Findings of Fact

1. The CAISO's work in developing its TEAM approach has advanced the state of the art in economic evaluations of transmission projects.

2. The state of the art in economic evaluations of transmission projects continues to evolve, with continuing developments in system modeling capabilities and computer advances.

3. It is reasonable for the Commission to adopt general principles and provide guidance to establish a framework and minimum requirements for economic evaluations to be submitted in CPCN proceedings for proposed transmission projects.

4. The Commission should retain the ability to assess the adequacy of the applicant's showing regarding its baseline resource plan and alternatives to a proposed transmission project, and to maintain consistency among proceedings in which the Commission assesses alternative means of meeting California's energy needs.

5. It is reasonable to allow the Assigned Commissioner or assigned ALJ in a CPCN proceeding for a proposed transmission project to modify application of the minimum requirements for economic evaluations adopted in this decision with good cause shown, taking case-specific conditions into account.

6. It is reasonable for the Commission to assess the applicability of the principles and guidance adopted in this decision in the context of individual CPCN applications, as the need arises.

7. In economic evaluations of proposed transmission projects, there are three general categories of costs and benefits: (1) the change in total production costs, or energy benefits, (2) changes in other quantifiable economic costs and benefits not included in production cost analyses, and (3) factors whose economic effects cannot be monetized.

8. In evaluating a proposed transmission project, the distribution of potential benefits and costs among geographic areas and among various types of market participants can be assessed.

9. The WECC or Societal benefit-cost perspective takes into consideration all market participants in the WECC area, including consumers (or their load serving entities), producers, and transmission owners.

10. The Modified Societal benefit-cost perspective includes only the portion of producer profits derived from competitive prices, and excludes additional producer net revenue obtained through the exercise of market power.

11. The CAISO Ratepayer benefit-cost perspective includes the benefits and costs that would accrue to CAISO consumers, utility-retained generation, and transmission owners (or holders of congestion revenue rights or firm transmission rights) of the CAISO-controlled grid.

12. It is reasonable to use the CAISO's standardized benefit-cost methodology, as described in this order, to measure the economic benefits of a proposed transmission project.

13. The perspective of CAISO ratepayers is of primary importance in the Commission's evaluation of a proposed transmission project, because it reflects the effects on customers of the utilities within our jurisdiction.

14. A transmission expansion may improve the import capability over a transmission path and allow access to additional sources of power, thus reducing producers' ability to exercise market power and lowering production costs, to the benefit of consumers.

15. For economic evaluations that include estimates of producers' strategic bidding behavior, the Modified Societal perspective is the appropriate perspective to use in evaluating societal benefits of the proposed transmission project.

16. Use of discount rates equal to the utilities' weighted cost of capital will facilitate consistent comparison of proposed transmission projects and alternative energy investments.

17. The energy benefits due to a proposed transmission project consist of the net changes in consumer costs, producer net income, and congestion revenues flowing to transmission owners or holders of transmission rights. The sum of these changes equals the change in energy production costs.

18. It is reasonable to use the CAISO's energy benefits framework for the computation of energy benefits of a proposed transmission project, as described in this order.

19. Both network models and transportation models have advantages and disadvantages.

20. It is reasonable to allow the applicant to choose the type of system model to use in its showing of need for a proposed transmission project.

21. The modeling of the benefits of market power mitigation is a complex undertaking, and it is difficult to confirm the extent to which such forecasts produce reliable results.

22. It is reasonable to allow the applicant to determine whether to include information regarding market power mitigation benefits as part of its showing of need for a proposed transmission project.

23. It is reasonable to require that parties identify significant assumptions and simplifications in their modeling of the economic impacts of proposed transmission projects, the reasons for those choices, and possible effects on study results.

24. It is reasonable to require that, in economic evaluations of proposed transmission projects, system operations be modeled for at least two years, with the years chosen several years apart.

25. It is reasonable to require that, in its economic evaluation of a proposed transmission project, each party address the extent to which resource or time constraints affected its economic study choices and the basis for any resulting trade-offs it made among study attributes.

26. Evaluations of proposed transmission projects require judgments and assumptions about system and market assumptions for many years into the future and even the best forecasts are inherently uncertain in this regard.

27. It is reasonable to require that an applicant address how uncertainty about future system and market conditions affects the likelihood that the proposed transmission project's forecasted economic benefits will be realized, taking into account a reasonable range of possible variations in key study parameters and contingency events.

28. It is reasonable to require that an applicant proposing a transmission project expected to cost more than $100 million provide a probabilistic analysis of the effects of uncertainty on the expected benefits of the project.

29. It is reasonable to require that each party submitting an economic evaluation in a transmission CPCN proceeding provide at least one cost-based deterministic reference case, with the applicant using its baseline resource plan and other parties mirroring the resources and other key assumptions in the applicant's reference case to the extent feasible.

30. It is reasonable to require that a party that models the effects on strategic bidding of a proposed transmission project submit a market-based reference case that varies from its cost-based reference case only in its forecast of strategic bidding.

31. It is reasonable to require that each party identify the parameters, assumptions, or relationships that most affect the conclusions in its economic evaluation of a proposed transmission project.

32. It is reasonable to require that the applicant identify any attributes of its proposed transmission project that may increase societal costs or have other detrimental effects and, if possible, quantify the potential effects.

33. It is reasonable to require that each party specify the level of project costs it assumed in its economic evaluation of a proposed transmission project, and how a change in project costs would affect its cost-effectiveness results.

34. The importance of identifying and quantifying non-energy economic benefits of a proposed transmission project depends, to some extent, on whether identified energy benefits provide sufficient justification for the project.

35. It is reasonable to require that, in its economic evaluation of a proposed transmission project, the applicant use a baseline resource plan and assumptions about the system outside the applicant's service territory that are consistent with its resource plan and system assumptions used in procurement or other recent Commission proceedings, with identification and explanation of any differences.

36. It is reasonable to require that, in their economic evaluations of a proposed transmission project, parties other than the applicant identify and justify any differences between the resource plan and other input assumptions they utilize and those submitted by the applicant.

37. It is reasonable to evaluate the availability and cost of feasible alternatives as part of the economic evaluation of a proposed transmission project.

38. It is reasonable to require that each party identify alternatives to the proposed transmission project that it considered, the bases for its choices, and the results of its alternatives analysis.

39. It is reasonable to adopt the Principles and Minimum Requirements for the Economic Evaluation of Transmission Projects appended as Attachment A, with the further guidance provided in this order, for use in CPCN proceedings in which the applicant proposes a transmission project wholly or partly on the basis of expected economic benefits.