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ORDER 1000

ORDER 1000. WHY CALIFORNIA PUBLIC UTILITIES COMMISSION SUPPORTS ORDER 1000’s ELIMINATION OF RIGHT OF FIRST REFUSAL OPINIONS EXPRESSED IN THIS PRESENATION DO NOT REPRESENT THE OPINIONS OF THE CALIFORNIA PUBLIC UTILITIES COMMISSION. CAISO’s FOOTPRINT. LIST OF PARTICIPATING TRANSMISSION OWNERS

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ORDER 1000

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  1. ORDER 1000 WHY CALIFORNIA PUBLIC UTILITIES COMMISSION SUPPORTS ORDER 1000’s ELIMINATION OF RIGHT OF FIRST REFUSAL OPINIONS EXPRESSED IN THIS PRESENATION DO NOT REPRESENT THE OPINIONS OF THE CALIFORNIA PUBLIC UTILITIES COMMISSION

  2. CAISO’s FOOTPRINT LIST OF PARTICIPATING TRANSMISSION OWNERS CITIZENS SUNRISE TRANSMISSION LLC CITY OF ANAHEIM CITY OF AZUSA CITY OF BANNING CITY OF PASADENA CITY OF RIVERSIDE CITY OF VERNON PACIFIC GAS & ELECTRIC COMPANY SOUTHERN CALIFORNIA EDISON COMPANY SAN DIEGO GAS & ELECTRIC COMPANY STARTRANS IO LLC TRANS BAY CABLE LLC TRANS-ELECT NTD PATH 15, LLC VAELLEY ELECTRIC ASSOCIATION, INC WESTERN AREA POWER ADMINISTRATION, SIERRA NEVADA REGION

  3. OTHER ISOs AESO: ALBERTA ELECTRIC SYSTEM OPERATOR OIESO: ONTARIO INDEPENDENT ELECTRIC SYSTEM OPERATOR NBSO: NEW BRUNSWICK SYSTEM OPERATOR ISO-NE:INDEPENDENT SYSTEM OPERATOR - NEW ENGLAND NYISO: NEW YORK INDEPENDENT SYSTEM OPERATOR PJM: PENNSYLVANIA, JERSEY, MARYLAND INTERCONNECTION MISO: MID-CONTINENT INDEPENENT SYSTEM OPERATOR SPP: SOUTHWEST POWER POOL ERCOT: ELECTRIC RELIABILITY COUNCIL OF TEXAS CAISO: CALIFORNIA INDEPENDENT SYSTEM OPERATOR

  4. ORDER 1000’S OBJECTIVES • ensure that rates for Commission Jurisdictional services are just and reasonable • necessary to provide for more efficient and cost-effective regional transmission planning • require planning for State and Federal public policy and eliminates incumbent transmission owners’ ROFR

  5. ELIMINATION OF RIGHT OF FIRST REFUSAL • “We direct public utility transmission providers to remove from their OATT’s or other Commission Jurisdictional tariffs and agreements any provisions that grant a federal right of first refusal to transmission facilities that are selected in a regional transmission plan for purposes of cost allocation. We conclude that leaving federal rights of first refusal in place for these facilities would allow practices that have the potential to undermine the identification and evaluation of a more efficient or cost-effective solution to regional transmission needs which in turn can result in Commission Jurisdictional Services that are unjust and unreasonable or otherwise result in undue discrimination by public utility transmission providers.”

  6. TWO KEY TERMS IN ORDER 1000’S ELIMINATION OF ROFR “We direct public utility transmission providers to remove … any provisions that grant a federal right of first refusal to transmission facilities that are selected in a regional transmission plan for purposes of cost allocation….” APPLIES ONLY TO NEW FACILITIES “… leaving federal rights of first refusal in place for these facilities would allow practices that have the potential to undermine the identification and evaluation of a more efficient or cost-effective solution to regional transmission needs which in turn can result in Commission Jurisdictional Services that are unjust and unreasonable ...” APPLIES TO FACILITIES SUBJECT TO FERC JURISDICTIONAL SERVICES FOR PURPOSES OF COST ALLOCATION

  7. OTHER PROTECTIONS FOR THE INCUMBENT TRANSMISSION OWNERS • UPGRADES TO OWNED FACILITIES • EXISTING RIGHT OF WAY • An incumbent transmission owner would be permitted to maintain a federal right of first refusal for upgrades to its own transmission facilities … p.319 • In addition, … our reforms are not intended to alter an incumbent transmission provider’s use and control of existing right-of-way… the retention, modification or transfer of rights-of-way remain subject to relevant law or regulation granting right-of-way

