2. Background
Rio Bravo Rocklin is a California General Partnership that owns and operates the Rio Bravo Rocklin generation facility (Rio Bravo).1 Rio Bravo sells energy and capacity to Pacific Gas and Electric Company (PG&E) under a Standard Offer Number 4 Long-Term Energy and Capacity Power Purchase Agreement (SO4) entered into on December 12, 1984, with a term that expires in 2020. Rio Bravo interconnects to PG&E's system via the Lincoln-Pleasant Grove 60 kilovolt Line.
On July 19, 2010, Rio Bravo filed a complaint against PG&E. Rio Bravo's complaint alleges that: 1) from June 9, 1999, to March 1, 2009, PG&E underpaid Rio Bravo for capacity purchased from its biomass facility; 2) this underpayment was the result of PG&E's failure to inform Rio Bravo that the biomass facility was no longer "remote" and PG&E's failure to apply the appropriate "non-remote" capacity loss adjustment factor (CLAF); and 3) PG&E has been unjustly enriched at Rio Bravo's expense. In addition to findings consistent with these allegations, Rio Bravo asks the Commission to order PG&E to remit approximately $2,000,000, which is the difference between the amount Rio Bravo claims PG&E should have paid for capacity from Rio Bravo as a non-remote resource, and the lesser amount PG&E actually paid during the period between January 1, 1999, and February 28, 2009, plus interest.
PG&E responded to Rio Bravo's complaint on August 27, 2010, by filing an answer to the complaint and a concurrent motion to dismiss the complaint. PG&E argues that Rio Bravo's complaint is without merit because: 1) Rio Bravo has not alleged any contractual basis for additional payment; 2) Rio Bravo fails to identify any law, rule, or Commission order which either requires PG&E to notify Rio Bravo that its facility might have become non-remote or to order a CLAF study; 3) PG&E did not have the necessary information to change its capacity payment factor; and 4) the Commission's adopted CLAF methodology requires a study to revise the CLAF and specifies that the study must be based on PG&E's transmission and distribution system in existence at the time of the study. Thus, PG&E argues that even if it had pertinent information, that information cannot now be used to justify a retroactive increase (or decrease) in capacity payments. Finally, PG&E asserts that because the parties' rights are governed by the terms of their contract, Rio Bravo's claim for equitable restitution cannot be heard. Rio Bravo responded to PG&E's motion to dismiss on September 13, 2010.
A prehearing conference (PHC) was held on November 22, 2010, at 10:00 a.m. Discussions at the PHC focused on PG&E's motion to dismiss the Rio Bravo complaint, the status of discovery between the parties, and the schedule for the proceeding. The subsequent Assigned Commissioner's Ruling and Scoping Memo denied PG&E's motion to dismiss and set forth a new schedule for the proceeding.2
On January 12, 2011, Rio Bravo and PG&E filed a joint motion seeking an extension of time for evidentiary hearings in order to pursue resolution and settlement of the disputed issues in this proceeding. After noting that the extension would allow them to focus on settlement discussions, Rio Bravo and PG&E pointed out that the extension was also needed to prepare documentation supporting the settlement, and to submit a joint motion seeking Commission approval of the settlement.3
On January 13, 2011, the assigned Administrative Law Judge (ALJ) granted the Rio Bravo and PG&E request and cancelled the scheduled hearings and briefings. The ALJ also directed Rio Bravo and PG&E to provide an update on their settlement efforts on, or before, February 15, 2011. On February 11, 2011, Rio Bravo and PG&E notified the ALJ that negotiations were at an impasse and requested that hearings be rescheduled. Prior to the date set for hearings in the Scoping Memo, Rio Bravo and PG&E reached an agreement that resolved the dispute (Settlement Agreement) and, by motion dated May 27, 2011, requested Commission approval of their Settlement Agreement.
In their motion seeking approval of the Settlement Agreement, Rio Bravo and PG&E assert that the Settlement Agreement is reasonable in light of the record, consistent with the law, and in the public interest. However, the Settlement Agreement requires the payment of ratepayer funds to Rio Bravo. We believe there is a potential conflict of interest where, as here, two commercial entities use ratepayer funds to resolve a dispute. In an abundance of caution, on July 13, 2011, the ALJ directed Rio Bravo and PG&E to submit a brief that discusses the propriety and lawfulness of investor owned utilities (such as PG&E) entering into settlement agreements with qualifying facilities (such as Rio Bravo), that resolve contract disputes with the payment of ratepayer funds. On August 9, 2011, PG&E and Rio Bravo submitted a joint brief that addressed this issue. On August 11, 2011, the ALJ took the additional step of issuing a ruling requesting comments on the settlement from The Division of Ratepayer Advocates (DRA). On August 31, 2011, DRA concurrently filed a motion for party status in this proceeding and comments on the Settlement Agreement.4 On September 23, 2011, PG&E and Rio Bravo filed a Joint Response to DRA's comments on the Settlement Agreement.
1 The Rio Bravo Rocklin facility was originally owned by Ultrapower, Incorporated.
2 As stated in the scoping memo: "As there is no express binding agreement that defines the Parties' rights in this area, nothing appears to preclude Rio Bravo's quasi-contract action for unjust enrichment. PG&E's motion to dismiss is therefore denied without prejudice to PG&E's raising such arguments after evidentiary hearings... ."
3 Rio Bravo and PG&E also acknowledged that the requested extension might extend the proceeding beyond the deadline imposed by Public Utilities Code Section 1701.2(d), and jointly stipulated their assent to an extension of this deadline.
4 DRA's request for party status was granted on September 11, 2011.
