X. Maximum Cost Pursuant to § 1005.5(a)
While FERC will ultimately decide how much of the costs for this project SCE may recoup in transmission rates, we have jurisdiction pursuant to § 1005.5(a) and the responsibility to specify in the CPCN a "maximum cost determined to be reasonable and prudent" for the Antelope-Pardee Transmission Line Project.
SCE initially estimated a cost of $80.3 million for the proposed project. In supplemental testimony, it revised its estimate by updating the anticipated cost of acquiring a right-of-way, reflecting a rise in California real estate prices. SCE's witness Ohanian estimated that north of the national forest to Antelope Substation SCE would need approximately 131 acres and would pay, on average, 90% of $50,000 per acre for the necessary rights. South of the national forest, in the Pardee area, SCE expects it would need approximately 44 acres and would pay, on average 90% of $200,000 per acre. He estimated that total right-of-way acquisition costs would be approximately $14 million. The increased land acquisition costs increased the total estimate for the project from $80.3 million to $92.5 million. No party disputed this estimate.
In setting the maximum reasonable cost, the Commission is to take several factors into consideration, including the design of the project, the expected duration of construction, an estimate of the effects of economic inflation, and any known engineering difficulties associated with the project.
The Commission has previously recognized the need for adjustments to cost caps in other decisions granting CPCNs. For example, the 1988 decision adopting an estimate of the maximum reasonable and prudent cost for the Devers-Palo Verde 2 project34 and more recently the decision on PG&E's Jefferson-Martin 230 kV transmission project35 both allowed for adjustments to the estimate of maximum reasonable cost. SCE requests that the certificate recognize that SCE may apply to increase the maximum reasonable and prudent cost estimate.
DRA appears to endorse SCE's initial cost estimate of $80.3 million, but does not directly refute or respond to the revised estimate of $92.5 million. SCE has offered a logical basis for its higher estimate, and we will adopt $92.5 million as the maximum cap for the Antelope-Pardee Transmission Project.
We note that the project we approve today is not identical to the project for which SCE developed its cost estimate. SCE may apply for a higher maximum cost if it can provide adequate justification, and must apply for a lower maximum if it appears that actual cost will be lower than the adopted estimated by at least 1%.
34 D.88-12-030, 1988 Cal. PUC LEXIS 774 (30 CPUC 2d 4.)
35 D.04-08-046, 2004 Cal. PUC LEXIS 391.
