Background
In D.06-07-029, the Commission adopted a cost-allocation methodology (CAM) that allows the advantages and costs of new generation to be shared by all benefiting customers in an investor owned utility's (IOU) service territory. The decision designated that the IOUs should procure the new generation through long-term power purchase agreements (PPA). The capacity and energy from the PPA are unbundled and the rights to the capacity are to be allocated among all the load serving entities (LSE) in the IOU's service territory. Each LSE would share in the capacity according to the LSE's share of the 12-month service area coincident peak, and the LSE can apply the capacity towards its RA requirement. The LSEs' customers receiving the benefit of this additional capacity pay only for the net cost of this capacity, determined as a net of the total cost of the contract minus the energy revenues associated with dispatch of the contract.3
The energy revenues are to be determined by the results of periodic energy auctions for the PPA energy rights.4 The Commission ordered in D.06-07-029 that the utilities develop implementation proposals for the energy auctions and that the ED hold workshops "prior to the IOUs' filing their Implementation Proposals, and subsequent workshops as needed."5
On September 25, 2006, an Assigned Commissioner's Ruling/Scoping Memo was issued that directed the utilities to file their implementation proposals for the energy auction by October 20, 2006. The IOUs made their filing on October 20th, and a workshop for all parties was subsequently conducted on November 1, 2006.
On November 17, 2006, the assigned Administrative Law Judge (ALJ) issued a ruling establishing a schedule for the submission of new or revised energy auction proposals on December 12, 2006, to be followed by a workshop on December 18, 2006. At the December 18th workshop, it became evident that there were many complex, interrelated issues related to the energy auction. As a result, the parties agreed that it would be appropriate to refer issues regarding the energy auction process and products to mediation in an effort to resolve many of the underlying issues.
On January 3, 2007, ALJ Kenneth Koss was appointed to oversee mediation efforts to develop the energy auction process and products. ALJ Koss subsequently provided notice to all parties on the service list in this proceeding as to the time and location of the first mediation session.6 After the first noticed mediation session, the parties agreed to continue meeting to work towards the development of a settlement agreement. Since January, a number of parties have been actively involved in negotiating numerous aspects of the energy auction process and products. The parties have engaged in almost twenty negotiating sessions, either face-to-face or telephonic, and have exchanged detailed draft proposals. As a result of these intensive mediation efforts, SCE; SDG&E; PG&E; Constellation; WPTF; DRA; Aglet; J. Aron & Company; TURN; Mirant; AReM; and Barclay's Bank, PLC (Settling Parties) reached a settlement regarding principles for the process and products for the energy auction.7 The auction described in the settlement agreement is essentially a sealed bid auction with an undisclosed minimum bid price. The settlement agreement is attached as Appendix A to this decision.
The motion to approve the Settlement regarding Energy Auction Principles was filed on May 11, 2007. During the 30-day comment period, no comments were filed on the proposal. We further note that the Settlement has been uncontested since its presentation.
3 Each IOU will perform annual forecasts and true ups for the net costs and charge them to all benefiting customers via a wires charge.
4 D.06-07-029 at 31, Item #16.
5 Id.
6 This notice satisfied the conditions of Commission Rule 12.1(b), requiring settling parties to "convene at least one conference with notice and opportunity to participate provided to all parties for the purpose of discussing settlements in the proceeding." Thus, the Commission does not need to convene any additional conferences before approving this settlement.
7 SDG&E supports the settlement as long as it is interim in nature and is not precedent setting.
