Parties Positions

The Settling Parties

PG&E, DRA, TURN and CURE

The settling parties urge the Commission to expeditiously approve the CPCN for CC8 on the grounds that the facility is in the public interest since it will provide lower rates for PG&E customers as well as provide a source of reliable energy supply. PG&E's estimates of the plant's completion costs and initial revenue requirements have decreased since PG&E filed the application and the purchase price for the facility is below market since it is the result of the settlement with Mirant. Mirant already obtained the necessary permits and partially completed construction. PG&E customers will be the beneficiaries of this economic asset.

The Settling Parties propose amortizing the cost of this generation asset over 30 years and seek to have all utility customers indifferent over this 30-year period to changing customer loads. Specifically, PG&E, along with DRA, TURN and CURE, suggest that all customers who benefit from the completion of the plant pay for it for 30 years─including departing load customers. The Settling Parties' concern is that if CC8 has any above-market costs during its 30-year life and all current customers are not responsible for these above-market costs, then PG&E's bundled ratepayers alone will bear the financial burden. Therefore, the settlement proposes that PG&E be authorized to recover any above-market costs of CC8 through an NBC for any departing load customers for the 30-year life of the project.

Paragraph 11 of the Settlement Agreement addresses this basic issue. The Settling Parties defer all other issues including, but not limited to the calculation, application and allocation of the NBC to another appropriate proceeding, possibly R.02-01-011.

CCSF

CCSF's argument against Paragraph 11 is that CC8 is a relatively low-cost and low-risk project, a "good economic deal" that "should not be uneconomic."⁴ CCSF believes that the Commission previously determined that a 10-year NBC was reasonable in regards to other similarly situated utility projects, such as Mountainview, Palomar, and Ramco, and was reasonable generically to all future utility projects as specified in D.04-12-048. While D.04-12-048 did permit a utility to justify an extended time for stranded cost recovery, CCSF argues that this justification is not presented in this record. First, CC8 should be economic, and therefore there should not be any "above-market" costs. Second, CC8 is a tried and true product, not a risky experimental project that conceivably could justify a longer NBC. And finally, under the 10-year default NBC, PG&E will have ample opportunity to adjust its procurement plans to changing customer loads. With a hybrid portfolio of different fuel types, different ownership forms and varied contract lengths, PG&E can adjust its procurement portfolio to match changing customer profiles.

MID

In principal, MID argues against any NBC as being anti-competitive. However, recognizing that an NBC might be imposed for CC8, Modesto, and Merced Irrigation Districts argue that the 30-year period set forth in Paragraph 11 of the Settlement is too vague, uncertain and anti-competitive to be reasonable or in the public interest. In particular, Paragraph 11 only authorizes PG&E to recover the above-market costs of CC8 for 30 years, but defers implementation and all the pertinent details to another case. MID contends that it would be more appropriate to defer all aspects of an NBC in excess of 10 years to another case, rather than approving the 30 years in this case─with all pertinent details to be determined later. For example, MID is concerned that if there are above-market costs in a particular year that are collected by way of an NBC, but yet in another year CC8 is below-market, there should be provisions for returning money to the NBC payers.

The Commission has already determined that a 10-year period for an NBC is reasonable in D.04-0-12-048, and MID claims that PG&E presented no evidence to support a revision of this provision. Finally, MID asks that if the Commission does impose an NBC, that it be for no more than 10 years, that it be applicable only to customers who depart on/after the date CC8 commences commercial operations and that it should not apply to "new" load, i.e., customers who have never been served by the utility.

EPUC

EPUC is concerned with customer-generated departing load (CGDL) and opposes the 30-year NBC because it would discourage co-generation (co-gen) and distributed generation (DG) at a time when the state and the Commission are promoting such alternative resources. EPUC argues that PG&E has the ability to anticipate changes in its customer base and should use prudent planning to shape its procurement plans to changing customer profiles rather than seek to collect above-market costs from departing load.

⁴ Transcript (Tr.), p. 191 (PG&E/Wan).