D0701040 Attachment A - Mitigation Measures
D0701040 Attachment B - CEQA Findings of Fact
D0701040 Attachment C - List of Appearances

ALJ/CFT/sid Mailed 1/26/2007

Decision 07-01-040 January 25, 2007

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

In the Matter of the Application of Southern California Edison Company (U 338-E) for a Certificate of Public Convenience and Necessity Concerning the Devers-Palo Verde No. 2 Transmission Line Project.

Application 05-04-015
(Filed April 11, 2005)

(See Attachment C for List of Appearances.)

OPINION GRANTING A CERTIFICATE OF

PUBLIC CONVENIENCE AND NECESSITY

TABLE OF CONTENTS

Title Page

OPINION GRANTING A CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY 2 2

I. Summary 2 2

II. Background 6 6

A. Procedural History 6 6

B. Scope of Proceeding 9 9

III. Project Benefits 11 11

A. Economic Evaluation of DPV2 11 11

1. Benefit Perspectives 12 12

2. Overview of Parties' Economic Evaluations of DPV2 14 14

a) SCE 14 14

b) CAISO 17 17

c) DRA 21 21

d) Other Parties 23 23

3. DPV2 Energy Benefits 24 24

a) System Modeling 24 24

b) Natural Gas Price Forecasts 27 27

c) Mitigation of Market Power 31 31

d) Treatment of Generation Units Owned or Controlled
by CAISO-Area Utilities 34 34

e) Extrapolation of Energy Benefits After the Study Period 35 35

f) Contingency Analyses 36 36

4. DPV2 Non-energy Benefits 41 41

5. DPV2 Costs 44 44

a) Costs of Proposed Route and Authorized Route Alternatives 44 44

b) Specification of Maximum Reasonable Cost 45 45

c) Effect of Route Alternatives on Cost-effectiveness of DPV2 46 46

6. Discount Rates 47 47

7. Load Forecasts and Baseline Resource Plans 48 48

B. Nonquantified DPV2 Benefits 49 49

C. Alternatives to DPV2 and the No Project Alternative 50 50

1. Alternatives to DPV2 50 50

2. The No Project Alternative 54 54

D. Discussion 54 54

IV. DPV2 Route Alternatives 61 61

A. Devers-Harquahala 500 kV Line 63 63

1. Description of Proposed Route 63 63

2. Route Alternatives Near Palo Verde Generating Station 65 65

3. Kofa National Wildlife Refuge 67 67

4. Alligator Rock Area 68 68

a) Proposed Project Route 68 68

b) Alligator Rock-North of Desert Center Alternative 69 69

c) Alligator Rock-Blythe Energy Transmission
Route Alternative 69 69

d) Alligator Rock-South of I-10 Frontage Alternative 70 70

e) Discussion 71 71

5. Desert Southwest Transmission Project and
Midpoint Substation 72 72

a) Desert Southwest Project as Proposed by IID 72 72

b) Possible Integration of DPV2 and Desert
Southwest Transmission Projects 73 73

B. Transmission Upgrades West of Devers Substation 74 74

1. Proposed Project 74 74

2. Devers-Valley No. 2 Alternative 76 76

3. Discussion 77 77

C. General Environmental Impacts 78 78

1. Impacts on Cultural and Paleontological Resources 78 78

2. Corona Noise Impacts 79 79

3. Air Quality Impacts 82 82

V. EMF Issues 84 84

A. EMF Along Routes Under Consideration 85 85

B. EMF Management Plan for DPV2 86 86

C. Discussion 88 88

VI. Environmental Analysis 89 89

A. Mitigation Measures 89 89

1. Raven Control 90 90

2. Agua Caliente Allottee Land 92 92

B. Mitigation Monitoring 94 94

C. Adequacy and Certification of the Final EIR/EIS 94 94

VII. Authorized DPV2 Project and Statement
of Overriding Considerations 96 96

A. Authorized DPV2 Project 96 96

B. Statement of Overriding Considerations 99 99

VIII. Compliance with Public Utilities Code Section 625 100 100

IX. SCE Motion Regarding DRA Consultant Costs 101 101

X. Comments on Proposed Decision 103 103

XI. Assignment of Proceeding 103 103

Findings of Fact 103 103

Conclusions of Law 107 107

ORDER 112 112

Attachment A - Mitigation Measures

Attachment B - CEQA Findings of Fact

Attachment C - List of Appearances

OPINION GRANTING A CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY

I. Summary

This decision grants a certificate of public convenience and necessity (CPCN) to Southern California Edison Company (SCE) to construct the Devers-Palo Verde No. 2 (DPV2) transmission line project. This project includes two major transmission lines. The first will be a second 500 kilovolt (kV) alternating current transmission line between southern Arizona near the Palo Verde nuclear generating plant, and SCE's existing Devers substation located in North Palm Springs in Riverside County, California. This Devers-Harquahala transmission line will be approximately 230 miles long, depending on final routing choices. Approximately 102 miles of this line will be located in Arizona and the remainder in California.

