ALJ/XJV/tcg DRAFT Agenda ID #8065
Ratesetting
12/18/08
Decision PROPOSED DECISION OF ALJ VIETH (Mailed 10/31/2008)
BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
In the Matter of the Application of San Diego Gas & Electric Company (U 902 E) for a Certificate of Public Convenience and Necessity for the Sunrise Powerlink Transmission Project. / Application 06-08-010(Filed August 4, 2006)
(See Appendix D for List of Appearances.)
DECISION DENYING A CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY FOR THE SUNRISE POWERLINK TRANSMISSION PROJECT
A.06-08-010 ALJ/XJV/tcg DRAFT
TABLE OF CONTENTS
Title Page
DECISION DENYING A CERTIFICATE OF PUBLIC CONVENIENCE
AND NECESSITY FOR THE SUNRISE POWERLINK TRANSMISSION
PROJECT 2
1. Executive Summary 2
2. Background 7
2.1. Procedural History 7
2.2. Scoping Memo 11
3. Project Objectives and Description 12
3.1. Project Objectives 12
3.2. Description of the Northern Routes 13
3.2.1. The Proposed Project 14
3.2.2. SDG&E’s “Enhanced” Northern Route 15
3.2.3. The Final Environmentally Superior NorthernRoute 16
4. Standard of Review and Governing Law 17
4.1. Burden of Proof 17
4.2. Section 1001 et seq. 19
4.3. Section 399.25 20
4.4. Rebuttable Presumption of Economic Need 20
5. SDG&E’s Electric System 23
5.1. SDG&E’s Transmission Resources 24
5.2. SDG&E’s Generation Resources 25
5.3. Future Generation Additions 26
5.4. Local Capacity Requirement 28
5.5. Upgrades Planned for Neighboring Transmission Systems 29
5.5.1. Imperial Irrigation District Transmission Upgrades 29
5.5.2. Green Path 30
6. Modeling Assumptions for the Analytical Baseline 32
6.1. Summary of Adopted Analytical Baseline Assumptions 34
6.2. Assumptions Regarding the Proper Peak Demand Forecast 36
6.2.1. Parties’ Positions 36
6.2.2. Discussion 38
6.3. California Solar Initiative Adjustments to the Peak Demand
Forecast 38
6.3.1. Parties’ Positions 38
6.3.2. Discussion 40
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A.06-08-010 ALJ/XJV/tcg DRAFT
TABLE OF CONTENTS
(Cont’d)
Title Page
6.4. Energy Efficiency Adjustments to the Peak Demand Forecast 41
6.4.1. Parties’ Positions 41
6.4.2. Discussion 42
6.5. Distributed Generation Adjustments to the Peak Demand Forecast 42
6.5.1. Parties’ Positions 42
6.5.2. Discussion 42
6.6. Demand Response Adjustments to the Peak Demand Forecast 43
6.6.1. Parties’ Positions 43
6.6.2. Discussion 45
6.7. Assumptions Regarding In-Area Fossil Resources 46
6.7.1. The Existing South Bay Power Plant 48
6.7.1.1. Parties’ Positions 49
6.7.1.2. Discussion 50
6.7.2. Peakers 51
6.7.2.1. Parties’ Positions 51
6.7.2.2. Discussion 52
6.7.3. Other Fossil Resources 52
6.7.3.1. Parties’ Positions 52
6.7.3.2. Discussion 53
6.8. Assumptions Regarding Out-of-State Generation – Including
Coal Plant Construction 54
6.8.1. Parties’ Positions 55
6.8.2. Discussion 62
6.8.3. Mexican Imports 64
6.9. Assumptions Regarding In-Area Renewables 64
6.9.1. Parties’ Positions 64
6.9.2. Discussion 65
6.10. Assumptions Regarding Imperial Valley Renewables 66
6.10.1. Parties’ Positions 66
6.10.2. Discussion 69
6.11. Assumptions Regarding the Availability of Out-of-State
Renewables to California 71
6.11.1. Parties’ Positions 71
6.11.2. Discussion 71
6.12. Assumptions Regarding Development of Renewables in Mexico 72
6.12.1. Parties’ Positions 72
6.12.2. Discussion 73
6.13. Assumptions Regarding Renewable Costs 73
6.13.1. Parties’ Positions 73
6.13.2. Discussion 75
6.14. Assumptions Regarding Transmission Resources 75
6.14.1. The Dispatch Limit at Imperial Valley Substation 76
6.14.1.1. Parties’ Positions 76
6.14.1.2. Discussion 78
