15. Assignment of Proceeding

Carl W. Wood is the Assigned Commissioner and Dean J. Evans is the assigned Administrative Law Judge in this proceeding.

Findings of Fact

1. EPTC System Facilities consists of assets now used for SCE's commercial oil storage and transport operations for third parties.

2. The total sale price for the EPTC System Facilities and the Station Facilities is $158.2 million, $152.9 for the EPTC System Facilities, and $5.3 million for the Station Facilities.

3. The net gain-on-sale for the EPTC System Facilities is $47.4 million and $3.1 million for the Station Facilities.

4. As a result of AB 1890, SCE sold all of its generating stations that used residual fuel oil and natural gas.

5. SCE continued to provide back-up fuel oil to the new owners of its former generating stations.

6. On August 26, 1999, the CALISO determined that back-up oil fuel facilities were no longer necessary.

7. In D.01-02-059, the Commission recognized that the EPTC System Facilities were no longer "generation-related assets," but rather an "oil pipeline" utility.

8. SCE prepared a Workforce Mitigation Measures plan to minimize the impact on SCE's employees from the sale of the FOP Facilities.

9. Pacific Terminals has the financial resources and managerial expertise to operate the FOP Facilities.

10. SCE electric ratepayers benefit from this sale.

11. SCE's creditworthiness will be improved.

12. SCE believes the gain-on-sale from the EPTC Facilities should accrue to the shareholders.

13. ORA believes a large percentage of the gain-on-sale should accrue to the ratepayers.

14. Future CEQA compliance will be Pacific Terminals' responsibility.

15. SCE electric ratepayers will have $28.7 million of decommissioning costs returned to them with the possibility of more later.

16. The South Coast Air Quality Management District is the Lead Agency for the proposed project pursuant to CEQA.

17. The South Coast Air Quality Management District originally prepared a Mitigated Negative Declaration for this group of facilities which found that the proposed project, the mitigation measures applicable to the project, and the mitigation monitoring protocols, eliminate and/or reduce the potential environmental impacts to a less than significant level.

18. The Commission is a Responsible Agency for the proposed project pursuant to CEQA and previously adopted the South Coast Air Quality Management District's MND for these facilities in Decision 94-10-044.

19. The Commission has considered the South Coast Air Quality Management District's MND in its decisionmaking process in accordance with the CEQA Guidelines Section 15096(f).

20. An Addendum for this project was prepared pursuant to CEQA Guidelines Section 15164.

21. The revenue sharing mechanism between SCE and its ratepayers that was authorized in D.94-10-044 shall cease and is not applicable to Pacific Terminals.

Conclusions of Law

1. The sale of SCE's FOP Facilities to Pacific Terminals is in the public interest.

2. SCE's FOP Facilities are subject to the Commission's jurisdiction under Pub. Util. Code §§ 216, 227 and 228 as an oil pipeline.

3. Section 377 of the Pub. Util. Code does not apply to the FOP Facilities.

4. SCE's Workforce Mitigation Measures will minimize employee disclocations.

5. Section 455.5 of the Pub. Util. Code is not applicable in this instance.

6. Applicants have met the requirements of §§ 851 and 854.

7. It is reasonable to apportion the gain-on-sale of the EPTC Facilities by using the gross sales price times the gross revenues 12 ½% ratepayers/87 ½% shareholders split.

8. Based on our apportionment, ratepayers should receive $19.1 million of the $47.4 million gain-on-sale, and the shareholders receive $28.3 million.

9. Crediting the ratepayer gain-on-sale to the PROACT (or to the Electric Distribution Revenue Adjustment Balancing Account, if the PROACT has been eliminated by the time of such crediting) is reasonable and fair.

10. Refunding some or all of the operating and maintenance costs that the ratepayers paid for EPTC System Facilities since August 1999 would constitute retroactive ratemaking.

