6. GHG Compliance Costs Not in Fixed Price Components
The fixed component of the AB 1613 pricing formula is defined as the "Fixed Component of the 2008 MPR minus GHG compliance costs, in $/kWh [kilowatt hour] based on 10-year contract."8 The Joint Utilities ask the Commission to clarify whether: (1) GHG compliance costs that are referenced in the contract should be subtracted from the fixed component; (2) the GHG adder in the 2008 MPR should be subtracted from this fixed component; or
(3) D.09-12-042 merely seeks to convey that the GHG adder in the 2008 MPR adder should not be included in this payment calculation, because GHG compliance costs are dealt with elsewhere in the contract.
FCE agrees that this point should be clarified and contends that the Joint Utilities' third interpretation is the correct characterization. It further points out that the Commission states in the Decision that the adopted approach was to have "GHG costs handled directly in the contract as a cost pass through instead of including an administratively established `adder' in the contract price."9 FCE does not object to this clarification of their perception of the Commission's intent.
TURN and DRA also agree that there should be some clarification on this point but do not offer any suggestion as to what that clarification should be. Although CCDC believes the Commission was clear in D.09-12-042 that the GHG adder is not already included in the AB 1613 payment calculation, it does not object to the modification proposed by the Joint Utilities if only to put an end to any efforts to further reduce AB 1613 payments.
6.1. Discussion
We agree that language adopted in Table 2 of D.09-12-042 may cause some confusion. This ambiguity stems from the fact that the fixed component of the 2008 MPR, upon which the AB 1613 pricing was based, does not include a GHG adder. GHG compliance costs in the MPR calculation are embedded in the variable component of the 2008 MPR. The Commission's intent in D.09-12-042 was to clarify that GHG compliance costs were not being paid for twice, once in the price and once as a pass through as a contract term. However, the language in D.09-12-042 apparently created some ambiguity. We agree with FCE and CCDC, the proper interpretation is that the GHG adder in the 2008 MPR variable component should not be included in the pricing formula, as GHG compliance costs are addressed elsewhere in the CHP contract. We therefore, clarify that since the fixed price components of the MPR do not include a GHG adder, and GHG compliance costs are not reflected in any way in the adopted pricing formula, no additional subtraction is necessary. GHG compliance is addressed in the contracts as a direct pass-through of actual compliance costs from the Seller to the Buyer. It does not need to be considered in the pricing formula adopted in D.09-12-042. We therefore, modify Table 2 to remove the phrase "minus GHG compliance costs."
8 See D.09-12-042 at 34, Table 2.
9 See FCE Response on the Joint Petition to Modification at 4.
