5. Modeling Scenarios and Input Assumptions

Joint Parties initially presented two scenarios in their testimony, a "Planning Scenario" and "Aggressive Generation Retirement and Outage Scenario." The Planning Scenario represents the Joint Parties' preferred assumptions concerning retirements and outages. The Aggressive Generation Retirement and Outage Scenario uses alternate retirements and outages assumptions provided by the CEC in accordance with Energy Division's direction. Additional scenarios were prepared before the start of hearings at the request of the ALJ. The various scenarios are referred to throughout this decision as follows:

Within each scenario, various "cases" were presented using alternate load forecasts, alternate assumptions regarding in-state generation and new Southwest generation additions. These cases are described in greater detail below.

5.1 Load Forecast

In addition to a base load forecast, Joint Parties presented alternate cases that scale the base load forecast (1) up by 10%, (2) down by 10%, (3) up by 20% and (4) down by 20%.3 In addition, Joint Parties presented an "average load" case defined as 65% of SCE's peak load and 54% of SDG&E's peak load.

The load forecasts were based on a 1 in 5-year heat wave forecast. They include the service territories of SDG&E, SCE, and the City of Pasadena. Load forecasts from other municipal utilities that are served from SCE's transmission system (e.g., City of Vernon, Anaheim, Azusa, and Banning) were included in SCE's load forecast.

5.2 Existing In-State Generation

The Joint Parties presented two alternative cases for existing in-state generation, one developed by the utilities based on dependable generation levels available as of January 1, 2001, and one developed by the CEC based on nameplate capacity, which is usually higher than dependable capacity.

5.3 New Generation Additions in Southern California

Five alternate sets of assumptions were used for new in-state generation, 1) a utility maximum new in-state generation case, 2) a CEC maximum new in-state generation case, 3) a CEC medium new in-state generation case, 4) a CEC low new in-state generation case and 5) a very low new in-state generation case. All new in-state generation addition numbers were held constant after the year 2005.

The utilities based their forecasts of maximum new in-state generation on information they obtain from developers requesting interconnection studies. By 2004, the utilities estimate that approximately 18,750 MW of new in-state capacity will be available during the planning period.

CEC based its maximum, medium and low cases based on the following status designations:

The CEC's maximum new in-state generation case includes all known projects having CEC's status 1-5, which represents approximately 20,500 MW of new capacity by 2004. The medium new in-state generation case includes all projects having CEC's status 1-3 (6,500 MW). Joint Parties define the low new in-state generation case as all projects having CEC status 1-2 (5,050 MW).

The very low new in-state generation case is from the Southern CA Study described above. Specifically, this case assumes that 720 MW in new in-state capacity (coming on line in 2003) will be available during the planning period.

5.4 New Southwest Generation Additions

The new Southwest generation cases were 1) a maximum potential level available to Southern California and 2) a medium potential level available to Southern California. CEC presented the estimates for Arizona and Nevada, by starting with all projects under the 1-5 status designations listed above. For Arizona, this represents approximately 10,500 MW by 2004, increasing to 17,700 MW by 2007. For Nevada, CEC estimates that approximately 4,600 MW will be available by 2004, increasing to 6,000 MW by 2007. The maximum potential case assumed that 50% of these resources would materialize, while the medium case assumes that 20% would materialize.

For Mexico import capability, the Joint Parties present two sets of assumptions. One set was developed by the utilities, based on the number of projects in their interconnection queue. Projects are placed in the queue when SDG&E receives an application for an interconnection study from the project owner. The utilities estimate that approximately 2,000 MW will be available for import from Mexico by 2003, increasing to 2,550 MW by 2005. The other set of assumptions was developed by the CEC based on publicly released information. CEC estimates a similar amount of availability by 2003, with that level increasing to about 2,300 MW by 2007. The maximum potential case assumed that 100% of these resources would materialize, while the medium case assumes that 20% would materialize. All new out-of-state generation addition numbers are held constant after the year 2007.

5.5 Generation Retirements

The Joint Parties' Planning Scenario (Scenario 1) did not assume any retirements for the planning period, i.e., 2001 through 2011. Alternate assumptions for retirements were used for Scenarios 2, 4, and 5.

For Scenarios 2 and 4, Redondo Beach 5 and 6 and High Grove 1-4 are retired in 2002 because of their very high heat rates, for a total of 500 MW. These units have heat rates in the 13,400 to 14,700 British thermal units (Btu) per kilowatt hour (kWh) range, and are expected to be retired, according to CEC. This scenario also assumes that 15 emergency peaking units in SCE's and SDG&E's service territories (approximately 615 MW) would retire in 2003. Most of these units have been offered three-year operating permits with the possibility of extending operation beyond that date only upon the expenditure of significant money for pollution abatement. No retirements during the rest of the planning period were assumed.

For Scenario 5, CEC developed estimates of additional retirements beyond 2003, at the request of the ALJ. CEC identified specific plants with heat rates that would probably not be profitable if prices drop by 2004 due to the amount of new capacity projected to come on line in California, Nevada, and Arizona. This scenario projects additional retirements of 1,760 MW between 2004 and 2007.4

5.6 Generation Outages

Scenario 1 makes allowances for generation outages using ISO transmission planning standards, namely, that the most critical single generating unit (San Onofre's Unit 2 or 3) is out of service in combination with the most critical single transmission line. This represents 1,150 MW of outages in each year of the planning period.

Scenario 2 adds to this allowance additional outages to reflect a scenario that represents one day per summer probability. According to CEC, this is accomplished by assuming approximately 3,400 MW in outage allowances each year of the planning period, based on historical experience. To derive this level, CEC assumed that 15% of gas-fired capacity in SCE and SDG&E's service territory plus 7½% of the gas and coal-fired capacity in Kern County would be unavailable along with an outage at one of the San Onofre units.5

5.7 In-State Transmission Constraints

Joint Parties' matrix methodology addresses only links to out-of-state resources, and does not address whether in-state transmission upgrades are needed to maintain reliable operations.6

5.8 Derating of Transmission Capability

California's existing transmission system is capable of importing a total of 7,319 MW from the Southwest, over and above entitlements for the ISO controlled grid and other commitments. This is the figure generally used in the matrix spreadsheet to calculate the need for new transmission capacity under the various sets of load and resource assumptions. However, under the "very low generation" case, the Joint Parties reduce or "derate" this capability for the baseload, baseload plus 10%, and baseload plus 20% matrix calculations.

Joint Parties' contend that, without additional reactive voltage support, the system would be unable to transfer imports at the full 7,319 MW level when there is a large gap between in-state generation and loads.

Therefore, they argue that import capability should be derated in the matrix model for the "very low generation" case using the following formula:7

Derated Capability = Import Capability - (Load Growth - New Generation) x (Load Growth)

Accordingly, Joint Parties derate transmission import capability from 7,319 MW to approximately 3,100 MW by 2011 under the very low generation case using base load assumptions. For base load plus 10% and 20%, Joint Parties derate import capability to approximately 2,675 and 2,250 MWs, respectively.

3 There were also three variations of the base load forecast presented in the matrix analysis-one prepared by the utilities, one prepared by CEC and one representing a "utility average load case." Since the record in this proceeding indicates that these three variations are relatively close, we use the CEC base load projection throughout our discussion and tables. See Reporter's Transcript (RT) at 18-24, Exhibit (Exh.) 17. 4 See RT at 282-290, Exhs. 11 and 30. 5 RT at 273-280; Exh. 11. 6 Exh. 1, p. 2, 19. 7 RT at 331

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