VI. Comments on Draft Decision
Pursuant to Section 311(g)(2) of the Public Utilities Code, this decision must be served on all parties and subject to at least 30-day public review and comment prior to a vote of the Commission. Section 311(g)(2) provides that this 30-day period may be reduced or waived upon the stipulation of the parties in the proceeding.
At the PHC held on May 5, 2004, the parties stipulated to shorten the comment period. Accordingly, opening comments must be filed by May 28, 2004 and reply comments must be filed by June 4, 2004.
Findings of Fact
1. Pub. Util. Code §§ 399.14(a)(2)(A) and 399.15(c) require the Commission to adopt a process and methodology for establishing an MPR to be used in implementing the RPS program.
2. Commission D.03-06-071, as modified by D.03-12-065, began the implementation of determining a process and methodology for establishing an MPR.
3. Commission staff has issued a white paper and has held workshops and received comments on the subject of the MPR.
4. Different MPRs are needed for each contract term and power product.
5. Determining a methodology for establishing the MPR requires choosing a gas forecasting approach and a modeling approach.
6. NYMEX futures contracts are a source of forward market prices for natural gas.
7. Forecasts of forward market prices based on natural gas fundamentals are available from a number of sources.
8. A cash flow simulation model can be used to calculate baseload and peaking MPRs.
9. Calculation of MPRs requires a defined capital recovery term.
10. A capital recovery term of 20 years more closely matches reality than a shorter term.
11. Calculation of MPRs requires a defined capital structure.
12. The CEC model provides a capital structure that is a reasonable starting place for calculations.
13. The CEC model of capital structure does not exactly correspond to the facts in this proceeding.
14. Modeling inputs may be obtained from outside sources.
15. A combustion turbine is a reasonable proxy for a peaker plant for purposes of calculating an MPR.
16. Pursuant to Pub. Util. Code § 399.14(a)(2)(A), the MPR must be disclosed only after the closing date of a competitive solicitation.
17. The timing of the disclosure of the MPR is important.
18. An ALJ Ruling allows for more precise timing of the disclosure of the MPR.
Conclusions of Law
1. There is an adequate record in R.01-10-024 and in this proceeding to adopt an MPR methodology.
2. Six statewide MPRs should be calculated, corresponding to the three contract terms and two power products.
3. In determining an MPR methodology, it is reasonable to use NYMEX gas futures prices and forecasts based on natural gas fundamentals.
4. In determining an MPR methodology, it is reasonable to use a cash flow simulation model.
5. A capital recovery term of 20 years is reasonable to use for modeling purposes in calculating an MPR.
6. A 70/30 debt/equity ratio is reasonable to use for modeling purposes in calculating an MPR.
7. Commission staff should seek reliable outside sources for modeling inputs.
8. The same methodology and model should be used to calculate baseload and peaking MPRs.
9. Inputs for a peaking MPR model will be different from those for a baseload MPR model.
10. An ALJ Ruling is the preferable approach for the release of the MPR.
ORDER
IT IS ORDERED that:
1. A Market Price Referent methodology is adopted, as described above, consistent with the preceding Findings of Fact and Conclusions of Law.
2. The Assigned Commissioner and Assigned Administrative Law Judge's will make such rulings as are necessary to effectuate this order.
3. This order is effective today.
Dated , at San Francisco, California.