  8. SUMMARY OF ROFR POSITIONS

  9. COMPLIANCE FILINGSSHOWING NO ROFR IN EXISTING TARIFFS • New York Independent System Operator • South Carolina Electric & Gas • Main Public Service Commission • Public Service Company of Colorado • Mid-Continent Power Pool (MAPP – North Western Corporation (South Dakota)) • Northern Tier Transmission Group • Desert Generation Transmission Corporation, Inc. • Idaho Power Company • Northwestern Corporation • PacifiCorp • Portland General Electric Company • Columbia Grid • Avista Corporation • Puget Sound Energy • WestConnect: • Terra-Gen Dixie Valley, LLC • Tucson Electric Power Company • UNS Electric, Inc. • Public Service Company of New Mexico • Arizona Public Service Commission • El Paso Electric Company • Black Hills Power Inc. • Black Hills Colorado Utility Company • NV Energy, Inc. • Cheyenne Light, Fuel and Power Company

  10. WEST CONNECT FOOTPRINT

  11. California Public Utilities Commission California Energy Commission Federal Trade Commission Massachusetts Department of Public Utilities and Energy Resources Maine Public Service Commission Arizona Public Service Commission SOME GOVERNMENT AGENCIES SUPPORTING ELIMINATION OF ROFR

  12. ARGUMENTS SUPPORTING RETENTION OF ROFR • Parties supporting retention of ROFR proffered several compelling arguments against FERC’s elimination of ROFR • Violation of Mobile Sierra Doctrine (United Gas Pipeline Co. vs. Mobile Gas Service Corp. 350 U.S. 332, Federal Power Commission vs. Sierra Pacific Power Co. 350 U.S. 348) • ROFR has not hindered Robust Transmission infrastructure development [Federal Power Act 215] • Unsubstantiated “Theoretical Threat”(National Fuel Gas Supply Corp. v. FERC, 468 F.3d831 (D.C. Cir. 2006)) • Impermissible intrusion over State’s citing and construction of electric transmission infrastructure • Discrimination against incumbent transmission owners • Efficiencies afforded by Vertical Integration

  13. THE CASE FOR ELIMINATION OF ROFR • Some Issues with the arguments supporting retention of ROFR • Some States Agencies [CPUC, CEC] do not see the elimination of ROFR as an infringement of their jurisdictional authority over transmission citing • Comparing costs for intra-regional transmission facilities is difficult in Single-State Independent System Operators • “Ripeness (Mobile Sierra)” vs. “Theoretical Threat” • ROFR’s preemptive nature may undermine open-access • Merchant Developer ROFRs are anti-competitive clauses and the Supreme Court has ruled that FERC must consider anti-trust implications of its decisions (Gulf States Utilities Co. v. FPC (1973) 411 U.S. 747, 758-59; Otter Tail Power Co. vs. U.S. (1973) 410 U.S. 366, 368, 372)

  14. CPUC CITING AUTHORITY • CPUC Transmission Citing and Approval Structure May Explain Why ROFRs pose no threat to CPUC’s Jurisdictional Authority • CAISO’s Planning process is coordinated with the CPUC but reasonably separate from CPUC’s citing authority • CAISO’s Transmission Planning Process • CAISO’s Board Approval • Transmission Developer’s Application to CPUC • Cost-cap considerations in a CPCN

  15. ROFR IMPACT IN CALIFORNIA • Between 2008 - 2010, 50 proposed independent transmission projects were rejected primarily due to ROFR* • Non-Incumbents Costs are always lower* • 10% reduction in transmission costs in California can reduce costs to ratepayers by $300 million annually* • IOU transmission development is subject to CPUC Jurisdiction while Municipal Utilities’ transmission approval is not CPUC Jurisdiction • Path 15 and TransBay Cable [Prior to 2005] • Clear Water Lugo vs. AV Clearview [Stay Tuned] *SOURCE: Z-GLOBAL ENGINEERING & ENERGY SOLUTIONS

  16. CONCLUSION • How much the elimination ROFRs would affect competition remains to be seen – the implementation (not the order) would decide • Incumbents still hold the advantage • Elimination of ROFR would likely lead to more partnerships of the Trans-Bay Cable model especially where incumbents’ transmission footprints traverse much of the state • Litigation against the elimination of ROFR might weaken application of Mobile Sierra Doctrine to FERC tariffs instead, if the Mobile Sierra applies.

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