8. ISO Transmission Planning, Approval, and Cost Allocation

At the request of the ALJ, ISO Witness Miller clarified the process by which transmission projects are reviewed and approved by the ISO, and the ISO's cost allocation policies.

The ISO conducts an annual transmission planning process, referred to as the ISO Grid Coordinated Planning Process. This is a four-part process. Each of the three major transmission owners (PG&E, SDG&E, and SCE) develops its own transmission expansion plan, with the process open to stakeholders. Although ISO participates as a stakeholder in the transmission owners' separate planning processes, it also conducts an independent control area wide assessment and five-year expansion plan. The planning process culminates in an overall transmission plan for the ISO grid, comprised of the four components. At the end of the calendar year, or shortly thereafter, the ISO approves specific transmission projects identified in the plan.

There is also a planning process for generators, whereby the ISO can approve interconnections on a faster timeframe throughout the year. In addition, transmission projects can come before the ISO as part of a special study or stakeholder process. For example, Witness Miller testified that the ISO would expect to consider the reliability need for a major Southwest intertie either as part of the annual studies conducted for the Grid Coordinated Planning Process, or in a separate study.¹¹

Projects under $20 million are approved by ISO management, i.e., the Regional Transmission Manager in the Grid Planning Department in consultation with ISO officers, as needed. Projects over $20 million must go to the ISO Board of Governors (Board) for approval. Since the ISO has been established, less than 10 out of almost 200 transmission projects approved by the ISO have required Board approval. Those requiring Board approval have included Valley Rainbow and reinforcements in Northeast San Jose, among others.

After obtaining ISO approval, the transmission owners file CPCN applications, as required, before this Commission. They also file their transmission expenses for rate recovery with Federal Energy Regulatory Commission.

In terms of cost allocation, the ISO tariff states that where there is a project recommended for economic reasons and the beneficiaries can be identified, there should be an equitable distribution of the costs among the project beneficiaries. The tariff does not describe a specific process for identifying the beneficiaries or allocating the costs among them. However, ISO Tariff 13 provides for an Alternative Dispute Resolution process in the event of a disagreement over this and other issues.¹² In actual practice, the ISO has never had to address cost allocation issues for projects recommended for economic reasons. All of the transmission projects that have come before the ISO since its inception in 1997 have been based on basic reliability needs, where the costs are rolled into utility rates.¹³

In discussing what the ISO's role might be in the future with respect to economic projects, Witness Miller expressed his view that the ISO would "facilitate a resolution" rather than make a determination on how the costs of economic transmission projects should be allocated between California ratepayers and project developers.¹⁴ He also expressed some doubt that the ISO had the legal authority to hold generators to any cost allocation that they were unwilling to bear.¹⁵