Discussion

When the Commission issued D.04-01-050 in January 2004, it did not address all of the outstanding issues concerning existing and new QF contracts, but instead deferred the resolution of the QF issues to rulemakings it anticipated opening in the spring 2004. Instead, D.04-01-050 directed the IOUs to continue purchasing power from the QFs pursuant to a five-year SO1 contract from any QF with a contract set to expire prior to January 1, 2006. The Commission further determined in D.04-01-050 that the pricing terms for any such contract should be consistent with existing Commission short-run avoided cost (SRAC) policy set forth in D.01-03-067, as modified by D.02-02-028.⁴ In April 2004, the Commission initiated the LTPP and the avoided cost rulemakings. While the Commission did issue a final decision⁵ in the LTPP proceeding, it did not squarely address the future of existing or new QF contracts, and R.04-04-025 is still unresolved.

Therefore, we find ourselves once again needing to issue a decision that covers QF contracts that are set to expire after December 31, 2005, before a final decision issues in the QF dockets.

As set forth above, interested parties and the three IOUs filed comments and reply comments on this topic of interim relief for expiring QF contracts, and for potential new QF contracts. It is no surprise to find that the IOUs and the QFs continue to view the procurement world from their respective positions: the QFs want long term contract options and strong purchase obligations whereas the IOUs generally want shorter-term contracts with minimal or no purchase obligation. These are important and complex issues that are slated to be resolved by a Commission decision/decisions in R.04-04-025 and R.04-04-003. Therefore, this is not the appropriate decision to address the larger QF issues, including pricing of contracts. This decision will only provide direction to the IOUs concerning QF contracts that expire post-December 31, 2005, and before the Commission issues a final QF decision.

⁴ D.04-01-050, pp. 156-158.

⁵ D.04-12-048.