1. Background
In Decision (D.) 04-12-048, the Commission adopted a long-term
procurement plan for PG&E, among other utilities, that provided direction on the procurement of resources over a 10-year horizon through 2014. Pursuant to that plan, D.04-12-048 identified for PG&E a need for 2,200 megawatts (MW) of new generation in northern California by 2010, and directed PG&E to initiate an all-source solicitation to secure these resources. In D.06-11-048, the Commission approved PG&E's conduct of its 2004 long-term request for offer (2004 LTRFO) and approved its resulting projects, including the original Power Purchase Agreement (PPA) with RCEC, finding them to be needed and cost-effective.
On November 8, 2007, RCEC notified PG&E that the RCEC Project had encountered permitting delays and cost increases and requested modifications to the original PPA to (1) delay the RCEC project on-line date by two years to June 2012; (2) revise the contract price; and (3) make other amendments.
On May 30, 2008, RCEC provided PG&E with a notice of termination of the original PPA. On June 6, 2008, RCEC and PG&E signed a letter agreement that provided the parties could negotiate modifications to the PPA and upon agreement the notice of termination would be deemed rescinded. These parties now consider the RCEC notice of termination rescinded. PG&E and RCEC completed negotiations on August 4, 2008, with the results embodied in the (First) Amended PPA (1stAPPA) submitted with the initial application as set forth below.
On September 10, 2008, PG&E filed the application for approval of the 1st APPA. Protests to the application were filed by DRA on October 10, 2008 and by TURN on October 15, 2008.
Administrative Law Judge (ALJ) Darling conducted a prehearing conference (PHC) on October 29, 2008 attended by PG&E, RCEC, DRA, TURN, CURE, Independent Energy Producers Association,1 and Rob Simpson.
On November 17, 2008, assigned Commissioner Peevey issued a Scoping Memo setting the scope and procedural schedule for the proceeding and granting TURN's Motion for Supplemental Testimony by PG&E. Commissioner Peevey expressly rejected the proposal by some parties that the Commission review in this proceeding the need for RCEC's 601 MW capacity, saying:
"The Commission has previously determined the need for the PPA with the RCEC Project in D.04-12-048. The cost-effectiveness of the original PPA was approved as part of PG&E's 2004 LTRFO in D.06-11-048.... I disagree with [DRA] and [TURN] that the underlying need for the 601 MW capacity of RCEC must be re-examined in this proceeding. That issue may be appropriate for consideration in the determination of the next long-term procurement plan, but is beyond the scope of issues to be considered in this application for approval of amendments to a previously approved PPA."2
The Scoping Memo identified the following issues as within the scope of the proceeding:
1. Are the terms and conditions of the Amended PPA for the RCEC Project just and reasonable, particularly when compared with bids in PG&E's 2008 LTRFO?
2. Have the increased costs asserted by RCEC as the basis for increased price in the amended PPA been independently verified?
3. Are there any outstanding permitting delays that would result in the RCEC Project not being viable as of its projected construction start date of September 10, 2010?
4. Should any adjustments be made to the Amended PPA prior to Commission approval?3
The Scoping Memo also granted TURN's motion directing PG&E to serve Supplemental Testimony by December 8, 2008 as follows:
1. A side-by-side comparison of the [First] Amended PPA with short-listed bids in the 2008 LTRFO using the same quantitative and qualitative criteria PG&E considered relevant in its evaluation of the 2008 LTRFO bids;
2. A review by PG&E's 2008 Independent Evaluator of the evaluation of RCEC's [First] Amended PPA for its comparability to 2008 LTRFO bids, including adjustments as necessary to account for comparison of an amended contract to proposed bids for power purchase;
3. An independent review of the reasonableness of RCEC's claimed increases to various costs from its 2004 Power Purchase Agreement asserted to support the price increase in the Amended PPA;
4. The overall impact on ratepayers if the Amended PPA is approved as compared to the original PPA; and
5. An updated status report about the pending appeals of (i) the July 31, 2008 extension granted by California Energy Commission to RCEC's license which authorizes RCEC to begin construction no later than September 10, 2010; and (ii) the amended Prevention of Significant Deterioration air permit issued November 1, 2007 by the Bay Area Air Quality Management District.
In a December 10, 2008 ruling, ALJ Darling extended the dates set in the Scoping Memo for service of testimony at the request of PG&E because serious settlement discussions were underway and PG&E had issued a Notice of Settlement Conference to all parties pursuant to Rule 12.1 of the Commission's Rules of Practice and Procedure (Rules). Two days later, the California Pilots Association, Skywest Townhouse Homeowners, and Hayward Area Planning Association moved to be granted party status together as "Group Petitioners." They received party status in a December 16, 2008 ruling and participated in settlement discussions with the other parties.
On December 23, 2008, the Joint Parties filed a Joint Motion for Approval of Second Amended and Restated Power Purchase Agreement, stating that the 2nd APPA was a settlement of all issues raised by and among the Joint Parties. The ALJ then suspended the procedural schedule pending Commission review of the settlement.
Rob Simpson and CARE timely filed Joint Comments in opposition to the proposed settlement, as did Group Petitioners. PG&E filed Reply Comments on February 3, 2009. These Comments and Reply Comments are discussed in detail below. On February 6, 2009, ALJ Darling issued a ruling determining that evidentiary hearings were not necessary on the Joint Motion because neither CARE/Rob Simpson nor Group Petitioners had identified any material contested issues of fact, and therefore no hearing is required pursuant to Rule 12.3.
Both TURN and CARE filed timely Notices of Intent (NOI) to Claim Intervenor Compensation. In response to a December 12, 2008 motion by Group Petitioners to allow a late-filed NOI, ALJ Darling ruled that Group Petitioners could file the NOI but determined that Group Petitioners were ineligible to claim intervenor compensation.4 On February 2, 2009, Group Petitioners filed a motion for reconsideration.
1 Independent Energy Producers Association appeared at the PHC but did not seek party status, and did not appear again in the proceeding.
2 Scoping Memo at 2-3.
3 Scoping Memo at 3.
4 ALJ's Ruling Granting Motion by Group Petitioners to Accept Late Filing of Notice of Intent and Finding Group Petitioners are not Eligible to Claim Intervenor Compensation, issued January 23, 2009.
