ML020450291
| ML020450291 | |
| Person / Time | |
|---|---|
| Site: | Diablo Canyon  |
| Issue date: | 01/24/2002 |
| From: | Dasso K Pacific Gas & Electric Co |
| To: | Office of Nuclear Reactor Regulation, US Federal Judiciary, Bankruptcy Court, Northern District of California |
| References | |
| 01 30923 DM, 94-0742640 | |
| Download: ML020450291 (10) | |
Text
1 JAMES L. LOPES (No. 63678)
JEFFREY L.' SCHAFER (Ni. 91404) 2 SARAH M. KING (No. 1-8961)
HOWARD, RICE, NEMEROVSKI, CANADY, 3
FALK & RABKIN A Professional Corporation 4
Three Embarcadero Center, 7th Floor San Francisco, California 94111-4065 5
Telephone:
415/434-1600 Facsimile:
415/217-5910 6
Attorneys for Debtor and Debtor in Possession 7
PACIFIC GAS AND ELECTRIC COMPANY 8
9 UNITED STATES BANKRUPTCY COURT 10 NORTHERN DISTRICT OF CALIFORNIA 11 SAN FRANCISCO DIVISION 12 In re No. 0130923 DM 13 PACIFIC GAS AND ELECTRIC Chapter 11 Case COMPANY, a California corporation, Date:
February 8,2002 o~aMPx 14 em Debtor.
Time:
2:30p.m.
15 Place:
235 Pine St., 22nd Floor
.15 San Francisco, California 16 Federal I.D. No. 94-0742640 Judge:
Hon. Dennis Montali 17 18 19 DECLARATION OF KEVIN DASSO IN SUPPORT OF DEBTOR'S 20 MOTION FOR ORDER APPROVING EXPENDITURE OF FUNDS TO UPGRADE SUBSTATIONS AND, IF NECESSARY, RECONDUCTOR A 230 KV TRANSMISSION
- 21.
LINE TO SUPPORT THE LOS BANOS-GATES 500 KV TRANSMISSION PROJECT
[PATH 15 PROJECTI 22 23 24 25 26 27 28 DECL. OF K. DASSO ISO OF DEBTOR'S MOT. FOR ORDER APPROVING EXPENDITURE OF FUNDS FOR PATH 15 UPGRADE PROJECT WD 012402/1-1419948/10/99455/v6
1 I, Kevin Dasso, declare as follows.
2
- 1. 1 am the Director of the Pacific Gas and Electrie Company ("POL&")
3 Electric Transmission and Distribution Engineering Departincot, a positiou I have held since 4
November 1999. 1 make this Declaration based upon my personal knowledge ortthe Los 5
Banos-Gates 500 kV iransmission proijt, also known as the Path 15 Upgrade Project, and 6
uponi my review of PG&[i's records conccrning the matters stated herein. If called as a 7
witness, I could and would testify competently to the facts stat ed herein.
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- 2.
PG&E is seeking an order authorizing P(G&B to enter into binding 9
agreements to expend funds to perform work necessary to support the Path 15 Upgrade 10 Project. If approved, PG&E would commit to design and build 500 kV and 230 kV substation equipment, and, irneedcd, to reconductor 230 kV transmission lines, to accommodate a new 500 kilovolt ("kV") transmission line to be constructed by the Western 12 S13 Area Power Administration ("WAPA") on Path 15. PO&I." estimates that the costs of its h-,UI work to support the Path 15 Upgrade Project, including previously incurredl engineering and
-15 permitting costs, will not exceed $75 million.
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Path 15 is a series of high-capacitY transmission lines that conncet 17 1customers in Northern and Southern Calitfrnia and also forms part oflthe Pacific AC Intertio linking the Pacific Northwest and Oregon to Southern Calilbrtia, The Path 15 Upgrade 19 Project will increase the south-to-north rating of Path 15 by approximately 1500 megawatts 20
("MW') through the addition of a new 500 kV line between PG&E's Los Bianos and Gates 21 substations. WAPA will construct the 500 kV line portion of the Path 15 Upgrade Project 22 with funding from project participants othcr than PG&l". The purpose of the Paih 15 Upgrade P'roject is to decrease congestion oi Path 1 5 and to further integrate gencraing 24 plants within the ISO-controlled grid. The scheduled operating date of the 14th 15 Upgrade 25 Project is October 2004.
