Comments on Draft Decision

The draft decision of ALJ Brown was mailed to the parties on May 27, 2005. Comments were received on June 16, 2005 from: CAISO; Calpine; ORA; Rohr; and SDG&E. Reply comments were received on June 21, 2005 from Calpine and SDG&E.

SDG&E fully supports the PD and only suggests non-substantive technical and typographical changes in its comments. Many of these recommendations have been incorporated into the decision.

In its comments, CAISO expressed support for the PD, and particularly noted that the PD recognized that CAISO performed a thorough analysis of alternative electrical solutions prior to selecting the OMPPA as the superior upgrade to achieving the benefits of the OMGP. Calpine's comments also supported the PD because the PD finds that OMPPA will allow SDG&E and its customers to realize the full range of benefits from OMGP as well as assisting SDG&E in meeting local reliability and resource adequacy needs, allow for future load growth, reduce exposure to cascading outages, improve system voltages and increase grid operation and flexibility.

ORA, on the other hand, urged the Commission to deny SDG&E's application for a CPCN for OMPPA at this time and instead direct SDG&E to study lower cost transmission alternatives. ORA argues that since the operation of OMGP is not dependant on the transmission upgrades that are the subject of the instant application, there is sufficient time to reexamine the economics of OMPPA. As referenced in its briefs, ORA is particularly concerned with the escalating cost of OMPPA and opines that it might be prudent to either reconsider alternative transmission options, or at the very least, defer approval of the Propose Project until OMGP is delivering power and then evaluate the cost of OMPPA against the benefits from full deliverability of OMGP.

Both Calpine and SDG&E addressed ORA's opposition to the Proposed Project in their reply comments. SDG&E suggests that ORA is really trying an end-run to the June 9, 2004, decision (D.04-06-011) that approved the Otay Mesa Generating Plant because ORA is re-circulating the same arguments now, in opposition to OMPPA, that it presented in opposition to OMGP that the Commission should study less-costly alternatives. SDG&E urges the Commission to disregard ORA's comments and approve OMPPA.

Calpine's reply comments also focused on ORA's comments that the PD should be rejected until transmission alternatives are evaluated or until the value of the upgrades exceeds the costs. In particular, Calpine speaks to alternative transmission options and argues that even CAISO performed a thorough analysis of optimal electrical solutions to achieve the full benefits from OMGP and concluded that the Proposed Project was the "superior alternative." In addition, Calpine suggests that no other party, including ORA, identified, or proposed, an alternative to the Proposed Project that would achieve the same benefits as the transmission upgrades in the PD would provide. Calpine also restates the net benefits that the OMPPA will provide to SDG&E's customers.

Rohr's comments also recommend against approval of the PD, but on the ground that the EIR is inadequate. Rohr argues that the PD is erroneous in its determination at p. 68, that the "contents of the FEIR comply with the requirements of CEQA [and] the FEIR should be certified for the Project in compliance with CEQA." Rohr is concerned that the FEIR fails to adequately address some environmental issues and mitigation measures involving Rohr's property. Rohr's primary consideration is that the "open trench installation" of the 230 kV conduits on Rohr's property could cause groundwater problems, and to obviate this concern, Rohr wants SDG&E to do Horizontal Direction Drilling (HDD) for the conduits. Rohr raised these same concerns in its comments to the DEIR and in its brief and wants the Commission to require that the DEIR be redrafted and then re-circulated for additional review and comment before a final decision is made.

The Commission's ED, along with the outside consultants Dudek & Associates, thoroughly perused Rohr's comments to the PD to determine whether Rohr raised any new issues that Rohr had not already raised in its comments to the DEIR and to assess whether the FEIR Response to Comments adequately addressed Rohr's concerns. In summary, ED, along with the consultants, determined that the FEIR, and in particular the Response to Comments section, was prepared with full knowledge of the shallow groundwater conditions within the vicinity of the Rohr property and impacts and mitigation measures were identified accordingly. Because the DEIR identified potential impacts that could result from the excavation activities on the Rohr site, the FEIR provides Mitigation Measures, HAZ-2a, HAZ-2b, and HAZ-3a which include standard mitigation requirements to prepare a Phase II Environmental Site Assessment, have an environmental monitor with OSHA training onsite, and observe for contaminated soil. With implementation of these measures, the FEIR concludes that any impact would be reduced to less than significant.

