7. Cost Recovery

Section 13 of the QF/CHP Settlement governs cost recovery associated with contracts executed pursuant to the QF/CHP Settlement and specifically deals with recovery of stranded costs. PG&E's April 14, 2011 response to the April 7, 2011 ALJ request for information acknowledges that there may be stranded costs associated with the Amendments, but the stranded costs associated with QF contracts under consideration in this application are currently eligible for recovery through the Competition Transition Cost (CTC), pursuant to California Pub. Util. Code § 367(a)(2).¹⁴ PG&E further states that the QF contracts will continue to be eligible for the CTC after the amendments are effective. Section 367(a)(2) states:

Power purchase contract obligations shall continue for the duration of the contract. Costs associated with any buy-out, buy-down, or renegotiation of the contracts shall continue to be collected for the duration of any agreement governing the buy-out, buy-down, or renegotiated contract; provided, however, no power purchase contract shall be extended as a result of the buy-out, buy-down, or renegotiation.

A contract must have been executed prior to December 20, 1995 in order for § 367 to apply. All three of the QF contracts in this proceeding were executed prior to this date, and the Amendments do not extend beyond the expiration dates executed in the original agreements. We find that stranded costs associated with the QF contracts and Amendments will continue to be recovered according to the § 367.

Section 13.2.1 of the QF/CHP Settlement provides that the utilities shall recover the cost of all payments made pursuant to power purchase agreement and power purchase agreement amendments executed under the QF/CHP Settlement in their respective Energy Resources Recovery Accounts, subject only to their reasonable administration. Given that the Amendments were executed pursuant to the QF/CHP Settlement, PG&E should recover all costs associated with the Amendments in its Energy Resources Recovery Account.

¹⁴ Unless otherwise noted, all references to code sections shall refer to the California Public Utilities Code.