DOE/WAPA Project Provides Better Sharing of Costs and Benefits

SAN FRANCISCO - With the recent signing of a multi-party Memorandum of Understanding (MOU) to begin upgrading Path 15 transmission lines and infrastructure, Pacific Gas and Electric Company has withdrawn its filing at the California Public Utilities Commission (CPUC) of a Conditional Application for a Certificate of Public Convenience and Necessity authorizing the construction of a Path 15 upgrade.

The MOU - led by the U.S. Department of Energy and the federal Western Area Power Administration (WAPA) - was signed by PG&E and several other public and private entities on October 18, 2001 in Palo Alto. It represents the best solution for upgrading Path 15 for the benefit of all California residents, and will do so on an aggressive schedule, by as early as Summer 2004. In light of this important new development, and to avoid needlessly increasing ratepayer costs by continuing with a duplicative process that is no longer necessary, PG&E is withdrawing its Conditional Application from further CPUC consideration.

"The Path 15 project outlined in the MOU envisions an innovative public-private partnership, where the parties will not only share the benefits but each will share an appropriate level of project costs," said Gordon R. Smith, president and CEO of the utility. "Since the benefits of a Path 15 upgrade will be shared by all California residents, the costs also should be shared fairly - and they will be, under this federally sponsored project.

"Participation of federal government agencies in this Path 15 upgrade project will reduce the overall costs to PG&E's customers, will help streamline the permitting process, and should assist with the coordination that will be needed among the numerous federal, state, and local agencies involved," Smith said.

"We are pleased to have the opportunity to work with PG&E and the other project participants to upgrade Path 15," said Mike Hacskaylo, WAPA's Administrator. "Western appreciates the work by the California Public Utilities Commission in studying the environmental impacts and moving the project forward. We pledge to work with the participants to help them meet state requirements and expedite this important project."

"We would also like to recognize the important contributions made by the CPUC in their work to complete the necessary environmental reviews," said Smith. "In particular, PG&E applauds the Commission for the speed with which it produced such a comprehensive draft environmental impact report. We expect this report will serve as the basis for the WAPA project's compliance with the California Environmental Quality Act."

If PG&E alone were to construct the Path 15 upgrade, the roughly $320 million cost of design, permitting, and construction would be borne initially only by customers of California's investor-owned utilities. Instead, under the WAPA project, responsibility for those costs will be spread over a larger number of customers, including customers of the participants in the Transmission Agency of Northern California and WAPA, and customers of various private energy companies, all of whom will benefit from the Path 15 upgrade.

Under the MOU, PG&E will construct the necessary modifications at its existing Los Banos and Gates 500 kV substations and the 230 kV reconductoring work, expected to cost approximately $65-75 million. Importantly, PG&E will receive a commensurate percentage of the capacity on the new 500 kV line to devote to the ISO-controlled grid, for the benefit of California consumers of electricity. PG&E also expects to receive an additional interest in the WAPA project commensurate with its other costs incurred, including costs for the engineering and environmental work performed to date and the costs necessary to fund preparation of the CPUC's draft environmental impact report.

PG&E is withdrawing the Conditional Application now to avoid incurring further significant costs for permitting and certification in connection with the Commission's process. These CPUC measures would be duplicative of those already underway through the MOU process, and would increase ratepayer costs unnecessarily.