6.14.2. Upgrades at Miguel Substation 78
6.14.2.1. Parties’ Positions 78
6.14.2.2. Discussion 80
6.14.3. Path 44 Upgrades 80
6.14.3.1. Parties’ Positions 80
6.14.3.2. Discussion 82
6.14.4. The Talega-Escondido/Valley-Serrano Transmission Line 83
6.14.4.1. Parties’ Positions 84
6.14.4.2. Discussion 85
6.14.5. Imperial Irrigation District Upgrades 85
6.14.5.1. Parties’ Positions 85
6.14.5.2. Discussion 86
6.14.6. The Green Path Transmission Line 87
6.14.6.1. Parties’ Positions 87
6.14.6.2. Discussion 88
6.14.7. Modified Coastal Link 88
6.14.7.1. Parties’ Positions 88
6.14.7.2. Discussion 90
6.15. Assumptions Regarding Gas Price Forecasts 90
6.15.1. Parties’ Positions 90
6.15.2. Discussion 91
6.16. Assumptions Regarding Combustion Turbine Costs 92
6.16.1. Parties’ Positions 92
6.16.2. Discussion 93
6.17. Assumptions Regarding Project Costs 94
6.17.1. Parties’ Positions 94
6.17.1.1. Capital Costs 94
6.17.2. Operating and Maintenance Costs 97
6.17.3. Cost Recovery Period 98
6.18. Discussion 99
7. Estimates of SDG&E’s Reliability Need Based on Analytical Baseline Assumptions 100
7.1.1. Parties’ Positions 100
7.1.2. Discussion 102
8. Energy Benefits 102
8.1. What They Are and How They Are Estimated 102
8.2. Overview of Conclusions 104
8.3. Parties’ Modeling Efforts 105
8.4. Discussion 107
9. Reliability Benefits 108
9.1. What They Are and How They Are Estimated 108
9.2. Overview of Conclusions 110
9.3. Parties’ Modeling Efforts 111
9.3.1. Sunrise’s Impact on Local Capacity Requirements 113
9.3.2. Estimating Benefits of Deferred New Generation 117
9.3.3. Estimating Must Run Contract Savings 118
9.3.4. Unquantifiable Reliability Benefits 120
9.4. SDG&E’s “Decision Quality” Framework Modeling 123
9.5. Discussion 124
10. RPS Compliance Savings 125
10.1. What They Are 125
10.2. Overview of Conclusions 126
10.3. How CAISO Estimates RPS Compliance Savings 127
10.4. Discussion 132
11. Calculating Net Benefits 133
11.1. Overview of Conclusions 133
11.2. Parties’ Modeling Efforts 135
11.3. CAISO’s Compliance Exhibit 140
11.3.1. Overview 140
11.3.2. Discussion 146
11.4. The Commission’s Update to the Compliance Exhibit 148
11.4.1. Overview 148
11.4.2. Discussion 151
12. Sunrise’s Role in Meeting RPS 153
12.1. Overview of Conclusions 154
12.2. SDG&E’s Position 154
12.3. SDG&E’s RPS Compliance to Date 156
12.4. Discussion 160
13. Uncertainty Analysis 160
14. Green House Gas Impacts 163
14.1. Overview of Conclusions 164
14.2. GHG Emissions Projected in the EIR/EIS 164
14.2.1. Parties’ Positions 165
14.2.2. Discussion 167
14.3. GHG Impacts of the Proposed Alternatives 169
14.3.1. Parties’ Positions 170
14.3.2. Discussion 171
15. The Northern Routes’ Anza-Borrego Link 171
15.1. Overview of the Proposed Project’s Route through Anza-Borrego 171
15.2. Anza-Borrego’s Place in the State Park System 173
15.3. Legal Issues Unique to the Anza-Borrego Link 175
15.3.1. Anza-Borrego’s General Plan 175
15.3.2. The California Wilderness Act and Potential Wilderness Dedesignation 181
15.3.3. SDG&E’s Right-of-Way through Anza-Borrego 184
15.4. Overview of the Environmental Impacts onAnza-Borrego 186
15.4.1. Environmental Impacts of the Proposed Project 186
15.4.1.1. Parties’ Positions 186
15.4.1.2. Discussion 187
15.4.2. Environmental Impacts of the “Enhanced” Northern Route 193
15.4.2.1. Parties’ Positions 193
15.4.2.2. Discussion 194
15.4.3. Environmental Impacts of the Final Environmentally
Superior Northern Route 197
15.4.3.1. Parties’ Positions 197
15.4.3.2. Discussion 197
15.5. Conclusions Regarding Any Route Through Anza-Borrego 200
16. Wildfire Risks 204
