7. Discussion

7.1. Project Considerations

With regard to SCWC's proposed extension of its West Orange County System's service territory to include the noncontiguous territory of the Developer's Mesa project and SCWC's proposed construction of an interconnecting 6.75-mile, 18-inch water transmission pipeline (A.99-11-003), and SCWC's proposed provision of wastewater services to the Mesa project (A.99-11-015), Public Utilities Code Section 1001 provides that before making such an extension or beginning such construction, or providing such services, SCWC must first obtain from the Commission a CPCN.

In determining whether or not the Commission will grant a CPCN, it must be reasonably assured that there is a public need for the services or facility; that the applicant possesses the resources, technical competence, and operational experience to provide the service and to construct the facility required; and that granting a CPCN would be in the public interest.

That there would be a need for water and sewer services when the Developer's Mesa project is started is obvious. SCWC's evidence shows that it has an adequate and reliable water supply available, sound plans for the design and construction of the interconnecting pipeline, the proven resources, technical competence, and operational experience to manage, operate, and maintain the water and sewer systems proposed for the Developer's Mesa project, and that it proposes fair and reasonable rates. In addition, SCWC asserts that most importantly, the record in this consolidated proceeding demonstrates that SCWC is the only provider presently "ready, willing and able" to provide the services.

Stating that it is the logical and natural service provider for the Mesa project; that the Mesa, while located in the unincorporated part of the County, is also within the City's sphere of influences, the City claims that the Developer is really "shopping around" for municipal type services for its own benefit to the detriment of the public. The City's evidence shows that the City has adequate and reliable water sources as well as the technical competence and operational experience to provide water and sewer services to the Mesa project. Were it to provide the water service, only 0.5 miles of paved roads would be temporarily disrupted, rather than the 7.5 miles if SCWC serves. As the City does not charge for sewer service, its total rate package charge would be about 6/7th of the SCWC's average proposed rates for the combined services.12 But the City since 1996 has taken the position that it would provide these services only in connection with annexation into the City. The City asks that SCWC'S application be denied.

The Developer does not deny that the City is both "ready and able" to provide both water and sewer services to its Mesa project. Indeed, earlier it sought to contract with the City for these services, offering considerable financial inducements to improve some deficiencies in the City's water system, but to no avail. Subsequently, the Developer worked aggressively with the City's staff toward development of a mutually acceptable pre-annexation proposal, including $12 to $15 million in public benefits for the City. Staff and the Developer mutually determined upon "deal points," only to have the City Council in June 1999, reject the proposal ostensibly in favor of pursuing additional negotiations. The Council wanted to keep its options open with regard to the Appeal Court ordered remand of the LCP back to the Coastal Commission. In view of the City's long-standing and continued efforts in support of no development on the Mesa or delay, the Developer considers that its hard-won land entitlements obtained from the County (as an unincorporated area entity) would be jeopardized if the Developer opted to annex.13 While the City could not defeat an annexation application, under annexation it would assume the lead role in regulating development and permit issuance. This is a powerful mechanism and ultimately determines whether a project gets built. If not supported by the City, processing can be delayed and approvals be overly conditioned. Accordingly, in the absence of specific and enforceable guarantees from the City, the Developer feels it could never assume the risk of annexation with its realistic possibility that local politics would undermine its existing County land-use approvals, and determine whether the project would ever get built. Concluding that while the City is "able" it is neither "ready nor willing" to provide service or facilitate the Mesa project, the Developer has turned to SCWC as the only viable alternative.

The Background History set forth herein, and the record adduced in this proceeding, provide the basis for the Commission's conclusion that as the City appears to be politically or otherwise unable to unequivocally agree to be the provider of services at present, we must look to the SCWC applicant as being the only "ready, willing and able" provider. There has been, as the Developer points out, no testimony from the City Council stating that the City does not oppose the project; no City Council resolution that unequivocally states the City's willingness to serve. As the Developer points out, four of seven Council members are either sympathetic to project opposition or are actual members of the Land Trust whose avowed mission is to stop development at all costs. And one Council Member (Bauer) is listed on the Land Trust stationery as advisor to the Land Trust.

For many years the Developer has tried to work with the City, first through the Coalition, and thereafter as directly as the City Council would permit, but to no avail. The Council will not accept the County entitlement agreement that would go with a pre-annexation agreement; it wants changes - - less density, more affordable housing, application of City standards, a series of issues. It would not agree not to testify or oppose the Developer's Mesa project before the Coastal Commission re-hearing of the LCP. Annexation would involve the LAFCO with procedural delays and legal appeals that would be virtually certain. And the past delays have cost the Developer and Landowner heavily.

In the City's response to the question posed in the Assigned Commission's Ruling noticing a PHC as to whether the City "desires" to provide service, the City avoided a direct response. It stated it would not provide service outside its boundary without LAFCO approval. But as the records shows, the City is and has been providing service to a number of others on the Bolsa Chica, with no mention of any LAFCO approval (Aera Energy operating over 250 active oil wells and water injection wells, John Thomas operating over 70 active oil wells and water injection wells, Woodman Pole Yard operating a landscaping business and horse stables, and others). But it refuses service to the Developer as exemplified by its abrupt revocation of a temporary use permit (allowing the Developer to tap a City hydrant across the street from the Mesa for use in drilling an exploratory on-site water well) when Land Trust members discovered the use and pressured the Council to end it.

After years and years of addressing the issue, at most the City is only prepared to assert that it has never unequivocally informed the Developer that it would not provide services to the Developer's Mesa project under any circumstances. But such a stance is not a demonstration of the willingness of the City to presently provide the needed services. On the other hand, SCWC is presently "ready, willing and able" to provide the services required as exemplified by its present applications.

Turning to consideration of the merits of SCWC's applications, it is the Commission's conclusion from the record in this combined proceeding, that SCWC has shown itself to be well qualified and competent to provide both the proposed water and sewer services to the Mesa project and to design and construct the proposed pipeline.

