ALJ/PVA/lil Date of Issuance 5/10/2011

Decision 11-05-005 May 5, 2011

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Order Instituting Rulemaking to Integrate and Refine Procurement Policies and Consider Long-Term Procurement Plans.

Rulemaking 10-05-006 (Filed May 6, 2010)

DECISION MODIFYING NEW GENERATION
AND LONG-TERM CONTRACT COST ALLOCATION MECHANISM
PURSUANT TO SENATE BILL 695

DECISION MODIFYING NEW GENERATION AND LONG-TERM CONTRACT COST ALLOCATION MECHANISM PURSUANT
TO SENATE BILL 695 1

1. Summary 2

2. Background 2

3. Elimination of the CAM Election Process 6

4. "Benefiting Customers" and "For the Benefit of All Customers" 7

5. Eligibility of Utility-Owned Generation for the CAM 9

6. Use of Energy Auction to Calculate Net Capacity Cost 11

7. Term of CAM Application 14

8. Next Steps 16

9. Comments on Proposed Decision 17

10. Assignment of Proceeding 18

Findings of Fact 18

Conclusions of Law 18

ORDER 19

DECISION MODIFYING NEW GENERATION
AND LONG-TERM CONTRACT COST ALLOCATION MECHANISM
PURSUANT TO SENATE BILL 695

1. Summary

This decision modifies the Cost Allocation Mechanism (CAM) adopted in Decision 06-07-029.¹ These modifications are to ensure that the CAM is consistent with provisions of Senate Bill 695 (Stats. 2009, ch. 337).

Specifically: 1) we eliminate the utilities' ability to elect (or decline to elect) CAM treatment for generation resources; 2) we allow CAM treatment for utility-owned generation; and 3) we change the duration of CAM treatment to match the duration of the underlying contract.

¹ Decision (D.) 06-07-029 was modified in D.07-11-051. All cites to D.06-07-029 incorporate the modifications made to that decision in D.07-11-051, unless otherwise noted.