VI. California Environmental Quality Act (CEQA)

SAEJ argues that the Commission should require an environmental impact report (EIR) before any decision is made on funding not covered by the Hazardous Substance Mechanism (HSM) because a funding decision may adversely affect the environment.

We disagree. CEQA requirements only apply to a "project."⁸ A Commission decision on a proposed action is a project only if the activities may cause a direct physical environmental change or a reasonably foreseeable indirect physical change. The activities that must be considered include the whole of the underlying action undertaken, supported or authorized by a public agency that may affect the physical environment.⁹ If the agency's approval is a necessary step and the activity has the potential to result in significant impacts to the physical environment, the activity must be treated as a project subject to CEQA. If however, agency action merely establishes its ability to take a later action that will affect the environment, but does not commit the agency to a definite course of action, that action is not a "project" subject to CEQA. (See Kaufman & Broad v. Morgan Hill Unified School District, (1992) 9 Cal.App.4^th 464, citing to Bozung v. Local Agency Formation Commission, (1975) 13 Cal.3d 263; Fullerton Joint Union High Sch. Dist. V. State Bd. Of Edu. 32 C3d 779, 796 (1982).)

Contrary to the argument of SAEJ, the Commission's adoption of a cost estimate will not preclude implementation of activities required by a regulatory agency having permitting authority over the HPPP decommissioning activities. The Commission has never suggested otherwise. In fact, it has explicitly stated that this proceeding is not to establish a decommissioning plan for HPPP. (ALJ February 4, 2000, Ruling.) And, as the caption for this docket indicates, this proceeding was premised on recovery of decommissioning costs as transition costs through the TCBA.

Under California Public Resources Code Section 21080(b)(8), CEQA does not apply to the establishment, modification, structuring, restructuring or approval or rates, tolls, fares, or other charges. This proceeding falls squarely within this statutory exemption. Not only is it inappropriate for the Commission to conduct a CEQA review in this ratemaking proceeding, it would be premature to conduct such a review without a decommissioning plan. As PG&E has stated over and over again, PG&E has not developed or presented a decommissioning plan for HPPP in this proceeding. Rather, PG&E has presented cost estimates for decommissioning HPPP in future years based on the best information available today. As with most cost estimates used to establish rates, the estimate to be adopted in this proceeding is based on future events. CEQA review is likely to be required when PG&E applies for its decommissioning permits, closer to the time that decommissioning actually occurs. At that time, the lead agency, likely CCSF, will initiate CEQA review, and SAEJ will have the opportunity to participate in that review. The Commission has not initiated such a review in this ratemaking proceeding.

SAEJ cites Shawn v. Golden Gate Bridge Etc. District (1976) 60 C.A.3d 699) to support its argument that the ratemaking exemption does not apply. That case does not support SAEJ's argument. It was decided in 1976. It does not discuss the ratemaking exemption for the simple reason that the ratemaking exemption did not exist at the time the case was decided. Subsection (b)(8) of Section 21080, which contains the ratemaking exemption, was not a part of Section 21080 at that time. It was added to Section 21080 by Stats. 1978, ch. 356, effective July 5, 1978.

In summary, we conclude that this ratemaking proceeding is not a project under CEQA.