On July 20th, a figurative data bomb shook the hearing process as SDG&E conceded that its economic case for the proposed Sunrise Powerline was crumbling. In new models provided on the evening of the 20th (well after media deadlines) SDG&E substantially lowered the claimed economic benefits of Sunrise. In SDG&E's best case scenario, benefits are down to $129 million/year from $204 million. In more likely scenarios, the economic benefits from the $1.3 billion project are down to about $60 million/year. However, if you factor in errors identified by UCAN early in the process that SDG&E hasn't rebutted, the benefits totally disappear, making Sunrise a money loser. And, if we factor in the more recent information (e.g. 2008 CTs and the Sunrise O&M cost issues), Sunrise becomes a very expensive and costly money-loser for the state.

In its July 20th filing, SDG&E acknowledged that seven errors in its economic modeling caused dramatic changes. Many of the errors had already been identified by UCAN. However, what is more notable is that UCAN has identified a number of additional errors which SDG&E, conveniently chose not to incorporate into its modeling. The reason is pretty obvious -- if it had, any semblance of economic justification for the line would likely have disappeared. And if the project can't be justified on an economic basis, then it's fate is dim, indeed.

SDG&E was preparing for this eventuality in a press release that it issued contemporaneously with the new model results. In it, SDG&E Vice President Michael Niggli is quoted as saying that Sunrise was all about reliability and renewables, not cost-effectiveness. Sadly for Mr. Niggli, he's wrong. The Commission can't easy justify the project if less costly alternatives are available.

But SDG&E could not have been prepared for the second bomb dropped by the CPUC on July 24th. Citing the new models as well as new information that came out during the hearings, the assigned Commissioner to the case ruled that the schedule for the hearing was going to change. The EIR/EIS process would be pushed out by another six months to allow time for the Commission to consider the environmental impacts of a second alternative line raised by UCAN in its testimony but dismissed by SDG&E as not being sufficiently "flexible".

The Commissioner also ruled that hearings on the economics and reliability of the project would also likely be changed to allow parties to file additional testimony to address SDG&E's new model runs.

But the part of the ruling that likely shook SDG&E executive offices was the Commissioner's conclusion that the case would not be decided by January 2008 and that the project would not likely be operational until 2011 at its earliest. The ruling lays the responsiblity for the delay squarely upon the utility for withholding information and being unresponsive to PUC information requests. Because SDG&E had vehemently maintained that the lights in San Diego would be dimmed and its renewable energy mandate couldn't be satisfied without Sunrise operational by 2010, the Commissioner's ruling effectively rejects SDG&E's bluff.

So what happens now? The hearings schedule is likely to change substantially -- UCAN will propose resuming them in October. In the interim, some very interesting information is now going to be forced out of SDG&E. Additional errors will come to the surface and further modifications to SDG&E's models will make the project a money loser. While it is hard to predict future developments, this much we know for sure: this extremely unpredictable hearing will continue to confound the utility and regulators alike. The best is yet to come................