5. Assignment of Proceeding
Michael R. Peevey is the assigned Commissioner and Amy C. Yip-Kikugawa is the assigned ALJ in both proceedings.
Findings of Fact
1. The MIF adopted in D.07-09-040 replaced the Transition Formula adopted in D.96-12-028, as modified by D.01-03-067, as the methodology for calculating the SRAC energy price that the IOUs pay QFs.
2. D.08-07-048 modified D.07-09-040 to permit the IOUs to seek retroactive application of the MIF and established procedures to permit the IOUs to file an application for retroactive true-up of SRAC prices on a going forward basis.
3. The IEP, the Cogeneration Association of California, the Energy Producers and Users Coalition and the QF Parties filed a joint petition (Petition) to modify D.08-07-048.
4. PURPA and the FERC rules implementing PURPA require state commissions to ensure that SRAC payments do not exceed a utility's avoided cost.
5. The procedures adopted in D.08-07-048 were intended to provide regulatory certainty to both QFs and IOUs and to address our concerns with respect to Commission resources.
6. The procedures adopted in D.08-07-048 concerning retroactive adjustment of SRAC prices are unclear and should be modified.
7. Under Section 206 of the Federal Power Act, the earliest refund effective date for a complaint alleging unreasonable rates is the date the complaint is filed.
8. Under Section 206 of the Federal Power Act, refund periods are generally limited to 15 months.
9. Pub. Util. Code § 1701.5(a) requires ratesetting cases to be resolved within 18 months after the scoping memo is issued.
1. QF Parties' petition for modification should be denied in part and granted in part.
2. In connection with its obligations under PURPA, the Commission must order retroactive true-up of SRAC prices if it determines that it is warranted to ensure compliance with PURPA.
3. A party seeking an earlier implementation date of the MIF bears the burden of proving that SRAC payments prior to the MIF's implementation date had resulted in a persistent and systematic violation of PURPA.
4. It would be reasonable to require IOUs seeking retroactive application of the MIF to file their request by November 4, 2008.
5. It would be unreasonable to adopt QF Parties' proposed procedures for future adjustments to SRAC payments.
6. The scoping memo in any proceeding considering adjustments to the then-existing SRAC methodology should state whether an earlier implementation date of any newly-adopted SRAC methodology will be an issue to be considered further in the proceeding.
7. It would be reasonable to set the earliest implementation date of any newly adopted SRAC methodology to be the date a request is made for early implementation of any new formula, so that parties to commercial transactions are on notice that early implementation is being considered.
8. It would be reasonable to set the maximum period for retroactive implementation of a newly-adopted SRAC methodology to not exceed 18 months, unless parties opposing the earlier implementation date are found to have unnecessarily delayed the proceeding.
9. There is a rebuttable presumption that the then-existing SRAC methodology is valid until a new methodology is implemented.
10. It would be reasonable to allow SCE to amend A.08-11-001 in light of the clarifications adopted in this decision.
11. The clarifications in this decision could unfairly foreclose the IOUs from seeking application of the MIF from the implementation date of D.07-09-040 to the implementation date of the MIF.
IT IS ORDERED that:
1. The joint Petition for Modification of Decision (D.) 08-07-048 filed on October 3, 2008, by the Independent Energy Producers Association, the Cogeneration Association of California, the Energy Producers and Users Coalition and the California Cogeneration Council is denied in part and granted in part, as discussed herein.
2. D.08-07-048 is modified as follows:
a. On page 7, Section II.D., "Retroactive true-up of SRAC energy payments" is deleted and replaced with the following:
D. Retroactive true-up of SRAC energy payments
The Joint Parties next allege that we erred in failing to order a retroactive true-up of SRAC energy prices in D.07-09-040. The Joint Parties point to page 9 of D.07-09-040, where the Commission states that the Decision "updates the methodology for calculating SRAC energy prices on a prospective basis only, to ensure that SRAC prices continue to reflect utility avoided cost in the changing electricity markets in California." (Joint Parties' Reh. App., p. 14.) The Joint Parties also refer to our statement that "the record in this proceeding does not support a conclusion that the [SRAC transition formula] yielded prices that exceed utility avoided costs or systematically violated PURPA," and allege that this determination is not supported by record evidence and is not reflected in sufficient findings and conclusions as required by Section 1705. (Joint Parties Reh. App., pp. 14-15.)