11. The USOA established by FERC confirm that generation assets include more than power plants, since separate accounts exist for elements such as fuel oil pipeline and facilities.

12. Section 377 does not bar the Commission from authorizing SCE to dispose of the EPTC Facilities at issue here.

13. The sale should not cause anti-competitive behavior by Pacific Terminals.

14. The South Coast Air Quality Management District's MND was prepared pursuant to CEQA and is adequate for this Commission's decision making purposes.

15. The Commission has considered the South Coast Air Quality Management District's MND in its decision making process in accordance with the CEQA Guidelines Section 15096(f).

16. Pursuant to Section 15096(g)(1) of the CEQA Guidelines, the Commission should adopt, as conditions of project approval, the mitigation measures identified in the South Coast Air Quality Management District's MND.

17. The preparation of an Addendum pursuant to CEQA Guidelines Section 15164 is appropriate for the transfer of the subject facilities.

18. The Commission should require as terms of project approval the conditions applicable to the transfer as outlined in the Addendum attached to this decision.

19. In order to eliminate uncertainty in the parties' business dealings, this order should be effective immediately.

ORDER

IT IS ORDERED that:

1. Application 02-03-035 is approved under Pub. Util. Code §§ 851 and 854.

2. The South Coast Air Quality Management District's MND was prepared pursuant to California Environmental Quality Act (CEQA) and is adequate for this Commission's decisionmaking purposes.

3. The mitigation measures outlined in the South Coast Air Quality Management District's MND are hereby made conditions of project approval by this Commission Order.

4. The preparation of an Addendum pursuant to CEQA Guidelines Section 15164 is appropriate for the transfer of the subject facilities.

5. The conditions applicable to the transfer as outlined in the Addendum attached to this decision are imposed as terms of project approval by this Commission order.

6. Southern California Edison Company (SCE) shall credit Procurement Related Obligations Account (PROACT) (or the Electric Distribution Revenue Adjustment Balancing Account, if the PROACT has been eliminated by the time of such crediting)with the net gain-on-sale of the Station Facilities of $3.1 million and the net ratepayer gain-on-sale of $19.1 million from Edison Pipeline and Terminal Company (EPTC) System Facilities and the decommissioning costs returned to the ratepayers.

7. SCE shall file an advice letter to reduce rates due to the ratepayers no longer having to support the EPTC System Facilities that are being sold to Pacific Terminals.

8. Pacific Terminals is authorized to use the same methodology as EPTC did to establish rates.

9. Pacific Terminals shall file its tariff with the Commission's Energy Division within 45-days, which shall indicate that the terms and conditions and charges

for service shall be established through negotiated contracts between the customer and Pacific Terminals.

10. This proceeding is closed.

This order is effective today.

Dated July 10, 2003, at San Francisco, California.

I will file a dissent.

/s/ CARL W. WOOD

Commissioner

I reserve the right to join Commissioner Wood's dissent.

/s/ LORETTA M. LYNCH

May 7, 2003

CEQA Addendum

California Public Utilities Commission

A.02-03-035

Southern California Edison Transfer of Edison Pipeline and
Terminal Company (EPTC) Facilities to Pacific Terminals

Summary

Pursuant to California Environmental Quality Act (CEQA) Guidelines Section 15164, the California Public Utilities Commission (CPUC) has prepared this Addendum to the Mitigated Negative Declaration (MND) published by the South Coast Air Quality Management District (SCAQMD) and previously adopted by this Commission in Decision 94-10-044.

As described below, the Applicants (Southern California Edison and Pacific Terminals) have applied to transfer by sale, with slight modifications, a system of facilities the operation of which were the subject of an MND previously adopted by the Commission. This transfer and associated modifications were reviewed by the agency and found not to result in either any new, previously undisclosed impacts or any previously disclosed impacts of greater severity. Therefore, the agency finds that the preparation of an Addendum pursuant to CEQA Guidelines Section 15164 is appropriate for the transfer of the subject facilities, as modified.

