3. PG&E's Request

PG&E notified by e-mail each of its Renewable QFs that it was eligible to execute a pro-forma amendment to existing QF contracts, known as the Fixed Energy Price Amendment (FEPA). QFs with no known valid e-mail address were mailed notification of the Amendment. On June 22, 2011, PG&E posted the pro-forma FEPA, instructions for completing and submitting a signed copy of the Amendment to PG&E, and frequently asked questions on its website. Interested QFs were given until July 18, 2011 to submit an executed copy of the Amendment to PG&E. All 48 Amendments signed by QFs and received by July 18, 2011 have been included in PG&E's Application for approval.

PG&E proposes to provide a pro-forma fixed energy price option to 48 renewable Legacy QFs. A copy of the pro-forma Amendment is included as Attachment A to this order. A list of the 48 QFs agreeing to the Amendment is included as Attachment B to this order. When compared to the universe of renewable legacy QFs, this number is smaller than the number approved in D.06-07-032; however, this makes a certain amount of sense since the number of existing "legacy" contracts will continue to get smaller over time as the expiration term dates are reached. The pro-forma FEPA is based on the amendment to existing QF PPAs (also known as the "Legacy PPA Amendment") that was approved as part of the QF/CHP Settlement in D.10-12-035. The primary difference between the two amendments is that with the FEPA, the energy price is fixed. The FEPA eliminates the link between the market price of natural gas and the energy payment for Renewable QFs. By doing so, the renewable Legacy QFs achieve a certain amount of price stability. The fixed energy price is $53.70/Megawatt-hour, per Article 2.1 of the pro-forma FEPA.

The fixed energy price is based on the otherwise applicable variable SRAC formula within the Legacy PPA Amendment, with adjustments specific to PG&E. The energy price is adjusted by the time-of-use (TOU) factors in the Legacy PPA Amendment. However, the TOU-differentiated energy price will not be recalculated each time TOU factors are re-published in PG&E's market price referent because then the price would not be "fixed." Ordinarily, application of a locational adder would result in an hourly changing price. In the pro-forma FEPA, the locational adder is set at zero.

The pro-forma FEPA requires the Seller (i.e., a QF agreeing to the contract amendment) to make good faith efforts to provide the forecasting and outage reporting as necessary to support PG&E's compliance with the California CAISO scheduling requirements. Forecasts generated by this process are non-binding on the Seller, so that the Seller's actual deliveries may deviate from its forecasts without incurring charges. Any charges that do occur are absorbed by PG&E's customers.

The pro-forma FEPA stipulates that the Seller will describe the disruption in specific terms that will enable PG&E to meet its obligations to report such events to the CAISO. As the QF's scheduling coordinator, PG&E remains responsible for all CAISO charges and is entitled to receive all CAISO revenues.

The QFs that execute the pro-forma FEPA are selecting a fixed SRAC price, instead of the variable SRAC price otherwise available under D.10-12-035. Thus, by electing the Fixed Energy Price Amendment, the renewable legacy QFs waive their right under the QF/CHP Settlement to execute another version of the Legacy Amendment. However, PG&E contends that if the Legacy QFs do not receive final and non-appealable Commission approval to adopt the FEPA, the renewable legacy QFs retain the opportunity to execute one of the Legacy PPA Amendments.

D.10-12-035 stated that the Legacy PPA Amendments are only available for 180 days from the date of the QF/CHP Settlement effective date. However, at the time the application was filed, the QF/CHP settlement adopted in D.10-12-035 had not yet become effective. Thus executing this option had a certain amount of regulatory certain available to the seller at the time of execution.

PG&E requests that the Commission approve the FEPAs by December 31, 2011 so that if approval is not granted, each Renewable QF will have sufficient time to exercise its option to execute a Legacy PPA Amendment under the QF/CHP Settlement. Given that D.11-10-016 clarified that the QF/CHP Settlement Effective Date would be when D.10-12-035 and D.11-10-016 both reach final non-appealable status, the timing is still consistent with this timeframe.

The FEPAs will remain in effect for the remaining term of the existing QF contracts, but for no more than five years. PG&E submitted 48 executed Amendments for approval through this Application. Instead of filing each Amendment, PG&E attached the pro-forma FEPA as Attachment A to its application and a list of the Renewable QFs that accepted the offer as Attachment B to its application. As noted above, these are also included as Attachments A and B to this order.