The water distribution and sewer collection systems SCWC will manage, operate, and maintain are both relatively simple systems presenting no unusual or difficult challenges to any experienced operator. SCWC currently operates 39 water systems serving over 240,000 customers in ten counties and 75 communities, and has over 70 years experience and adequate experienced staff numbering 475 employees. SCWC also currently operates two wastewater treatment plants and has 12 employees experienced in wastewater operations. In addition, the utility's everyday water operations include operation of facilities that are very similar operationally to wastewater facilities. Further, SCWC intends to hire contractors who specialize in sewer system maintenance to maintain the principal components of the wastewater system. SCWC has extensive experience in meeting the standards of the California Department of Health, and meets all federal and state requirements for monitoring, reporting, and treatment. SCWC has service personnel 9 miles away, and available 24 hours daily to respond to service emergencies. In its proposed water input area, its West Orange County District, SCWC has over 5,900 gpm excess capacity, far more than needed to supply the total build-out residential and fire protection requirements of the Mesa project.

SCWC has extensive experience in the planning, construction, and supervision of construction of water pipelines. In the West Orange County District alone, each year it installs 4 to 5 miles of pipeline. These include 14- and 16-inch lines; some crossing under major freeways, storm drain channels and around underground construction. SCWC's role in construction of this proposed pipeline will be to have SCWC's Engineering and Planning Department review the design, plans, and specifications provided by the Developer's engineering consultant before construction is to be performed pursuant to a bidding procedure. SCWC will provide inspection, and after inspection will own, operate, and maintain the pipeline as a contributed facility.

The 6.75-mile underground 18-inch ductile iron pipeline will originate at the SCWC Orange County System in the City of Cypress, and terminate at the 4-million gallon buried concrete reservoir on-site at the Mesa project. The location for the pipeline between these points was determined by the Developer's engineers and approved by SCWC after evaluation of multiple locations based on criteria including impact on traffic, ease of construction, rights-of-way and environmental impacts. The pipeline is divided into three segments which will be constructed concurrently, using open trench construction with typical trenches ranging 3.5 to 15 feet deep, and three feet wide. Open trench construction will approximate 100 feet per day in each of the three segments. Boring and jacking will be employed at three locations, (1) The U.S. Naval Weapons Station rail tracks crossing of Bolsa Chica Street just south of Westminster Boulevard; (2) the intersection of Bolsa Chica Road and Westminster Boulevard; and (3) the crossing of I-405/SR-22 freeway interchange). Special methods of construction will be employed at two flood control crossings.

Again, there is nothing particularly difficult, distinctive, or uncommon about either the proposed pipeline or in its construction. The pipeline will run parallel to, or cross, other public utilities already in most of the right-of-way route. These other utilities include water mains, sewer pipes, power lines, natural gas mains, telephone lines, and petroleum pipelines. While most are between 6 to 12 inches in diameter, others go to over 3 feet with one being 42 inches. The repair, maintenance, and replacement of such utility piping is a common place in any urban setting such as the City.14

Here, about 2/3 of the route selected is on Bolsa Chica Street and Road where the daily traffic volume ranges between 23,000 to 49,000 vehicles. This flow would be disrupted in part by the construction but the disruption would be relatively of short duration, and one common in cities where underground utilities must be maintained or replaced. The major portion of the rest of the route will be in maintenance or service roads or on a golf course. Other routes were considered, but this one was chosen as preferable, it being the most direct route, thus requiring the least construction and disruption. The disruptive effects from water system construction, albeit relatively minimal and of temporary duration, are a factor considered in the granting of a CPCN.

The rates SCWC proposes to charge for water to the Mesa project customers are those in effect in the rest of SCWC's West Orange County District, and are those determined to be just and fair in SCWC's last general rate proceeding for the district. SCWC's proposed sewer rates, being based on estimated costs of service for a ½ build-out, appear to be fair and reasonable start-up period rates. After a period of operations, these can be reviewed using actual costs in a later rate proceeding.

Approximately $12 to $13 million in facilities will be contributed to SCWC by the Developer, and will be excluded from rate base for ratemaking purposes. Staff and the City on brief propose that any approval of the SCWC applications should be conditioned by a requirement that SCWC should not receive compensation for the cost or value of these contributed facilities in the event of a subsequent sale, condemnation, or transfer of the utility systems in the Planned Community.

This is not a new proposal. The Commission's general position in the past has been that the matter should be addressed only on a specific case-by-case basis when the issue arises; that the Commission will not prejudge either Superior Court or a future Commission's ability to judge each case on its merits (See New Water Main Extension Rule (1982) 7 CPUC2d 778, where expert witnesses from both the then Hydraulic Branch and the Revenue Requirements Division of the Commission opposed adoption.) In addition, contributed plant may be an element in whether a premium over rate base is found in a just compensation proceeding. Finally, in the July 14, 1997 Committee Report for Senate Bill 1268 (enacted as Public Utilities Code § 2720), the Assembly Committee on Utilities and Commerce proposed that "[t]he author may wish to consider amending the bill to ... limit the application of the selected valuation to that portion of the system for which the Developers paid." That such limiting language was not adopted in the final version of the statute indicates that contributed plant may be considered in determining either fair market value or RCNLD value of the acquired system. Thus the legislative history of Section 2720 makes clear that the Legislative intended to allow a purchaser to include the fair market value of contributed plant in rate base.

The Commission is not responsible for local land use decisions. Here the County and the Coastal Commission have a shared jurisdiction and the Developer has been granted development entitlements under the LCP. That this LCP is under review as the result of an Appeals Court decision, and that the result could possibly be a diminished Mesa development, does not affect this Commission's obligation to act with regard to the application before us. If the project should be smaller, a smaller diameter pipeline may suffice the Developer's needs, but that would not significantly effect the pipeline construction process, essentially the same size trench, etc. would still be required. Nor would it change the Commission's conclusions as to the ability of SCWC to ably and reliably provide the water and sewer services on-site and to construct the water pipeline. Delay would only serve partisan interests. SCWC's proposals to provide water and sewer services to the Mesa project and to construct the pipeline are in the public interest and should be granted.

