STATE OF CALIFORNIA ARNOLD SCHWARZENEGGER, Governor
PUBLIC UTILITIES COMMISSION
505 VAN NESS AVENUE
SAN FRANCISCO, CA 94102-3298
June 20, 2006 Agenda ID #5776
Ratesetting
TO: PARTIES OF RECORD IN INVESTIGATION 05-06-041
This is the proposed decision of Administrative Law Judge (ALJ) TerKeurst, previously designated as the principal hearing officer in this proceeding. It will not appear on the Commission's agenda for at least 30 days after the date it is mailed. This matter was categorized as ratesetting and is subject to Pub. Util. Code § 1701.3(c). Upon the request of any Commissioner, a Ratesetting Deliberative Meeting (RDM) may be held. If that occurs, the Commission will prepare and publish an agenda for the RDM 10 days beforehand. When an RDM is held, there is a related ex parte communications prohibition period. (See Rule 7(c)(4).)
When the Commission acts on the proposed decision, it may adopt all or part of it as written, amend or modify it, or set it aside and prepare its own decision. Only when the Commission acts does the decision become binding on the parties.
Parties to the proceeding may file comments on the proposed decision as provided in Article 19 of the Commission's "Rules of Practice and Procedure," accessible on the Commission's website at www.cpuc.ca.gov. Pursuant to Rule 77.3 opening comments shall not exceed 15 pages.
Comments must be filed with the Commission's Docket Office. Comments should be served on parties to this proceeding in accordance with Rules 2.3 and 2.3.1. Electronic copies of comments should be sent to ALJ TerKeurst at cft@cpuc.ca.gov. All parties must serve hard copies on the ALJ and the assigned Commissioner, and for that purpose I suggest hand delivery, overnight mail or
I.05-06-041 ALJ/CFT/tcg
Page 2 of 2
other expeditious methods of service. The current service list for this proceeding is available on the Commission's web site, www.cpuc.ca.gov.
/s/ ANGELA K. MINKIN
Angela K. Minkin, Chief
Administrative Law Judge
ANG:tcg
Attachment
ALJ/CFT/tcg DRAFT Agenda ID #5776
Ratesetting
Decision PROPOSED DECISION OF ALJ TERKEURST (Mailed 6/20/2006)
BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
Order Instituting Investigation on the Commission's Own Motion into Methodology for Economic Assessment of Transmission Projects. |
Investigation 05-06-041 (Filed June 30, 2005) |
OPINION ON METHODOLOGY FOR
ECONOMIC ASSESSMENT OF TRANSMISSION PROJECTS
(See Attachment B for List of Appearances.)
OPINION ON METHODOLOGY FOR ECONOMIC
ASSESSMENT OF TRANSMISSION PROJECTS 11
III. Overview of Positions of the Parties 88
IV. Consideration of Economic Benefits in Transmission Project
CPCN Proceedings 2020
V. Principles for Assessment of Economic Benefits of Transmission
Lines 2626
B. Quantification of Energy Benefits 3434
B. Quantification of Energy Benefits (Cont'd)
C. Other Quantifiable Economic Benefits and Costs 6161
D. Non-monetized Considerations 6262
E. Resource Plans and Alternatives to a Proposed Project 6363
VI. Comments on Proposed Decision 6767
VII. Assignment of Proceeding 6767
Attachment A - Principles and Minimum Requirements for the Economic
Evaluation of Transmission Projects
Attachment B - List of Appearances
OPINION ON METHODOLOGY FOR
ECONOMIC ASSESSMENT OF TRANSMISSION PROJECTS
I. Summary
The Commission opened Investigation (I.) 05-06-041 in order to consider methodologies for the economic assessment of proposed transmission projects. In today's decision, we adopt general principles and minimum requirements and provide other guidance for economic evaluations of proposed transmission projects that may be submitted in Commission certificate of public convenience and necessity (CPCN) proceedings.
A threshold issue is what deference should be given to determinations by the California Independent System Operator (CAISO) regarding the cost-effectiveness and need for a transmission project that is proposed for its economic benefits. The CAISO is a critical player in California's efforts to ensure reliability and economic efficiency of the transmission system. The CAISO's work in developing its Transmission Economic Assessment Methodology (TEAM) has advanced the state of the art in economic evaluations of transmission projects. We agree with and adopt many aspects of the CAISO's TEAM approach. As discussed in Section IV of this order, we believe that it would be counter to the public interest to shift the burden of proof from an applicant requesting a CPCN for a transmission project. Therefore, we decline to adopt the CAISO's proposal that a rebuttable presumption of economic efficiency be triggered in a CPCN proceeding in which the applicant relies on the study underlying a CAISO determination that the transmission project is cost effective.
We agree with the consensus among the parties that Commission requirements regarding economic evaluations of transmission projects should not be overly prescriptive. Instead, today we adopt general principles and provide guidance to establish a framework for economic evaluations to be submitted in CPCN proceedings. The adopted principles, along with minimum requirements for economic evaluations, are appended as Attachment A to this order, and can be summarized as follows:
1. The CAISO's standardized benefit-cost methodology shall be used to measure the economic benefits of proposed transmission projects. The perspective of CAISO ratepayers is of primary importance in a CPCN proceeding, although there is value in reviewing benefit-cost results from other perspectives as well.
2. The CAISO's framework for the computation of potential energy benefits shall be used. Parties shall assess energy benefits using established, credible, and commercially available production cost modeling tools. The applicant may decide whether to include market power mitigation benefits as part of its demonstration of need for a proposed transmission project.
3. In addition to energy benefits, other economic effects of a transmission project may be considered, including economic effects that may not be quantifiable.
4. Economic evaluations shall consider how uncertainty about future system and market conditions affects the likelihood that a transmission project's forecasted benefits will be realized.
5. Economic evaluations shall use baseline resource plans and assumptions about the system outside the applicant's service territory that are consistent with resource plans and system assumptions used in procurement or other recent Commission proceedings, updated as appropriate.
6. Economic evaluations shall consider feasible resource alternatives to the proposed transmission project.
The Commission is taking steps to simplify transmission planning and permitting procedures and make them more efficient, both here and in I.05-09-005 and other venues. Our adoption today of principles and guidance regarding economic evaluations of proposed transmission projects will complement the Commission's streamlining efforts and further the goal of greater coordination and consistency between the Commission and the CAISO. The adopted principles and guidance should be useful to parties that participate in the CAISO review. Parties that provide economic evaluations to the CAISO that are consistent with our guidelines may also submit them in our CPCN proceedings, thus reducing duplication of efforts, the expense of participating both at the CAISO and here, and the time required for the two reviews. Additionally, parties' experience in defending their project evaluations during the CAISO process should narrow issues and streamline the process in a CPCN proceeding here.