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In order to intercofmect and othcrwise support the Path 15 Upgrade Project, 27 PG&E would design and construct the ibllowing facilities; 500 kV terminal equipment at 28 28rDlEDCL, Cal1" K. DASSO IN St PPOi[tlcw i-I[ITU'S MUTI'I(N OR OlI).E APPROVINUJIýATII 15 IJPlrR A01 11RIRfJEC' WD 0 12 402/1-I419948/1081i96455M I l-
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- 15 16 17 18 19 20 21 22 24 25 24 2'2 Los Banos and Gates for the proposed Los B1anos-Gates 500 kV transmission line; Ircconfiguratioi of the Gates 500 kV bus from a ring-bus to ibreaker-and-a-half arranrgemeint; install 250 MVAR of 230 kV shunt capacitors at both Los Banos mid Gates substations to provide ncessary voltage support; and rmonductor the Gates-Midway 230 kV transmlission line or provide the nccessury capability by re-rating the transmission lines. The construction of the Project is contingent upon !he Path 15 Upgrade Project-cniabling agreements being developed and executed.
- 5.
Following congestion on Path 15 during various periods in 2000 and before PG&E's Chapter II filing, the California Public Utilities Commission ("CPUC") ordered PG&B, to submit an application fur a Cetlifieate of Public Necessity and Conveniencle (a "CPCN") to construct the Path 15 Upgrade Project.. PG&E submitted a Conditional Application to the CPUC on April 13. 2001 pursuant to the CI'UC order and applicable provisions of the California Public Utilities Code. While that CPCN application wts pending, the United States Department of Energy directed WAPA to solicit expressions of interest in constructing the Path 15 Upgrade Project, and WAPA did so through a Federal Register Notice. On October 16, 2001, PG&E, WAPA and other participuntf executed a non-binding Memorandum of Understanding ("MOU") regarding construction oL"thw Path 15 Upgrade Project. WAPA, C'G&E and the other participants arc now in the process of negotiating binding agreements regarding construction orthe Path 15 Upgradc Project.
Attached hereto as, Vxhibit A is a true andcorrect copy of the MOU.
- 6.
On November 6,2001, inlight of the MOU, PG&E filed a "Notice of Withdrawal" of its Conditional Applicatign. In an order dated November 30, 2001 (the "CPUC Order"), the CPUC treated PG&E Inotice as a motion for permission to withdraw Sthe conditional application, denied it, and consolidated the conditional application with tle CPUC's investigation, pursuant to Calibfmia Assembly Bill 970, of electric tran1smision and distributtion constraints, actions to rcsolve those constraints, and relatcd matters affiecting uE¢C"* OF K. DASI() ISU OF DEll ft).S MOT. FOiR u)KORi)R APPROVING
,XILNIfITIR1RE Or ruINL).' m'C m1 PATi IS WPIKRADE I'Mix WI) 0124021-141 994311000'451.6 IK)% st 6uK1,N BU¢~1 I
the reliability of electric supply.' Thc CPUC'S Administrative Law Judge has scheduled hearings on tic economic benefit o' the Path 15 Upgrade Project, requird submission of the 3
MOU impleimentation agreements to be followed by heiarings thereon, and brieling on 4
whether a CPCN is required for PG&E* s participation in the project.
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- 7.
Because the WAPA-sponsored Path 15 Upgrade Project will increase the 6
Path 15 electric transmission capacity to the same extent as contemplated in PG&E's 7
Conditional Application, allow PG&B to obtain a share of such capacity comtensurate with its costs incurred for the benefit of the Path 15 Ulpgrade Project, and require PG&E to incur costs estimated at or less than $75 million, rather than spend the estimated $325 million it 10 will cost to construct the entire Path 15 Upgrade Project, PG&E intends to participate ill the I I Path 15 Upgrade Projcct through its contemplated work in support of the WAPA-sponsored 12 project rather than pursuing its Conditional Application to construct the entire project alone.
Mt, 13
- 8.
Path 15 is a transmission system segment located in the southernl portion of 114t"R the PG&E service area and in the middle of the Independent Systemn Operator (SO")I controlled grid, Path 15 consists ofthe 11ollowing lines: Los Banos-Gates 500 kV; 1,0s 16 Banos-Midway 500 kV; Gates-Panochc f1 230 kV: Gates-Panoche #2 230 kV; Gates-Gregg 17 230 kV; and Gatcs-McCall.230 kV. These facilities are used to meet transmission capacity 18 requirements of various parties in the Northwest, Northern California and Southern 19 California, and for integrating generating plants within the ISO-controlled grid, 20
- 9.
