COM/MP1/KPC/JF2/acb Mailed 8/26/02

Decision 02-08-071 August 22, 2002

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Order Instituting Rulemaking to Establish Policies and Cost Recovery Mechanisms for Generation Procurement and Renewable Resource Development.

Rulemaking 01-10-024 (Filed October 25, 2001)

TABLE OF CONTENTS

Title Page

INTERIM OPINION 2

I. Summary 2

II. Background 3

III. Edison's May 6^th Motion 5

A. Request 5

B. Applicability to PG&E and SDG&E 8

C. Should DWR Contract Allocation Be Completed First? 10

D. What Types of Products Should Be Authorized and in What Amounts? 11

1. Parties' Positions 11

2. Discussion 13

a) Establishing a Procurement Limit 13

b) Product Types 18

E. Procedural Process 22

1. What is Being Requested? 22

2. What is Required Now? 23

IV. Qualifying Facilities 26

A. The Statutory and Regulatory Framework Governing PURPA 26

1. Federal Law 26

2. State Law 28

B. Treatment of QFs During the Transition Procurement Period 31

V. Procurement of Renewables Through a Set-Aside During the Transitional Period 33

VI. Shortening the Public Review Period of the Proposed Decision 36

Comments on Draft Alternate Proposed Decision 36

Findings of Fact 37

Conclusions of Law 41

INTERIM ORDER 42

APPENDIX A - List of Appearances

APPENDIX B - Procurement Contract Review Process

APPENDIX C - Adopted Master Data Request

INTERIM OPINION

I. Summary

The question before the Commission in this interim decision is the extent to which, if at all, the respondent utilities should be permitted to immediately contract for a portion of their residual net short (RNS) in partnership with the California Department of Water Resources (DWR).¹

In this decision, we authorize the respondent utilities to enter contracts in participation with DWR between the effective date of this decision and January 1, 2003. In this decision, we address the very limited motion of Southern California Edison Company (Edison) dated May 6, 2002.²

We adopt a procedural process to review and approve these contracts. This process provides the utilities with an opportunity for an expedited Resolution that resolves reasonableness issues, while ensuring effective Commission oversight.

We also address the procurement of renewables in this transition period by setting aside a portion of procurement to come from renewable sources.

Finally, we require the utilities to procure QF power during the transition period for one year or until implementation of their final procurement plans as approved by the Commission in a later phase of this proceeding.