5. Proposed Contingencies

Pursuant to Section 16.2 of the QF/CHP Settlement, it is not effective until and unless certain conditions precedent have been met, including approval by the FERC of a waiver of the utilities' obligations under Section 210(m) of PURPA. As of this time, those conditions have not been met, and D.10-12-035 approving the QF/CHP Settlement is the subject of three pending applications for rehearing.

In its opening brief, AReM requests that the Commission make approval of the power purchase agreements subject to any changes that may be made to the QF/CHP Settlement as the result of the Commission's resolution of the pending applications for rehearing D.10-12-035 or potential future petitions to modify the decision, as well as any changes that may occur to the CHP Program as the result of potential future petitions to modify D.10-12-035 or future proceedings regarding the utilities' long term procurement planning. In its reply brief, AReM additionally requests that the Commission make approval of the power purchase agreements contingent on resolution of the pending applications for rehearing of D.10-12-035 and a FERC ruling approving PG&E's application for waiver from PURPA requirements.

It is inappropriate to make approval of this application contingent on the resolution of pending applications for rehearing of D.10-12-035. D.10-12-035 was made effective immediately upon its issuance and, therefore, the applications for rehearing do not suspend it. (See Rules of Practice and Procedure [Title 20, Division 1, of the California Code of Regulations], Rule 16.1(b).)

It is likewise inappropriate to make approval of this application subject to potential future changes to the QF/CHP Settlement, D.10-12-035, or the CHP Program, as it is entirely speculative whether future changes will be made or that, even if they are, any such changes would directly impact the issues addressed in this proceeding. If such changes are made in the future, the proper procedural approach would be for AReM to file a petition to modify this decision approving the power purchase agreements.

It is, however, appropriate to make approval of this application contingent on the QF/CHP Settlement becoming effective. The reasonableness of the proposed PPAs is premised, in large part, on their value relative to the Transition PPAs that the sellers could receive under the QF/CHP Settlement, and the appropriateness of PG&E's proposed recovery of costs is premised on it having entered into the PPAs pursuant to the QF/CHP Settlement. If the QF/CHP Settlement does not become effective, consistency with the settlement will not be determinative of the reasonableness of the PPAs and appropriateness of PG&E's recovery of their costs.

We approve the PPAs and PG&E's recovery of their costs contingent on the QF/CHP Settlement becoming effective. In its reply comments on the proposed decision, PG&E attached a binding agreement between PG&E and all parties to the PPAs that the PPAs are not effective until and unless the QF/CHP Settlement becomes effective. Accordingly, this proceeding may be closed.