission has no authority thereunder to order the submission of additional cost estimates after issuance of the CPCN" or to require PG&E to show cause why the costs should not be lowered. (First App. for Rehearing at 15.)

Applying Section 1005.5 to transmission projects subject to ISO control does not exceed the Commission's statutory authority under state law, nor is the Commission preempted from doing so by the FPA. Section 731 of the FPA determines that siting is reserved to the states. Specifically, the FPA states: "[n]othing in this title or in any amendment made by this title shall be construed as affecting or intending to affect, or in any way to interfere with, the authority of any State or local government relating to environmental protection or the siting of facilities." (15 U.S.C. § 79.) Thus, states retain control over transmission siting. AB 1890 did not transfer siting authority from the Commission to the ISO. The Commission has the statutory duty under Section 1001 to ensure that a project of this magnitude is necessary. Further, the Commission must determine whether costs for the Project are reasonable pursuant to Section 1005.5.

C. PG&E's Contention that D.01-12-017's Reductions of PG&E's Costs Estimates Are Unsupported By the Factual Findings or Evidence in the Record Is Unsubstantiated.

PG&E argues that the Second Decision arbitrarily reduced PG&E's cost estimates in violation of Public Utilities Code Section 1757(a)(4) and is therefore subject to reversal. (See Pub. Util. Code § 1757(a).) PG&E has the burden of proving the reasonableness of its cost estimates. The Second Decision disallowed several portions of PG&E's cost estimate because the Commission determined that PG&E did not properly justify them. (Second Decision, mimeo, at 8.) Because of PG&E's insufficient showing, the Commission properly reduced the cost cap, allowing PG&E to apply to increase the cost cap if necessary.

D. PG&E's Requests For Oral Argument.

PG&E also requested oral argument. Rule 86.3 of the Commission's Rules of Practice and Procedure states that oral argument will be considered if the application "demonstrates that oral argument will materially assist the Commission in resolving the application, and . . . raises issues of major significance for the Commission." (Cal. Code of Regs., Tit. 20, § 86.3). Contrary to its assertions, PG&E has not persuaded us that the First and Second Decisions depart from existing precedent or establish new precedent. Oral arguments will not materially assist the Commission here, and therefore, PG&E's request for oral argument is denied.

⁵ The statutory definition of "project" is "the whole of an action, which has the potential for resulting in either a direct physical change in the environment, or a reasonably foreseeable indirect change in the environment, and that is any of the following: (1) An activity that is directly undertaken by a public agency; (2) An activity undertaken by a person which is supported in whole or in part through public agency contracts, grants, subsidies, loans, or other forms of assistance from one or more public agencies; (3) An activity involving the issuance to a person of a lease, permit, license, certificate, or other entitlement for use by one or more public agencies." (CEQA Guidelines, § 15378; Cal. Pub. Resources Code § 21065.)