7.2. Environmental Considerations

The first step in the process of preparing a Final SEIR is the preparation of a Draft SEIR. The Draft SEIR in this instance was prepared by an independent environmental consultant, the Aspen Environmental Group, under the supervision of the Energy Division, and was distributed on December 6, 1999, for public review. It includes the analysis of four alternatives (plus the No Project Alternative) to the proponent's Proposed Project and identifies over 30 mitigation measures to avoid or minimize impacts.

      7.2.1.1. Public Comments and Input

Public comments on the Draft SEIR were solicited through its distribution, as well as through an Informational Meeting held on January 6, 2000, and a PPH conducted on January 21, 2000. The latter two meetings were held in Huntington Beach. Written comments were accepted through January 20, 2000. The Commission received 19 sets of written comments and 10 people commented verbally at the PPH.

The Final SEIR was filed with the Commission's Docket Office on February 11, 2000. The Final SEIR consists of the Draft SEIR, with minor revisions in response to comments and other information received by the Commission, plus the actual comments received on the Draft SEIR along with responses to these comments.

      7.2.2.1. Alternatives Screening Process

CEQA requires an EIR to evaluate alternatives to a proposed project (Guidelines § 15126(d)). As part of the preparation of the SEIR, a number of alternatives were studied that could meet most of SCWC's project objectives. The alternatives evaluation process focused on finding alternatives that (1) were feasible, (2) would substantially avoid or lessen the Proposed Project's significant environmental effects, and (3) would attain most of SCWC's basic project objectives. The assessment of feasibility was directed toward reverse reason, that is, an attempt was made to identify anything about the alternative that would not be feasible on technical or regulatory grounds. The alternatives analysis addresses two types of alternate projects: (1) alternate pipeline routes for the SCWC water transmission line; and (2) possible alternative water providers.

Five alternatives were evaluated and determined to be either infeasible or not having environmental benefits over the Proposed Project. The eliminated alternatives included a variety of other pipeline routes as well as the installation of new groundwater wells on Bolsa Chica Mesa. The rationale for eliminating each of these alternatives is explained in detail in Section D.1.4 of the Final SEIR.

      7.2.2.3. Alternatives Evaluated in the SEIR

Four alternatives were described and evaluated in the SIER that were judged to be capable of satisfying SCWC's basic project objectives and having some potential to reduce the impacts of the Proposed Project. Two of these alternatives involved alternate pipeline routes; two involved alternative water providers. In addition to the No Project Alternative, the following alternatives were evaluated in the Final SEIR: (1) Connection to the City of Huntington Beach Water System; (2) Anaheim-Barber City Channel Diagonal (Rancho Road); (3) Springdale Street/Graham Street; and (4) North Seal Beach Wellfields.

The Final SEIR identifies Connection to the City of Huntington Beach Water System as the environmentally superior alternative. This alternative was selected because it would have substantially reduced environmental impacts compared to both the Proposed Project and the other project alternatives, which each involve construction of a significantly longer water transmission line. The environmentally superior alternative would involve construction of an underground pipeline connection to the City's water main in Warner Avenue, approximately one-third of a mile from the proposed reservoir on the Bolsa Chica Planned Community site.

With respect to the other project alternatives, the types of environmental impacts associated with these alternatives are largely similar to each other and to the Proposed Project, although the impacts differ slightly in magnitude. The basic impacts shared by these alternatives include disruption of local traffic due to construction activities in public streets, air quality and noise impacts, and various other construction-related impacts. As the Proposed Project is more direct and offers the least amount of construction in public street rights-of-way and has relatively fewer sensitive land uses along its route, the Proposed Project is preferred over the remaining alternatives.

Although we have identified connection to the City of Huntington Beach as the environmentally superior alternative, we are rejecting that alternative as infeasible, based on the administrative record and the reasons discussed in Section 7.1. The SEIR, in subsection D.2.1, found the connection to the City of Huntington to be feasible "from a technical and regulatory standpoint," and proceeded to describe and analyze it. This was the prudent approach to take at the time of preparation of the SEIR. As the Commission stated in response to comments on the draft SEIR submitted by O'Melveny & Myers on behalf of SCWC, "[T]he scoping memorandum prepared by the CPUC Administrative Law Judge (dated March 16, 1999.) specifically identified the prospect of the City providing water service as an issue to be addressed in the CPCN proceeding." (SEIR, p. J-144.) The issue has now been addressed, and with the significantly more developed administrative record before us, we find that the alternative of connection to the City of Huntington Beach is infeasible.

The CEQA Guidelines indicate that an EIR need examine in detail only those alternatives that the lead agency determines "could feasibly attain most of the basic objectives of the project." (CEQA Guideline 15126.6(f).) More specifically, the Guidelines state that "Among the factors that may be taken into account when addressing the feasibility of alternatives are ... economic viability ... and whether the proponent can reasonably acquire, control or otherwise have access to the alternative site ... " (CEQA Guideline 15126.6(f)(1).) And they continue: "An EIR need not consider an alternative whose effect cannot be reasonably ascertained and whose implementation is remote and speculative." (CEQA Guideline 15126.6(f)(3).) Applying these criteria with the benefit of hindsight, the SEIR may not have been required to regard the connection to the City of Huntington Beach as feasible, but that determination could not have been definitively made without the administrative record now before the Commission.

The Proposed Project and each of the various alternatives have potentially significant adverse impacts that vary in severity and in the ability of mitigation measures to reduce their impacts. Section C of the Final SEIR describes and examines the environmental impacts associated with the Proposed Project. The detailed significant environmental impacts of the environmentally superior alternative and the other alternatives considered are presented in Section D of the Final SEIR. Tables D.5-1 and D.5-2 in the Final SEIR compare the major environmental issues of the alternatives with the Proposed Project. The mitigation measures for the Proposed Project are discussed in Section C of the Final SEIR. The Final SEIR includes a Mitigation Monitoring, Compliance, and Reporting Program for the mitigation measures proposed for the project in Section K. The roles and responsibilities of governmental agencies in implementing and enforcing the adopted mitigation measures are discussed therein.

