3. Parties' Positions
3.1. Joint Parties
The Joint Parties state that the 2nd APPA represents the settlement of all issues raised by the settling parties and "renders moot the protests previously filed by DRA and TURN."9 The Joint Parties contend the 2nd APPA is a reasonable resolution of the proceeding in light of the whole record that is consistent with the law and in the public interest for several reasons. First, Joint Parties point out that the Commission has already approved the original PPA in D.06-11-048 as necessary to help PG&E meet an identified resource need.10 Second, according to the Joint Parties, the terms and conditions of the 2nd APPA are substantially better for customers than the 1st APPA, largely based on a lower capacity price than initially proposed in PG&E's application. Third, the Joint Parties believe the 2nd APPA represents a reasonable, viable and timely addition of a new generation resource to PG&E's portfolio of resources at a time when two of the five previously approved PPAs from PG&E's 2004 LTRFO have been terminated.11
The settlement represented by the 2nd APPA is also consistent with the law, according to Joint Parties, because the substance of the 2nd APPA is consistent with existing Commission policies and decisions, in part because it will satisfy an identified resource need, encourage retirement of aging plants, and provide PG&E sufficient operational flexibility to accommodate the "intermittent nature of renewable resources."12
Additionally, the Joint Parties assert that approval of the 2nd APPA is in the public interest because it will help assure PG&E has adequate resource capacity from a new, efficient generation source at a reasonable and competitive price to ratepayers.13
3.2. CARE/Simpson
CARE and Rob Simpson (collectively "CARE") oppose the settlement based on several arguments, some specific to the 2nd APPA and other more general objections to the underlying RCEC project. Specifically, CARE argues that Section 10.4 of the 2nd APPA provides for transfer of ownership and operation of the RCEC facility without notice or opportunity for comment by affected communities, and "ratepayers with a dispute over the operation and emissions of [RCEC] will have no recourse through the Commission complaint procedures."14
CARE agrees that the test for reasonableness could be met by comparison of the 2nd APPA to the 2008 LTRFO, but did not "see evidence to support the contention that the RCEC Project is just and reasonable when compared with bids in PG&E's 2008 LTRFO."15 CARE also rejects PG&E's independent verification of RCEC's increased costs because the results were not "independently verified."16
CARE's other objections can be divided into two categories: (1) concern about RCEC performing and PG&E enforcing the 2nd APPA's terms, and (2) numerous environmental criticisms about the siting and permitting of the RCEC power plant. Concerns about the RCEC project site are primarily articulated in a number of petitions attached to CARE's Comments in which signatories, stating they are residents in the Hayward area, have signed under several pre-printed paragraphs which state objection to:
· PG&E's development of fossil fuel fired electricity generation without satisfying the 20% renewable energy portfolio requirements;
· the proposed site of the Plant next to the San Francisco Bay without a "Formal Biological Opinion from the U.S. Department of Fish and Wildlife";
· the propensity to site plants in neighborhoods of color and/or low income;
· Bay Area Air Quality Management District (BAAQMD) or United States Environmental Protection Agency issuing air pollution permits for the project; and
· Erroneous projections of increased demand to justify ratepayers funding the project.
3.3. Group Petitioners
Group Petitioners comments opposing the settlement 17 largely relate to the site of the proposed RCEC facility rather than the terms of the 2nd APPA contract. The arguments specific to the 2nd APPA are described first.
Group Petitioners reject the Joint Parties' claim that issues raised in the initial protests are moot, and reprise arguments offered in protests made by DRA and TURN to the 1st APPA. Group Petitioners first argue that approval of the settlement would violate the Commission's policy of competitive bidding, citing D.08-11-004 issued November 6, 2008 (Tesla Decision), in which the Commission said "long-term power should be obtained through `competitive procurements,' rather than through preemptive actions by the investor-owned utilities, except in truly extraordinary circumstances."18 Group Petitioners view the 2nd APPA as a new bilateral contract which goes far beyond simple amendment.
Group Petitioners also object to a shift of burden of GHG compliance costs from RCEC to PG&E that is still present in the 2nd APPA. Group Petitioners also argue that the entire 2nd APPA is flawed because it fails to identify all material government approvals. According to Group Petitioners, this omission misleads the Commission as to the viability of the RCEC project primarily because the BAAQMD permit is likely to be denied.19
Group Petitioners have several other concerns about the underlying RCEC power plant, both financial and environmental, which they argue should be considered in this decision. They question the financial reliability of the project and argue RCEC should disclose who might become an equity partner in the future, presumably as it relates to the likelihood of obtaining project financing.20 Other objections raised by Group Petitioners relate to the RCEC project location and include alleged airport hazards, violation of Federal Aviation Administration (FAA) flight rules, and failure of the CEC to consider the airport-related problems, noise pollution, and safety problems.21
3.4. Reply Comments
In Reply Comments, the Joint Parties state none of the arguments offered by CARE/Simpson or Group Petitioners identify any material contested issue of fact warranting a hearing or demonstrate why the 2nd APPA should not be approved by the Commission.
