STATE OF CALIFORNIA GRAY DAVIS, Governor

PUBLIC UTILITIES COMMISSION

505 VAN NESS AVENUE

SAN FRANCISCO, CA 94102-3298

June 1, 2001

TO: PARTIES OF RECORD IN RULEMAKING 99-11-022

This is the draft decision of Commissioner Loretta Lynch. It will be on the Commission's continuation meeting on June 7, 2001. The Commission may act then, or it may postpone action until later.

When the Commission acts on the draft decision, it may adopt all or part of it as written, amend or modify it, or set it aside and prepare its own decision. Only when the Commission acts does the decision become binding on the parties.

Pursuant to Rule 77.7(f)(9), comments on the draft decision must be filed on June 5. Reply comments are waived.

In addition to service by mail, parties should send comments and reply comments in electronic form to those appearances and the state service list that provided an electronic mail address to the Commission. Finally, comments must be served separately on ALJ and the Assigned Commissioner, and for that purpose I suggest hand delivery, overnight mail, or other expeditious methods of service.

/s/ LYNN T. CAREW (by ANG)

Lynn T. Carew, Chief

Administrative Law Judge

LTC:tcg

Attachments

COM/LYN/GIG/abw DRAFT H-21

For Continuation Meeting 6/7/2001

Decision DRAFT DECISION OF COMMISSIONER LYNCH

(Mailed 6/1/2001)

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Order Instituting Rulemaking into Implementation of Public Utilities Code Section 390

Rulemaking 99-11-022 (Filed November 18, 1999)

OPINION

Summary

This decision is another interim measure we adopt to bring stability to the electric supply arrangements represented by the long-term contracts between utilities and sellers known as Qualifying Facilities (QFs). In this decision, we pre-approve three voluntary QF contract amendments for Southern California Edison Company (SCE), San Diego Gas and Electric Company (SDG&E), and Pacific Gas and Electric Company (PG&E) that address the special circumstances presented by the dysfunctional wholesale market in California. We also direct these utilities to make payments of 15% of all amounts owed by the utilities to any QF which demonstrates an immediate need for such funds to continue or reestablish safe and reliable operation.

In Decision (D.) 01-030-067 (March 27, 2001) we ordered utilities to pay QFs going forward in accordance with their existing contracts as modified by certain changes to the Short Run Avoided Cost (SRAC) formula. In April, we initiated Investigation (I.)01-04-027 into the nature and status of the delivery obligations represented by the long-term contracts, recognizing that ongoing disputes over payment raise fundamental questions about these obligations. With this decision we take another step toward resolving disputes in a way that will preserve the benefit of these long-term contracts for ratepayers.