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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................
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Post-Hearing Wrap Up
It is May 8th and the evidentiary phase of the Sunrise Powerlink hearings are finally over. It took the better part of two years to get here. SDG&E is going to be submitting one more exhibit (SD-144) today and we will have wrapped up the fact-gathering part of this case and moving into the briefing mode.
What I can say today is that SDG&E's case has effectively fallen apart. It's alleged economic annual savings claim of $400 million a year shrank after the first round of hearings to $140 million per year. Now, in the latest round, those savings have pretty much disappeared. SDG&E was pretty much forced to concede yesterday that San Diego can save far more money by building just one 500MW in-basin combined cycle power plant than it can by building a powerline to Imperial Valley.
SDG&E's claim of access to renewables also fell apart. Aside from the increasing signs that most of the promising, cost-effective renewables are located outside of the Imperial Valley, it was also readily determined that SDG&E could comply with the state's Renewable Portfolio Standard without having Sunrise constructed. And some very compelling testimony relating to the use of indigenous solar power along with Edison's announcement of its ambitious solar project undercut much of SDG&E's claims. There was also the embarrassing revelation that the controversial Stirling project has plans to build regardless of whether Sunrise was built or not. Oops. Of course, no one in California is betting that Stirling will be built anytime soon -- there are no signs that its technology will actually ever work in the field.
As to the question of Sunrise being needed to maintain reliability, or in SDG&E's parlance, "to keep the lights on", SDG&E fell flat on its face. UCAN and the PUC staff made overwhelming showings that SDG&E has a panoply of short and long-term lower-cost options to keep up with electricity demand without Sunrise. Even the California ISO distanced itself from SDG&E's claim that the line was needed for reliability.
The truth about the October wildfires also became clearer during the hearings. The transmission lines were found to be major contributors to wildfires. And the proposed Sunrise route runs directly through a fire-prone area. Moreover, testimony about seismic dangers showed that the Sunrise route begins at a spot that is the most seismically active in the United States with a high degree of likelihood for a 7.0 or larger quake. One of SDG&E's experts claimed that the Imperial Valley substation can withstand quakes in excess of 7.0 without suffering any damage. Yeah right. We'll see how confident they are when their own money is at stake.
So why is SDG&E continuing to push so hard for a powerline that is not justifiable on economic or reliability grounds other than "wouldn't it be nice"? The answer is three-fold:
1. It's about money. The appx. $800 million that SDG&E can reap in profits in building this powerline is simply too much potential profit from which the company can walk away. Sunrise is not just a cash cow, its a cash herd. Plus, SDG&E assumes that it will recoup all of the $200 million that it has and will continue to spend to make this project happen, so it has got nothing to lose by pursuing the project. It gets paid if it loses, it gets paid big-time if it wins. Las Vegas would go broke with those odds.
2. Second, this is about creating the ability for power companies to send power through San Diego County into Northern California. SDG&E views this project as the first of two powerline projects. The "full loop" that the company was found to be planning continues with another major 500kV line into the Edison territory. Why? Well, Sempra's Baja power plant is just one of many reasons.
3. It's about politics. The Bush administration has been pushing transmission construction for the better part of its 8-years in power. These big construction projects are the mothers milk of the utility industry. With fewer new power plants being built and with those plants being increasingly risky propositions, the utilities need some long-term investments that will ensure their economic welfare for the next generation. Transmission is it -- whether it is needed or not. And the Federal government and the Schwarzenegger administration hell-bent on pushing these utility cash-cow projects, the politics behind Sunrise may well eclipse the merits of this project.
Final briefs will be completed by June 13th. At that time, the public will finally have an authoritative and complete accounting of all of the "facts" behind this ill-conceived nightmare. At that point, the real truths behind the proposed powerline will become far more apparent.
Thank you for your work on the Powerlink
Many thanks to Michael Shames and David Marcus for everything UCAN is doing on the "Sunrise Powerlink" case.
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