The environmental review indicates that the construction and operation of the Proposed Project will have significant adverse environmental impacts, which are typical of a project of this type and magnitude. Some of the adverse impacts can be mitigated or avoided; others cannot. Although there are significant adverse impacts that cannot be mitigated or avoided, we find that overall there are overriding considerations that make the Proposed Project worthwhile and cause us to grant approval of the Proposed Project.

      7.2.4.1. Beneficial Impacts (Class IV)

The Final SEIR does not identify any beneficial effects to the environment from project construction and operation.

      7.2.4.2. Adverse, But Not Significant Impacts (Class III)

The Final SEIR identifies a number of adverse, but less-than-significant impacts including: short-term air pollutant emissions during construction; minor air pollutant emissions and noise associated with project operation; traffic added to local streets by construction vehicles; effects on surface water quality; and construction impacts on residences, recreational facilities, and businesses. Because these impacts are not considered significant, no mitigation measures are required. The details of these impacts are described in Section C of the Final SEIR and summarized in Table ES-2.

      7.2.4.3. Significant Impacts That Can be Mitigated To a Level That Is Less Than Significant (Class II Impacts)

The Final SEIR identifies several significant environmental effects of the Proposed Project that can be mitigated to a less-than-significant level or avoided. The Final SEIR includes a Mitigation Monitoring, Compliance, and Reporting Program to assure that mitigation measures are implemented effectively. The Mitigation Monitoring, Compliance, and Reporting Program set out in Section K of the Final SEIR describes how the following adverse effects will be mitigated or avoided. The program is based on the Proposed Project as described in Section B of the Final SEIR and the impact analysis presented in Section C.

The following sections describe the significant but mitigable (Class II) impacts identified in the Final SEIR, including a description of each impact and the relevant mitigation measures. The impacts and mitigation measures are described in more detail in Section C of the Final SEIR.

      7.2.4.3.1. Noise

Short-term construction noise could disturb land uses, e.g., business and residents, adjacent to the pipeline alignment. Mitigation Measures N-1 through N-3 include procedures to reduce noise impacts by requiring SCWC to notify residents of construction timing, to implement complaint procedures, and to use noise reduction techniques on construction equipment.

      7.2.4.3.2. Traffic and Circulation

Project construction would have a short-term impact on local circulation and property access: vehicular access to adjacent properties could be temporarily blocked, and bus, bicycle, and pedestrian routes would be temporarily disrupted. Mitigation Measures T-3 through T-7 require advance notification to businesses and residents of access disruptions, implementation of techniques to minimize access problems, coordination with transit providers to minimize disturbance to bus service, provisions for keeping bus stops accessible, and preparation of management plans for bicycle routes and pedestrian crosswalks affected by construction.

      7.2.4.3.3. Environmental Contamination

Construction through areas with contaminated soils could affect workers or the nearby public. Mitigation Measures EC-1 through EC-3 require site evaluation prior to construction so that contaminants and their locations are identified. These mitigation measures also require use of trained personnel to assess areas of contamination and develop procedures for worker protection, and hazardous material handling, treatment and disposal, as needed. All evaluations of contaminated sites require review and approval by the Commission, the County Health Department, and the Department of Toxic Substances Control prior to construction. Construction could also potentially disturb previously undiscovered areas of contamination. Mitigation EC-4 requires SCWC to assign trained personnel to be present during construction to observe excavation and perform testing as necessary when evidence of contamination is encountered.

      7.2.4.3.4. Geology and Soils

Various geologic hazards identified in the SEIR could damage and rupture the proposed pipeline, including strong ground shaking, liquefaction of soils, lateral spreading, and differential settlement. Mitigation Measures G-2 through G-4 require geologic/geotechnical investigations for the development of design measures to reduce the likelihood and severity of pipeline damage. The pipeline could also be damaged by the corrosive effects of local soils. Mitigation Measure G-4 requires further investigation of the presence, extent, and corrosion potential of soils along the pipeline alignment and the implementation of appropriate measures to minimize corrosion potential.

      7.2.4.3.5. Cultural Resources

Pipeline construction could disturb prehistoric site CA-ORA-83/86/144 or prehistoric site CA-ORA-84/85/288 on Bolsa Chica Mesa, or result in discovery of unrecorded cultural resources. Mitigation Measures CR-1 through CR-4 establish procedures to protect cultural resources by requiring SCWC to conduct testing in sensitive areas prior to construction, to monitor for cultural resources during construction, and to follow the recommendations of a qualified archaeologist if any resources are found during the course of construction.

      7.2.4.3.6. Biological Resources

Construction of the pipeline along Old Bolsa Chica Road has the potential to disturb nesting birds utilizing the adjacent riparian habitat in Bolsa Chica Channel. If construction is scheduled in this area during the nesting season, Mitigation Measure B-1 requires a survey of the area prior to construction to locate territorial pairs or nests of any birds listed under the Migratory Bird Act. Construction will avoid the area if territorial pairs or nests are located.

      7.2.4.3.7. Public Services and Utilities

During construction, lane closures and traffic congestion could impede local access for emergency service providers. Mitigation Measure PS-1 requires SCWC to coordinate with emergency service providers regarding construction in public streets, to provide advance notice of any anticipated access restrictions, and to make provisions to accommodate emergency vehicles.

