[California Energy Commission Letterhead]


Energy Resources Conservation
and Development Commission

In the Matter of:
Application for Certification
for the High Desert Power Project

Docket No. 97-AFC-1


We have considered the matters raised in "Applicant's Response to Third Revised Scheduling Order" (July 28, 1998), as well as the comments contained in the responses to the Committee's July 28, 1998 ORDER DIRECTING CLARIFICATION filed by Staff (August 4, 1998), the California Unions for Reliable Energy (August 4, 1998), and Calpine Corporation (August 5, 1998) in formulating this Ruling.


The existing draft Preliminary Staff Assessment (PSA) was released on May 15, 1998. All parties acknowledge that it does not cover all topic areas, is substantively deficient in its treatment of others, and does not analyze the second natural gas pipeline proposed by Applicant. While a PSA is not required by statute or regulation, previous public discussions have indicated that all parties, including the Applicant, recognize its utility as an analytic tool in defining areas of agreement and disagreement. The existing/partial document is of limited usefulness in this regard.

The Committee's THIRD REVISED SCHEDULING ORDER (July 20, 1998) contains a listing of events expected to occur in order to provide information sufficient for Staff to prepare its revised PSA. This information also provides other parties with a comprehensive description of the proposed project's potential impacts and possible mitigation measures.

The revised PSA is due on September 24, 1998. Applicant essentially requests that this document be issued a month earlier than currently scheduled, i.e., on August 23, 1998 (Applicant Response to the Third Revised Scheduling Order, p. 2), based on its disagreement with what it characterizes as "additional delays that are the result of new requirements imposed...or unreasonable interpretations of existing requirements" reflected in the THIRD REVISED SCHEDULING ORDER. (Id., p. 10).

Applicant's request misses the basic point of the Scheduling Order. The Order is designed, in large part, to accommodate unanticipated delays in obtaining information necessary to perform a complete and adequate analysis of the High Desert Power Project. Evaluations by other entities such as the Mojave Desert Air Quality Management District (in its Determination of Compliance) and the California Independent System Operator (in its determination regarding the transmission interconnection study) are necessary for project analysis but are not yet available and are not reasonably expected to be available before September 1, 1998. Releasing the revised PSA on August 23, as requested by Applicant, would thus merely result in the propagation of another incomplete document. We therefore deny this request. The revised/complete PSA remains scheduled for release on September 24, 1998.


Confusion apparently exists over the level of information concerning emission reduction credits (ERCs) needed to provide a sufficient basis for air quality analyses by Staff and other parties. Staff has provided Applicant with a sample "Letter of Intent" which outlines the type and extent of information it believes is necessary. Applicant has submitted information which it believes complies with Staff's request (Applicant Response, p. 4; see also pp. 5-8). The California Unions for Reliable Energy (CURE) contend that the Applicant must provide "binding commitments to purchase specific offsets" prior to preparation of the Final Staff Assessment (FSA) in order for the FSA to comply with Energy Commission regulations (CURE Response to Order Directing Clarification of Air Quality Issues, August 4, 1998, p. 4). Applicant for Calpine's Sutter Power Plant Project (Docket No. 97-AFC-2) indicates that it has submitted executed ERC option contracts in that proceeding, as well as has secured "Letters of Intent to signify its good faith efforts to purchase additional ERCs from ERC certificate holders." (Calpine Response to Order Directing Clarification, August 5, 1998, pp. 1-2). In that case, these actions have been taken at Staff's request and before the release of the FSA.

We believe it is necessary to conceptually differentiate between the analytic and decisional phases of the Application for Certification process. In our view, the purpose of the analytic phase is to obtain sufficient information from Applicant in order to allow analysis by the other parties of the proposed project. [Cal. Code of Regs., tit. 20, §§ 1742, 1742.5, 1743, 1744, 1744.5]. During this phase, Staff typically prepares a preliminary assessment which, after further data gathering, forms the basis for the Final Staff Assessment (FSA) required by the regulations (Cal. Code of Regs., tit. 20, § 1747). The FSA traditionally serves as Staff testimony for formal evidentiary hearings. [Cal. Code of Regs, tit. 20, § 1742.5(b)].

Thus, during the analytic phase, Staff and other parties need adequate information to provide a basis for reasoned assessment. Regarding ERCs in particular, Staff and CURE have consistently stated that they must know: 1) the specific identification of proposed offsets; 2) the location of the offset source; 3) the reduction control strategy; 4) the type and quantity of proposed offsets; and 5) whether or not such offsets are banked. (See, e.g., April 28, 1998 RT 45-47, 79).

We agree it is Applicant's obligation to provide this specific information during the analytic phase. Having this information is logically and legally appropriate for the parties to formulate their testimony, and thus reflect their positions on the acceptability of the Applicant's proposal. In this regard, Applicant bears the risk that its failure to provide the information in a complete and timely manner could delay preparation of the FSA and other testimony, and thus also delay the evidentiary phase.

It does not, however, appear that establishing contractual certainty or the actual enforceability of rights to specific ERCs is necessary prior to preparing testimony. Rather, this is a matter appropriate for the evidentiary/decisional phase which commences when testimony and other evidence is filed, and hearings begin.

The purpose of the second, or decisional, phase is to determine whether Applicant has persuasively established that it will design, construct, and operate its project in compliance with all applicable laws, ordinances, regulations, and standards. This is accomplished in part through a formal evidentiary hearing process. During these hearings, Applicant has "the burden of presenting sufficient substantial evidence to support the findings and conclusions required for certification of the site and related facility." [Cal. Code of Regs., tit. 20, § 1748(e).] These findings encompass whether or not the proposed project is in conformity with applicable air quality standards [Cal. Code of Regs., tit. 20, § 1752(b)], including the requirements of other agencies such as the Air District, the California Air Resources Board, and the United States Environmental Protection Agency.

The "proof" that Applicant meets these standards, and actually has enforceable rights to sufficient ERCs, or will obtain them prior to licensing, is a matter appropriate for determination by the Committee, as decision-maker, in light of the evidence offered by all parties at evidentiary hearings. Applicant must meet its ultimate burden of persuading the Committee, and eventually the Commission, that the project conforms with applicable law. In the present context, this burden can conceivably be met by a variety of means such as options, contracts, or actual purchase of ERCs. The method is at the Applicant's discretion and the probative value of its showing is subject to the persuasive weight of any countervailing evidence offered by other parties.

Dated placed online: August 26, 1998


Presiding Member

Associate Member

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