Background

The initial Prehearing Conference (PHC) in this Rulemaking on electric resource planning was held April 30, 2004, a second PHC was held August 25, 2004, and evidentiary hearings (EH) were held August 30 through September 24, 2004. The Commission issued D.04-12-048 adopting Long-Term Procurement Plans (LTPP) for the three investor-owned electric utilities (IOU), Pacific Gas and Electric Company (PG&E), Southern California Electric Company (SCE) and San Diego Gas & Electric Company (SDG&E).

The LTPPs were filed on July 9, 2004. Guidance to the IOUs in drafting and designing their LTTPs was provided in Assembly Bill (AB) 57,¹ the Energy Action Plan (EAP),²D.03-12-062,³ D.04-01-050,⁴ R.04-04-003, and the Assigned Commissioner Ruling/Scoping Memo (ACR) issued by Commissioner Peevey on June 16, 2004, as amended June 29, 2004,⁵ in R.04-04-003.

Specifically, the ACR stated "[a]s indicated in the OIR [R.04-04-003], review and adoption of the utilities' long-term procurement plans is the centerpiece of this proceeding. . . . This exercise, including the adoption of upfront standards and criteria for rate recovery constitutes the last major step remaining for implementation of AB 57. Completion of this review and approval of utility plans by the end of this year is of critical importance so that the utilities can make the investment decisions that are crucial to the reliable energy future of this state."⁶

Consistent with the ACR, D.04-12-048 gives the three IOUs authorization to plan for and procure the resources necessary to provide reliable service to their customer loads for the planning period 2005 through 2014. In addition, D.04-12-048 works in concert with or incorporates Commission and legislative efforts from other proceedings, in particular: Community Choice Aggregation (CCA),⁷ Demand Response (DR),⁸ Distributed Generation (DG),⁹ Energy Efficiency (EE),¹⁰ Avoided Cost and Long-term Policy for Expiring Qualifying Facility (QF) Contracts,¹¹ Renewable Portfolio Standards (RPS),¹² Transmission Assessment¹³ and Transmission Planning.¹⁴ Finally, but before D.04-12-048, the Commission had issued D.04-10-035, the Resource Adequacy (RA) decision in this docket. The LTTPs had to reflect the Commission's policy direction from these other proceedings into their LTPPs and to inform the Commission how the utilities intended to meet the established goals from the other proceedings through their respective procurement decisions between now and 2014.

Utilities also had to prioritize their resource procurement following the "loading order" of preferred resources established in the EAP. The EAP's "loading order" framework identifies certain demand-side resources as "preferred" because they work towards optimizing energy conservation and resource efficiency while reducing per capita demand. The EAP loading order is: energy efficiency and demand response; renewables (including renewable DG); clean fossil-fueled DG; and finally clean fossil-fueled central-station generation.

The ACR also instructed the IOU's to prepare three supply/demand scenarios: high-, medium-and low-incremental need. The medium-load plan was to be the preferred resource plan of each utility that meets the needs identified in its Alternative Base Case load-forecast scenario, or its CEC Integrated Energy Policy Report (IEPR) base case scenario. The high-load plan would be a reasonable guess at how great the burden of service could become under high future load growth and an optimistic view of economic growth, assuming modest customer migration for CCA. The low-load plan would be based on reasonable assumptions about progress in conservation and pessimistic assumptions about the economy and generous assumptions about the development of core/non-core and CCA. The IOU's were to use these scenarios to demonstrate how they planned to accommodate the many possible outcomes and to employ risk management vis-à-vis future commitments by incorporating contract terms of different duration.

