2. Background
Decision (D.) 09-12-042 (Decision) adopted policies and procedures for purchase of excess electricity from eligible combined heat and power (CHP) systems by an electrical corporation under Assembly Bill (AB) 1613 (Ch. 713, Stats. 2007). Among other things, this decision adopted a standard form contract available to all eligible CHP systems up to 20 megawatts (MW) and a simplified form contract for eligible CHP systems that export no more than 5 MW. Pricing under the AB 1613 form contracts was based on the costs of a proxy natural gas generation resource, and a location bonus was applied to eligible CHP systems located in high-value areas.
On January 20, 2010, the Joint Utilities together filed an application for rehearing of the Decision on the grounds that the pricing established in
D.09-12-042 is preempted by federal law and violates the ratepayer indifference standard in AB 1613. On the same day, the Alliance for Retail Energy Markets also filed an application for rehearing. On April 26, 2010, the California Public Utilities Commission (the Commission or the CPUC) issued D.10-04-055 denying both rehearing applications.
On February 2, 2010, the Joint Utilities timely filed this Joint Petition for Modification (Joint Petition) pursuant to the requirements of Rule 16.4 of the Commission's Rules of Practice and Procedure. In filing the Joint Petition, the Joint Utilities seek to address alleged problems with the implementation of the D.09-12-042 as it currently stands.1
On March 4, 2010, California Clean DG Coalition (CCDC), San Joaquin Refining Company (San Joaquin), and Fuel Cell Energy (FCE) filed responses to the Joint Petition. The Utility Reform Network (TURN) and Division of Ratepayer Advocates (DRA) jointly filed a response to the Joint Petition on
March 4, 2010.
On May 4, 2010, the Commission submitted a petition for declaratory order to the FERC to find that the Federal Power Act (FPA), the Public Utility Regulatory Policies Act of 1978 (PURPA) and FERC regulations do not preempt the Commission's decision to require California utilities to offer a certain price to CHP generating facilities of 20 MW or less that meet energy efficiency requirements. On May 11, 2010, the Joint Utilities filed a separate petition for declaratory order with the FERC in which they argued that the Commission's decision is preempted by the FPA insofar as it sets rates for electric energy that is sold at wholesale.
On July 15, 2010, FERC issued an order granting in part and denying in part the cross-petitions for declaratory order (FERC Declaratory Order), which found: that "[a]lthough the CPUC has not argued that its AB 1613 program is an implementation of PURPA, we find that to the extent the CHP generators that can take part in the AB 1613 program obtain Qualifying Facility (QF) status, the CPUC's AB 1613 feed-in-tariff is not preempted by the FPA, PURPA or FERC regulations, subject to certain requirements."2 The requirements were that:
(1) the CHP generators ... are QFs pursuant to PURPA; and (2) the rate established by the CPUC "does not exceed the avoided cost of the purchasing utility.3
On August 16, 2010, the Commission filed with FERC a request for clarification, or, in the alternative, a request for rehearing, which sought clarification regarding the avoided cost rates for facilities participating in the
AB 1613 program.
On September 9, 2010, the Commission issued an Amended Scoping Memo and Ruling. This Ruling amended the November 4, 2008 Scoping Memo to account for issues related to the FERC Declaratory Order and asked for further comment on certain issues brought up in the Joint Petition. On September 29, 2009, DRA filed a response to the Amended Scoping Memo. Comments in response to the Amended Scoping Memo were filed by the Joint Utilities, DRA, FCE, CCDC, San Joaquin, and Sustainable Conservation. Joint comments were filed by Pacific Corp and Sierra Pacific Power Corps (the Multijurisdictional Utilities).
On October 21, 2010, FERC issued an order, which granted the Commission's August 16, 2010 request for clarification (FERC Clarification Order).4 In this order, FERC clarified that the state has a wide degree of latitude in setting avoided cost, can utilize a multi-tiered avoided cost rate structure, and that this approach is consistent with the avoided cost requirements set forth in Section 210 of PURPA.
1 The Joint Utilities asserted that they did not waive the claims separately raised in their Application for Rehearing.
2 California Public Utilities Commission et al., 132 FERC ¶ 61,047 at 65.
3 Id. at 67.
4 California Public Utilities Commission, 133 FERC ¶ 61,059.