Path 15 is currently constrained to a lower south-to-north transfer limit than 21 the rest of the 500 kV system in Northern California because there are just two 500 kV lines 22 in this area. Because the two 500 kV lines arc located in a common corridor, the Westent 23 Systems Coordinating Council ("WSCC") transmission reliability criteria require that the 24 system be operated to withstand their simultaneous loss ("Los Banos South double-line 25 outage"). Under these criteria, the present maximum south-to-north transfer. limit is 26 27
'See CPUC Investigation No. 00-11-001, A true and correct copy of the CPJC Order is attached hereto as Exhibit 13.
28 Dt:CI. oF K. DASSI) 1S0OF DEIBOR'S MO'[' R
)RI)ER APPROVING F.XPENL)TLURE OFI:UNDS FOR IArII 15 uI;RArF.1ROIEC WD 0124021l-1419948/I (8/96945SIV6 I' °
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.:28 IKA'MD
)AJC ct3W1
4 3,950 MW. T1his limit is bascdon the availability of special automatic zrod imanual operating procedures that would be initiated immediately after any Los Banos Souih doubnle line outage.
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The ISO has found in recent years that Path I5 coe,89tion hal resultWd in highcr generating costs to Nortlern California consumers mainly during off-peak periods.
During such periods, the ISO has found that it'has been necessary to operate higher-cost generation in Northern California, to import higher-cost power from the Northwest, or to reroute lower-cost power from Southern California onto the Pacific D)C Intertie to meet demand in Norther California, The ISO has found that access to additional lowcr-cost generating resources in the south has bccn limited due to the Path 15 transler limits.
- 11.
Due to limited generation availability in Northern California during the latter part of 2000, congestion on Path 15 began to occur much more irequcntly. The problem escalated further in January 2001 as a shortage of generation in Northern Caliromia led to rotating outagcs north of Path 15. While the ISO concluded that there were additional generating reserves in Southern California, the ISO found that constraints on Path 15 prevented full access to this generation. The ISO further found that Path 15 constraints, combined with generation shortages, could again contribute to rotathig outages il Nortliern California. 12.
0,vcn belore the rotating outages occurred, I'G&E and the ISO began analysis of Pathl 5, with thc objectiveof identifying aitcrnaties to reduce off-peak generation costs. Subsequent analyses conducted by the ISO and published in January 2001 following the outages described in paragraph 11 above indicated that: (a) ath 15 congestion resulted in increased market costs ranging friom $7 million to $220 million over the 16-month' period ending December 31, 2000 (depending on how the market would have responded had the Path O5 uprade been in-service); and (b) Path 15 constraints could contribute to future rotating outages. The ISO analyses were not conclusivC on project need but provided su: ffieicn t
Supp0r4tObegijt the work necessary to undertake the permitting DEICLI OF I* A tlASSO 15 O ISOF I"I'WRS MoT" FOR ORDnI APPROVIN(T I:XIPO NDIT1tRE OF U lINDS FOR I'ATII I5 tPlIIjAIf~tl Pk(JECT Wi) 012402/414 9A"811OtS/96t455/Vr0 I
[ proce~ss 2
- 13.
Subject to PG&E nmanagcrnt's approval, PG&E reqiested ISO approval 3
to conduct preliminary engineering and project siting work imeessary to pursue the pernits 4
for the construction of a ncw Los Banos-Gatcs 500 kV project. The ISO approved PG&l,'s reqLLCes to proceed with the permitthig process on February 5, 200 L. Addifinnally, before 6
applybig for the necessary permits, PG&E. and the ISO agreed to perform additiioiml ianalyses 7
to ascertain project need under future generation build-out scenarios.
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On March 29, 2001, thc C[UC ordcred PIO&1 to submit an application lor 9
a CPCN to construct the Path 15 Upgrade Project. In accordmcec with the CPUC ordcr, l 0 PG&E filed Conditional Application, No. 01-04-012 (the "Conditional Application") lbr a I I CPCN for the Conditional Application Project on April 13, 2001. PG&t's application was 12 conditioned upon the following: (1) a PG&E and ISO determination that the Project is Hc,,
13 needed and cost effective; (2) PG&E management approval; and (3) this Court's approvol of M
K the cxpenditure of funds to construct the Path 15 Upgrade Project.
