5. The Power Purchase Agreement Amendments are Just and Reasonable
As discussed below, we find that the Amendments between PG&E and Yuba City Cogen, Greenleaf 1, and KES Kingsburg are just and reasonable and should be approved. The Amendments result in customer savings, improved operational profiles, and likely GHG reductions.
5.1. Market Value and Customer Savings
Under the QF/CHP Settlement, a Utility Prescheduled Facility is defined as an Existing [Combined Heat and Power] facility that has changed operations to convert to a utility controlled scheduled dispatchable generation facility, including, but not limited to, an Exempt Wholesale Generator5. Existing combined heat and power (CHP) QFs that met the federal efficiency requirements for a qualifying cogeneration facility under 18 Code of Federal Regulations (CFR) § 292.205 as of September 20, 2007 and convert to a Utility Prescheduled Facility may amend an existing power purchase agreement through bilateral negotiations.6
Under the Amendments in this application, the QF facilities will convert to Utility Prescheduled Facilities, allowing PG&E to schedule the resources only when it is economic to do so. As a result of this scheduling flexibility, the Amendments will provide approximately $14 million7 in ratepayer cost savings over what would have been paid under the current must-take contracts. In its original protest, DRA raised concern about whether the negotiated heat rate would indeed result in ratepayer savings.8 We find that the negotiated heat rate is reasonable in light of heat rates in other peaking facility contracts,9 and the ability to schedule the facilities only when it is economic to do so will result in significant market value for ratepayers.
5.2. Operational Benefits
Absent the Amendments, the three QF generators operate as must-take resources, and PG&E is required to take and pay for energy that is delivered, regardless of need or cost. Furthermore, as mentioned earlier, PG&E currently does not have scheduling rights and receives limited scheduling information from these facilities.
The Amendments give PG&E the right to schedule the facilities to operate when energy is needed and when it is economic to do so. Furthermore, the Amendments include provisions that require the QF facilities to notify PG&E of available capacity, and changes in available capacity, so that PG&E is able to more accurately forecast and schedule the output of these facilities. The Commission noted these benefits of converting an existing QF to a Utility Prescheduled Facility in its recent decision approving the QF/CHP Settlement.10
Finally, if the QF facilities elect to operate as Exempt Wholesale Generators, they must comply with all applicable CAISO tariff requirements, including interconnection agreements. This requirement is consistent with the Commission's policy to better integrate QF resources into the CAISO tariffs and deliverability standards.11 We find that the proposed Amendments will provide better operational benefits than could have been achieved under the existing contracts.
5 QF/CHP Settlement at § 17.
6 QF/CHP Settlement at § 4.8.1.1
7 In its April 14, 2011 response to the April 7, 2011 ALJ ruling, PG&E offered several reasons for the discrepancy in savings estimates between the original and amended applications. The explanations offered by PG&E are reasonable, and ratepayer savings will be achieved through approval of this application.
8 As noted earlier, DRA withdrew its protest on April 13, 2011.
9 A Utility Prescheduled Facility will most likely be operated in a similar fashion to other peaking plants on the utilities' systems.
10 D.10-12-035 at 45-46.
11 D.07-09-040 at 210-211.
