5. Eligibility of Utility-Owned Generation for the CAM

D.06-07-029 declined to approve the CAM for utility-owned generation.¹⁴ SB 695, however, expressly provides that utility-owned generation is eligible for the CAM under certain conditions, specifically in the event that the Commission "orders" an electrical corporation to obtain that generation "to meet system or local area reliability needs for the benefit of all customers in the electrical corporation's distribution service territory."¹⁵

No party disputes that SB 695 allows the costs of utility-owned generation to be allocated among all load serving entities if the statutory conditions are met, but AReM argues for conditions or limitations on CAM treatment for utility-owned generation.

AReM argues that the language requiring the Commission to "order" the procurement of utility-owned generation means that such generation developed on the utility's own initiative would not be eligible for the CAM.¹⁶ This interpretation would appear to preclude the Commission from ordering procurement of utility-owned generation (eligible for CAM) if that generation was proposed by a utility for the first time in an application. In other words, the Commission would have to act first to order the utility to procure utility-owned generation, rather than approve a request from the utility that it be allowed to procure such generation. We decline to put such a narrow definition on the word "order." If a Commission order authorizes the procurement of utility-owned generation, that counts as an "order" under SB 695, regardless of whether the Commission or the utility was the first to come up with the idea.

AReM also argues that utility-owned generation projects "should be permitted only when competitive options are completely unavailable."¹⁷ This condition unnecessarily ties the Commission's hands, as the Commission would then not be able to select (and CAM) a highly attractive utility-owned generation project if any competitive option, regardless of the comparative merits, was somehow available. This interpretation is not in, nor supported by SB 695, and we decline to impose such a tortured and restrictive interpretation.

Finally, AReM argues that "the ability for the Commission to allow CAM treatment for [utility-owned generation] does not create any preference for such resources."¹⁸ We agree. The language of SB 695 appears to be placing utility-owned generation and independent generation on a relatively equal footing, and should not be read to favor utility-owned generation over other kinds of generation.

CAM treatment of utility-owned generation resources is permissible under SB 695 if the statutory conditions are met. If the Commission determines that a utility-owned generation resource is needed for system or local area reliability for the benefit of all customers in a utility distribution service territory, then cost allocation applies on a nonbypassable basis, consistent with our departing load provisions established in D.08-09-012.

¹⁴ D.06-07-029 at 4.

¹⁵ Section 365.1(c)(2)(A).

¹⁶ Id. at 13.

¹⁷ AReM October 1st 2010 Comments at 13.

¹⁸ Id. at 13.