16.1. Overview 204
16.2. Risk of Fire Ignition 205
16.3. Risk of Dual Line Failure Due to Wildfire 208
16.4. Comparison of Fire Risk Across Transmission Alternatives 211
16.5. Conclusion 213
17. Environmental Review 213
17.1. Alternatives Analyzed in the EIR/EIS 214
17.2. Connected Actions 218
17.3. Future Transmission Expansion 219
17.4. All-Source Generation Alternative 220
17.4.1. Description 220
17.4.2. Parties’ Positions 222
17.4.3. Discussion 226
17.5. In-Area Renewable Alternative 229
17.5.1. Description 229
17.5.2. Parties’ Positions 231
17.5.3. Discussion 233
17.6. LEAPS Transmission-Only Alternative 235
17.6.1. Description 235
17.6.2. Parties’ Positions 236
17.6.3. Discussion 238
17.7. Final Environmentally Superior Southern Route 240
17.7.1. Parties’ Positions 241
17.7.2. Discussion 242
17.8. Northern Routes 244
17.9. LEAPS Transmission Plus Generation Alternative 244
17.10. No Project Alternative 244
17.10.1. Description 244
17.10.2. Parties’ Positions 245
17.10.3. Discussion 246
17.11. Conclusions Drawn from Environmental Review 247
18. Certification of the Final EIR 247
19. Community Values and Other Requirements Pursuant to Public
Utilities Code Section1002(a) 248
19.1. Mussey Grade Road and Backcounty Areas 248
19.2. Agricultural Community Values 251
20. Miscellaneous Procedural Matters 254
21. Comments on Proposed Decision 254
22. Assignment of Proceeding 254
23. Conclusion 254
Findings of Fact 254
Conclusions of Law 262
ORDER 263
Appendix A - Acronyms
Appendix B - Assumptions Modeled in CAISO Compliance Exhibit
Appendix C - Risk of Fire Ignition
Appendix D - List of Appearances
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A.06-08-010 ALJ/XJV/tcg
DECISION DENYING A CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY FOR THE SUNRISE POWERLINK TRANSMISSION PROJECT
1. Executive Summary
This decision denies the application of San Diego Gas & Electric Company (SDG&E) for a Certificate of Public Convenience and Necessity (CPCN) to construct the Sunrise Powerlink Transmission Project (Sunrise).[1]
SDG&E’s initial construction proposal, referred to as the Proposed Project, contemplates a new transmission system running approximately 150 miles from the El Centro area of Imperial County through Anza-Borrego Desert State Park (Anza-Borrego) to northwestern San Diego County. The Proposed Project includes construction of 91 miles of 500 kilovolt (kV) line and 59 miles of 230 kV transmission line, replacement of transmission cable for several other lines, a new substation, and modification of several other substations.
A statutory framework governs our review of this application and we highlight its major components. Pursuant to Public Utilities Code Section 1001,[2] before granting a CPCN we must find a need for the Proposed Project or an alternative evaluated in this proceeding. Section 1002(a) requires that we consider four additional factors: community values; recreational and park areas; historical and aesthetic values; and influence on the environment. We also consider – and find inapplicable to Sunrise – § 399.25, which provides that a transmission project may be justified if we determine it is “necessary to facilitate the achievement of” California’s Renewable Portfolio Standard (RPS).[3]
SDG&E claims that Sunrise is needed to maintain reliability, promote renewable energy, and reduce energy costs and projects that construction of the line will provide economic benefits to its ratepayers. The CPCN portion of our proceeding has been the forum for economic review and this decision evaluates each of SDG&E’s claims.