In response to Rohr's objections to the FEIR, SDG&E suggests that the Commission certify the FEIR now. The Phase II environmental and geotechnical investigation that the FEIR requires as a mitigation measure is scheduled for July 2005. This study will determine if open trench techniques are appropriate, or if there is sufficient justification for the more costly HDD. In either installation method, SDG&E commits to implementing all Commission-imposed mitigation as well as other reasonable and prudent measures to alleviate Rohr's concerns.

Energy Division and Dudek & Associates agree with these conclusions but recommend adding the following clarifying language to Mitigation Monitoring Table D.9-7, Effectiveness Criteria HAZ-2a in the FEIR to ensure that Rohr's concerns are addressed regarding the use of Open Trench vs. HDD.

If the required Phase II Environmental Site Assessment concludes any of the following, then the Commission will verify that SDG&E has implemented in affected areas horizontal drilling in lieu of conventional open-cut trenching as proposed:

We agree this clarifying language is useful and adopt it as part of the FEIR certified by this decision.

Upon careful consideration of Rohr's comments and the replies from SDG&E and the ED and Dudek & Associates, we are satisfied that the FEIR along with the additional clarifying Effectiveness Criteria in the Mitigation and Monitoring Table for HAZ-2a properly addresses all environmental issues, recommended feasible mitigation measures and its analysis of cumulative impacts is adequate. In responding specifically to Rohr's comments, we are further persuaded that the Phase II investigation can properly resolve the trenching vs. horizontal drilling issue and that all of Rohr's concerns were adequately covered in the Response to Comments section of the FEIR and that re-drafting and re-circulation of the DEIR is not required.

Findings of Fact

1. On March 8, 2004, SDG&E filed an application for a CPCN for the proposed OMPPA Transmission Project to construct two new 230 kV electric transmission circuits to connect SDG&E's Miguel Substation with both the Sycamore Canyon Substation and the Old Town Substation in San Diego County.

2. In accordance with CEQA and the State CEQA Guidelines, the Commission is the lead agency under CEQA with respect to the environmental review of the project and preparation of the FEIR and has conducted an environmental review of the project in conformance with CEQA. The FEIR consists of the DEIR, revised to incorporate comments received by the Commission from the proponent, agencies and the public, and the responses to comments. The FEIR has been completed in accordance with CEQA Guidelines Sections 15120 through 15132.

3. On November 18, 2004, SDG&E amended its application to reflect an alternative to the Proposed Project that proposes undergrounding a short portion of a segment that transverses the City of Chula Vista's Bayfront.

4. The EIR and the application proceeding for the CPCN proceeded on parallel timelines.

5. In lieu of Evidentiary Hearings on the CPCN, parties submitted testimony and reply testimony, and opening and reply briefs. The matter was submitted upon the filing of reply briefs on April 29, 3005.

6. The OMPPA Project is needed to provide full dispatchability of resources from the proposed OMGP that could be delivered into the San Diego LRA; provide firm transmission delivery of OMPG to load centers; prevent intra-zonal congestion at the Miguel Substation; meet G-1/N-1 reliability criterion; provide for expansion capability; minimize load shedding and avoid potential cascading outages during Miguel Corridor outage; and provide cost savings in reduced RMR costs.

7. The only Class I environmental impact from the Proposed Project was the visual impact along Segment #3 if 63 steel poles are added to the existing lattice towers in the transmission corridor. However, for some key viewpoint locations, APMs and mitigation measures would reduce the impacts to less than significant.

