Assignment of Proceeding

Mark J. Ferron is the assigned Commissioner and Darwin E. Farrar is the assigned ALJ in this proceeding.

Findings of Fact

1. BVES is a public utility subject to the jurisdiction of this Commission.

2. BVES prepared an integrated resource plan to serve retail customers.

3. BVES issued several requests for proposals for energy and it reviewed and analyzed the various proposals from potential suppliers.

4. BVES negotiated a contract with LACSD for energy products identified in the integrated resource plan.

5. The duration of the LACSD PPA is 10 years.

6. BVES is subject to the settlement agreement adopted in D.02-12-041 which caps energy cost recovery through August 31, 2011.

7. SFAS No. 133 requires BVES to recognize unrealized gains or losses on the contract when the contract is marked to market for financial reporting.

8. A non-interest bearing memorandum account would recognize refunds or under collections offsetting the unrealized gains or losses for financial reporting purposes.

9. A non-interest bearing memorandum account would offset unrealized gains or losses to stabilize financial reporting.

Conclusions of Law

1. At the time it submitted this application, BVES was required to submit all PPAs for RPS-eligible power for approval by means of an application rather than an advice letter.

2. The electric energy sold or dedicated to BVES pursuant to the LACSD PPA constitutes procurement by BVES from an eligible renewable energy resource for the purpose of determining BVES' compliance with its obligations to procure such resources pursuant to the RPS legislation and other applicable law. However, nothing in this decision shall be read to allow generation from a non-RPS eligible renewable energy resource under the LACSD PPA to count towards BVES' RPS compliance obligation.

3. All procurement under the LACSD PPA should count towards any annual procurement target established which is applicable to BVES.

4. The substantive terms of the non-modifiable STCs established in D.08-04-009 (as modified by D.08-08-028) cannot be modified.

5. Contracts with changes to the non-modifiable STCs cannot be approved by the advice letter process.

6. Any changes to the non-substantive terms of the non-modifiable STCs must provide the same or greater ratepayer protections.

7. Before August 31, 2011, BVES may only recover the incurred costs of the LACSD PPA for energy delivered to retail customers subject to the settlement adopted in D.02-10-041.

8. The settlement adopted in D.02-12-041 is not modified or altered by this decision.

9. After August 31, 2011, BVES may recover in retail rates the reasonably incurred costs of the LACSD PPA for energy delivered to retail customers subject to prudent contract administration.

10. A non-interest bearing memorandum account reasonably offsets unrealized gains or losses created by the financial reporting impacts of SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities."

11. Application 10-06-003 should be closed.

ORDER

IT IS ORDERED that:

1. The application is granted subject to the Ordering Paragraphs below.

2. Golden State Water Company's Bear Valley Electric Service Division (Bear Valley) shall establish a memorandum account to track unrealized gains and/or losses on the Power Purchase Agreement with Los Angeles County Sanitation District No. 2, in accordance with Statement of Financial Accounting Standards No. 133.

3. Nothing in this decision shall change or modify the provisions of Decision 02-07-041 or the settlement agreement approved thereby.

4. For energy delivered to retail customers, Bear Valley shall recover the actual costs of the Power Purchase Agreement, with Los Angeles County Sanitation District No. 2 incurred before August 31, 2011, subject to the existing settlement agreement adopted in Decision 02-10-041.

5. Bear Valley shall recover the actual costs of energy delivered to retail customers after August 31, 2011, pursuant to the Power Purchase Agreement with Los Angeles County Sanitation District No. 2, and subject to prudent contract administration.

6. Bear Valley shall establish a non-interest bearing memorandum account to record refunds or under-collections to offset the unrealized gains or losses of the Power Purchase Agreement with Los Angeles County Sanitation District No. 2, created by the financial reporting impacts of the Financial Account Standards Board's Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities."

7. Bear Valley must file for authority before subsequent energy contracts can be included in the balancing account.

8. Bear Valley shall file a Tier 2 advice letter, pursuant to General Order 96 B Section 5.3(2) proposing the specific language for the memorandum account with the Commission's Energy Division which will become effective upon approval as appropriate at the time.

9. No hearings are necessary.

10. Application 10-06-003 is closed.

This order is effective today.

Dated June 23, 2011, at San Francisco, California.

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