      7.2.4.4. Significant Impacts That Cannot Be Mitigated To Insignificant Levels (Class I Impacts)

The Final SEIR identifies several significant effects of the Proposed Project that cannot be fully mitigated or avoided. Two of these impacts are temporary effects caused by construction activities - emissions of nitrogen oxides (NOx) from construction equipment emissions and increased traffic congestion during construction in heavily traveled streets. In addition, because the pipeline route crosses two fault zones, the potential for pipeline rupture during fault displacement cannot be completely avoided. As it is not possible to completely eliminate the adverse traffic and air quality effects of construction activities or to avoid pipeline damage from fault displacement, these impacts remain significant and unmitigable. The significant and unmitigable impacts described in the Final SEIR are the following:

      1. The estimated maximum daily and quarterly emissions associated with construction of the pipeline would exceed the South Coast Air Quality Management District's (SCAQMD) significance thresholds for NOx (100 lbs/day). Nine mitigation measures are included in the SEIR (Section C.1 - Air Quality) to reduce NOx emissions through equipment specifications, specific engine maintenance procedures, use of certain electric- and solar-powered equipment, cessation of construction during smog alerts, scheduling equipment and material deliveries outside of peak traffic hours, and prohibition against prolonged vehicle idling. Emission levels are expected to exceed SCAQMD thresholds even with the implementation of the mitigation measures prescribed in the SEIR.

      2. The loss of roadway/intersection capacity during pipeline construction would adversely affect service levels along the Bolsa Chica Street/Road corridor. Mitigation Measure T-1 of the SEIR requires the preparation of detailed traffic control plans for construction that are to be reviewed and approved by local cities (Section C.3 - Traffic and Circulation). The traffic control plans shall address permitted time periods for construction, placement of traffic control and warning devices, designation of detours and haul routes, and a coordination program with affected agencies. Mitigation Measure T-2 requires the implementation of a public information program to inform area residents, workers, and businesses to the construction and anticipated impacts to traffic. Despite the implementation of these measures, temporary but significant impacts to local traffic are still expected.

      3. A large earthquake on the Newport-Inglewood Fault or the Los Alamitos Fault could cause pipeline rupture. Mitigation Measure G-1 of the SEIR requires SCWC to complete geologic/geotechnical investigation of the fault crossing locations and to implement specific design measures to reduce the likelihood of pipeline rupture in an earthquake (Section C.5 - Geology and Soils). Nevertheless, a large earthquake could still cause pipeline damage.

As required by CEQA, we cannot approve the Proposed Project unless we find that the project has been modified to mitigate or avoid each significant effect on the environment, or that specific considerations make the mitigation measures or alternatives identified in the Final SEIR infeasible and specific overriding economic, legal, social, technological, or other benefits of the Proposed Project outweigh the significant effects on the environment. The following address (1) significant effects of the Proposed Project, and (2) alternatives considered.

As described above, all significant impacts resulting from the Proposed Project cannot be avoided or eliminated. The significant and unmitigable effects of the Proposed Project include short-term NOx emissions, loss of roadway/intersection capacity, and potential pipeline rupture due to fault displacement. The NOx emissions are considered to be acceptable due to their relatively short duration, and the implementation of nine mitigation measures that will reduce construction emissions to the extent feasible. With respect to traffic circulation, this impact is considered acceptable given the temporary nature of the impact during the construction period only, plus the implementation of mitigation measures that require the development and use of traffic control/management plans. Construction of the pipeline will be contingent upon SCWC securing approval of a traffic control plan from each city affected by the Proposed Project. Lastly, with respect to potential pipeline rupture due to fault displacement, this impact is considered acceptable due to implementation of a mitigation measure requiring SCWC to incorporate design features intended to reduce the likelihood and severity of rupture (based on further geologic/geotechnical investigations). Therefore, the significant impacts of the Proposed Project are considered to be mitigated to the extent feasible, and as the benefits of the pipeline meet the objectives of the project in that in addition to provision of needed additional housing, they produce significant cultural and recreational benefits to the county, enhanced tax revenues, and a fire station, and they provide a long-term domestic water supply by means of constructing a water transmission system designed specifically to meet the particular projected domestic water demands and fire protection needs of the Bolsa Chica Planned Community, benefits of not inconsiderable public interest, and benefits considered to outweigh the potential impacts.

As described in Sections 7.2.2.1-7.2.2.4, several alternative projects were considered in the SEIR, one of which was found to be environmentally superior to the project proposed by SCWC: connection to the City of Huntington Beach water system. While this alternative has environmental advantages, as discussed in Section 7.1 and 7.2.2.1, we are overriding this alternative in favor of the Proposed Project and its concomitant benefits. As explained in Sections 7.1 and 7.2.2.1, the Proposed Project is preferred over the remaining alternatives as it is more direct and offers the least amount of construction in public street rights-of-way and has relatively fewer sensitive land uses along its route.

The Final SEIR must contain specific information according to CEQA Guidelines, Sections 15122 through 15131. The various elements of the Final SEIR satisfy these CEQA requirements. The Final SEIR consists of the Draft SEIR with minor revisions in response to comments and other information received. Section J of the Final SEIR contains the comments received on the Draft SEIR along with responses to these comments. (Guidelines, Section 15132.)

      7.2.6.2. Certification of the Final EIR

The Commission must conclude that the Final SEIR is in compliance with CEQA before finally approving the applications. The basic purpose is to insure that the environmental document is a comprehensive, accurate, and unbiased tool to be used by the lead agency and other decisionmakers in addressing the merits of the project. The document should embody "an interdisciplinary approach that will ensure the integrated use of the natural and social sciences and the consideration of qualitative as well as quantitative factors." (CEQA Guidelines, Section 15142.) It must be prepared in a clear format and in plain language. (CEQA Guidelines Sections 15006 (q) and (r); 15120; 15140.) It must be analytical rather than encyclopedic, and emphasize alternatives over unnecessary description of the project. (CEQA Guidelines, Sections 15006, 15141; Pub. Res. Code Section 21003(c).) Most importantly, it must be "organized and written on such a manner that [it] will be meaningful and useful to decisionmakers and the public." (Pub. Res. Code Section 21003(b).)

We believe that the Final SEIR meets these tests. It is a comprehensive, detailed, and complete document that clearly discusses the advantages and disadvantages of the various alternatives compared to the Proposed Project. We find that the Final SEIR is the competent and comprehensive informational tool that CEQA requires it to be. The quality of the information therein is such that we are confident of its accuracy. We have considered that information in reaching that decision.

The Commission should certify the Final SEIR.

