Requests to Intervene
On September 12, 2000, CE Generation, LLC (CE) petitioned to intervene for purposes of filing comments on the Phase 1 proposed decision issued on September 5, 2000 in this proceeding. The assigned ALJ denied that request arguing that CE had constructive notice of the issues through its membership in IEP. The ALJ provided that CE could participate in other aspects of the proceeding if it appeared at the appropriate public hearing to enter an appearance. No subsequent hearing has occurred. On December 5, 2000, CE again petitioned to intervene. We will grant CE's petition with respect to the outstanding petition to modify the Transition Formula and Phase 2, because deliberation on these issues is either in the early stages (and therefore there is no prejudice to CE's participation) or because these are issues which were not originally within the scope of the proceeding and therefore no constructive notice occurred. However, we continue to deny CE's request to participate in Phase 1 aspects of this proceeding.
Tractebel Power, Inc. (Tractabel) filed for leave to intervene on December 1, 2000. Tractebel owns Ripon Cogeneration, Inc., a holding company for two cogeneration facilities in California. Tractabel Energy Marketing, Inc. (TEMI) filed for leave to intervene on December 11, 2000. As we ruled for CE, we will grant Tractabel and TEMI's petitions to intervene with respect to commenting on the petition to modify the Transition Formula and related decisions, and Phase 2. However, this participation does not extend to commenting or participating on issues established as Phase 1 issues in the Scoping Memo for this proceeding.
Comments on Draft Decision
Rule 77.7(f)(9) provides for reduction or waiver of the 30-day period for public review and comment when public necessity requires such reduction. We must balance whether the public necessity of adopting an order outweighs the public interest in having the full 30-day period for review and comment. We are
convinced that the petition of SCE as expanded falls under Rule 77.7(f)(9), and for that reason, we established a shortened period for comments on the draft decision.
Findings of Fact
1. Avoided cost postings are based on the Transition Formula adopted in D.96-12-028, which incorporates various California border price indices.
2. Each Transition Formula contains a utility specific "factor" designed to compare historical SRAC prices to historical gas border prices for that utility.
3. The Commission has filed a complaint (Docket No. RP00-241-000) at FERC seeking recision of certain contracts entered into by El Paso Natural Gas Company and its affiliates.
4. The starting energy price for the Transition Formula was calculated using 1995 values for the incremental system heat rate, average border gas prices and average interstate and intrastate gas transportation costs (collectively, the burnertip gas price), and a variable operations and maintenance adder.
5. D.96-12-028 set the factor for SCE at 0.7067.
6. The factor is the product of a linear regression comparing historical SRAC prices and historical gas border prices.
7. SCE's Petition does not include a declaration supporting new facts relied upon.
8. The facts relied upon in SCE's Petition are verifiable from a review of SoCal's tariffs.
9. Section 390(b) does not expressly refer to a factor.
10. The index methodology was developed during a time that utilities owned gas-fired generating facilities and operated those plants on the margin.
11. To meet incremental electricity needs, SCE no longer turns to its own generating facilities as it did in the past, but instead turns to the electricity market.
12. With the exception of the IER and variable O&M, all elements of the monthly factor formula can be calculated based on tariffed rates or published indices.
13. We do not have a sufficient record to update the IER or variable O&M components.
14. No party has proposed that PG&E or SDG&E factors require updating.
15. The gas prices used to calculate SCE and SDG&E short-run avoided costs rely on published border prices at Topock.
16. PG&E's short-run avoided costs are based on a 50/50 weighting of published border prices at Malin and Topock.
17. D.96-12-028 found that the Topock indices represented a reasonable proxy for the commodity portion of SCE's avoided cost of gas.
18. The basis differential is the difference between prices in the producing basins and at the border and usually bears some relationship to transportation costs from the basin to the border.
19. Numerous QFs purchase gas, the price of which is tied or linked to Topock prices.
20. A significant volume of purchases linked to Topock prices are not reflected in reported Topock border prices.
21. D.96-12-028 adopted California border indices to replace the index methodology, which derived a border gas price by relying on prices in the producing basins plus interstate transportation costs.
22. Neither basin prices plus transportation or tariffed core subscription rates are California border indices as the terms are understood.
23. SCE purchased gas in the Southern California market when it owned gas-fired generating facilities.
24. In adopting the Topock indices, the Commission did not find that SCE had historically purchased natural gas at a price equal to the simple average of the Topock prices.
25. In a given month, a utility's avoided cost of fuel will differ from the proxy relied upon in the Transition Formula.
26. In 93 FERC ¶ 61,294 (December 15, 2000), FERC found that California's market was yielding unjust and unreasonable rates.
27. In 93 FERC ¶ 61,294 (December 15, 2000), FERC found that an average of historical utility embedded cost of generation would represent an appropriate benchmark for determining the prudency and reasonableness of forward contracts.
28. $67.45/MWh represents an average of historical utility embedded cost of generation prior to restructuring.
29. Reliance solely on § 390(b) to calculate QF prices has recently yielded prices in excess of $67.45/WMh.
1. Avoided cost prices can be adjusted upwards but not downwards pursuant to D.82-12-120.
2. Modification of the factor in the manner proposed by SCE more closely ties the resulting avoided costs to the IER methodology used prior to D.96-12-028.
3. It would be unfair to modify any component of the Transition Formula based on changes to only one underlying component.
4. The Petition should not be rejected on the basis of lack of declarations.
5. There are not disputed facts at issue regarding SCE's proposed modification to the factor that require evidentiary hearings.
6. Section 390(b) does not limit our ability to consider revisions to the factor.
7. If the Commission had the discretion in the first instance to adopt a factor, it can exercise the same discretion to modify the factor without violating § 390(b).
