Procurement Implementation Plan

SDG&E's LTPP also contains the up-front, AB 57 guidelines for procurement that focus on activities that take place within the year and that are conducted to ensure least-cost dispatch. This portion of SDG&E's plan includes details regarding procurement processes such as RFOs, products for electric and gas procurement, and risk management policy and strategy.

SDG&E's LTPP explains the modeling and planning that are used to meet load requirements in a least-cost dispatch manner. The products that SDG&E uses for procurement are also detailed in the LTPP and are based on those listings in Table 1 of D.02-10-062, as well as other products that have been added through update filings, all of which are consolidated into this LTPP. The primary procurement objectives are to promote supply reliability and ensure the resource requirements of the portfolio are met. The LTPP does not specify in advance specific volumes of each product to be procured, but SDG&E determines the best products and markets for serving its customers' requirements as market conditions and customer loads become more certain consistent with least-cost, best fit requirements. Additionally, SDG&E's LTPP explains that it will utilize four primary mechanisms for purchasing and selling authorized products: bilateral contracts, exchanges, spot markets, and competitive solicitations.

SDG&E's LTPP also describes its risk management policy and strategy, including the current risk management practices, portfolio risk assessment, security requirements, CRT, and VaR-to-Expiration. Included in SDG&E's LTPP is its five-year "evergreen" hedge plan and the hedge strategies for the short-, intermediate-, and long-term time frames. SDG&E's LTPP establishes limits for how much of its total portfolio it will hedge in years three, four, and five of the rolling five-year plan. The LTPP also calculates the amount of collateral that may be required and sets a limit on how much collateral SDG&E will make available to implement this Plan.

SDG&E's portfolio risk assessment includes a description of forecast SDG&E risk positions, risk management products, and selection criteria. This discussion shows how risk positions trend and change in future years, how positions accumulate over time, and support potential future collateral requirements. The LTPP also outlines the credit and collateral risk management practices of SDG&E's procurement operations as well as the working capital requirements for liquidity consistent with the AB 57 goal of assuring creditworthiness.

The LTPP also explains how SDG&E uses CRT as a hedge metric (remaining CRT) to manage customer risk in procurement in years one and two of the rolling risk management strategy. The CRT for SDG&E was set by the Commission in D.02-12-074. The remaining CRT analysis is also accompanied by VaR-to-Expiration reporting at 95% and 99% confidence intervals. The LTPP explains how these metrics are calculated and how they guide hedging activities.

SDG&E's LTPP also includes the fuel procurement strategy for the dispatchable resources that are at SDG&E's disposal, including SDG&E-owned facilities, SDG&E-contracted tolling agreements and DWR dispatchable contracts allocated to SDG&E. This section of SDG&E's LTPP is the former "Gas Supply Plan" that SDG&E recommends now be filed with the LTPP rather than the prior biannual filing requirement the Commission had imposed on the utilities.