Discussion
The change in builder from third party to PG&E does not support reassessment of the Commission's prior approval of the Colusa Project. The physical nature of the project is unchanged. The project meets the same need for which it was approved in D.06-11-048. The project was, and continues to be, a utility-owned generation project subject to cost-of-service ratemaking, the capital cost cap established in the RFO process, and 50/50 sharing of any capital cost savings as required by D.04-12-048. PG&E states its intention that the project's rate impact remain the same as it would have been had it been developed by E&L under the original PSA. For all the reasons that we approved it in D.06-11-048, and subject to conditions that we adopt today to ensure that the project rate impact remains the same, we grant PG&E a CPCN to construct the Colusa Power Project, contingent on CEC certification and our review of that certification.
The maximum cost determined to be reasonable and prudent is $684 million. This figure represents the sum of the project's fixed contract costs, estimated owner's costs, owner's contingency, and maximum potential incentive payments approved in D.06-11-048.1
We approve an initial capital cost in the amount of the sum of the project's fixed contract costs, estimated owner's costs and owner's contingency approved in D.06-11-048. Consistent with D.06-11-048, we direct PG&E to adjust the initial capital cost by advice letter filing to reflect any performance incentive payments that would have been paid, or performance incentive penalties that would have been due to it, under the PSA upon equivalent plant performance. Likewise consistent with D.06-11-048, we direct PG&E to true-up the initial capital cost in the next GRC following operation to reflect 50% of any savings relative to the initial capital cost.
WPTF/AReM argue that, if it is not expressly clear that PG&E's shareholders will bear all of the same risks for cost and performance risks as E&L would have borne under the original PSA, the utility-built Colusa Project must be reviewed as a new project. WPTF/AReM contend that the CPCN should be denied unless it is expressly conditioned on project adherence to the same standards with respect to costs and risks as applied to the previously-approved
project. Similarly, DRA, TURN and PG&E ask the Commission to adopt five proposed conditions intended to ensure that the project will not cost ratepayers any more than was approved in D.06-11-048. Pursuant to D.04-12-048, we condition the grant of the CPCN on the capital cost cap and associated ratemaking adopted in D.06-11-048.
WPTF/AReM object to consideration of the proposed conditions as inconsistent with the letter and spirit of Article 12, which require a settlement conference, 30 days to comment on the proposed settlement, request hearing and, if a non-settling party identifies a material contested fact, conduct discovery. Specifically, PG&E tendered for filing a document entitled "Joint Stipulation Resolving Concerns of California Division of Ratepayers [sic] Advocates and The Utility Reform Network to Pacific Gas and Electric Company's Application for Expedited Issuance of a Certificate of Public Convenience and Necessity for the Colusa Power Plant." As WPTF/AReM correctly point out, the "Joint Stipulation" represents a proposed settlement that, if it is to be given special consideration as such, must comply with the requirements of Article 12 of the Rules of Practice and Procedure. The "Joint Stipulation" did not comply with those requirements and has not been accepted for filing. We consider the merits of the proposed conditions on the weight of the argument in the filed pleadings. We do not give them the weight of, or the special consideration that applies to, settlements under Article 12.
WPTF/AReM contend that the adequacy of the proposed conditions cannot be assessed without first determining what assets PG&E acquired under its agreement with E&L, whether PG&E paid for them or acquired them for free, whether PG&E forfeited or received a termination payment or other consideration, the likelihood that PG&E will be able to complete the project under the initial cost cap adopted in D.06-11-048, and whether another developer could have competitively bid to complete the remainder of the project for the same or lower cost as PG&E. Alternatively, WTPF/AReM suggest that the utility-built project should be evaluated as a new project if it has different actual costs than were approved for recovery in D.06-11-048.2 WTPF/AReM miss the point of the conditions, which is to ensure that the project's impact on ratepayers is identical to what it would have been under the PSA. We do not need to assess PG&E's actual project costs in order to make that determination.
WPTF/AReM claims that the utility-built project should be reviewed as a new project because PG&E, as developer, has a stronger incentive to make operational improvements to it than it otherwise did as mere owner. We find no basis for this claim. D.06-11-048 authorized PG&E to seek recovery of the reasonable costs of operational enhancements to the project; PG&E has the same opportunity and incentive to make operational enhancements to the project whether it is the project developer or not.
WPTF/AReM note that PG&E has the burden of showing compliance with Pub. Util. Code § 1000 et seq., including specifically, Section 1003, and General Order 131-D, Appendix B, and alleges that PG&E did not comply with the notice requirement of Rule 3.1(b) of the Commission's Rules of Practice and Procedure. We find that PG&E's application contains all of the information required under the statutes, order and rule.
WPTF/AReM suggest that there is no need to expedite this application as PG&E requests because, even without the Colusa Project, PG&E's reserve margin will exceed the reserve margin authorized in D.07-12-052. Conversely, we find no need to delay it beyond the schedule adopted in the Assigned Commissioner's Scoping Memo and Ruling.
CARE asserts that the Colusa Project requires review as a new project because it does not have the same costs, and may be more profitable for PG&E, than the project approved in D.06-11-048. As discussed previously, D.06-11-048 approved the project costs (that are recoverable from ratepayers) as reasonable and cost-effective, imposes a capital cost cap, and requires PG&E to share any savings relative to the initial capital cost on a 50/50 basis between ratepayers and shareholders. Because this CPCN is conditioned on the identical ratemaking treatment of actual costs relative to the approved project costs, there is no basis to review the project's reasonableness and cost-effectiveness as a new project.
CARE cites to D.91-12-076 (Re Southern California Edison Company, 42 CPUC2d 645) for the proposition that unidentified projects may not substitute for previously-approved projects. D.91-12-076 does not inform our analysis here.
CARE cites to D.03-04-038, wherein the Commission approved an amendment of an existing CPCN based on a "let the market decide policy" and placed the utility at risk for all unused project capacity, as precedent for denying PG&E recovery of any Colusa Project costs absent a showing of the actual cost of service of the project. D.03-04-038 does not apply to this application.
1 We take official notice of A.06-04-012, Exhibit 1-C, pages 9C-2 through 9C-4, which identifies these amounts.
2 On a related point, WPTF/AReM suggest that allowing PG&E to exclude the costs of employees and temporary contractors that are already in rates from the approved capital cost for the project may hide the fact that the PG&E-built project costs more than the authorized costs of the original project and is therefore a new project.
