IV. CONCLUSION

Rehearing is granted on the limited issue of GHG compliance costs, and modifications to D.10-12-055, as described herein, shall be made: (1) modify our treatment of GHG compliance costs to be consistent with avoided cost principles;
(2) clarify why the MPR-based energy price adopted by D.09-12-042 and affirmed in D.10-12-055 is consistent with avoided cost principles; (3) clarify why the 10% Location Bonus is consistent with avoided cost principles, and (4) conform D.09-12-042 with the modifications ordered by D.10-04-055 and D.10-12-055, as modified herein. Rehearing of D.10-12-055, as modified, is denied. We also deny the Joint Utilities' motion for stay as without merit.

THEREFORE, IT IS ORDERED that:

1. Rehearing of D.10-12-055 is granted for the limited purpose of addressing greenhouse gas compliance cost issues.

2. D.10-12-055 shall be modified as follows:

a. The discussion in Section 1 "Summary" on pages 1 and 2 is replaced with the discussion at Section 1 "Summary" in the Conformed Version of D.10-12-055, attached hereto as Attachment A.

b. The first full paragraph on page 3 starting "On January 20, 2010, ..." is replaced with the first full paragraph starting "On January 20, 2010, ..." on page 3 of the Conformed Version of
D.10-12-055, attached hereto as Attachment A.

c. The text of Section 7.1 "Discussion" on pages15 and 16 is replaced with the discussion at Section 7.1 "Discussion" in the Conformed Version of D.10-12-055, attached hereto as Attachment A.

d. The title of Section 8 - "Remove Language Requiring IOUs to Purchase GHG Allowances" - on page 16 is modified to "GHG Compliance."

e. A new heading "8.3.1 The Pricing Terms Established By The QF Settlement Do Not Apply To The AB 1613 Program" is added underneath the heading "8.3 Discussion" at page 18.

f. A new footnote is added to the end of the partial paragraph at the top of page 19 that reads:

"The QF Settlement decision, D.10-12-035, expressly declined to apply the QF Settlement price to AB 1613 CHPs:

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."

g. A new heading "8.3.2 Modification to Provision Regarding Procurement of GHG Allowances" is added above the first full paragraph on page 19 that begins "In addition, the FERC Clarification Order explains that compensation for ...."

h. The first full paragraph on page 19 that begins "In addition, the FERC Clarification Order explains that compensation for ...." is deleted.

i. The first sentence of the first full paragraph on page 20 that begins "However, the Joint Utilities make a reasonable request ...." is modified to read:

"The Joint Utilities make a reasonable request in their Petition for Modification regarding which entity is best positioned to actually purchase the GHG allowances needed for an AB 1613 facility."

j. A new Section 8.3.3 "Modification to GHG Compliance Cost Pass-Through To Be Consistent With Avoided Cost Principles" is added at the end of Section 8.3 "Discussion" as set forth in the Conformed Version of D.10-12-055, attached hereto as Attachment A.

k. The title of Section 12 - "Changes Needed to Contracts in Light of Subsequent FERC Orders" - on page 27 is modified to "Additional Changes and Clarifications Required in Light of Subsequent FERC Orders."

l. A new heading "12.1 Overview" is added underneath the heading "12. Changes Needed to Contracts in Light of Subsequent FERC Orders" at page 27.

m. A new heading "12.2 Amended Scoping Memo and Party Comments" is added underneath the second full paragraph starting "The significance of the FERC's Clarification Order ...." at page 28.

n. The three paragraphs starting with the last paragraph on page 28 that reads "In consideration of the FERC Declaratory Order, ..." and ending with the second full paragraph on page 29 that reads "Regarding the event that a QF loses its AB 1613 certification ..." are replaced with the discussion in Section 12.2 of the Conformed Version of D.10-12-055, attached hereto as Attachment A.

o. A new section 12.3 "The Record Reflects That The MPR-Based Price Is An Avoided Cost" as set forth in the Conformed Version of D.10-12-055, attached hereto as Attachment A, is added after the second full paragraph on page 29 that reads "Regarding the event that a QF loses its AB 1613 certification ..."

p. Section 12.1 "Discussion" at pages 29 to 32 is replaced with Section 12.4 "QF Status and Two Tier Pricing Structure" as set forth in the Conformed Version of D.10-12-055, attached hereto as Attachment A.

q. The following new sections are added to the end of Section 12.1 at page 32, as set forth in the Conformed Version of D.10-12-055, attached hereto as Attachment A: (1) Section 12.5 "A PURPA Contract May Include Sanctions For Non-Compliance With State Efficiency Requirements"; (2) Section 12.6 "The 10% Location Bonus Is Based On The Utilities' Avoided Costs"; (3) Section 12.6.1 "Record On The 10% Location Bonus"; and (4) Section 12.6.2 "Analysis Of The 10% Location Bonus."

r. The discussion in Section 13 "Comments on Proposed Decision" on pages 32 and 33 is replaced with the discussion at Section 13 "Comments on Proposed Decision" in the Conformed Version of D.10-12-055, attached hereto as Attachment A.

s. The Findings of Fact, Conclusions of Law, and Ordering Paragraphs are modified as set forth in the Conformed Version of D.10-12-055, attached hereto as Attachment A.

3. Rehearing of D.10-12-055, as modified herein, is denied.

4. The motion for stay of D.10-12-055 is denied.

5. The Joint Utilities shall submit supplemental advice letters to amend the tariff sheets and contracts associated with the AB 1613 program consistent with the holdings in this order within 30 calendar days of the effective date of this order.

6. For clarity and for the convenience of the parties and the general public, we hereby adopt the "Conformed" Versions of D.10-12-055 and D.09-12-042, attached hereto as Attachments A and B, respectively. These conformed versions of D.10-12-055 and D.09-12-042 incorporate all modifications ordered by subsequent decisions in this proceeding, including this order, with the exception of those modifications ordered by D.10-04-055 to D.09-12-042 which are superseded here. To the extent modifications ordered result in express conflicts among the decisions in this proceeding, the holdings of the last in time decision shall control with the exception that the discussions set forth in Sections 5, 9, 10, and 11 of D.10-12-055 are not intended to be modified and stand as written.

7. To the extent that the AB 1613 contracts require further amendments to be consistent with the Commission's decisions in this proceeding, Energy Division is authorized to address such amendments through the resolution and advice letter process.

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This order is effective today.

Dated April 14, 2011, at San Francisco, California.

MICHAEL R. PEEVEY

President

TIMOTHY ALAN SIMON

CATHERINE J.K. SANDOVAL

MARK FERRON

  Commissioners

Commissioner Michel Peter Florio, being necessarily absent, did not participate.