"We aren't buying it":CPUC's Division of Ratepayer Advocates blasts SDG&E's Sunrise Powerlink application

Report Exerpts regarding San Diego Gas and Electric's (SDG&E) Sunrise Powerlink application from the Division of Ratepayer Advocates (DRA) of the California Public Utilities Commission

For more info, visit the DRA website [1]

• Sunrise is clearly not needed to meet any of its stated objectives, including the critical goal of providing reliable service in San Diego. DRA is not convinced that Sunrise is the best alternative for meeting such goals - or even that Sunrise's benefits will exceed its costs. (ES 1-1)

• Unfortunately, the passage of time has made SDG&E's analysis of Sunrise's value in meeting local reliability needs obsolete. (ES 1-1)

• Together, these initiatives should meet San Diego's local reliability needs through 2014, as shown in Table ES-1. Additional initiatives SDG&E is pursuing may meet local needs in additional years as well. (ES 1-2)

• Sunrise is not needed to enable SDG&E and other Load-Serving Entities (LSEs) within the CAISO to meet their Renewable Portfolio Standard (RPS) obligations. (ES 1-3)

• Sunrise should not be assumed to yield significant reductions in energy costs. (ES 1-4)

• SDG&E's analysis of Sunrise's benefits is not adequate and should not be relied upon by this Commission. Second, in measuring Sunrise's benefits, the most appropriate frame of comparison is not the "Gas Turbine (GT) Reference Case" that SDG&E employed to measure the benefits of all alternatives. Rather, Sunrise's BCR should be computed by comparing Sunrise's benefits and costs to those of the best alternative plan that could be developed in the absence of Sunrise. As SDG&E has not performed an analysis sufficiently complete to identify the truly best alternative to Sunrise, the GT Reference Case is likely suboptimal, and Sunrise's relative benefits are thus likely overstated.

• Finally, this range of quantified values in Table ES-2 suggests a broad range of uncertainty surrounding Sunrise's value to ratepayers. In Table ES-3 below, DRA presents a list of key outcomes of uncertain variables that will result in Sunrise realizing relatively higher values. Commission approval of a Sunrise CPCN based on SDG&E's current application will imply that the Commission anticipates several of these favorable outcomes occurring. (ES1-5&6)

• Additional DR and local power plants submitted to such RFOs may be able to meet even more of San Diego's local reliability need at a lower net cost than Sunrise. (ES 1-7)

• DRA believes some of these options may also help meet SDG&E's local reliability need at a lower net cost than Sunrise. (ES1-7)

• There are several serious problems with SDG&E's analysis. Some of these issues were present from the start of SDG&E's analysis, but other key flaws have arisen due to SDG&E's continued efforts to meet the local reliability criterion in San Diego. (1-18)

• A key to Sunrise's purported reliability benefits is the assumption that Sunrise would reduce San Diego's local reliability need by 1,000 MW. Though DRA has not yet seen a contrary analysis, DRA has seen evidence that Sunrise could lead to some new local requirements that might require SDG&E customers to incur some new costs that would offset Sunrise's reliability benefits. (1-20)

• Even if the SBPP were assumed to retire in 2009, SDG&E's assertions of its local reliability need in 2010 are greatly overstated. This overstatement may be driven largely by the passage of time and SDG&E's continued efforts to meet its customers' various needs. SDG&E has implemented or proposed at least three initiatives that collectively would postpone a local reliability deficit - even without the SBPP - through 2014. (1-22)

• One of the major sources of Sunrise's purported reliability cost savings is a reduction in the amount of RMR fixed contract costs San Diego-area customers endure. Such savings would purportedly derive from a reduction in both the quantity of RMR contracts that would be necessary and - due to competitive pressures - the fixed prices of such contracts. However, SDG&E's analysis of such cost reductions is based on two very unrealistic assumptions. (1-23)

• To be specific, Sunrise will not relieve SDG&E customers entirely from paying for an additional 1,000 MW of capacity. It will relieve them of paying for 1,000 MW of San Diego local capacity. But SDG&E customers will instead need to pay for an additional 1,000 MW of System RA capacity. (1-26)

• Despite all the sound and fury surrounding SDG&E's efforts to model the energy benefits of Sunrise (and apparently the renewable benefits as well), DRA thinks such work is of virtually no value. DRA believes the Commission should not rely on SDG&E's modeling results unless significant changes are made to the data set and SDG&E re-runs its simulations. (1-28)

• However, in their response to UCAN 2-99, they further state that adopting this more restrictive N-2 credible contingency criterion is not required by WECC for two parallel transmission lines not on common towers. (2-6)

• The estimated Second SWPL project CI is $785 Million - $469 Million for the 500 kV line plus $317 Million for the more than ten associated transmission facility upgrades. The Second SWPL alternative cost estimate is significantly less (about $500 Million less CI) than Sunrise. (Id)

• I will not go through the entire litany of modeling problem areas in SDG&E's energy benefits analysis. Instead, I focus on three key Sunrise value drivers, two of which consist of unsupportable assumptions, the correction of which will lead to an immediate deflation of SDG&E Sunrise energy benefit estimates, and the third of which is perhaps only a modeling quirk, but with an impact that also arouses concern. In any event, this third issue is likely to disappear upon correction of one of the two problematic assumptions previously alluded to. With these examples, I am largely able to show that the expected Sunrise energy benefits are modest, and certainly - by themselves - do not represent a pillar of the Sunrise value proposition. (3-3)

• SDG&E has also assumed an unsupportable WECC capacity expansion plan for its modeling, including 12,000 MW of new coal plant capacity. SDG&E has attempted to justify these assumptions, and others, by pointing out that the source of its data, the SG14 WI database, was the fruit of a collaborative industry effort, going as far as stating that it believes the SSG-WI database to be the "best available source of comprehensive information concerning existing generation and transmission elements and projected generation additions and transmission upgrades." Even if one were to share the high esteem SDG&E has for the SSG-WI database, SDG&E should have been able to assess the problematic SSG-WI resource expansion assumptions through (1) review of existing studies that have used the SSG-WI database, (2) discussion with the analysts that put the database together, and (3) simple review of the "reasonableness" of the results, otherwise known as validation. (3-5)

• Throughout its application, SDG&E has argued a need for the Sunrise Project in order to meet its RPS requirements in a cost-effective manner. However, it has not demonstrated how Sunrise would allow for RPS compliance in a cost-effective manner. Neither has it demonstrated evidence of the "prohibitively costly congestion," which it claimed was of a "high likelihood." (3-12)

• SDG&E's simulation of only two or three years of a 40-year life project is an inadequate analysis for purposes of a CPCN. As further described below, simulating a complex system's performance every five years for two or three observations is inadequate to capture the dynamic interactions impacting the power markets and transmission system. This limitation, coupled with the deterministic selection of input variables, guarantees a narrowly focused evaluation. (4-7)

• A systematic study approach is needed to address the economic value of Sunrise. The use of Gridview to systematically study the conditions of the western electric system that would generate either positive or negative economic value for Sunrise is not appropriate. Gridview is computationally burdensome, and multi-year simulations require new input data sets. DRA notes, however, that both SDG&E and the CAISO have had to run a large amount of Grid view case studies in response to discovery and data requests for model runs. Each of these runs requested by intervener parties to this proceeding point to the need for a comprehensive study approach that would have organized these many Grid view model runs into a systematic study program. (4-9)