2. Background
In Decision (D.) 07-09-040, we adopted specific policies and pricing mechanisms applicable to the purchase of energy and capacity from qualifying facilities (QFs) by Pacific Gas and Electric Company (PG&E), Southern California Edison Company (SCE) and San Diego Gas & Electric Company (collectively, the investor-owned utilities or IOUs). Among other things, D.07-09-040 adopted the Market Index Formula (MIF), which specifies the methodology for calculating the short-run avoided cost (SRAC) energy price that the IOUs pay QFs. As part of that decision, Energy Division was ordered to hold a workshop to address technical issues necessary to ensure smooth implementation of the adopted
QF program.1
During the technical workshop held November 14-15, 2007, parties reached agreement on various issues. Among other things, parties agreed on how certain components of the SRAC formula should be determined. Energy Division, however, subsequently determined that there were discrepancies between the agreements reached during the workshop and the requirements of D.07-09-040. On February 6, 2008, Energy Division sent an email to the parties listing the discrepancies and advised parties to file a petition to modify
D.07-09-040.2
On March 3, 2008, the QF Parties filed their joint petition for modification (Petition) seeking the following modifications to D.07-09-040:
1. Revise the market-based heat rate component of the MIF to be calculated using a 12-month simple, rather than rolling, average of forward market prices;
2. Revise the Time of Use (TOU)/Time of Day (TOD) factor of the MIF to use the energy only portion of the Market Price Referent (MPR);
3. Update the intrastate transportation rate component on a monthly, rather than annual, basis;
4. Allow forward market prices to be based on multiple independent sources, not just Platts Megawatt Daily and/or the Intercontinental Exchange;
5. Modify the definition of small QFs to include the phrase "less than or equal to 175,200 [megawatt hours];"
6. Modify footnote 6 to calculate the monthly weighted average power price based on "actual" on-peak and off-peak hours in the applicable month, rather than the adopted 57%/43% allocation; and
7. Eliminate the requirement that the IOU's joint MIF Advice Letter filing include the data set and formula for calculating the MIF once Market Redesign and Technology Upgrade (MRTU) is operational.
The California Cogeneration Council, The Utility Reform Network (TURN), and the IOUs each filed responses to the Petition. The various responses reveal broad support for some of the proposed modifications, but significant disagreement on others.
1 D.07-09-040, at p. 151 (Ordering Paragraph (OP) 2).
2 Energy Division's email is attached as Appendix A of the Petition.
