Optional Fixed Prices

The existence of the CDWR portfolio provides an opportunity to offer QFs long term price stability at levels consistent with recent commitments by the state representing consumer interests. As a matter of policy, we believe that utilities purchasing from QFs should make available a pricing option that reflects the costs of the CDWR portfolio on a long term average basis.

As reflected in the Declaration of Ray Hart recently submitted by the CDWR, attached to the Order as Exhibit A, the ten year average cost of purchases for a fully rounded portfolio is $69 per megawatt. The average price for the first five years is $79 dollars per megawatt. The average price is $69 for the full ten years. These blended averages will change as the content of the portfolio evolves to reflect evolving conditions in the market. Nevertheless, in order to bring price stability, the commission will order the utilities to offer procurement terms including contract modification that will permit QFs to be paid the average portfolio price for deliveries. Specifically, electing QFs may opt to receive $79 per megawatt hour for deliveries between April 1, 2001 and March 31, 2006. Electing QFs may opt to receive $69 per megawatt hour for deliveries between April 1, 2001 and March 31, 2011. These payments will be "all in." That is, the payments will be all inclusive of energy, capacity, and adders. Contract that provide for seasonal variation in payments for capacity or energy as incentives for peak season and peak hour availability may be modified as needed to accommodate the fixed price. During the period of the election, the price will not be changed except to accommodate the incentive structures described above. Changes in the CTP in the future will not affect the price under either the five year or the ten year option.

QFs will have 30 days from the effective date of this order in which to make the election to take a five-year or ten-year fixed price, as an alternative to the modified Transition Formula described above. Certain QF contracts have provisions intended to provide incentives for peak season and peak hour operation. The QFs whose supply arrangements are structured in this manner may apply to the Commission for a variant payment structure that preserves the benefits of enhanced performance within the overall CTP parameter, calculated on an annual basis.