To allow the power to reach SCE's load centers, the Commission also authorizes SCE to construct the 41.6-mile Devers-Valley No. 2 transmission line, an alternative to the West of Devers portion of the DPV2 project proposed by SCE. Devers-Valley No. 2 will be a second 500 kV transmission line between the Devers substation and SCE's Valley substation located in the unincorporated community of Romoland in Riverside County.

The DPV2 project¹ will increase the transfer capability between southern California and Arizona by 1,200 megawatts (MW), providing greater access to sources of low-cost energy in the Southwest. Parties have provided convincing evidence that DPV2 will provide economic and other benefits to California ratepayers.

The Commission authorizes SCE to construct the Devers-Harquahala line from either the existing Harquahala Generating Company switchyard located approximately 49 miles west of Phoenix, Arizona, as proposed by SCE, or a new Harquahala Junction switchyard that would be constructed about five miles east of the Harquahala switchyard at the point where the existing Harquahala-Hassayampa transmission line and SCE's existing Devers-Palo Verde No. 1 (DPV1) transmission lines diverge. Because terminating DPV2 at Harquahala Junction is less costly and is the environmentally preferred alternative, we instruct SCE to pursue good-faith efforts to reach a commercially reasonable agreement and seek the additional authorizations needed for construction of Harquahala Junction. If Harquahala Junction does not receive the needed approvals in Arizona or is otherwise not feasible, SCE may terminate DPV2 at the Harquahala switchyard.

The route for DPV2 between the Harquahala area and the Devers substation will parallel the existing DPV1 route, except that it may diverge from DPV1 to eliminate or reduce impacts in the Alligator Rock Area of Critical Environmental Concern (ACEC)² in Riverside County. The Alligator Rock-North of Desert Center alternate route segment would avoid the Alligator Rock ACEC and is environmentally preferable to the proposed route paralleling DPV1 through the ACEC. The proposed route segment through the ACEC and most of the North of Desert Center alternative are on federal land controlled by BLM. We authorize SCE to construct the North of Desert Center alternative if BLM authorizes this route. Otherwise, SCE may build DPV2 on a route segment through the Alligator Rock ACEC area that is acceptable to BLM, if the route segment received full consideration in the Final Environmental Impact Report/Environmental Impact Statement (EIR/EIS) or if it deviates from one of the reviewed segments solely within BLM land and BLM undertakes supplemental environmental review.

The Devers-Valley No. 2 transmission line will be constructed adjacent to SCE's existing Devers-Valley No. 1 transmission line and primarily within existing SCE easements. SCE initially proposed upgrades to approximately 48 miles of existing 230 kV transmission lines, which SCE called the West of Devers portion of the proposed project. However, we conclude that the West of Devers upgrades are not feasible and that the Devers-Valley No. 2 alternative is a viable and acceptable alternative.

The Commission also authorizes SCE to construct certain upgrades to other electrical transmission and telecommunications facilities related to the Devers-Harquahala and Devers-Valley No. 2 transmission lines.

We adopt a maximum cost³ for DPV2 of $545,285,000 in 2005 dollars, which is decreased by $24,080,000 if the Devers-Harquahala line is terminated at Harquahala Junction. The maximum authorized cost is increased by $8,282,000 if the Alligator Rock-North of Desert Center route segment is used.

The Final EIR/EIS for the DPV2 project, prepared jointly by the Commission pursuant to the California Environmental Quality Act (CEQA)⁴ and BLM pursuant to the National Environmental Policy Act (NEPA), finds that the authorized project has several significant unmitigable environmental impacts. In order to reduce the environmental impacts to the extent feasible, we adopt the mitigation measures SCE proposes (called "Applicant Proposed Measures") and additional mitigation measures recommended in the Final EIR/EIS with one modification. However, some impacts will remain significant even after the implementation of mitigation. The approved mitigation measures are contained in Attachment A to this decision. The Commission also adopts the mitigation monitoring plan proposed in the Final EIR/EIS. SCE must comply with the adopted mitigation measures and mitigation monitoring plan as a condition of accepting its CPCN. We modify the Final EIR/EIS in two other respects and certify that it has been completed in compliance with CEQA.

Upon balancing the substantial economic, operational, and other benefits of the DPV2 project against the unavoidable environmental risks, we find that the DPV2 project should be approved, with the modifications and conditions contained in this decision. In Section VII, we include a statement of overriding considerations for the authorized DPV2 project, as required by CEQA.

¹ Because Devers-Valley No. 2 is an integral part of the system upgrades necessary to increase the transmission transfer capability between southern California and Arizona, we use the term "DPV2" to refer to the combined Devers-Harquahala and Devers-Valley No. 2 transmission lines.

² An ACEC is an area within the public lands managed by the United States Department of Interior, Bureau of Land Management (BLM) that BLM designates for protection of historic, cultural, scenic, fish and wildlife, or other identified resources.

³ Pub. Util. Code § 1005.5(a) provides that "Whenever the commission issues to an electrical...corporation a certificate authorizing the new construction of any addition to or extension of the corporation's plant estimated to cost greater than fifty million dollars ($50,000,000), the commission shall specify in the certificate a maximum cost determined to be reasonable and prudent for the facility."

⁴ Public Resources Code § 21000 et seq.