8. The EIR proposes an "Environmentally Superior Alternative" for Segment #3, Alternative 7 PV1, that when the existing lattice towers are removed would result in reducing the overall visual impacts from the key viewpoint locations to less than significant. It is within the discretion of the Commission to adopt this Alternative or some other variation.

9. The degree of overall change from the existing conditions along Segment #3 to those under Alternative 7 PV1 would range from beneficial to slightly adverse when compared to the Proposed Project.

10. The ESA of the EIR (Alternative 7 PV1) is not adopted in this decision because it would provide minimal, short-term visual benefits that do not support the Alternative when balanced against the totality of the considerations attendant to the Proposed Project and alternatives, including, cost-effectiveness concerns, delays in construction, potential reduction in dispatch from the South Bay plant with a corresponding increase in RMR costs, problems with reliability, and restrictions to expansion capability for future load growth.

11. The FEIR analyzes the environmental impacts, mitigation measures and significance after mitigation under the following categories: (1) air quality; (2) biological resources; (3) cultural resources; (4) geology and soils; (5) public health and safety; (6) hydrology; (7) noise; (8) transportation and traffic; (9) public services and utilities (10) land use, agriculture, and recreation (11) population and housing; and (12) visual resources The FEIR contained mitigation measures that would avoid or reduce all environmental impacts except specified visual impacts of the Proposed Project and Class I land use impacts of the South Bay Power Plant to Sweetwater River Overhead Design Alternative, to less than significant levels.

12. If an agency approves a project which will have significant and unavoidable environmental impacts it must determine that the benefits of the project outweigh the significant unavoidable impacts pursuant to Public Resources Code Section 21081 and adopt a Statement of Overriding Considerations.

13. The mitigation measures identified in the FEIR are feasible and reasonable.

14. 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.

15. The Mitigation Monitoring, Compliance and Reporting Plan in the FEIR conforms to the recommendations of the FEIR for measures required to mitigate or avoid environmental effects of the project as modified and adopted that can be reduced or avoided.

16. The FEIR must contain specific information according to the CEQA Guidelines Sections 15120 through 15132. The Commission must conclude that the FEIR is in compliance with CEQA before approving SDG&E's application for a CPCN for the OMPPA Project.

17. We believe the FEIR meets these tests and we find that the FEIR is the competent and comprehensive informational tool that CEQA requires it to be and the quality of the information therein is such that we are confident of its accuracy.

18. We have considered that information in the FEIR in evaluating the SDG&E's Proposed Project as described herein in this decision.

19. The FEIR reflects the Commission's independent judgment and analysis on the issues addressed in the FEIR, and the Commission has reviewed and considered the information in the FEIR before issuing this decision on the project.

20. The OMPPA Project, as adopted today, is needed to provide full dispatchability of resources from OMGP for delivery into the San Diego LRA; provide firm deliverability of OMGP to Load Centers; reduce intra-zonal congestion at Miguel Substation; meet G-1/N-1 reliability requirements for future growth; provide for expansion capability for load growth; minimize load shedding and avoid potential cascading outages during Miguel corridor outages; and provide RMR cost savings.

21. The economic benefits of OMPPA outweigh the economic costs.

22. SDG&E's estimate that the Project will cost $209,818,000 is reasonable. Because the record shows the cost of transmission projects has increased considerably over the past 18 months, it is reasonable to adopt as a cost cap SDG&E's estimate, plus a 5% adder for a contingency against future increases to the price of inputs to the construction process.

Conclusions of Law

10. The procedures employed for this project are in conformance with CEQA. The contents of the FEIR comply with the requirements of CEQA and represent the Commission's independent judgment. Accordingly, the FEIR should be certified for the Project in accordance with CEQA.

11. The Commission has jurisdiction over the Proposed Project pursuant to Pub. Util. Code Section 1001 et seq.

12. The Commission, under CEQA Guidelines Section 15021, has an obligation to balance economic, social/community factors, timing of need, along with the environmental information presented in the FEIR to make the ultimate determination regarding whether the Proposed Project is to be approved.

