9. Uniform versus Utility-specific
Upfront Standards
9.1. Parties' Position
One of the issues in this proceeding is whether, and to what extent, the Commission should establish uniform hedging guidelines and policies for convergence bidding for all three IOUs, or should instead have different standards for each IOU.
PG&E proposes IOU specific convergence bidding - strategies to hedge against unforeseen events.64 Similarly, SDG&E proposes an IOU specific application to use convergence bidding.65 SCE points out that the Commission does not need to adopt uniform upfront standards for all three IOUs solely for the sake of uniformity.66
DRA points out that SCE states that AB 57 does not require the Commission to adopt the same upfront standards for each IOU's procurement practices.67 DRA agrees with SCE on this point, but also contends that AB 57 does not preclude the same standards, allowing for differences in load and resources. DRA cites that in gas hedging and Time-to-expiration Value at Risk (TEVaR) measuring the gas price volatility, the Commission uses the same standard for all three IOUs. DRA argues that convergence bidding is more like gas hedging and TEVaR than any traditional power transactions by the IOUs. TURN believes that letting each IOU "go its own way" with respect to convergence bidding could prove to be a disservice to the ratepayers and supports giving all three IOUs broad authority as requested by SCE.68
9.2. Discussion
The Commission has established standards for the IOUs to propose IOU-specific procurement plans that are approved by the Commission. Thus, the standards we adopt here are designed to promote consistency among the IOUs where applicable. Each IOU faces different operational and market constraints, and we recognize that differences in convergence bidding hedging proposals among the IOUs are based on variations in market and operational factors. We also recognize that a one-size-fits-all approach to convergence bidding could unduly limit the IOUs from responding to different conditions or circumstances within their different service territories.
We adopt a uniform set of rules that provide consistency among the IOUs. The standards adopted in this decision take into account that each IOU faces different conditions and circumstances, and allows the flexibility for each IOU to participate in convergence bidding consistently with its own hedging strategies. Each IOU will file detailed hedging strategies in their bundled procurement plans that comply with the standards adopted here.
64 PG&E July 19, 2010 Response at 4.
65 SDG&E July 19, 2010 Response at 3.
66 SCE August 12, 2010 Proposal at 6.
67 DRA August 30, 2010 Comments at 4.
68 TURN August 30, 2010 Comments at 1-2.