Comments on the Proposed Decision of the ALJ

As provided by Pub. Util. Code § 311(d), the Proposed Decision (PD) of ALJ Weiss was served on the parties to this proceeding on April 4, 2000. Timely comments were submitted by Hearthside, the City and RRB. Timely reply comments were submitted by SCWC and Hearthside.

In their comments both Hearthside and the City identified minor factual and typographical errors which have been corrected. Hearthside recommends adoption of the PD in its entirety, stating its view that each of the findings of fact and conclusions of law represent reasonable and appropriate reflections of the evidence of record. The City states that although the PD improperly imputes "no growth" motives to the City's protest, the City's opposition to the applications is because the City opposes development without annexation. But City avoided a preannexation agreement that would accept the Developer-County entitlement agreement. Citing various federal and state laws, it deprecates Heartheside's concerns. We believe the multi-year Background History in the PD speaks for itself as to the facts that lead to the PD's finding that the City was not "willing" to serve the Developer's project, but was willing to serve adjacent properties in the County. The City misconstrues the standard in Radisavljevic v. Cal-Am Water Co. (1979) 1 CPUC 2d 311. The SCWC extension at issue here is to logical natural boundaries (the Mesa), will provide service to a small unserved enclave, and is not gerrymandered to exclude customers - precisely the standard of Radisavljevic. With reference to the comments that approval of the applications would violate CEQA, we note that while the City alternative was identified in Subsection D.2.1 of the SEIR at the time of preparation of the SEIR as being environmentally superior and feasible, it was subsequently rejected in the PD based upon consideration of the administrative record which ultimately found the prospect of present City service to be infeasible (see Subsection 7.2.2.4 of the SEIR).

RRB's comment repeats its hearing and briefing position that approval of the applications should be conditioned by a requirement that SCWC, in the event of a subsequent sale, condemnation, or transfer of the systems, should not receive compensation for the cost or value of the contributed plants. The City's comment supports RRB's position on this issue. As discussed in the PD, the Commission's historical position has been to address the matter on a case-by-case basis when the issue of a sale, condemnation, or transfer arises, and recent 1997 legislative history does not change the conclusion that the Commission should not prejudge either Superior Court or a future Commission's ability to adjudicate each case on its merits.

SCWC's reply to the City's comment asserts that City wrongly accuses the PD of second-guessing City's reasons for requiring annexation before serving. SCWC states it is proper for the PD to analyze the City's past actions and statements to ascertain whether the City is ready and willing to serve. SCWC notes that the cases City cites to support its contention that the PD should not examine "motives" are not on point. (For example, Ensign Bickford Realty Corp. v. City of Council of Livermore (1977) 68 CA3d, 467 dealt with a state court's standard of review of zoning ordinances in a mandamus proceeding; similarly, County of Del Norte v. City of Crescent City (1999) 71 CA 4th, 965 dealt with a state court's standard of review of a legislative act in a mandamus proceeding). As SCWC points out, the issue here is not whether the City's motives are proper, but whether the City's actions and motives support the finding that the City is not ready, willing, and able to serve the project. SCWC further notes that while the City's comments argue that the evidence shows it is "ready" and "able" to serve, City "coyly omits the crucial admission that it is "willing" to serve-as it has done throughout this proceeding.

SCWC's reply to the RRB and City comments relative to conditioning the sale to a requirement that SCWC not receive any compensation for the contributed facilities in the event of a future sale, condemnation or transfer, states that these comments do not outweigh the Commission's rationale in D.82-01-062 (New Water Main Extension Rule) for not prejudging the issue, both as to future condemnation or voluntary scenarios. SCWC states this is an issue related to the amount of purchase price includable in a hypothetical future purchaser's rate base-not SCWC's rate base upon granting of the SCWC applications, and the issue is determined by Pub. Util Code § 2720(a) at present. SCWC observes that the legislative history of Pub. Util. Code § 2720 contradicts RRB. Contributed plant may be considered in determining either fair market value and RCNLD value of the acquired system, and thus under Evidence Code § 820 would enhance the value to a purchaser, and could be attributed value in an appraisal.

Hearthside's reply to the City's comment stresses that to date there has never been any representation by the City that it is willing to serve Hearthside's development, as is manifest by contrasting City's treatment of Hearthside vis-a-vis City's treatment of others outside its boundaries on the Bolsa Chica (where annexation has not been required). Hearthside further states that the fact that the SEIR erred on the conservative side by including review of a project alternative that may be feasible neither precludes the Commission from determining that the City alternative in reality is infeasible, nor requires recirculation of the SEIR simply to inform the public that an alternative considered was ultimately found by the decisionmaker actually to be infeasible. The SEIR in no way considered, as the PD did, the demonstrated unwillingness of the City to provide service as evidentiary proof of infeasibility of City service.

Where appropriate, changes in the text of the decision have been made. No substantive changes to the decision have been otherwise deemed necessary or appropriate as the issues posed by the comments have been adequately addressed and resolved in the decision.

Findings of Fact

1. SCWC is a Class A California public utility within the jurisdiction of the Commission, and provides water and sewer services to communities and governmental entities in the State.

2. Hearthside is the Developer for Signal Landmark, owner of the Mesa segment of the Bolsa Chica which is located in the unincorporated area of Orange County and subject to County and Coastal Commission jurisdiction as to land uses.

3. Hearthside holds entitlements to develop a 1,235 unit planned residential community on the approximate 220 acres of the Mesa pursuant to a 1995 County Bolsa Chica Local Coastal Plan approved by the Coastal Commission in 1996.

4. While the County provides various other services in the unincorporated areas, it does not provide water or sewer services, and Developers in these areas must turn to adjoining cities, districts or public utilities for these services.

5. Local interest groups, with considerable influence upon and membership on the City's Council, want the entire Bolsa Chica for open space, and repeatedly over many years have brought pressure as well as successive legal challenges to prevent or delay any development on the Bolsa Chica.

6. While the City is "able" to provide water and sewer services to Hearthside's development, being contiguous to Bolsa Chica on three sides, despite offers of very substantial benefits involving millions of dollars from the Developers to do so, the City repeatedly has demonstrated that it is not "ready and willing" to do so, except possibly upon its terms which include annexation.

