ALJ/MEG/CFT/sid Mailed 7/14/2003

Decision 03-07-033 July 10, 2003

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Order Instituting Investigation into Implementation of Assembly Bill 970 regarding the identification of electric transmission and distribution constraints, actions to resolve those constraints, and related matters affecting the reliability of electric supply.

Investigation 00-11-001 (Filed November 2, 2000)

INTERIM OPINION ON PROCEDURES TO IMPLEMENT

PUBLIC UTILITIES CODE SECTION 399.25

1. Summary and Background¹

This decision describes the process the Commission will use to implement Public Utilities Code Section 399.25, which was enacted on September 12, 2002, as part of Senate Bill (SB) 1078.² The main purpose of SB 1078 is to increase California's use of renewable energy resources, and § 399.25 specifically focuses upon electric transmission facilities necessary to achieve that purpose.

Among other things, SB 1078 created the Renewable Portfolio Standard (RPS) program in California, under which the state will increase its electrical generation from renewable sources by at least 1% per year, until renewables comprise 20% of total investor-owned utility (IOU) procurement. Article 16 of SB 1078, commencing with § 399.11, describes the RPS program envisioned by the Legislature. It includes the submission of renewable energy procurement plans by the IOUs, accompanied by "a bid solicitation setting forth the need for renewable generation of each deliverability, characteristic, required on-line dates and locational preferences," as applicable.³

SB 1078 also contains the following language, now codified as § 399.25:

399.25. (a) Notwithstanding any other provision in Sections 1001 to 1013, inclusive, an application of an electrical corporation for a certificate authorizing the construction of new transmission facilities shall be deemed to be necessary to the provision of electric service for purposes of any determination made under Section 1003 if the commission finds that the new facility is necessary to facilitate achievement of the renewable power goals established in Article 16 (commencing with Section 399.11).

(b) With respect to a transmission facility described in subdivision (a), the commission shall take all feasible actions to ensure that the transmission rates established by the Federal Energy Regulatory Commission are fully reflected in any retail rates established by the commission. These actions shall include, but are not limited to:

(1) Making findings, where supported by an evidentiary record, that those transmission facilities provide benefit to the transmission network and are necessary to facilitate the achievement of the renewables portfolio standard established in Article 16 (commencing with Section 399.11).

(2) Directing the utility to which the generator will be interconnected, where the direction is not preempted by federal law, to seek the recovery through general transmission rates of the costs associated with the transmission facilities.

(3) Asserting the positions described in paragraphs (1) and (2) to the Federal Energy Regulatory Commission in appropriate proceedings.

(4) Allowing recovery in retail rates of any increase in transmission costs incurred by an electrical corporation resulting from the construction of the transmission facilities that are not approved for recovery in transmission rates by the Federal Energy Regulatory Commission after the commission determines that the costs were prudently incurred in accordance with subdivision (a) of Section 454.

By today's order, we adopt the following general framework for implementing the requirements of this statute:

· The provisions of § 399.25 apply to network transmission facilities that come before the Commission in the form of a Certificate of Public Convenience and Necessity (CPCN) or Permit to Construct (PTC) application. "Network" transmission facilities are defined as those that are needed to ensure reliable electric service and full delivery of a generator's output with the addition of generation. The provisions of § 399.25 do not apply to transmission facilities needed to bring power from the plant to the first point of interconnection with the existing transmission grid.

· The procurement proceeding will develop the rules and procedures for the RPS planning process and RPS renewables bidding program. If the transmission facility is an integral part of a renewables project approved pursuant to the RPS process, (i.e., a winning renewables bid), that creates a prima facie finding that the network upgrade will facilitate achievement of the renewable power goals set forth in Article 16 of SB 1078.

· The Commission will make § 399.25(a) and § 399.25(b)(1) findings on whether a proposed transmission project is "necessary" to facilitate achievement of renewable power goals in the applicable CPCN or PTC proceeding, based on the results of the RPS procurement process and General Order (GO) 131-D considerations of alternatives to the proposed project. The evaluation will not, however, reconsider the selection of the winning generation project.

· In the applicable CPCN or PTC proceeding, the Commission will make § 399.25(b)(1) findings regarding whether the transmission project undertaken to ensure reliable electric service with the addition of generation will also provide benefits to the transmission network.

· The Commission will continue to perform the appropriate review of CPCN and PTC applications under the California Environmental Quality Act (CEQA) , which may include consideration of project alternatives.

We believe that these general procedures will ensure a consistent understanding and application of § 399.25, and will serve to coordinate our activities in transmission planning and renewable procurement. However, as discussed below, nothing in today's decision precludes us from holding evidentiary hearings on § 399.25 issues (e.g., network benefits) for potential renewable transmission projects in advance of a RPS bid solicitation or filing of a CPCN or PTC if circumstances warrant. As a case in point, we have proceeded with evidentiary hearings on the Tehachapi Transmission Project in this proceeding.

Nor do these general procedures preclude us from delineating a set of system upgrades likely to be required in the next few years, or from taking affirmative steps to plan for them, based on the renewables transmission study we are preparing pursuant to SB 1038.⁴ That study is due to the Legislature by December 1, 2003.

Today's adopted framework focuses on the results of the IOUs' procurement process. We will consider the applicability of § 399.25 to the procurement practices of other RPS-obligated retail sellers (electric service providers and community choice aggregators) in coming phases of RPS implementation as the rules for these sellers are developed.