I.EXECUTIVE SUMMARY/INTRODUCTION

(view the corresponding tables)

See also: Thoughtless and Careless, a 7-page summary, and "57 Contentions, but Nothing There" a sentence-by-sentence rebuttal of the 57 statements made in SDG&E's opening brief.

Utility Consumers' Action Network (UCAN) recommends that that the Public Utilities Commission reject SDG&E's Sunrise project, as currently proposed. The months of discovery and weeks of evidentiary hearings have borne much greater clarity into the SDG&E application. They have revealed that the applicant has misled regulators and the public about the costs of the project, misstated the need and timeline for the project, and ignored smarter, more flexible and more economic alternatives.

In its application to the Commission, SDG&E offers a three-legged basis for building the so-called Sunrise Transmission Project (hereinafter referred to as "STP"). SDG&E builds its justification for the new line upon a three-legged argument:

1.It must meet ISO reliability obligations,
2.It is necessary to deliver thousands of megawatts (Mw) of new renewable generation which are going to be built in the Imperial Valley in the next eight years,
3.It will deliver major economic benefits to the state's ratepayers.

Beginning in early 2006 through October of 2007, UCAN conducted a thorough analysis of SDG&E's proposal and was unable to verify any of the three legs upon which SDG&E's application is precariously perched. In fact, UCAN found that most of SDG&E's assumptions for the STP were either unsupported or, in many cases, blatantly wrong. While SDG&E may be legally entitled to its own opinions about the project, it is not entitled to its own version of the facts. Many of the linchpin facts upon which SDG&E relies upon in support of its application to spend $1.265+ billion on STP are, in fact, not facts at all.

In contrast, UCAN undertook its analysis appreciating that much is at stake. STP's cost is formidable. SDG&E is asking for well over $1.2 billion dollars; UCAN's analysis suggests the ultimate price tag will be much higher when SDG&E's undercounted operating costs are taken into account. Over its 40 year depreciable life, the state's customers will be obligated to pay over $7 billion.1 SDG&E is also asking to build a major transmission project through a valuable desert state park; a project that once erected will likely have centuries-long environmental impacts. The utility is proposing to route one of San Diego's electricity lifelines through terrain that is fire-prone and inaccessible. And it is seeking to sink a substantial amount of public resources into an archaic technology at a time when emerging energy technologies may render the line obsolete within a decade.

In light of these consequential factors, UCAN has conducted a comprehensive analysis of the proposal and fashioned at least two alternative proposals that provide comparable reliability and ability to import renewable power from the Imperial Valley. The first, a combination of wires upgrades and use of existing resources, comes at a capital cost for SDG&E of a little over $100 million2, and an annual levelized savings of $92 million per year compared to SDG&E's proposal. This proposal is outlined at Chapter VI, C.1

The second, a southern route paralleling SWPL, provides equivalent transmission benefits without requiring 23 miles of new 500 KV line to be constructed inside California's largest state park.3 This is discussed at Chapter VI, A.9.

But the Commission is not limited to those two alternatives. As will be explained in this brief, UCAN has offered the Commission a veritable Chinese menu of potential entrees that, in other combinations, can approximate the benefits of STP at a fraction of the alleged cost, all discussed in Chapter VI. And, in light of the late October fires that ravaged much of San Diego County's backcountry, the UCAN in-basin options arguably create much higher reliability than tenuous eastern-linked transmission projects.4

UCAN's findings go well beyond its list of feasible, flexible, affordable (and, in our humble opinion, first-rate) ideas of how to improve SDG&E's reliability and resource mix at a fraction of STP's cost. It includes the most exhaustive analysis conducted by any party in this case of the assumptions proffered by the only two parties supporting STP: SDG&E and the California Independent System Operator (ISO). This is not a case in which two parties reasonably disagree. This is a case in which one party - SDG&E - has failed to honor the Commission's request for a thoughtful and justifiable application.

From the hearings, some common themes have evolved. The first is that there is no compelling economic argument for STP. SDG&E's estimates were inflated. UCAN found reasons to believe the proposal will cost state's ratepayers tens of millions of dollars. The ISO was only able to find economic value for the project in its rebuttal testimony that inflated the cost of any future construction and overestimated the value of Imperial Valley renewable energy allegedly spurred by the line.

Second, both applicants and the ISO have sought to solve perceived reliability needs and resource diversification needs with a singular construction project. These parties have persistently devalued the capability of existing infrastructure and the value of incremental upgrades to accomplish the same reliability and resource benefits. They've also devalued non-line strategies that, when combined with infrastructure investment, could fully serve SDG&E's needs for more than a decade.

Third, SDG&E's decision to forego the services of independent analysts to evaluate and prepare its application has disserved both the company and the Commission. In addition to overcoming many of the inherent conflicts of interest described below, the process would have been better served by independent analysis of the broad scope of options available to the utility rather than focus upon singular transmission fixes to exaggerated problems. The quality of the analysis conducted by SDG&E's modest corps of in-house analysts was not sufficient to justify the kind of ratepayer investment sought by the applicant.

Finally, the record suggests that applicants had an exceedingly difficult time distilling and digesting the essential facts that underlay its proposal. SDG&E's expert witnesses were overwhelmed by the complexities of the subject matter. As described below, its witness assigned to carry the burden of evaluating alternatives was not well suited for the task. And its GridView-based economic analysis was hampered by an inappropriate use of the analytic model and a witness who, albeit capable, was admittedly very inexperienced in production cost modeling. But the problems went well beyond SDG&E's witnesses. It went to the very top of SDG&E management.

UCAN graphically detailed the extent to which SDG&E's Senior Vice James Avery was either misinformed or intentionally distorted the case for STP. 5 But the gaffes were not limited to Mr. Avery. In the process of developing its brief, UCAN took the additional step of re-examining the Opening Statement made on behalf of SDG&E by its Chief Operations Officer Michael Niggli. We identified 57 individual factual representations made by Mr. Niggli to the Assigned Commissioner and ALJ who presided at that first day of hearings. We were shocked to discover that of the 57 factual assertions made by Mr. Niggli, UCAN could not validate any of the 57 assertions. All of his representations were either demonstrably wrong, not proven by SDG&E, or were red-herring statements that did not accurately reflect the record. UCAN has provided its analysis of Mr. Niggli's verbatim statements in Table 2 attached to this brief. Table 2 is insightful in that it reflects the extent to which SDG&E has built its argument for STP on a foundation of factual quicksand. It is also a revealing second indicator that SDG&E's top management did not sufficiently require or value factual integrity.

The size of UCAN's brief reflects the significant undertaking made by UCAN to thoroughly test SDG&E's representations and attempt the kind of analysis that we believe SDG&E should have made when it was developing its strategy to improve reliability and increase access to renewable power.

As will be shown below, SDG&E's case is so riddled with factual errors and incomplete analysis that it simply cannot be relied upon by the Commission to justify a $1.26+ billion investment of ratepayer monies. UCAN's detailed discussion of the evidentiary record begins below.