VIII. Qualifying Facilities: Long-Term Policy For Expiring QF Contracts

On September 30, 2004, ALJ Wetzell issued a ruling "initiating the Commission's consideration of a long-term policy for expiring QF contracts" (p.1). The ruling called for proposals for such a policy [to] be filed on November 10, 2004, which "may also address policy for new QFs" Id. Comments in response to those proposals are due November 24, 2004. The ruling further stated that "the final schedule for adopting a long-term policy for expiring QF contracts [in R.04-04-003] will be determined after review of the comments and a determination of whether evidentiary hearings are required" (p.4). The ruling "anticipated establishing a schedule providing for a Commission decision in the first quarter of 2005 if hearings are not required. If hearings are required, ... a Commission decision [is anticipated] in the second quarter of 2005.

Although we anticipate adopting a long-term policy for expiring QF contracts in this rulemaking, R.04-04-003, by mid-2005, we may be able to benefit from the work being done on avoided cost issues in R.04-04-025, Order Instituting Rulemaking to Promote Consistency in Methodology and Input Assumptions in Commission Applications of Short-run and Long-run Avoided Costs, Including Pricing for Qualifying Facilities. Parties are, however, aware that R.04-04-025 will be litigated during 2005. A prehearing conference in R.04-04-025 was held on November 9, 2004. To the extent that the development of a long-term policy for expiring QF contracts in R.04-04-003 becomes contingent upon any anticipated policy outcomes in R.04-04-025, unacceptable delays in the establishment of such a policy could result. Specifically, QFs whose contracts expire after December 31, 2005 are not eligible for the one-year or five-year contract extension options set forth in D.03-12-062 and D.04-01-050, respectively. Currently, the only recourse for QFs, whose contracts expire in 2006 and beyond, is (1) to participate in any upcoming power solicitations, or (2) negotiate bilateral contracts with utilities. Neither of these two options is entirely certain. Though we expect QFs to continue to participate actively in these opportunities, thus, without contract extensions or a new long-term policy, QF contracts that lapse in 2006 could cause QF power to go off-line at that time. However, our plan to address these issues by mid-2005 will avert these concerns.