I. INTRODUCTION

In Decision (D.) 09-12-042 (or "Decision"), we adopted the policies and procedures for purchase of excess electricity from eligible Combined Heat and Power ("CHP") systems by an electrical corporation under The Waste Heat and Carbon Emissions Reduction Act, Assembly Bill ("AB") 1613 (Stats. 2007, ch. 713).

On January 20, 2010, Pacific Gas and Electric Company ("PG&E"), Southern California Edison Company ("Edison"), Southern California Gas Company ("SoCalGas"), and San Diego Gas and Electric Company ("SDG&E") (collectively, "Joint Utilities"), jointly filed a timely application for rehearing of D.09-12-042. The Joint Utilities allege the following legal error: (1) the Commission exceeded its authority to set the wholesale price for energy in violation of the Supremacy Clause of the United States Constitution and the Federal Power Act ("FPA"); (2) the Commission failed to maintain "ratepayer indifference" as required by AB 1613; and (3) D.09-12-042 violates state law by failing to allocate the above-market costs of energy and capacity to all customers who benefit from the AB 1613 program. On January 20, 2010, the Joint Utilities also filed a Motion for Stay of D.09-12-042. Joint Utilities' motion requests that the Commission stay the Decision for ninety days.

On January 20, 2010, the Alliance for Retail Energy Markets ("AReM")
also filed a timely application for rehearing of D.09-12-042. AReM alleges that

D.09-12-042's allocation of AB 1613 contract costs to unbundled customers is unlawful because: (1) the allocation of any of the costs of the AB 1613 contracts to unbundled customers while failing to equally allocate any of the benefits violates Public Utilities Code section 2841(e)¹; and (2) the allocation of costs to all customers based on indirect societal benefits is inconsistent with Commission precedent, and is arbitrary, discriminatory, an abuse of the Commission's discretion, and in violation of sections 1705, 451, and 453.

Responses to the rehearing applications and/or Motion for Stay were filed jointly by PG&E, SDG&E, and Edison; by AReM; by San Joaquin Refining Company, Inc.; jointly by California Clean DG Coalition ("CCDC") and Fuelcell Energy, Inc.; and by the Division of Ratepayer Advocates.

We have reviewed each and every argument raised in the rehearing applications and are of the opinion that modifications, as described herein, are warranted to: (1) clarify instances where reference to "avoided cost" is referring to the utilities' short-run avoided costs as previously adopted by the Commission in D.07-09-040; (2) clarify language in the Decision that could lead to ambiguity regarding the fact that the price adopted in the Decision is the price utilities must offer under the AB 1613 program; (3) correct an inaccuracy regarding the Federal Energy Regulatory Commission's ("FERC's") requirements for obtaining certification as a qualifying facility ("QF"); (4) clarify statements referencing any above-market portion of contract costs; (5) clarify the statement that the pricing formula adopted in the Decision reflects the current market price for power; (6) clarify that the discussion regarding procurement of emissions allowances is merely illustrative; (7) include additional findings of fact regarding how direct access ("DA") and community choice aggregation ("CCA") customers receive benefits associated with the 10% location bonus; (8) delete references to D.02-11-074; and (9) correct typographical errors, as set forth below. Rehearing of D.09-12-042, as modified, is denied.

¹ All subsequent section references are to the Public Utilities Code, unless otherwise specified.