This document provides an overview of the transaction; identifies the facilities subject to transfer, their operational history and regulatory regime; describes the modifications to the set of facilities; and defines their future ownership and conditions of transfer.

Project Description

Overview

In March of 2002, Southern California Edison (SCE) and Pacific Terminals (PT) jointly filed Application A.02-03-035 requesting authority to sell and transfer pipeline facilities to PT and authorizing PT to operate them as a public utility. Subsequent to the filing of the application, SCE and PT filed the following documents in support of their application:

Southern California Edison Company will transfer to Pacific Terminals a group of facilities (EPTC) that were previously operated by SCE/EPTC for third-party terminalling and bulk transfer operations. This group of facilities, its operation as a system, and three phases of contemplated operation, including facility upgrades and conversions, were previously subject to an environmental review and resultant MND in 1994 by the SCAQMD, including required mitigation measures applicable to facility operations, upgrades, and conversions for each of the three phases. Two modifications to the facilities in the 1994 MND are contemplated within the facilities proposed for transfer from SCE/ETPC to PT: (1) four tanks at Los Alamitos and two tanks at Long Beach will be added to the inventory of facilities subject to the transfer; and (2) a small number of facilities previously covered in the 1994 MND have been decommissioned and removed from the SCE/EPTC inventory, and are therefore not a part of the subject transfer.

Facility Background

The original facilities consist of 120 miles of pipeline, one tank farm, storage facilities adjacent to 7 electric generating stations, and 11 heating and pumping stations. These facilities were installed to provide primary fuel supply to SCE power plants. The facilities became secondary in the 1980s when natural gas became the fuel of choice for economic and environmental reasons - the facilities provided only back-up fuel capability in the 1980s. With increasingly stringent air quality regulations and high availability of low-cost natural gas, the bulk oil facilities experienced declining use throughout the late 1980s and early 1990s and were only on call for emergency back-up fuel.

SCE received approval from the CPUC to transfer these facilities to a subsidiary (SCE/EPTC) in 1994 for the purpose of providing third-party terminalling and bulk transfer services, including potential increases in use and potential changes in product mix. The SCAQMD was the CEQA Lead Agency and performed an environmental review of the facilities subject to the 1994 transfer and issued an MND in 1994. The Commission approved the 1994 transfer and adopted the SCAQMD MND as a Responsible Agency under CEQA. These EPTC facilities have been operated as a bulk terminalling and transfer system since 1994, primarily serving contract customers. In the late 1990s SCE sold its power plants in anticipation of a restructured marketplace for electric power, and in 1999 the California Independent System Operator (CAISO) subsequently determined that SCE therefore no longer needed back-up fuel oil capability, resulting in SCE's determination that the facilities were surplus. The new owners of the power plants were not interested in the EPTC facilities as they either would not or could not burn fuel oil in the power plants.

SCE/EPTC has decommissioned and abandoned some of the tanks and pipeline facilities originally included in the SCE/EPTC group of facilities that were reviewed and transferred in 1994 by SCAQMD and the CPUC, respectively. SCE/EPTC has also begun a series of upgrades and conversions for some of the facilities as contemplated in the 1994 SCAQMD MND, including installing floating roofs and double bottoms in some tanks as well as some control system upgrades. The facilities are spread out over a broad area, including: Long Beach, Los Alamitos, and Huntington Beach as well as a number of pumping stations located along the pipeline alignments.

