II. Background
This investigation has been coordinated with Phase 1 of Application (A.) 05-04-015, the application of Southern California Edison Company (SCE) for a CPCN to construct the Devers-Palo Verde No. 2 (DPV2) transmission project, a proposed 230-mile, 500 kilovolt alternating current transmission line between California and Arizona. DPV2 would connect SCE's existing Devers substation near Palm Springs, California to the existing Harquahala Generating Company switchyard located approximately 49 miles west of Phoenix, Arizona.
On June 30, 2005, the Commission opened I.05-06-041 to consider appropriate principles and methodologies for assessment of the economic benefits of transmission projects, including DPV2, that are submitted for Commission approval. The Commission named SCE, Pacific Gas and Electric Company (PG&E), and San Diego Gas & Electric Company (SDG&E) as Respondents to the investigation. As established in the Order Instituting Investigation (OII), the Commission wished to consider, in particular, the CAISO TEAM approach to economic evaluation of transmission projects, both as an evaluative framework and as applied to assess the economic benefits of the DPV2 project. The OII provided that issues then under consideration in I.00-11-001 regarding the methodology for assessment of the economic benefits of transmission projects were subsumed in I.05-06-041, and that the record on these issues developed in I.00-11-001 would be fully available for consideration in I.05-04-061.
The Assigned Commissioner issued the scoping memo for A.05-04-015 and I.05-06-041 on August 26, 2005. The scoping memo categorized this proceeding as ratesetting and stated that hearings were necessary. The scoping memo also provided that evidence regarding DPV2 would be received in two phases. Phase 1 would address need issues and the economic methodology used to assess cost effectiveness on a coordinated basis for A.05-04-015 and I.05-06-041. Phase 2, in A.05-04-015 only, is underway to address environmental, routing, updated cost estimates, and other issues related specifically to DPV2. The Commission plans to rule on SCE's CPCN request for authorization to construct DPV2 by the end of 2006. In that decision, we will consider Phase 1 evidence regarding the cost-effectiveness of DPV2 in addition to other CPCN issues considered in Phase 2.
Among other issues in I.05-06-041, the Commission planned to address validation of and reliance on CAISO assessments of need in Commission proceedings. Parties discussed this issue, among others, at a joint workshop held on September 14 - 15, 2005. Based on workshop discussions, a September 27, 2005 Administrative Law Judge (ALJ) ruling determined that a complete validation of the CAISO's TEAM approach should not be pursued at this time. The ALJ ruling established that Phase 1 would address the following issues related to I.05-06-041, in addition to issues related to the need for the DPV2 transmission project under consideration in A.05-04-015:
1. What general principles or methodologies should the Commission employ in assessing the economic benefits of transmission projects within its jurisdiction?
2. Is the CAISO's TEAM approach, as applied to Path 26 and to DPV2, consistent with such general principles or methodologies?
3. Are the following procedures a reasonable approach at this time for the Commission's assessment of the economic benefits of transmission projects?
a. In I.05-06-041, the Commission would adopt principles, a framework for decision-making, and criteria for the economic analysis of transmission lines.
b. In subsequent certificate proceedings, the Commission would evaluate whether the CAISO, in evaluating economic need for the proposed project, has followed the guidance provided by the Commission in a reasonable manner.
c. If so, the Commission would adopt the CAISO's economic determination, so that the outcomes at the CAISO and the Commission would be consistent.
4. After the Commission adopts general principles or methodologies for assessing the economic benefits of transmission projects, how should the Commission evaluate in a certification proceeding whether the CAISO, in evaluating economic need for the proposed project, has followed the guidance provided by the Commission in a reasonable manner?
5. If the Commission determines in a certification proceeding for a transmission project proposed for its economic benefits that a CAISO assessment of need has followed the guidance provided by the Commission in a reasonable manner, are there additional requirements that must be met in the Commission's determination of economic benefits and need for the project?
6. For those certification proceedings for transmission projects proposed for economic benefits where there is no CAISO assessment of need that the Commission has found to be reasonable and consistent with guidance provided in this investigation, what requirements should the Commission adopt for consideration of economic benefits and need?
We agree with the September 27, 2005 ALJ ruling that consideration of these issues in I.05-06-041, in the context of assessment of need for DPV2, should further the Commission's goal of streamlining transmission planning and help ensure consistency in Commission and CAISO results.
As provided in the September 27, 2005 ALJ ruling, parties filed comments and reply comments on Phase 1 issues. An ALJ ruling dated October 28, 2005 provided further guidance regarding the scope of Phase 1 testimony and evidentiary hearings.
Three days of evidentiary hearings were held in Phase 1 on January 10-12, 2006. The following parties filed opening briefs: the CAISO, SCE, PG&E, SDG&E, Division of Ratepayer Advocates (DRA), The Utility Reform Network (TURN), Bay Area Municipal Transmission Group (BAMx),1 and Global Energy Decisions, Inc. (Global Energy). All of these parties except BAMx also filed reply briefs. Following the receipt of late-filed exhibits and opening and reply briefs, Phase 1 was submitted on March 24, 2006. No party requested final oral argument before the Commission on Phase 1 issues in its opening brief, as allowed by the scoping memo.
1 BAMx is an unincorporated association of publicly owned utilities located in the Greater Bay Area. Members include the City of Santa Clara, Alameda Power and Telecom, and City of Palo Alto Utilities.
