Assignment of Proceeding

Michael R. Peevey is the assigned Commissioner and Hallie Yacknin is the assigned Administrative Law Judge in this proceeding.

1. D.06-11-048 approved the Purchase and Sale Agreement (PSA) for the Colusa Power Project after its selection pursuant to a competitive Request for Offer (RFO) process.

2. D.06-11-048 found that the PSA was cost-effective.

3. D.06-11-048 found that the megawatts (MW) represented by the PSA are needed.

4. D.06-11-048 adopted, and approved as reasonable, an initial capital cost for the project equal to the sum of its fixed contract costs (excluding incentive payments or penalties) plus PG&E's estimated owner's costs, including PG&E's proposed owner's contingency.

5. D.06-11-048 authorized PG&E to adjust the initial capital cost by advice letter filing to reflect any performance incentive payments paid under the PSA.

6. D.06-11-048 directed PG&E to adjust the initial capital cost by advice letter filing to reflect any performance incentive penalties due to it under the PSA.

7. D.06-11-048 authorized PG&E to apply for approval, and recover the reasonable costs, of operational enhancements to the project.

8. D.06-11-048 directed PG&E to true-up the project's initial capital cost in the next general rate case following operation to reflect 50% of any other savings relative to the initial capital cost.

9. D.06-11-048 provided for the initial revenue requirement for the project to begin to accrue in the Utility Generation Balancing Account (UGBA) as of the date of closing of the PSA, and to be included in rates on January 1 of the following year.

10. D.06-11-048 authorized PG&E to recover costs associated with the bridge tolling agreement for the project through the Energy Resources Recovery Account (ERRA) proceeding.

11. PG&E seeks a CPCN to construct the project as owner-builder, without modification to project description or cost impact on ratepayers.

12. Environmental review of the project under CEQA and the Warren-Alquist Act, is now pending before the CEC as lead agency; the Commission will exercise its responsibilities and preserve its rights as a responsible agency pursuant to CEQA Guideline § 15096.

1. The Colusa Power Project for which PG&E seeks a CPCN is, for all material purposes relevant to the Commission's review of project need and cost-effectiveness, the same project as was approved in D.06-11-048 (issued in A.06-04-012).

2. The maximum reasonable and prudent cost for purposes of Pub. Util. Code § 1005.5 should be set at $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.

3. The initial capital cost for the project should be set equal to the sum of the fixed costs of the PSA (excluding incentive payments or penalties) plus PG&E's estimated owner's costs, including PG&E's proposed owner's contingency, as reflected in the record of A.06-04-012 and approved in D.06-11-048.

4. PG&E should be authorized to adjust the initial capital cost by advice letter filing to reflect any performance incentive payments that would have been paid under the PSA, upon equivalent plant performance, consistent with the authority granted in D.06-11-048.

5. PG&E should be directed to adjust the initial capital cost by advice letter filing to reflect any performance incentive penalties that would have been due to it under the PSA, upon equivalent plant performance, consistent with the authority granted in D.06-11-048.

6. PG&E should be authorized to apply for approval, and recover the reasonable costs, of operational enhancements to the project, consistent with the authority granted in D.06-11-048.

7. PG&E should be directed to true-up the project's initial capital cost in the next general rate case following operation to reflect 50% of any other savings relative to the initial capital cost.

8. PG&E should not be permitted to include any costs that are already included in rates, e.g., that were included in PG&E's general rate case forecast, in determining the actual capital cost relative for purposes of the true-up of the project's initial capital cost.

9. The initial revenue requirement for the project should begin to accrue in the UGBA as of the date that it achieves the milestones that would have resulted in the closing of the PSA, and to be included in rates on January 1 of the following year.

10. PG&E should be authorized to recover costs that would have been paid under the bridge tolling agreement for the project through the Energy Resources Recovery Account (ERRA) proceeding.

11. In the event that PG&E ceases development or construction of the project, PG&E should be authorized to file an application for the recovery of reasonable costs associated with abandoned plant to the extent that PG&E would have been liable for such costs under the PSA.

12. Grant of the CPCN should be contingent on project certification by the California Energy Commission (CEC) and the Commission's consideration of that certification.

13. PG&E should be directed file the CEC certification document in this proceeding within three days of its issuance.

INTERIM ORDER

IT IS ORDERED that:

1. Pacific Gas and Electric Company (PG&E) is granted a Certificate of Public Necessity and Convenience (CPCN) to construct the Colusa Power Project, contingent on certification by the California Energy Commission (CEC) and the Commission's consideration of that certification, as more fully discussed in the decision. For purposes of the interim construction authority granted herein, the Colusa Power Project includes all elements of the Project as defined in the Application for a Certificate to Construct attached as Exhibit A to PG&E's application, including interconnection facilities subject to environmental review by the CEC that also require a permit from this Commission under General Order 131-D.

2. The maximum reasonable and prudent cost for purposes of Pub. Util. Code § 1005.5 is $684 million.

3. PG&E is directed to file the CEC certification document in this proceeding within three days of its issuance.

4. An initial capital cost for the project equal to the sum of the fixed costs of the Purchase and Sale Agreement (PSA) (excluding incentive payments or penalties) plus PG&E's estimated owner's costs, including PG&E's proposed owner's contingency, as reflected in the record of Application 06-04-012 and approved in Decision (D.) 06-11-048, is adopted and approved as reasonable.

5. PG&E is authorized to adjust the initial capital cost by advice letter filing to reflect any performance incentive payments that would have been paid under the PSA, upon equivalent plant performance, consistent with the authority granted in D.06-11-048.

6. PG&E is directed to adjust the initial capital cost by advice letter filing to reflect any performance incentive penalties that would have been due to it under the PSA, upon equivalent plant performance, consistent with the authority granted in D.06-11-048.

7. PG&E is authorized to apply for approval, and recover the reasonable costs, of operational enhancements to the project, consistent with the authority granted in D.06-11-048.

8. PG&E is directed to true-up the project's initial capital cost in the next general rate case following operation to reflect 50% of any other savings relative to the initial capital cost.

9. PG&E may not include any costs that are already included in rates, e.g., that were included in PG&E's general rate case forecast, in determining the actual capital cost for purposes of the true-up of the project's initial capital cost.

10. The initial revenue requirement for the project shall begin to accrue in the Utility Generation Balancing Account as of the date that it achieves the milestones that would have resulted in the closing of the PSA, and be included in rates on January 1 of the following year.

11. PG&E is authorized to recover costs that would have been paid under the bridge tolling agreement for the project through the Energy Resources Recovery Account proceeding.

12. In the event that PG&E ceases development or construction of the project, PG&E is authorized to file an application for the recovery of reasonable costs associated with abandoned plant to the extent that PG&E would have been liable for such costs under the PSA.

13. PG&E is directed to file the CEC certification document in this proceeding within three days of its issuance.

This order is effective today.

Dated February 28, 2008, at San Francisco, California.

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