2. Procedural Background

By ruling dated March 29, 2001, the Assigned Commissioner directed PG&E to file a Certificate of Public Convenience and Necessity (CPCN) to upgrade the portion of Path 15 between Los Banos and Gates substations. On April 13, 2001, PG&E submitted CPCN Application (A.) 01-04-012, as directed. A prehearing conference (PHC) was held on May 10, 2001 and another on June 27, 2001 to address scheduling issues for A.01-04-012. Public participation hearings were held on September 19, 2001 in Los Banos and Coalinga.

PG&E and the ISO served opening testimony on September 25, 2001. PG&E's testimony focused on more fully describing the project and the expected costs to build the project. The ISO testimony addressed the economic need for the project. The Office of Ratepayer Advocates (ORA) submitted testimony criticizing the ISO's economic analysis on November 8, 2001. ISO responded with rebuttal testimony on November 15, 2001. Evidentiary hearings were scheduled to begin on November 26, 2001.

Before the testimony could be subject to evidentiary hearings, PG&E filed a motion to withdraw A.01-04-012.⁴ In its motion, PG&E stated that it would not build a stand alone Path 15 project in light of a recent agreement among various public and private entities to participate in a Path 15 expansion project, i.e., the October 16, 2001 Memorandum of Understanding (MOU) executed by WAPA, PG&E, PG&E National Energy Group, Kinder Morgan, Transmission Agency of Northern California (TANC), Trans-Elect, and Williams Energy Marketing and Trading Company. The document provides a general discussion of the planned Path 15 expansion project, and leaves to future agreements the definition of parties' shares of the project costs and benefits, as well as specific roles and responsibilities. The MOU states that such agreements are to be executed no later than 90 days after the MOU was executed (i.e., by January 14, 2002.)

ORA and ISO filed responses to PG&E's motion on November 13, 2001. By ruling dated November 30, 2001, the Assigned Commissioner denied PG&E's motion and consolidated A.01-04-012 with the Commission's generic investigation of transmission constraints, stating:

"I.00-11-001 provides a logical forum to further explore the issue of project economics and to examine the allocation of benefits among project participants under the MOU development approach or a PG&E stand-alone project.... PG&E is currently a respondent to I.00-11-001 and matters surrounding the economics of transmission projects throughout the state are the subject of the investigation. Parties to A.01-04-012 should be prepared to discuss a schedule for supplemental testimony regarding the allocation of costs and benefits of the federal project at the December 19, 2001 prehearing conference already scheduled in I.00-11-001.... [T]he assigned Administrative Law Judge in I.00-11-001 will establish the scope and schedule for further consideration of the Path 15 expansion application, previously served testimony and supplemental testimony."⁵

A further PHC was held on December 19, 2001, followed by the assigned ALJ ruling regarding the schedule and scope of evidentiary hearings.⁶ The ISO filed Errata to the September 25 testimony on January 25, 2002, and ORA filed additional rebuttal testimony on February 8, 2002. Three days of evidentiary hearings were held on February 25, 26 and 27. During these hearings, the ALJ requested additional information from the ISO regarding the assumptions and methodology used to perform the economic analysis. This information was examined during a fourth day of evidentiary hearings on March 27, 2002.

Opening briefs were filed on April 10, 2002 by PG&E, ORA and ISO. ORA and the ISO filed reply briefs on April 22, 2002.

On April 30, 2002, WAPA filed a letter agreement at the Federal Energy Regulatory Commission (FERC) describing who will own the land, the lines and the transmission rights on the Path 15 upgrade and seeking pre-approval of a proposed ratemaking treatment for the project participants. Those project participants are identified as WAPA, PG&E and Trans-Elect. The letter agreement states that subsequent implementation agreements will provide more detail on the ownership percentages, project scope, and the nature of the ownership rights and responsibilities, including payments for project costs.⁷