The review process established by the California Environmental Quality Act (CEQA)[4] has been the primary focus for environmental review. As lead agency pursuant to CEQA, we have evaluated the environmental impacts of the Proposed Project, seven alternatives (two of them solely generation based, “nonwires” alternatives and the rest, transmission based, “wires” alternatives), and a No Project Alternative. CEQA requires a lead agency to identify and study feasible alternatives and mitigation measures to reduce a project’s significant environmental impacts.
This proceeding has been heavily-contested, involving lengthy evidentiary hearings and dozens of public meetings. In addition to voluminous testimony, documentary evidence, and two rounds of briefs in connection with the evidentiary hearings, there have been no fewer than eleven opportunities for public comment, both written and oral, including Public Participation Hearingsat five different locations. The Final Environmental Impact Report/Environmental Impact Statement (Final EIR/EIS)[5] prepared jointly by this Commission and the United States Bureau of Land Management (BLM) is over 11,000 pages long. Today’s decision certifies the Final EIR, which is the CEQA document.
All of the proposed transmission routes, whether built through Anza-Borrego or through Cleveland National Forest, will create significant, unavoidable environmental impacts. We must weigh these impacts against the potential benefits of a new transmission line and other factors, such as the public values reflected in § 1002(a).
The record shows, on balance, that all of the transmission proposals likely would provide additional reliability to SDG&E’s service area. However, SDG&E’s service area will not experience a reliability need or “shortfall” until 2014, and the shortfall may be met more economically and more reliably with generation-based alternatives.
The record also shows, on balance, that most of the proposed transmission routes will encourage the development of renewable resources in the Imperial Valley.[6] However, the record further shows that Imperial Valley renewables are not economic under 20% RPS, and do not become economic unless we assume 33% RPS. We have no legal authority to require SDG&E to comply with RPS above 20%. Moreover, the record establishes that SDG&E has existing opportunities to meet, and even exceed, its 20% RPS obligation without Sunrise, including through procurement or renewable resources located north of its service area.
Finally, the record shows that most of the transmission proposals are not economic under 20% RPS and potentially will generate significant ratepayer costs if constructed.[7] Conversely, one of the generation alternatives studied in the EIR/EIS, the All-Source Generation Alternative, is environmentally superior to all transmission proposals and is estimated to generate economic benefits. Further, the energy cost savings or “energy benefits” projected for transmission proposals assume that more than 12,000 megawatts (MW) of new coal fired generation will be installed in the western United States. To the extent a new transmission line is projected to produce energy benefits, it is because the line is assumed to import this coal fired generation into California. These same projections suggest that the construction-related green house gas (GHG) emissions associated with transmission proposals may not be offset if a new line delivers coal fired generation to California. Thus, the potentially high economic costs to ratepayers and the potential implications for our GHG policy objectives do not justify the severe environmental damage that any of the transmission proposals would cause.
SDG&E proposes to build the Proposed Project, with 150 miles of cable and steel towers standing over 150 feet high, through wilderness lands in the heart of Anza-Borrego. Many members of the public have referred to Anza-Borrego as the crown jewel[8] of the State Parks system. The Vision Statement in Anza-Borrego’s General Plan very powerfully states:
Anza-Borrego is a place of awe, inspiration, and refuge. The vast desert landscape and scenery are preserved in a pristine condition. The full array of natural and cultural resources are cared for so as to perpetuate them for all time while supporting those seeking enjoyment from these resources ...[9]
The Final EIR/EIS finds that SDG&E’s Proposed Project has 52 significant, unmitigable environmental impacts that would require de-designation of approximately 50 acres of state wilderness in Anza-Borrego, affect the safety and habitat – and ultimately, the viability – of threatened and endangered species, damage Native American cultural sites, destroy scenic vistas, and increase fire risk. To avoid encroachment into state wilderness, SDG&E subsequently proposed to build entirely within a 100-foot corridor in Anza-Borrego currently occupied by an 80-year old, 69-92 kV wood pole line. However, the Final EIR/EIS concludes that this “Enhanced” Northern Route only increases the severity of certain potential for significant, adverse environmental impacts. Further, the status of legal right-of-way within that 100-foot corridor is heavily contested. The towers would be more numerous, taller, and closer together, and in order to stay within the corridor, SDG&E would be forced to construct the new line in the middle of a resource-rich ancient Native American village site. The Final Environmentally Superior Southern Route described in the Final EIR/EIS would avoid Anza-Borrego, but still would produce more than 41 significant, unmitigable environmental impacts.