I. INTRODUCTION

In Decision (D.) 10-12-035 (or "Decision"), the Commission approved the "Qualifying Facility ("QF") and Combined Heat and Power ("CHP") Program Settlement Agreement" ("Settlement Agreement").

A. Issues in the Rehearing Applications

Applications for rehearing of the Decision were filed by the City and County of San Francisco ("CCSF"), the California Municipal Utilities Association ("CMUA"), and jointly filed by the Marin Energy Authority, the Alliance for Retail Energy Markets, and the Direct Access Customer Coalition (collectively, "CCA/DA Parties").

In its rehearing application, CCSF contends that the Commission should grant rehearing and modify the Decision to remove from the Settlement Agreement those provisions that impose requirements on community choice aggregators ("CCAs"), electric service providers ("ESPs"), and municipal departing load ("MDL"). Specifically, CCSF alleges the following error: (1) D.10-12-035 unlawfully exceeds the Commission's limited jurisdiction over CCAs; (2) providing for expanded stranded cost recovery for the CHP program is inconsistent with the law and contrary to Commission precedent; (3) the Decision fails to correctly apply the heightened standard for settlements that do not include all parties; and (4) the Commission failed to provide non-settling parties meaningful notice or opportunity to comment on the Settlement Agreement. In its rehearing application, CCSF further makes a request for oral argument, pursuant to Rule 16.3 of the Commission's Rules of Practice and Procedure.

In its rehearing application, CMUA challenges the Commission's approval of the provisions that would impose new nonbypassable charges ("NBCs") on MDL customers as a result of the CHP Program. CMUA asks the Commission to revise D.10-12-035 to reject these provisions. Specifically, CMUA argues: (1) the Commission has unlawfully overturned or departed from the precedent in Decision on Non-Bypassable Charges for New World Generation and Related Issues [D.08-09-012] (2008) __Cal.P.U.C.3d __ that new generation NBCs do not apply to MDL customers; (2) the Commission's departure from D.08-09-012 is not supported by the findings or the record; and (3) CMUA was not included in the settlement discussions or provided with reasonable notice that issues affecting CMUA members would be resolved adversely to them.

Like CCSF, CCA/DA Parties contend that the Commission should grant rehearing and modify the Decision to remove from the Settlement Agreement those provisions that impose requirements on CCAs, ESPs and publicly owned utilities ("POUs"). Their rehearing application supports the allegations raised in CCSF's application for rehearing.¹

Southern California Edison Company ("Edison"), Pacific Gas and Electric Company ("PG&E"), San Diego Gas and Electric Company ("SDG&E"), The Utility Reform Network, California Cogeneration Council ("CCC"), Independent Energy Producers Association, Cogeneration Association of California and the Energy Producers and Users Coalition ("CAC/EPUC"), and the Division of Ratepayer Advocates (collectively, "Joint Parties") jointly filed a response requesting denial of the rehearing applications. CCA/DA Parties filed a response supporting CCSF's rehearing application.

B. CMUA's Motion for Abeyance

Subsequently, on March 16, 2011, CMUA filed a motion for abeyance of its rehearing application. Since CMUA filed its rehearing application, CMUA and the Joint Parties have entered into settlement negotiations. CMUA asserts that abeyance of its rehearing application is necessary to allow CMUA and the Joint Parties time to finalize agreed upon modifications to the Settlement Agreement and to make an appropriate filing with the Commission for consideration of the modifications. In light of our policy favoring settlements, and because a settlement could potentially moot the issues raised in CMUA's rehearing application, we grant CMUA's request for abeyance.

In its rehearing application, CCSF raises two of the same issues that were raised in CMUA's rehearing application: the allocation of costs to MDL customers (CCSF Rehrg. App., pp. 17-18) and due process (CCSF Rehrg. App., pp. 22-25). Disposition of these issues in CCSF's rehearing would effectively dispose of CMUA's rehearing application. Since we are granting CMUA's request for abeyance, we also hold these two issues in CCSF's rehearing application in abeyance. In its motion, CMUA represents that CCSF, who is a member of CMUA, does not oppose its motion for abeyance.

As to the issues raised in CCSF's rehearing application that we do not hold in abeyance, we have reviewed each and every argument and are of the opinion that modifications, as described herein, are warranted to: (1) clarify that Commission approval is required prior to any adjustment to the greenhouse gas ("GHG") emissions reduction targets; and (2) clarify that the only resources procured pursuant to the QF/CHP program are those that the Commission has determined are needed for system and local reliability. Rehearing of D.10-12-035, as modified, is denied as to the issues in the rehearing applications not being held in abeyance.

¹ CCA/DA Parties generally allege that rehearing should be granted for the reasons set forth in CCSF's rehearing application. CCA/DA Parties' rehearing application does not meet the requirements of Public Utilities Code section 1732, which provides that an application for rehearing "shall set forth specifically the ground or grounds on which the applicant considers the decision or order to be unlawful." (Pub. Util. Code, §1732.) Rather, CCA/DA Parties' rehearing application is more akin to a response to a rehearing application. Although CCA/DA Parties' rehearing application does not meet the technical requirements of section 1732, we note that disposing of CCSF's rehearing application will also dispose of CCA/DA Parties' rehearing application.