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ALJ/MSW/jt2 Date of Issuance 12/21/2010

Decision 10-12-035 December 16, 2010


Application of Southern California Edison Company (U338E) for Applying the Market Index Formula and As-Available Capacity Prices adopted in D.07-09-040 to Calculate Short-Run Avoided Cost for Payments to Qualifying Facilities beginning July 2003 and Associated Relief.

Application 08-11-001

(Filed November 4, 2008)

And related matters

Rulemaking 06-02-013

Rulemaking 04-04-003

Rulemaking 04-04-025

Rulemaking 99-11-022


Table of Contents

Title Page


1. Summary 22

2. Background 33

3. Summary of the Proposed Settlement 1212

4. Discussion 2626

5. Disposition of Proceedings 5959

6. Comments on the Proposed Decision 5959

7. Assignment of Proceedings 6060

Findings of Fact 6060

Conclusions of Law 6464

ORDER 6767

Appendix A - Links To Joint Motion and Attachments, Including Settlement Agreement, Term Sheet, And Exhibits


1. Summary

After more than a year and a half of intensive negotiations, three investor-owned utilities, four representatives of qualifying facilities (QFs), and two ratepayer advocacy groups have developed, and now propose for our consideration, their "Qualifying Facility and Combined Heat and Power Program Settlement Agreement" (Proposed Settlement). In this decision the Commission reviews the Proposed Settlement, finds that it meets established criteria for approval of settlements, and therefore approves it.

The Proposed Settlement is comprehensive. It would resolve numerous outstanding QF issues involving disputes in several Commission, and provide for an orderly transition from the existing QF program to a new QF/Combined Heat and Power (CHP) program. This new program is designed to preserve resource diversity, fuel efficiency, greenhouse gas (GHG) emissions reductions, and other benefits and contributions of CHP. The Proposed Settlement is also designed to promote new, lower GHG-emitting CHP facilities and encourage the repowering, operational changes through utility-pre-scheduling, or retirement of existing, higher GHG-emitting CHP facilities. Additionally, the Commission finds that the Proposed Settlement provides for an appropriate allocation of the costs of the QF/CHP program to all customers in California who benefit from the CHP portfolio. The Proposed Settlement is comprehensive, but it does not resolve issues in numerous Commission proceedings implementing recent statutory requirements that pertain to QFs of 20 MW or less, such as new CHP systems under Assembly Bill 1613 (codified as Pub. Util. Code sections 2840-2845), except to acknowledge that the megawatt (MW) and GHG reductions will count toward the investor-owned utilities' MW and GHG reduction targets.

While the Proposed Settlement is the result of compromise and agreement among representatives of diverse interests, several parties strongly object to aspects of it. Foremost among their concerns is the Proposed Settlement's establishment of procurement and reporting requirements for community choice aggregators and electric service providers. We review the opponents' arguments for either rejecting the Proposed Settlement or approving it only with modifications. We conclude that the Proposed Settlement meets the Commission's standards for approval of settlements - it is reasonable in light of the record, consistent with the law, and in the public interest.

In approving the Proposed Settlement, we set in motion a series of steps that should lead to eventual closure of each of the captioned proceedings. However, we find that it is premature to close the proceedings. Accordingly, the proceedings will remain open at this time.

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