With regard to the Commission's policy requiring competitive bids, Joint Parties argue the 2nd APPA was subject to market comparisons in its current and prior form, and point to at least three events. PG&E found the 1st APPA to be "within range of market values for contracts executed in the 2004 LTRFO."22 The 1st APPA also compared favorably in a side-by-side comparison with PG&E's 2008 LTRFO short list.23 Lastly, both DRA and TURN applied PG&E's analysis of the 1st APPA to the 2nd APPA and found it competitive with the short-listed 2008 LTRFO bids if it were bid into that RFO.24 Thus, Joint Parties conclude the 2nd APPA has been compared to potentially competitive bids, does not violate the Commission's policy requiring competitive bids, and need not meet the "truly extraordinary circumstances" standard discussed in the Tesla decision, even if Tesla were analogous.25
The Joint Parties address Section 10.426 Assignment and Change of Control in the 2nd APPA, which was singled out by CARE in a comment that suggested CARE believed it eliminated some public rights. The Joint Parties reply that these concerns are speculative, and that the Joint Parties made revisions to the default provisions to improve the ratepayers' position upon default and see no further need for changes.27
Concerning CARE's objection to the independent verification of the increased costs claimed by RCEC, the Joint Parties state that the costs were independently verified by Sargent & Lundy, LLC.28 If CARE is saying the independent verification should be independently verified again, then the Joint Parties counter that CARE failed to identify any particular part of the report with which they disagree.29
Joint Parties reject all arguments related to airport and aviation safety as outside the scope of the proceeding.30 RCEC additionally argues that these issues were previously addressed by the CEC in consideration of the permit issued to RCEC when it found the aviation risk "less than significant."31 The Joint Parties argue that any re-examination of the need for RCEC should be similarly rejected as outside the scope of the proceeding. With respect to questions raised as to the project's viability, Joint Parties reply that the fact additional public comment time was added to the rehearing of the BAAQMD permit is no indication of the outcome of the permit process or of a significant delay.32
9 Joint Motion at 1. This settlement does not extend to the issue of what standards the Commission should use going forward to consider requests to approve amendments to PPAs that the Commission has previously approved in a competitive solicitation process. The Joint Parties state their understanding that the Commission will address this issue as a policy matter in Phase 2 of the 2008 long-term procurement plan rulemaking, Rulemaking 08-02-007.
10 PG&E Testimony at 2-1.
11 Id. at 1-2.
12 PG&E Testimony at 1-7 to 1-8.
13 Joint Motion at 8.
14 CARE/Simpson Comments at 1-2.
15 Id. at 3.
16 Id.
17 Group Petitioners filed a "Public" and a "Confidential" version of "Contest and Opposition to Joint Motion for Approval of Second Amended and Restated Power and Purchase Agreement" (GP Comments) along with a motion to file under seal, which have different page numbers and much non-confidential material redacted from the version labeled "Public." Unless otherwise stated, references to GP Comments refer to the so-called "Confidential" version, albeit to information we do not think is market sensitive.
18 GP Comments at 4.
19 Id. at 8-10.
20 Id. at 7.
21 Id. at 10-22.
22 PG&E Testimony at 3-4.
23 Confidential Revised Supplemental Testimony at Attachment 1-2.
24 Joint Motion at 6.
25 Joint Parties Reply at 7.
26 Ordinarily this contract provision would be confidential pursuant to D.06-06-066 but PG&E waived that status when it addressed the concern in the Public version of the Joint Parties Reply.
27 Joint Parties Reply at 9-10.
28 Revised Supplemental Testimony Chapter 2 Attachment 2-1.
29 Joint Parties Reply at 11.
30 Joint Parties Reply at 2.
31 Joint Parties Reply at 2-3, citing to the CEC Commission Adoption Order, 07-0926-04 (Oct. 2, 2007) (CEC Decision), Docket No. 01-AFC-7C. A copy of the CEC Decision is available at http://www.energy.ca.gov/2007publications/CEC-800-2007-003/CEC-800-2007-003-CMF.PDF.
32 Joint Parties Reply at 12.