7. State law provides that a city cannot annex unincorporated areas without the consent of the landowners of the area it would annex.

8. Fearing that by annexation before its project is completed, it would suffer loss or diminishment of its County entitlements and administrative delays through City use of its police and permitting powers, thereby further endangering the owner's considerable financial investment in the project, Hearthside will participate and accept annexation only after the project is built.

9. Following years of unfruitful efforts to obtain water and sewer services from the City, except upon the City's terms, which in view of the City's past hostility the Developer with reason believes could jeopardize its entitlement and with virtual certainty spur further lengthy delaying legal challenges, Hearthside contracted with SCWC for the latter to incorporate the Mesa development project into SCWC's West Orange County District; construct a 7.5 mile, 18-inch interconnecting water transmission pipeline to the Mesa project, and provide sewer services to the Mesa project.

10. The Mesa project is not contiguous to SCWC's local district. SCWC filed the present applications, seeking CPCN authorization for the utility to perform its contracts with the Developer.

11. The City, the Bolsa Chica Land Trust and the RRB filed timely protests to the SCWC applications.

12. Except for the short-term disruptions that would attend construction of an SCWC length of pipeline which could substantially be avoided by City source, there is little difference between the two as service providers, both have adequate water available; both would be competent to operate the relatively basic and simple on-site water and sewer systems contemplated, and the rates of both over a term are generally comparable when the City's lack of a monthly sewer charge is offset by its considerable sewer connection fee.

13. City service, if presently available, would be an environmentally superior alternative to SCWC service.

14. But by avoidance of a commitment to provide present service unencumbered by conditions, the City's protest when considered in context with its past and present actions appears merely a device to seek further delay, if not prevention of the Developer's Mesa project.

15. There is a present need for water and sewer services to the Developer's Mesa project and SCWC is "ready, willing, and able" to provide the services requested.

16. The City is not presently willing to provide the Developer's Mesa project the service requested, although it presently provides water service to the majority of adjacent, unincorporated area property owners; thus accepting services from SCWC is not a matter of picking or choosing between neighboring utility entities, rather it is a matter of accepting the only presently feasible alternative.

17. As water services rates and charges presently authorized by the Commission for SCWC's West Orange County District were determined to be just and reasonable for that district, and for the future must also be found just and reasonable before being authorized, application of these same rates and charges to the Planned Community addition to that district is reasonable.

18. As wastewater rates and charges proposed by SCWC to apply to the Planned Community will be based upon the projected costs to operate and maintain the wastewater system rather than upon any rate base, the rates proposed by the application should be authorized.

19. The proposed 6.75-mile pipeline is a necessary and integral element to enable SCWC to provide the services needed by the Developer's Mesa project.

20. The Commission is the lead agency under CEQA with respect to the environmental review of the Project and preparation of the Final SEIR.

21. The Commission has conducted an environmental review of the Project pursuant to CEQA.

22. The Final SEIR consists of the Draft SEIR, revised to incorporate comments received by the Commission from the proponent, agencies, and the public, and the responses to comments.

23. The Final SEIR has been completed in accordance with CEQA Guidelines, Sections 15120 through 15132.

24. The Commission has reviewed and considered the information in the Final SEIR before approving the Project.

25. The Final SEIR identifies significant environmental effects of the Project that can be mitigated or avoided to the extent that they become not significant. The Final SEIR describes measures that will reduce or avoid such effects.

26. The mitigation measures identified in the Final SEIR are reasonable.

27. As lead agency under CEQA, the Commission is required to monitor the implementation of mitigation measures adopted for this Project to ensure full compliance with the provisions of the monitoring program.

28. The Mitigation Monitoring, Compliance, and Reporting Plan in Section K of the Final SEIR conforms to the recommendations of the Final SEIR for measures required to mitigate or avoid environmental effects of the Project that can be reduced or avoided.

29. The Commission will develop a detailed implementation plan for the Mitigation Monitoring, Compliance, and Reporting Plan.

30. The Final SEIR identifies connection to the City of Huntington Beach as the environmentally superior alternative to the Proposed Project.

31. The Final SEIR identifies several significant environmental effects of the Project that cannot be mitigated or avoided, as follows: (a) the estimated maximum daily and quarterly emissions associated with construction of the pipeline would exceed the South Coast Air Quality Management District's significance thresholds for NOx (100 lbs./day); (b) the loss of roadway/intersection capacity during pipeline construction would adversely affect service levels along the Bolsa Chica Street/Road corridor; (c) a large earthquake on the Newport-Inglewood Fault or the Los Alamitos Fault could cause pipeline rupture.

32. For significant effects where no feasible mitigation exists to reduce the environmental effects to less than significant, the specific overriding benefits of the Project, including substantial monetary inputs to the County's Mesa Conservation Fund and a child care center, traffic improvements, substantial additions to Wieder Regional Park, contributions to a Park ecological interpretative center, additional pedestrian and bicycle trails, a new fully equipped fire station, tax revenues, and additional housing and jobs, outweigh the significant effects on the environment.

Conclusions of Law

1. SCWC is the only service provider unconditionally presently "ready, able, and willing" to provide water and sewer services to the Developer's Mesa project and to construct the necessary pipeline.

2. Commission approval of SCWC's applications is in the public interest.

3. The processing of the SEIR in this proceeding complies with the requirements of CEQA.

4. The contents of the Final SEIR comply with the requirements of CEQA and represent the Commission's independent judgement.

5. The Final SEIR should be certified for the Project in accordance with CEQA.

6. The approval of the application as provided herein should be conditioned upon the completion of the mitigation measures identified in the Final SEIR.

ORDER

IT IS ORDERED that:

1. A Certificate of Public Convenience and Necessity is granted to Southern California Water Company (SCWC) to effect a non-contiguous extension of its West Orange County District to include the Bolsa Chica Mesa Planned Community on the Bolsa Chica being developed by Hearthside Homes, Inc. (Hearthside); to provide public utility water distribution and wastewater collection services within the Bolsa Chica Mesa Planned Community; and to construct a 6.75-mile water transmission pipeline to interconnect the SCWC West Orange County System with the planned on-site water distribution system at the Bolsa Chica Mesa Planned Community.