We address this argument by modifying D.07-09-040 to permit an IOU to request application of the MIF for periods prior to the effective date of the Decision. An IOU seeking retroactive application of the MIF will have until November 4, 2008 to file its application. In its application, the IOU must state the time period for which the MIF should applied retroactively and demonstrate that application of the Transition Formula during that time period had resulted in SRAC payments that persistently and systematically exceed its avoided costs in violation of PURPA. We remind the IOUs that prior to adoption of D.07-09-040, SRAC prices under the Transition Formula are presumed to properly reflect utility avoided cost. Therefore, the IOUs bear the burden of presenting evidence to the contrary. This burden is not met by simply showing "the magnitude in reduction in SRAC energy payments that would have resulted if the new MIF pricing formula were applied retroactively." (Joint Parties' Rehearing Application, p. 16.)
Consistent with our obligation under PURPA to ensure that SRAC payments reflect utility avoided cost, we also modify D.07-09-040 to include procedures for future applications and rulemakings considering changes to the then-effective SRAC methodology. Going forward, the following procedures shall be followed:
1. For applications seeking adjustment of the SRAC methodology, the earliest implementation date for any newly adopted SRAC methodology shall be the date the application is filed. The applicant (in its application), or a party (in response to the application) must specifically request that an earlier implementation date be applied to any revised SRAC methodology adopted in the proceeding, and include substantial evidence demonstrating that current application of the ten-existing SRAC methodology has resulted in a persistent and systematic violation of the PURPA. The maximum period for retroactive implementation of a newly-adopted SRAC price will be eighteen (18) months from the date the request is made, except where the party opposing the earlier implementation date is shown to have engaged in malfeasance or dilatory conduct that results in prolonging the proceeding unnecessarily. Unless an earlier implementation date is requested and supporting evidence provided at the time the application is filed, any newly-adopted SRAC methodology shall only be effective prospectively. Any proceeding considering an earlier implementation date of a newly-adopted SRAC methodology shall include this issue in the scoping memo.
2. For Commission rulemakings that address the then-existing SRAC methodology, a request for an earlier implementation date must be made as part of comments to the Order Instituting Rulemaking and supported by substantial evidence demonstrating that current application of the then-existing SRAC methodology has resulted in a persistent and systematic violation of PURPA. If such a request is made, the earliest implementation date for any newly-adopted SRAC methodology would be the date the request is filed. The maximum period for retroactive implementation of a newly-adopted SRAC price will eighteen (18) months from the date the request is made, except where the party opposing the earlier implementation date is shown to have engaged in malfeasance or dilatory conduct that results in prolonging the proceeding unnecessarily. Any rulemaking addressing the then-existing SRAC methodology shall state in the scoping memo whether an earlier implementation date of any newly-adopted SRAC methodology is an issue to be considered further in the proceeding. Unless consideration of an earlier implementation date is in the scope of the rulemaking, any newly-adopted SRAC methodology shall only be implemented prospectively.
We remind parties that it is presumed that the then-existing SRAC methodology is valid until a new methodology is approved and implemented. Accordingly, an earlier implementation date for any newly-adopted SRAC methodology shall only be applied if evidence in the record demonstrates that the then-existing SRAC pricing methodology has systematically and persistently violated PURPA.
