2. Summary¹

Today's decision addresses San Diego Gas & Electric Company (SDG&E) request for a certificate of public convenience and necessity (CPCN) to construct a proposed 500 kilovolt (kV) transmission project and associated upgrades, called the Valley-Rainbow Project. The Commission concludes that SDG&E will continue to meet established reliability criteria under conservative supply and demand forecasts within the adopted five-year planning horizon. In reaching this conclusion, the Commission reviewed forecasts for existing and new generation in San Diego, the ability of SDG&E to rely on resources in northern Baja California, Mexico, the possibility for additional import capability due to transmission upgrades, and assumptions that impact the peak demand forecast. The evidence shows that SDG&E will continue to meet the reliability criteria until at least 2008, even under the conservative planning assumptions utilized in today's analysis. Therefore, the proposed project is not needed for reliability purposes.

Because the proposed project cannot be justified on the basis of reliability, the Commission evaluated whether the proposed Valley-Rainbow Project would provide positive economic benefits to SDG&E ratepayers and California generally. The evidence shows that the proposed project is not cost-effective to ratepayers except under the extreme assumptions that six consecutive years of one-in-35 year drought conditions occur, all new generation available to serve California is located in San Diego or northern Baja California, Mexico, and a major transmission project (Path 15) is constructed in Northern California. Under all other assumptions, the projected costs exceed the projected benefits, thus the proposed project cannot be justified on economic grounds.

For these reasons, today's decision denies without prejudice SDG&E's application for a CPCN to construct the proposed Valley-Rainbow Project. The Energy Division is directed to cease preparation of the Draft Environmental Impact Report/Draft Environmental Impact Statement for the proposed Valley-Rainbow Project. This proceeding is closed.