A. Procedural History

IOUs filed their respective LTPPs on July 9, 2004. Testimony was served on August 6, 2004, by Border Generation Group (BGG), Cogeneration Association of California (CAC), California Independent System Operator (CAISO), Calpine Corporation (Calpine), California Cogeneration Council (CCC), Center for Energy Efficiency and Renewable Technologies (CEERT), City of Chula Vista (Chula Vista), City of San Diego (CSD), California Manufacturers & Technology Association and the California Large Energy Consumers Association (CMTA/CLECA), Constellation Power Source (Constellation), County of Los Angeles (LA), Duke Energy North America (DENA), California Department of Water Resources (DWR), Independent Energy Producers (IEP), Modesto Irrigation District (Modesto), Natural Resources Defense Council (NRDC), Office of Ratepayer Advocates (ORA), South San Joaquin Irrigation District (SSJID), Strategic Energy and Constellation New Energy (Strategic Energy), The Utility Reform Network (TURN), Utility Consumers Action Network (UCAN), UCS, West Coast Power (WCP) and the Western Power Trading Forum (WPTF).

On August 20, 2004, rebuttal testimony was served by PG&E, SCE, SDG&E, CAISO, Calpine, NRDC, ORA, Strategic Energy, TURN and UCS.

During the almost four weeks of evidentiary hearings there was extensive cross-examination of utility and intervenor witnesses and 128 documents were received in evidence. Post-hearing briefs were filed on October 18, 2004, by PG&E, SCE, SDG&E, BGG, CAC, CCC, Calpine, CAISO, CEERT, Chula Vista, CSD, CMTA/CLECA, Constellation, DENA, IEP, Modesto, NRDC, ORA, Sempra Energy Global Enterprises (SEGE), SSJID, Strategic Energy, TURN, UCAN, UCS, WCP and WPTF. Reply briefs were filed on November 1, 2004, by PG&E, SCE, SDG&E, CAC, CCC, Calpine, CAISO, CEERT, Chula Vista, Constellation, DENA, IEP, Modesto, NRDC, ORA, SSJID, Silicon Valley Manufacturing Group (SVMG), Strategic Energy, TURN, UCS and WCP, and a letter was received from the DWR.

The proposed decision (PD) was mailed on November 16, 2004. On November 30, 2004, SCE filed a timely request for Final Oral Argument (FOA) before the whole Commission. FOA was held on December 13, 2004.

As referenced above, UCS was an active participant in the proceeding from the beginning. UCS sponsored expert testimony, cross-examined witnesses, filed briefs and reply briefs, filed comments and reply comments on the proposed decision and participated in oral argument.

UCS is a non-profit organization dealing with global warming, renewable energy policy and climate change policy. UCS's primary role in the proceeding was to enhance the Commission's understanding of the need to increase the role of energy efficiency and renewables in California's resource mix, and to take steps toward addressing global warming emissions resulting from utility generation and purchases.

¹ AB 57, (Stats.2002, Ch.850, Sec.3 Effective September 24, 2004). AB 57 added § 454.5 to the Pub. Util. Code.

² The Energy Action Plan issued jointly on May 8, 2003, by this Commission, the California Energy Commission (CEC) and the California Consumer Power and Conservation Financing Authority (CPA). A copy of the complete EAP is available for downloading on the Commission's website at www.cpuc.ca.gov.

³ D.03-12-062, issued in R.01-10-024, gave the IOUs procurement authority, often referred to as "AB 57 authority" for 2004, including the authority to sign contracts for up to five-year duration for 2005 procurement needs.

⁴ D.04-01-050 gave continued procurement authority to the IOUs through the first three quarters of 2005, with authority to sign contracts for up to one year's duration for 2005 procurement needs. D.04-01-050 closed R.01-10-024, and established the parameters for R.04-04-003.

⁵ The June 29, 2004, Administrative Law Judge (ALJ) Ruling augmented the June 16, 2004, ACR and directed the utilities to include in their LTPPs responses to specific questions regarding global climate change issues.

⁶ ACR, June 4, 2004, p. 3.

⁷ R.03-10-003.

⁸ R.02-06-001.

⁹ R.04-03-017.

¹⁰ R.01-08-028.

¹¹ R.04-04-025.

¹² R.04-04-026.

¹³ R.04-01-026.

¹⁴ R.00-01-001.