b. On page 19, Ordering Paragraph 1.f. is deleted and replaced with the following:
The contract terms and pricing in this decision apply specifically to expired, expiring and new QF contracts. Other than updating the SRAC formula and posted capacity prices, we do not change existing QF contracts. Furthermore, this decision updates the methodology for calculating SRAC energy prices on a prospective basis only, to ensure that SRAC prices continue to reflect utility avoided cost in the changing electricity markets in California. In comments, SCE has requested that the adopted MIF be applied retroactively. However, updating the SRAC formula to better reflect changes in the energy market does not, by itself, indicate that SRAC prices under the prior formula were in violation of PURPA. Furthermore, the Modified Formula is presumed valid for all periods prior to the implementation of the MIF and the record in this proceeding does not contain evidence rebutting this presumption. Nonetheless, consistent with Edison II and Edison III, should a party believe retroactive review of the Modified Formula is necessary to ensure compliance with PURPA, it should file an application. In the application, the IOU must specify the time period for which the IOU believes SRAC payments under the Modified Formula exceeded its avoided costs and substantial evidence demonstrating that application of the Modified Formula had resulted in SRAC payments that persistently and systematically over time exceed the IOU's avoided costs in violation of PURPA. If this showing is not made, the application shall be dismissed with prejudice. An IOU seeking retroactive application of the MIF will have until November 4, 2008 to file its application.
Going forward, we adopt the following procedures for applications and rulemakings considering adjustments to the then-effective SRAC methodology:
1. For applications seeking adjustment of the SRAC methodology, the earliest implementation date for any newly adopted SRAC methodology shall be the date the application is filed. The application must specifically request that an earlier implementation date be applied to any revised SRAC methodology adopted in the proceeding, and include substantial evidence demonstrating that current application of the then-existing SRAC methodology has resulted in a persistent and systematic violation of PURPA. The maximum period for retroactive implementation of a newly-adopted SRAC price will be eighteen (18) months from the date the request is made, except where the party opposing the earlier implementation date is shown to have engaged in malfeasance or dilatory conduct that results in prolonging the proceeding unnecessarily. Unless an earlier implementation date is requested and supporting evidence provided at the time the application is filed, any newly-adopted SRAC methodology shall only be effective prospectively. Any proceeding considering an earlier implementation date of a newly-adopted SRAC methodology shall include this issue in the scoping memo.
2. For Commission rulemakings that address the then-existing SRAC methodology, a request for an earlier implementation date must be made as part of comments to the Order Instituting Rulemaking and supported by evidence demonstrating that current application of the then-existing SRAC methodology has resulted in a persistent and systematic violation of PURPA. If such a request is made, the earliest implementation date for any newly-adopted SRAC methodology would be the date the request is made. The maximum period for retroactive implementation of a newly-adopted SRAC price will be eighteen (18) months from the date the request is made, except where the party opposing the earlier implementation date is shown to have engaged in malfeasance or dilatory conduct that results in prolonging the proceeding unnecessarily. Any rulemaking addressing the then-existing SRAC methodology shall state in the scoping memo whether an earlier implementation date of any newly-adopted SRAC methodology is an issue to be considered in the proceeding. Unless consideration of an earlier implementation date is in the scope of the rulemaking, any newly-adopted SRAC methodology shall only be implemented prospectively.
We believe that these procedures are reasonable given our legitimate concerns about Commission resources and the need for regulatory certainty for both QFs and IOUs.
3. Southern California Edison Company may amend Application 08-11-001 to reflect the clarifications adopted herein within 20 days after this decision is issued.
4. Southern California Edison Company, Pacific Gas and Electric Company, and San Diego Gas & Electric Company may file applications seeking application of the MIF as of September 20, 2007 if a decision addressing the California Cogeneration Council's petition to modify D.07-09-040 concerning the implementation date of the MIF adopts a date other than September 20, 2007. These applications shall be filed within 45 days after the date the decision resolving the implementation date of the MIF is issued.
5. Rulemaking (R.) 04-04-003 and R.04-04-025 remain open.
This order is effective today.
Dated April 16, 2009, at San Francisco, California.
MICHAEL R. PEEVEY
President
DIAN M. GRUENEICH
JOHN A. BOHN
RACHELLE B. CHONG
TIMOTHY ALAN SIMON
Commissioners
