2. Factual Background

Crockett is a California limited partnership that operates the 240 MW Crockett Cogeneration Project (CCP) located in Contra Costa County. Crockett sells the power produced by the CCP to PG&E pursuant to a power purchase agreement (PPA) that was approved by the Commission in a series of decisions, the most recent being Decision (D.) 98-01-016.

Crockett delivers power to PG&E via an 8,000-foot underground cable to a transition station for interconnection with PG&E's grid. The transition station is located on 25,000 square feet of property leased from PG&E and taps into PG&E's pre-existing Lakeville-Sobrante #1 230 kilovolt (kV) transmission line. The facilities, equipment, and installations necessary to connect generation stations with transmission grids are commonly referred to as "generation ties."

In 1993, Crockett received authority from the California Energy Commission (CEC) to construct and operate the CCP and the associated generation tie.² In D.93-10-039, the Commission granted PG&E's request for a certificate of public convenience and necessity (CPCN) to construct, own, and operate the generation tie. However, for reasons that are not fully explained in the record of this proceeding, Crockett decided to construct, own, and operate the generation tie pursuant to its authority from the CEC.

In December 1994, PG&E signed an agreement with Crockett that allows Crockett to lease 25,000 square feet of PG&E's property for the purpose of building and operating the transition station described previously (referred to hereafter as the Crockett lease). The transition station became operational in 1996. The CCP has delivered power to PG&E ever since.

The rental rate for the Crockett lease is $3,000 per year, adjustable every five years. The lease expires six months after the end of the 30-year PPA. PG&E continues to use a portion of the leased property for the maintenance and operation of its transmission facilities.