Current and Future Owners

From 1994 until the present, SCE/EPTC has engaged in terminalling and storage for refinery operations, known as the "black oil" business -- primarily involving crude oil, "gas oil," heavy fuel oil, and bunker fuel, but not jet fuel or gasoline products. PT is a subsidiary of Pacific Pipeline Systems Incorporated (PPSI), a Commission-regulated crude oil transportation and trunk line business with facilities extending from Bakersfield (Kern County) to Long Beach (Los Angeles County). PT intends to operate the EPTC system and facilities in the same manner as SCE/EPTC did and to continue serving SCE/EPTC's current "black oil" markets under existing operations. PT will be a Commission-regulated common carrier and public utility subject to the Commission's jurisdiction, and has asked for the same ratemaking authority as SCE/EPTC. PT will take assignment of SCE/EPTC's existing contracts where possible and will accept assignment of SCE/EPTC's existing contracts "as is" with respect to the number of inventory cycles, degree of heating, and type of products subject to the contracts. PT will not seek to operate the SCE/EPTC facilities outside of the bounds of the activities and applicable mitigations contemplated in the 1994 SCQAMD MND without seeking further authority and, if necessary, environmental review from this Commission and any other relevant agencies. The SCE/EPTC facilities are subject to various permits issued by the SCAQMD and other agencies, and upon transfer PT will not operate the facilities outside of the bounds of those permits without seeking appropriate permit review and approval by the appropriate jurisdictional agencies.

The 1994 SCAQMD MND contemplated a series of phases for eventual full use of the SCE/EPTC facilities, including mitigation measures designed to ensure compliance with SCAQMD Rule 463 (e.g., specific control technologies and emission reduction offsets). The initial phase included the modification of up to 19 tanks to enable SCE/EPTC to commence third-party operations. Subsequent phases of modifications were contemplated and reviewed in the 1994 MND to accommodate increases in third-party service if market conditions warranted. Indeed, although it was not considered likely, the 1994 MND considered that additional oil pipeline facilities could also be included in SCE/EPTC operations if market conditions warranted. To date, SCE/EPTC has completed most of the proposed initial phase modifications, including: conversion of fixed roofs to external floating roofs on certain above-ground storage tanks; and installation of double bottoms on tanks and double seals on the floating roofs as required by the 1994 MND mitigation monitoring plan. SCE/ETPC had begun a series of subsequent facility changes contemplated by the MND, such as changes at Los Alamitos Tank No. 10 and the upgraded control system; however, those changes have now been suspended and PT will now assume those remaining obligations under the proposed transfer.

Six existing tanks (four at Los Alamitos and two at Long Beach) were not originally included in the previous transfer or environmental review conducted in 1994. These facilities are similar in size, type, function, and permits to the facilities reviewed in the 1994 MND. All six of these tanks have existing permits from the appropriate regulatory agencies and are in compliance with or being operated consistent with the mitigation measures in the 1994 SCAQMD MND. Pacific Terminals will operate these tanks for the storage of products for which they are already currently permitted, and PT does not have any plans to modify the tanks or change the service for which the tanks are permitted.

Should PT construct new tank facilities, retrofit existing facilities, or change service beyond that evaluated in the 1994 MND, new discretionary permits and associated environmental reviews would be required. In the transfer, PT will agree to the imposition of the applicable mitigation measures in the 1994 MND on these six tanks and include them in the management regime contemplated by the 1994 MND for the entire set of SCE/EPTC facilities. Should PT contemplate additional changes to the operations or facilities of the SCE/EPTC package outside of the bounds contemplated in the 1994 SCAQMD MND and/or the existing permits for those facilities, PT will seek further authority and environmental review, if necessary, from this Commission and any other relevant agencies.

Impacts of Project Modifications

Review of the transfer of the facilities as modified indicates that, with the implementation of the existing mitigation measures applicable to the project facilities and the applicant-proposed conditions outlined and recommended below, there would be no new, previously undisclosed impacts or any previously disclosed impacts of greater severity.

Recommendations

With the amendment of the SCAQMD MND to include the additional facilities at Los Alamitos and Long Beach and the requirement that those facilities be subject to the existing mitigation measures and applicant-proposed conditions below, the proposed transfer and project modifications will have no significant impact on the environment. No further analysis or documentation is required.

Conditions Applicable to the Transfer

Previous PageTop Of PageGo To First Page