2. Within 60 days after the effective date of this order, SCWC shall file with the Commission, in conformity with General Order (GO) 96-A, a tariff service area map applicable to the extension service area certified.

3. Within 60 days after initiation of service, SCWC shall file for each system a comprehensive map, drawn to an indicated scale not smaller than 300 feet to the inch, delineating by appropriate markings the tract of land and territory certificated herein for each utility system, the principal water distribution facilities and sewer collection facilities, and the location of the various system properties of SCWC used to provide the services.

4. Once service is initiated, SCWC is authorized to charge such water service rates and tariffs in the Bolsa Chica Mesa Planned Community as are in effect concurrently in SCWC's West Orange County District.

5. Before service is initiated, SCWC is authorized and directed to file with this Commission, in conformity with GO 96-A, the schedule of rates and charges shown in Appendix B attached hereto, and upon not less than five days' notice to the Commission and to the resident customers, to make said rates effective for wastewater services rendered thereafter.

6. Within 10 days of the event, SCWC shall notify the Commission's Executive Director in writing of the date service is first rendered to the public by each utility system under the rates and tariffs authorized herein.

7. The Final Supplemental Environmental Impact Report (SEIR) is certified as the EIR for the Project which is the subject of the applications and is certified for use by responsible agencies in considering subsequent approvals for the Project, or for portions thereof.

8. SCWC shall, as a condition of approval, comply with all mitigation measures specified in Section K of the Final SEIR (which is reproduced in Appendix A attached hereto) as directed by the Executive Director.

9. The Executive Director shall supervise and oversee construction of the Project insofar as it relates to monitoring and enforcement of the mitigation conditions described in Appendix A. The Executive Director may delegate his duties to one or more Commission staff members or outside staff. The Executive Director is authorized to employ staff independent of the Commission staff to carry out such functions, including, without limitation, the on-site environmental inspection, environmental monitoring, and environmental mitigation supervision of the construction of the Project. Such staff may be individually qualified professional environmental monitors or may be employed by one or more firms or organizations. In monitoring the implementation of the environmental mitigation measures described in Appendix A, the Executive Director shall attribute the acts and omissions of SCWC's employees, contractors, subcontractors, or other agents to SCWC. SCWC shall comply with all orders and directives of the Executive Director concerning implementation of the environmental mitigation measures described in Appendix A.

10. The Executive Director shall not authorize SCWC to commence actual construction until SCWC shall have entered into a cost reimbursement agreement with the Commission for the recovery of the costs of the mitigation monitoring program described in Appendix including, but not limited to, special studies, outside staff, or Commission staff costs directly attributable to mitigation monitoring. The Executive Director is authorized to enter into an agreement with SCWC that provides for such reimbursement on terms and conditions consistent with this decision in form satisfactory to the Executive Director. The terms and conditions of such agreement shall be deemed conditions of approval of the application to the same extend as if they were set forth in full in this decision.

11. SCWC shall file a written notice with the Commission, served on all parties to this proceeding, of its agreement, executed by an officer of SCWC duly authorized (as evidenced by a resolution of its boards of directors duly authenticated by a secretary or assistant secretary of SCWC) to acknowledge SCWC acceptance of the conditions set forth in Ordering Paragraphs 8 through 10 inclusive. Failure to file such notice within 45 days of the effective date of this decision shall result in the lapse of the authority granted by this decision.

12. The Executive Director shall file a Notice of Determination for the Project as required by the California Environmental Quality Act and the regulations promulgated pursuant thereto.

13. Upon satisfactory completion of the Project, a notice of completion shall be filed with the Executive Director by the Energy Division.

14. Application (A.) 98-11-003 and A.98-11-015 are closed.

This order is effective today.

Dated October 5, 2000, at San Francisco, California.

I dissent.

/s/ LORETTA M. LYNCH

President

I dissent.

/s/ CARL W. WOOD

Commissioner

APPENDIX A

NOTE

The Final Supplemental Environmental Impact Report was mailed to selected active parties to the application. Hard copy is available at CPUC Central Files and it is also posted on the Commission's web site at http://www.cpuc.ca.gov/Static/Environment/info/aspen/bolsachica/fseir/fseir.htm.

APPENDIX B

SOUTHERN CALIFORNIA WATER COMPANY

GENERAL METERED TO RESIDENTS' SEWER

APPLICABILITY

Applicable to all Planned Community sewer collection service.

TERRITORY

The Planned Community, Bolsa Chica Mesa, Orange County, California.

RATES

SPECIAL CONDITIONS:

12 See Appendix B for SCNC's sewer rates. 13 As relevant here, a proposal to annex territory into a city may be initiated by the city affected, the county, or by a property owner. The Local Agency Formation Commission (LAFCO) decides whether or not the annexation should follow; however, a protest by 50% of the property owners or 50% of the assessed value holders in the annexation area terminates the annexation. If the city initiates it for environmental purposes it, becomes the lead agency; if the county initiates it, it becomes the lead agency; and if a property owner initiates, LAFCO is the lead agency. If the City here were to initiate annexation, the County-Hearthside Development Agreement would limit the City, unless the City finds that application would be injurious to the health, safety, and welfare of the City's residents. Then the City could exercise its police powers to revise or suspend the Agreement. Hearthside considers that the City exercising its power to police is a powerful mechanism for regulating development, and ultimately determines whether a project gets built. If a project gets opposition, as the record here seems to guarantee, the City could delay processing, condition approvals, or ensure that the matter goes before the voters in the City. 14 Indeed, were the City to provide service to the Mesa project, it states it would have to replace over 2,000 feet of existing water pipes in Lynn and Bolsa Chica Streets. There also is a stretch of Bolsa Chica Street south of Heil Street recently dug up for an installation.

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