5. Clarification of Fixed Price Component

Exhibit B of the simplified contract and Exhibit C of the standard contract, as proposed by the working group to Rulemaking 08-06-024 (R.08-06-024), included the pricing formula for each contract. In adopting the standard contract, the Commission added language and tables to Exhibit C, Section 3 to reflect the fixed price component of the AB 1613 form pricing. Both the table and added language reflect escalating prices based on the 2008 MPR. The added language was as follows:

...the Fixed Price Component of the Monthly Contract Payment shall be the amount in the following table for the year in which the payment is being calculated.

The Joint Utilities contend the added language is in error because, taken literally, the language implies that the fixed component should escalate every year. The Joint Utilities believe that the MPR already assumes an escalation in the fixed component and has levelized that escalation so that the payments are the same during the entire period of the contract.

DRA and TURN support modification of the contract language to correct the "Fixed Price component" of the price paid to clarify that it is a constant value during the entire term of the contract.

FCE supports the Joint Utilities' proposed revision to Section 3 in Exhibit C of the standard contract to clarify that the MPR fixed price component be the amount identified for the year "in which the Agreement was executed by the Parties." However, FCE contends that the proposed redline does not match the language in Exhibit C.3 of the less than 20 MW contract and Exhibit B.3 of the Small CHP contract which refers to "the year of the Term Start Date." FCE believes it is important that the CHP contracts clearly show that, for purposes of determining the fixed price component, the relevant year is the year in which the facility initiates deliveries to the utility. FCE suggests that to eliminate any ambiguity the definition of the Term Start Date be revised to refer to the "initiation of commercial operation" or other similar language.

San Joaquin agrees with the Joint Utilities' proposal to clarify that the fixed price component of the AB 1613 price is constant over 10 years. San Joaquin disagrees with the Joint Utilities, however, about when that price is fixed. San Joaquin contends that the MPR fixed components shown in the table are determined based on the year in which a project comes on line.

CCDC agrees with the Joint Utilities that the MPR-based fixed component includes a levelized escalation for the term of the contract. CCDC generally agrees with the Joint Utilities' proposed revision to Section 3 of Exhibit C. However, CCDC notes there is some ambiguity between the revision proposed by the Joint Utilities in the text of the Joint Petition and the revision proposed in Exhibit C of the standard contract. CCDC conditions its support on its belief that the Joint Utilities intended that Section 3 of Exhibit C be revised to clarify that the fixed price component will be the amount for the year of the "Term Start Date" and that the reference to the year of execution in the text of the Joint Petition is an inadvertent error.

5.1. Discussion

We agree that the language added by D.09-12-042 is in error and that the fixed price component of the contract price does not escalate during the contract term. We also agree with FCE, San Joaquin, and CCDC that the fixed component should be based on the year in which a project is expected to begin commercial operation or come online, which is synonymous with "Term Start Date," and not the year in which the contract is signed. The "Term Start Date" is defined within Section 1.01 of the adopted contracts as the date that the project starts, in other words, the year in which a project is expected to come online, not the date the contract is signed. We therefore, modify the language of Section 3 of Exhibit C of the standard contract as follows:

The Fixed Price Component, "FPC," for all TOD Periods shall be the amount in the following table for the year of the Term Start Date.