November 12, 1998

Mr. Andrew Barnsdale
Project Manager
c/o Environmental Science Associates
225 Bush Street, Suite 1700
San Francisco, CA 94104

Dear Mr. Barnsdale:

On December 19, 1997, San Diego Gas & Electric Company ("SDG&E") filed its Application and Proponents Environmental Assessment for its proposed sale of electrical generating facilities and power purchase contracts. On October 13, 1998, the Commission published its draft Mitigated Negative Declaration and Initial Study ("Negative Declaration") pertaining to SDG&E’s Application.

Among the electrical generating assets SDG&E proposes to sell as a part of its Application is the Encina power plant located at 4600 Carlsbad Boulevard in the City of Carlsbad. As described in Section 2.3.3, Description of the Assets to be Sold, and Figure 2.3 of the Negative Declaration, the Encina power plant is located on approximately 671 acres owned by SDG&E ("SDG&E Land"). The portion of the SDG&E Land consisting of the lands used for electrical generation purposes and the three basins of the Agua Hedonda Lagoon, comprising approximately 386 acres, is proposed for sale as part of the Encina power plant ("Encina Land"). The Encina Land is depicted on Figure 2.4 of the Negative Declaration.

The separation of the Encina Land proposed for sale from the SDG&E Land to be retained by SDG&E, as shown on Figure 2.4, anticipated certain boundary or lot line adjustments ("lot line adjustments") affecting eleven existing parcels. The existing eleven parcels comprising the SDG&E Lands (the 671 acres) are described in Exhibit "A" enclosed herewith. The proposed lot line adjustments would not change the number of parcels but would affect their configuration. The eleven parcels as they would appear after the proposed lot line adjustments are depicted on Exhibit "B" enclosed herewith. The sale of the Encina power plant as now described in the Negative Declaration would involve the sale of Parcel Nos. 2, 3, 4 and 9 to the buyer. SDG&E would retain ownership of the remaining parcels. The necessary lot line adjustments have not yet been obtained and will not likely be obtained prior to the expeditious sale of the Encina power plant as presently described.

It is in the public interest for SDG&E to proceed with its auction of the Encina power plant as expeditiously as possible. Therefore, SDG&E will proceed with the auction of the Encina power plant in a form which does not require the lot line adjustments, but which in substance and effect is substantially the same as that described in the Application.

The necessary adjustments to the project description are minor and really quite simple. In short, SDG&E will convey to the buyer fee title in and to all of the SDG&E Lands west of Highway 5, except for one small parcel to the north of the plant (parcel 1) which has never been proposed to be transferred, and reserve to itself an exclusive easement for SDG&E’s continued use and occupancy of the lands in which SDG&E would have retained ownership under the original real estate conveyance scheme as now described in Section 2.3.3 and Figure 2.4 of the Negative Declaration ("SDG&E Easement Lands"). SDG&E’s use of such lands will remain unchanged. SDG&E will also reserve to itself the right to purchase the SDG&E Easement Lands when the necessary lot line adjustments have been implemented. Upon obtaining the lot line adjustments, which SDG&E will pursue, SDG&E will repurchase the SDG&E Easement Lands for a nominal cost. In addition, SDG&E will retain the fee title to all of the SDG&E Land east of Highway 5, and will grant to the buyer an easement to use, dredge, and otherwise maintain the inner basin of Agua Hedonda Lagoon for purposes of electric generation at the Encina Power Plant. SDG&E will grant to the buyer the right to purchase, at nominal cost, the inner basin upon obtaining the lot line adjustments described above. The adjusted format for conveyance of the relevant real property interests associated with the Encina power plant are generally shown on Exhibit "C" enclosed herewith. A more precise and detailed description of the adjusted real property conveyance format will be provided in SDG&E’s compliance filing to be made under the Application.

Though the ownership of the land underlying SDG&E’s North Coast Construction and Operation Center, SDG&E’s land south of the tank farm, and Cannon Park will be conveyed to the buyer under this adjusted format, and although the inner basin of Agua Hedonda Lagoon will continue to be owned by SDG&E, the buyer and SDG&E will occupy and use the same lands and in the same manner as each would have occupied and used such lands as now described in the Negative Declaration. When the lot line adjustments are made, SDG&E and the buyer will exercise their purchase options, following which SDG&E and the buyer will in fact hold the precise real property interests originally contemplated in the Negative Declaration.

SDG&E requests that the Commission modify Section 2.3.3, Project Description, and Section 4.1, Land Use and Planning of the Negative Declaration as necessary to incorporate the adjusted real property conveyance format for the proposed sale of the Encina real property described above. The adjusted format will neither result in a new substantial adverse environmental impact nor substantially increase the severity of any potential environmental impact identified in the Negative Declaration. The modifications requested will not in any way significantly affect any premise, fact, or circumstance upon which the Commission’s environmental analysis under the California Environmental Quality Act ("CEQA") is based. Therefore, SDG&E’s comments herein and the requested chances to the Negative Declaration are properly considered minor.

Finally, the Negative Declaration imposes various mitigation measures upon SDG&E pertaining to the real property to be sold as a part of the Encina power plant. Indeed, the Negative Declaration requires SDG&E to implement mitigation measures to protect Biological Resources described in Section 4.7, and Cultural Resources described in Section 4.13, specifically Mitigation Measure Nos. 4.7.a.1 through 4.7.a.4, 4.13.6.1, and 4.13.b.2. For purposes of the sale of the Encina power plant, SDG&E requests that the foregoing mitigation measures be modified to be applicable to all parcels or easement areas being conveyed or granted as a part of the adjusted real property conveyance format.

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If you have any questions or comments, please call.

Sincerely,
/s/
James R. Dodson
Attorney
JRD/dtm

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