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ALJ/HSY/gd2 Date of Issuance 3/15/2011

Decision 11-03-010 March 10, 2011


Application of Pacific Gas and Electric Company for Approval of Four Power Purchase Agreements With Westside Qualifying Facilities and Associated Cost Recovery. (U39E)

Application 10-10-005

(Filed October 8, 2010)



This decision approves four power purchase agreements between Pacific Gas and Electric Company (PG&E) and four existing qualifying facilities, and cost recovery associated with those agreements, contingent on the "Qualifying Facility and Contained Heat and Power Program Settlement Agreement" becoming effective. This proceeding is closed.

1. Background

By this application, Pacific Gas and Electric Company (PG&E) requests Commission approval of four power purchase agreements (PPAs) between PG&E and four existing cogeneration qualifying facilities (QFs): Mid-Set Cogeneration Company (46 megawatts (MW)), Salinas River Cogeneration Company (49.9 MW), Coalinga Cogeneration Company (49.9 MW), and Sargent Canyon Cogeneration Company (48.5 MW) (collectively, "sellers").

Each of these QFs began firm capacity deliveries to PG&E pursuant to 15-year Interim Standard Offer 4 contracts that were executed by PG&E and the sellers' predecessors-in-interest on June 28, 1985. Although the original contracts have expired, PG&E has continued to purchase electric generation from the sellers under Standard Offer No. 1 as-available capacity contracts that are currently set to expire on December 31, 2011, March 5, 2012, February 28, 2012, and February 21, 2012, respectively. The proposed PPAs will replace the current contracts and provide for deliveries through December 31, 2016.

PG&E filed this application in anticipation of the Commission's approval of the then-pending "Qualifying Facility and Combined Heat and Power Program Settlement Agreement" (QF/CHP Settlement), which resolved numerous outstanding QF-related disputes. PG&E asserts that the power purchase contracts are just and reasonable, in large part, because they are consistent with the QF/CHP Settlement. Alliance for Retail Energy Markets (AReM) filed a protest opposing the application, including the proposed cost recovery provisions, as premature because the QF/CHP Settlement had not been adopted by the Commission. The California Independent System Operator (CAISO) filed a response supporting the application.

On December 3, 2010, the assigned commissioner issued a scoping memo and ruling which identified the issues to be determined and set a schedule for addressing those issues. In particular, the scoping memo determined that the matter should be submitted upon the filing of concurrent opening and reply briefs without the need for evidentiary hearing, set a schedule in anticipation that the Commission would issue a decision on the QF/CHP Settlement on December 16, 2010, and provided an opportunity for parties to file a motion for extension of time or other procedural relief upon a showing that the Commission decision approving the QF/CHP Settlement, if any, substantially deviated from the then-pending proposed decision. The Commission approved the QF/CHP Settlement in Decision (D.) 10-12-035 on December 16, 2010, whereupon no motions were filed seeking an extension of time or other procedural relief.

PG&E and AReM filed concurrent opening briefs on January 10, 2011, AReM filed its concurrent reply brief on January 20, 2011, and PG&E filed its concurrent reply brief on January 24, 2011, upon which the proceeding was submitted.

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