12. Coordination of Avoided Cost-Related Issues
During the March 2006 workshops, the ALJ requested additional information on pending proceedings where avoided cost-related issues are being raised. The responses points to the continued need to coordinate across proceedings on these issues. It is unavoidable that the utilities and interested parties will be proposing methodologies for avoided cost or marginal price valuation in the context of specific revenue allocation, rate design, or resource-related proceedings between now and when we initiate and complete Phase 3 of this rulemaking. As indicated in the comments in this proceeding, the utilities have proposed a CT-based valuation approach in pending applications for advanced metering infrastructure (AMI), rate design phases of general rate cases, among others.75 However, the fact that the utility submittals propose a particular avoided cost methodology in a pending proceeding, does not mean that we will accept the merits of those proposals or, if we do require an estimate of avoided or marginal costs to resolve the pending issue(s), that this will establish a precedent for avoided cost valuation.
We have clearly stated that debate over avoided cost methodology should be conducted in this rulemaking, and not in multiple proceedings where the methods and inputs for specific applications of avoided costs are applied. We reiterate today that:
"...this rulemaking serves as the Commission's forum for developing a common methodology, consistent input assumptions and updating procedures for avoided costs across our various proceedings, and for adopting avoided cost calculations and forecasts that conform to those determinations. It is the forum for considering similarities as well as appropriate differences in methods and inputs for specific applications of avoided costs, including QF avoided cost pricing. Our goal is to establish `apples to apples' comparisons across resource options, to the greatest extent possible. We will strive for consistent methodologies and assumptions across applications of avoided costs, while recognizing that statutory directions for specific programs may require some other considerations."76
The reasons we articulated for consolidated avoided cost issues into a single rulemaking are as valid today as they were two years ago. As we noted then, it is less confusing for all interested parties to follow and participate in avoided cost issues if they are addressed in a single rulemaking proceeding. Even with careful notice procedures and coordination among the assigned ALJs and Commissioners, it is difficult to ensure that the public knows clearly where and when avoided costing methods, assumptions, forecasts, and updating procedures will be considered by the Commission.
In addition, we continue to believe that consolidating these issues into a single rulemaking will ensure a consistent record as the Commission considers how best to calculate and update avoided costs for the various resource-related applications:
"As we recognized in R.04-03-017, cohesive and rational policy making for resource procurement requires that we develop a common methodology for assessing avoided costs across the full range of supply- and demand-side technologies. QF pricing is part of this mix, and should not be addressed in isolation. Although there may be legitimate reasons for differences in avoided cost calculations, depending upon the application, we believe that addressing methodological issues, input assumptions, and updating procedures in a single forum is the best way to consider those differences as we develop avoided costs for use in our proceedings."
Accordingly, we reiterate and emphasize today that this rulemaking continues to serve as the forum for developing "the common methods, input assumptions, and updating procedures" for avoided cost calculations used in all Commission proceedings where avoided cost calculations or forecasts are to be applied.77
75 A.05-06-028 (PG&E's AMI), A.05-03-015 (SDG&E's AMI), A.05-05-023 (SCE's GRC Phase 2), A.06-03-006 (PG&E's GRC Phase 2), A.05-12-030 (KRCC Contract Evaluation), and A.04-02-026 (SONGS Anaheim Transfer Evaluation). SCE's AMI docket (A.05-03-026) was closed, and there is no current docket opened for those issues.
76 Order Instituting Rulemaking to Promote Consistency in Methodology and Input Assumptions in Commission Applications of Short-run and Long-run Avoided Costs, Including Pricing for Qualifying Facilities, (Avoided Cost OIR), issued April 22, 2004, mimeo., p. 2.
77 Ibid., p. 13.