13. The Commission retains authority to approve SDG&E's mitigation plan to ensure that the OMPPA Project does not affect the environment adversely.

14. Commission's approval of SDG&E's application for a CPCN, as modified herein, is in the public interest.

15. The approval of the application, as provided herein, should be conditioned upon the completion of the mitigation measures identified in the FEIR. Those mitigation measures with Modification of Effectiveness Criteria for Measure HAZ-2a as specified in this decision should be adopted and made conditions of project approval.

16. With respect to those mitigation measures referenced in the immediately preceding Conclusion of Law that are within the responsibility and jurisdiction of another public agency, such mitigation measures can and should be adopted by that other agency.

17. Construction of the project approved herein will result in significant and unavoidable visual impacts that cannot be mitigated to less than significant levels.

18. Benefits of the project identified in the Statement of Overriding Considerations outweigh the significant and unavoidable impacts of the project and justify its approval.

19. SDG&E should be granted a CPCN for the OMPPA Project because of its beneficial impact on the operation of the state's electric system, and in particular, SDG&E's electric system.

20. There are no internal disputed facts and EHs are not required.

O R D E R

IT IS ORDERED that:

21. The Final Environmental Impact Report (FEIR), which consists of two separate documents, the Draft EIR and the Final EIR, is certified as the Environmental Impact Report (EIR) for the Otay Mesa Power Purchase Agreement Transmission Project (OMPPA), which is the subject of this application and is certified for use by responsible agencies in considering subsequent approvals for the project, or for portions thereof.

22. The Statement of Overriding Considerations is adopted and certified as part of the FEIR.

23. A Certificate of Public Convenience and Necessity is granted San Diego Gas & Electric Company (SDG&E) to construct the OMPPA Project consistent with the environmental and regulatory requirements set forth herein.

24. SDG&E shall, as a condition of approval, build the project in accordance with the alternative design options as described in the FEIR, but not with Alternative 7 PV1. In addition, SDG&E shall comply with the mitigation measures applicable to the Proposed Project, as specified in the DEIR, FEIR, and Mitigation Monitoring and Reporting Program modified, adopted and certified by this Order.

25. The Executive Director shall supervise and oversee construction of the project insofar as it relates to monitoring and enforcement of the mitigation conditions described herein. 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 the DEIR and FEIR, the Executive Director shall attribute the acts and omissions of SDG&E's employees, contractors, subcontractors, or other agents to SDG&E.

26. SDG&E shall comply with all orders and directives of the Executive Director concerning implementation of the environmental mitigation measures described in the DEIR and FEIR, including the mitigation measures specified in Attachment B.

27. The Executive Director shall not authorize SDG&E to commence actual construction until SDG&E has entered into a cost reimbursement agreement with the Commission for the recovery of the costs of the mitigation monitoring program described in Section G of the FEIR, 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 SDG&E that provides for such reimbursement on terms and conditions consistent with this decision in a 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 extent as if they were set forth in full in this decision.

28. SDG&E's right to construct the project as set forth in this decision shall be subject to all other necessary state and local permitting processes and approvals.

29. SDG&E shall file a written notice with the Commission, served on all parties to this proceeding, of its agreement, executed by an officer of SDG&E duly authorized (as evidenced by a resolution of its board of directors duly authenticated by a secretary or assistant secretary of SDG&E) to acknowledge SDG&E's acceptance of the conditions set forth in Ordering Paragraphs 1 through 9, inclusive, of this decision. Failure to file such notice within 75 days of the effective date of this decision shall result in the lapse of authority granted by this decision.

30. 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.

31. A cost cap for the Project is set a $209,818,000, plus 5% of this amount. If SDG&E can bring the Project to completion within this funding authority, it does not need to seek further authorization.

32. Application 04-03-008 is closed.

This order becomes effective immediately.

Dated June 30, 2005, at San Francisco, California.

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