call all; Fl? 'L'w BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA '5 (elm? QR Order Instituting Rulernaking to Establish Policies and Cost Recovery Mechanism for Generation Procurement and Renewable Resource Development ?30 i? COMMENTS 0F INTERGEN SERVICES, INC. AND CORAL POWER L.L.C. TO ADMINISTRATIVE LAW JUDGE BROWN AND COMMISSIONER PROPOSED DECISIONS ON OPINION APPROVING MOTION OF SAN DIEGO GAS ELECTRIC COMPANY (U 902 E) FOR APPROVAL TO ENTER INTO NEW ELECTRIC RESOURCE CONTRACTS RESULTING FROM GRID RELIABILITY REQUEST FOR PROPOSAL William Kissinger Danielle Merida Bingharn McCutchen LLP 3 Embarcadero Center, 18?h Floor San Francisco, California 941 1 Tel: (415) 393?2000 Fax; (415) 393-2286 E-Mail: Danielle.Meridag?binghanrcom Attorneys for InterGen Services. Inc. John W. Leslie Luce, Forward, Hamilton 8: Scripps LLP 600 West Broadway, Suite 2600 San Diego, California 92101 Tel: (619) 699-2536 Fax: (619) 446-8244 E-mail: jleslie@luce.com Date: April 26, 2004 Attorneys for Coral Power, L.L.C. 3157215534914 i3 because it would not reduce market prices as much as a plan in which relied more on new transmission to increase import capability.? Instead it urged a ?balanced portfolio? would be most bene?cial for ratepayers.? By including new transmission in a balanced portfolio, both congestion and energy prices for customers, and possibly all ISO customers, would decline.13 also acknowledged that new transmission would reduce the need for additional generation within local reliability area and allow to take advantage of the new generation in the Mexicali and Palo Verde areas placed in service in the last three years.? New transmission would effectively and ef?ciently connect this existing generation to the system to meet its long term needs?m In fact, new transmission projects are currently being considered in a comprehensive manner. The Southwest Transmission EXpansion Process regional transmission planning process Sponsored by the California ISO with numerous market participants, including California and Arizona utilities, munis and independent generators, is one such example. Five of the six transmission projects on the STEP ?short list? include a new line out of the Imperial Valley substation to San Diego.?n If the Otay Mesa PPA is to provide the l? Tr. at 6475 (Anderson). ?7 LTRP Ex. 66 at 13-14 (Anderson). '3 Tr. at 6476-6477 (Anderson), Tr. 7026 (Korinek). 1" Tr. at 7026-7027 (Korinek). 1" Tr. at 6510 (Anderson). 1? Tr. at 7041-7042 (Korinek). - nun?- 4 better access to the lower cost generation located in Mexico and the Southwest.23 Yet, if the commitment to the Otay Mesa PPA and, presumably, the necessary transmission upgrades is made, it should not be allowed to change the framework within which the ISEP is judged. The proposed decisions acknowledge this concern and assures the parties that no such interference will occur.? The Commission, however, should go further.? If the Commission ultimately decides to include Otay Mesa in this motion, it should do so only under the condition that that other transmission projects in the area, including the Mission Miguel and ISEP projects not be delayed. ?3 Ex. RFP-76 (Avery); Tr. at 7043?7044 (KorinekThere is already evidence however that the second Mission Miguel line could be delayed in order to supplement the environmental and economic justi?cation of the project in light of recently ?led CPCN application for the Otay Mesa project. Joint Assigned Commissioner and Administrative Law Judge?s Ruling and Scoping Memo, (?led 3/24/04) (directing the parties in the Miguel Mission proceeding to review the economic bene?ts of the Miguel?Mission project once again, this time in conjunction with the Otay Mesa transmission project). 10 a am meeting any of RMR requirements or local reliability needs.? In view, ?denial of the transmission upgrades would eliminate the bene?ts [of the Calpine altogether.am Recognizing this fact, the proposed PPA only requires to purchase energy and capacity from Calpine?s Otay Mesa Power plant if the transmission upgrades at issue are approved as well. As one witness noted in the RFP proceeding, ?without the transmission, there is no contract with Calpine.W This assessment is reasonable in light of the impact that the lack of these transmission upgrades will have on and its ratepayersconcluding that the PPA meets reliability needs because the generation would be located within its service territory. The transmission is the only way by which that generation is useful to CONCLUSION The Commission?s desire for additional ?insurance? is reasonable but not at any price. The State is at a critical juncture where it can make choices but only if it examines the options. The Otay Mesa PPA, if approved, effectively ties the Commission?s hands and prevents it from examining the full range of choices. This would be a bad outcome not only for private power plant developers and marketers like InterGen and Coral, but, more importantly from the Commission?s standpoint, it would also be a bad choice for ratepayers for years to come. 3? Tr. at 7024 (Korinek); Tr. at 6537 (Avery6538 (Avery). l2 SF121558491.4