8. The Commission's invitation to parties in D.96-12-028 to petition to modify the border indices does not preclude parties from seeking modification of D.96-12-028 on any other grounds.
9. Section 1708 provides the Commission with the discretion to "rescind, alter, or amend any order or decision made by it."
10. It is unclear, going forward, whether the statutory requirement to based SRAC payments on California border gas prices will accurately represent SCE's avoided cost of electricity.
11. Section 390(b) requires us to calculate SRAC using gas prices as the primary input.
12. There is no reason the Transition Formula should not be updated periodically.
13. Updating just one element of the Transition Formula does not retain the balance established by D.96-12-028.
14. All elements of the proposed monthly factor, not just the intrastate gas cost component, should be updated.
15. SCE's fixed factor should be converted to a formula, updated monthly, effective with the next regularly scheduled SRAC posting.
16. Changes to the monthly factor should be subject to possible upward adjustment based on our review of the IER and variable O&M components.
17. Parties should serve concurrent opening and reply testimony on how to calculate the incremental system heat rate and variable O&M for SCE on February 28 and March 21 respectively.
18. FERC has the ultimate authority and responsibility to provide relief to California ratepayers should in concur with our complaint that market power abuse has artificially raised gas prices at the California border.
19. We need not have a definitive ruling that market power abuse is occurring to find that the Topock border index no longer represents a robust market.
20. The Topock index is no longer sufficiently robust to be utilized in the § 390(b) Transition Formula.
21. Reliance on a basin price plus interstate transportation violates § 390(b) requirements.
22. Reliance on a tariffed core subscription rate violates § 390(b) requirements.
23. If we no longer rely of a California border price at a Southern California market center, but instead use a different border index, the price must be adjusted to represent a Southern California market.
24. A Malin border price plus intrastate transportation as a replacement for Topock meets the requirements of § 390(b).
25. We do not need to find that SCE would have purchased gas solely to the border to find that Malin plus intrastate transportation is a reasonable proxy for SCE's avoided cost of gas and is consistent with PURPA.
26. The Topock index should be replaced with a simple average of Malin, Oregon indices plus PG&E's G-AAOFF (Redwood to Off-System Path) tariffed rate effective with the next regularly scheduled avoided cost posting for SCE, PG&E, and SDG&E following the effective date of this decision.
27. Over time, setting avoided cost based on a robust border price index can reasonably represent gas procurement costs under a portfolio procurement strategy and therefore will generally meet the requirements of PURPA.
28. To fulfill our obligations under PURPA that payments to QFs be just and reasonable, we should retain the §390(b) Transition Formula as our primary QF pricing methodology but establish a cap on prices posted at the corrected FERC reasonableness benchmark ($67.45/MWh).
29. In the longer run, the statutory requirement to base SRAC on gas prices must be modified to more accurately reflect utility's positions in the electricity market.
30. SCE, PG&E, and SDG&E should be directed to file a revised short-run avoided cost posting, no later than January 19, 2001, for the remainder of January that implements the $67.45/MWh cap on a prospective basis.
31. We should grant the petitions of CE, Tractabel, and TEMI to intervene with respect to the petition to modify the Transition Formula and Phase 2. However, this participation should not extend to commenting or participating on issues established as Phase 1 issues in the Scoping Memo for this proceeding.
32. Pursuant to Rule 77.7(f)(9), the public review and comment period has been shortened.
ORDER
Therefore, IT IS ORDERED that:
1. The factor adopted for Southern California Edison Company (SCE) in Decision (D.) 96-12-028, Attachment 1, shall be modified to a monthly calculation where:
Factor = (((IER * (GPN + GTN))/10,000) + O&M) - Pbase
Pbase * ((GPN - GPbase)/GPbase)
2. Pbase and GPbase shall remain fixed as set forth in D.96-12-028, Attachment 1; all other factor inputs shall be updated monthly or as subsequently ordered by this Commission effective with the next regularly scheduled short-run avoided cost posting.
3. Parties shall serve concurrent opening and reply testimony on how to calculate the incremental system heat rate and variable operations and maintenance (O&M) for SCE on February 28 and March 21, respectively.
4. Until such time as the Commission adopts a revised incremental system heat rate or variable O&M component for SCE, SCE shall use 9,140 Btu/kWh and $0.002/kWh as inputs to the monthly factor formula.
5. Revisions to the incremental system heat rate and variable O&M for SCE that increase the monthly factor shall be effective with the first posting that includes the monthly factor.
6. Revisions to the incremental system heat rate and variable O&M for SCE that decrease the monthly factor shall be effective with the first posting following the decision that revises those elements.
7. The Topock index adopted in D.96-12-028 shall be replaced with a simple average of Malin, Oregon indices plus Pacific Gas and Electric Company's (PG&E) G-AAOFF (Redwood to Off-System Path) tariffed rate effective with the next regularly scheduled avoided cost posting for SCE, PG&E, and San Diego Gas & Electric Company (SDG&E) following the effective date of this decision.
8. Payments to qualifying facilities shall be made consistent with the Transition Formula as modified today but shall not exceed $67.45/MWh, the Federal Energy Regulatory Commission's benchmark for just and reasonable short term energy purchases.
9. SCE, PG&E, and SDG&E shall file a revised short-run avoided cost posting, no later than January 19, 2001, for the remainder of January that implements the $67.45/MWh cap on a prospective basis.
10. The petitions of CE Generation, LLC, Tractabel Power, Inc., and Tractabel Energy Marketing, Inc. to intervene with respect to the petition to modify the Transition Formula and Phase 2 are granted. However, this participation shall not extend to commenting or participating on issues established as Phase 1 issues in the Scoping Memo for this proceeding.
This order is effective today.
Dated _____________________, at San Francisco, California.
