Expiring Contracts

Since the Commission will not determine the SRAC pricing for QF contracts or determine the Commission's ongoing policy of promoting cogeneration resources in this decision, it is reasonable to treat QF contracts that expire during this gap period - January 1, 2006 until a Commission final decision in 2006 - the same as contracts that expire by the end of 2005. D.04-01-050 set forth directives for interim relief for QFs with expired or expiring contracts, continuing the interim treatment (with a five-year instead of a one-year contract term) established in D.02-08-071 and D.03-12-062, for QF contracts expiring prior to the completion of the Commission's final decision on the policy and pricing of QF contracts. This decision will extend that interim treatment for expired or QF contracts from January 1, 2006 until the Commission's final decision. Nothing in this decision impedes a QF and an IOU from reaching an independent agreement on the terms of a continuing or a new QF contract.

In sum, this obligates the utilities to continue purchasing power pursuant to a five-year SO1 contract from any QF with a contract set to expire prior to the Commission's issuance of a final decision in the open QF dockets, R.04-04-003 and R.04-04-025. The pricing terms for any such contract will continue the order from D.04-01-050.

The pricing terms for any such contract should be consistent with existing Commission SRAC policy set forth in D.01-03-067, as modified by D.02-02-028; provided, however, to the extent that the Commission adopts a revised QF pricing policy, the pricing terms of the contract shall be modified to reflect said revised QF pricing policy as of the effective date of the Commission decision adopting a revised pricing policy.

While we recognize that this decision does not resolve any of the outstanding, vexing issues that are of concern to both the QF community and the IOUs, we determine that it is reasonable to continue the interim treatment rather than to attempt to establish a different temporary policy that will affect very few contracts and only be in effect for a short period of time. Evidentiary hearings are set in the combined dockets for January 2006 and parties will have a full opportunity to develop a record on which the Commission will base its long term policy decision on expiring and new QF contracts and on the pricing terms for QF contracts.