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PG&1 and the ISO submitted opening testimony in thc CPCN proceeding on September 25, 2001 regardiag the conditional application. PG&E's testibony presented, 16 17 among other things, two service alteniatives considered for upgrading Path 15, the estimated 18 cost of those altcrnatives, possible routes for the new line, and the estimated cost o' those 19 route alternatives. PG&1 estimated that it will cost approximately $325 million to construct 20 the Path 15 Upgrade Project. The ISO's testimony addressed the cconomic need for the Path 21 15 Upgrade Project, and concluded that the P'roject is cost-justified. Thlie Oflice of Ratcpayer 22 Advocates ("ORA") submitted opposing testimony and the ISO submitted rebuttal 23 testimony. No CPUC administrative hearings were or have been held on the Path 15 23 24 Upgrade Project.
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While PG&E's Conditional Application was pending befure the CPUC, tihe 26 Ulnited States Department of Energy alld WAPA solicited interest in a public-privatC 27 parhersbip to construct the Path 15 Upgrade Project. Following execution of the MOU 28 D 3CL. OF Kj. IASSO ISO lV)LH'IrOR"S MOT' FOR ORFlbi AVIIROVLNrj l:XPI1-Nr)I'rUIE O1 IUNJ)S IoR iATI I 5IIPiRAI)i-IROJ-L.1 WDEO i 24O*2/L141990110Kt9)I 4)f5/v
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10 II 12 13 15 "16 17 18 19 20 21 22 23 24 25 2 t:2 regarding the WAPVAsponsorcd Path 15 Upgrade Project, PG&E withdrew its Conditional Application on November 6, 2001 and its opening testimony oil November 13, 200.
Although the CPIJC declined to allow PG&E to withdraw its Conditional Applicatioa, it dropped scheduled hearings on the PG&L-7sponsored Path 15 t) pgrade Project and consolidated the Conditional. Application proceedinig with the CPUC's ongoing investigation pursuant to California Assembly Bill 970 of electric transmission iand distribution constraints. T'hereafter, thc CPUVs Administrative Law Judge set hearings in rate February 2002 to consider the economic, acCed for the Path 15 Upgrade Project, required PG&LE to submit the MOU implementation agreements, and scheduled briefing on the ORA's claim that PG&&E needed a CPCN to perfornm its contemplated portion of the WAPA-spotisored Path 15 Upgrade Project. Although the ORA asscrts that PG3&E must have a CI'CN to participantc in the Path 15 Upgrade Project, PG&E believes hint, based oil unambiguous language in General Order 13 l-D, it does not need a CPCN to perform the work that it would commit to perform in support of the Path 15 Upgrade Project.
- 17.
In May 2001, the United States Secretary of'Energy, prompted by a Presidential directive incorporated in the National Energy Policy report, directed WAIPA to complete planning for an upgrade to Path 15 nod to solicit financing anod ownership interest in the project.
- 18.
In June 2001, WAPA posted a notice in the Federal Register to solicit financing and ownership interest in a project to upgrade Path 15 based on PG&E's ptoposcd Path 15 Upgrade Project set forth in its Conditional Application. Following its solicitation, WAPA inet with a number of public and private entities to discuss the possibility of constructing the Path 15 Upgrade Project.
