LADWP, Edison Reach Deal on Devers-Palo Verde 2 Transmission Line

By Published On: September 29, 2006

The Los Angeles Department of Water & Power and Southern California Edison are expected to announce next week which of them will sponsor and/or operate the proposed Devers-Palo Verde 2 transmission line running from Southern California to central Arizona. The two utilities have been haggling over the right to build and run the high-voltage line for more than a year. “We’re still finalizing the fine points of the agreement with Edison,” said Henry Martinez, LADWP assistant general manager for power. He said that LADWP and Edison plan to jointly announce their deal, but he would not say which utility would be in charge. An Edison spokesperson concurred that an agreement may be near. When the two utilities agreed to the Devers-Palo Verde 1 line, they laid out an agreement for ownership of any second line. In that deal, LADWP is set to own 30.7 percent of the second line. The proposed $680 million, 230-mile high-voltage line would parallel an existing transmission line. Edison filed for a certificate of public convenience and necessity with the California Public Utilities Commission in April. Edison has also filed for similar approval with the Arizona regulators. The California Independent System Operator approved the project in February. The dispute over who would sponsor the line arose from language in the 2005 federal Energy Policy Act. EPAct includes protections to “native load,” transmission incentives, and participation funding, according to LADWP. LADWP interprets the energy bill as protecting native loads’ access to the grid – keeping munis from getting stuck in line with others on a congested transmission highway. If LADWP sponsors the line, it could escape the CPUC approval process because municipal utilities are not under the commission’s control. If Edison remains the project sponsor, CPUC approval will, however, be required. With either utility as the project owner, the Federal Energy Regulatory Commission must approve the project. Arizona doesn’t make a distinction between municipalities and investor-owned utilities in its regulatory oversight. The proposed line would need final approval from the Arizona regulators regardless of who sponsors it, according to Arizona Corporation Commission spokesperson Heather Murphy. Observers expect Edison to be involved in the project, but the size and extent of its role remain in question. Bets are that it will keep its application moving ahead at the CPUC, according to Dave Olsen, Center for Energy Efficiency and Renewable Technologies director. “My read is that Edison would not be able to rate base the investment without specific CPUC approval,” Olsen said. If LADWP took on the role of project sponsor, “that would be a major capital investment,” he added. This is at a time when LADWP is trying to scrape up enough money to invest in renewable power. Indeed, Edison spokesperson Tom Boyd noted that the utility expects the line to get CPUC approval and be permitted in its rates. Currently, Devers-Palo Verde 2 is also being reviewed by the Arizona Power Plant and Transmission Line Siting Committee. Arizona state regulators are concerned that this major line will increase the cost of electricity in their state. Some cities and environmentalists are concerned about the project’s physical and visual impacts. “One of the big questions that comes up in Arizona is the commissioners saying, ‘Why allow it to be built to allow cheap power to go to California?'” said Edison chief executive officer Al Fohrer. “My hope is that we’ve addressed their concerns” that Californians are first trying to help themselves by increasing supplies, he added. If the Arizona commission does not approve the line, Fohrer said, the utility would ask the Federal Energy Regulatory Commission to use its “backstop” authority. It requires federal action when a state has failed to decide on a transmission line. Environmentalists will oppose the project regardless of which entity sponsors and operates it, according to Olsen. A second Devers-Palo Verde line “would crowd out renewables in a major way by taking all that thermal energy in from Arizona,” he explained. “If they don’t have that line, they would have to take renewables more seriously.”

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