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On October 16, 2001, PCG&E, WAPA and other Path 15 Upgrade Project p:rticipants executed the MOU, The MOU outlines, on a preliminary basis, the r,.e spOSibilities, financial contributions, ownership rights and operational dotails of the rojt an'd requires. the partivs.tP agree on tn aggressive schedule to "define the Projcct and reiest age nndagesies ci.Li. OF K. DASWO IS OF 1JjBTOR'S.M(T. I:OR ODIWR APPRCOVINO I'XPh'NuI"ITuIu OF PIJNns FOR PATHI 15 Ul'URA El t
Rt1R L:C WID U12402/1-141994'I81UN/9M9455/V6 iic
(?IA1 I
the work to be done at each facility" by January 16, 2002. 'llic MOIJ contemplates that the 2
increased transmission capacity arising from the Path 1 5 Upgrade PrqJcct will be shared 3
among the public and private entities comilels-urate with eacii entity's contributions to the 4
Path 15 Upgrade Project. PG&-','s proposed contributions would include- (1) enviroiuental 5
and engineering studies and design work perlbriued to date; and (2) detailed design and 6
eolia'uction work for the 500 kV and 230 kV substation and 230 kV rccondtictoring work 7
necessary to accommodate the additional 500 kV transmission lines to be coustructed by 8
WAPA, which PG&E believes will be consistent with POG&E's Plan of Service Alternative 2 9
outlined in its since-withdrawn opening testimony submitted in the CPUC Conditional 10 Application proceeding. T'he total cost for this work is estimated not to exceed $75 million, I I including the more costly option of reconducturing Ohe Gates-Midway 230 kV transmission 12 line and $9.5 million previously approved by the Board of Directors on May 8, 2001 for kLS:13 environmentlr
, engineering mid permitting work related to a Path 15 upgrnde project. Based U
14 on lie ratio of PG&ws contribution to the anticipated total project cost ($325 million,
, 15 although certain aspects of the project may chmige under WAl'A-sponsorshlip)i M
PG&E 16 would be allocated about 345 MW oFthe 1500 MW incremental tnulsfer capability.
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If this Coutrt grants PG&E the authority to expend Funds to construct the Project, PG&E expects to include the cost or its work to support the Path 15 Upgrade Project 19 in PG&E's base utility revenue requirements and seek authorization by the Federal lInergy 20 Regulatory Commission ("FERC") to earn a rate of return on such costs.
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PG&E, along with the other Path 15 Upgrade Project participanlts, was advised by FERC staff that the Path 15 Upgrade Project may be eligible for prc-construction 23 23 approval, accelerated depreciation, and a 200 basis points premium on return on equity.
24 pG&E's contribution of $75 million to the Path 15 Upgradc Project translates to an inereasce 25 in PG&F's present value of revenue requiremcnt o1'$95 million based on standard 26 depreciation and return on equity.
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On November 27, 2001, pG&E's Maniagement Committee proposed that 28 DECL IOFK. DASSO ISO OF DEBTOR'S MUL. FIURORDEIR ANiIIOVINW EXNDITUILL. OF INDS FOR h'AIII 15 0I1IRALOPRtO"EL WD 0 1240*2/1-14199'1 11 oK1g69455/06
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the Board of Directors authorize a capital expenditlre of $75 million for the work to support the Path 15 Upgrade Project. On Decetnber 19, 200 1, PG&E's Board of Directors approved an appropriation of $75 million to rund the 'rojcct.
- 23.
Based on preliminary design estimates prcpared fbr thc Conditional Application Project, Alternative 2, Western Corridor Route, uld including previously incurred engineering and pcrmilting costs, PG&E estimates that its work to support hlic WAPA-sponsorcd Path 15 Upgrade Project will cost approxiLmntcly $75 million, witl $4 million to be inclhdcd in PG&E's 2002 budget and the balance presently anticipated to be incurred in the next few years consistent with the Path 15 Upgrade Project's currenL targe*ted completion date in 2004.
- 24.
There is no CPUC order directing PG&E to coinstruct the entire Path 15 Upgrade Project, forbidding PG&E from participatitig in.the WAPA-sponsored Path 15 Upgrade Project through performance or the contemplated work. or requiring PG&Fl to obtain a CPCN to performn the work contemplated by the MOU.
I declare under penalty of perjury trider the laws of the United States of America that the fbregoing is true and correct. Execuicd this -4= day of Jnnuary 2002, at San Francisco, California.
Kcvin Dasso DmuL.OF K. DASSO ISO OF IDUIOR'S MOT IUOlt.U RUEK AMl lOVIN
)IXPliRLOFi4UNDsJ IOR PA'IiI 15 lifvRAI)IDI'kLJJ C WI.) 012402/I-8419-010KI9694550-
Exhibits are not attached to the service copies of this document.
You may obtain copies of the Exhibits in one of the following ways: through the "Pacific Gas & Electric Company Chapter 11 Case" link accessible through the Bankruptcy Court's website (www.canb.uscourts.gov), or by written request to Howard, Rice, Nemerovski, Canady, Falk & Rabkin, Attn: Racquel Lopez, Three Embarcadero Center, 7th Floor, San Francisco, California 94111-4065 WD 071801/1-1419901/gff/932202/vI