19. Contract Termination Provisions

This decision implements SB 32 by directing utilities to incorporate a provision into their standard form contract and/or tariff, which utilities and parties are currently developing, for termination of service under the § 399.20 FiT Program.

SB 32 adds subsection (l) to § 399.20 to provide for contract termination before the contract expiration date in certain circumstances. SB 2 1X makes no modifications to this subsection. Subsection (l) of § 399.20 provides, generally, that the owner or operator of an electric generation facility shall continue to receive service under the tariff or contract until either of the following occurs (1) the owner or operator no longer meets the eligibility requirements for receiving service pursuant to the tariff or contract or (2) the period of service established by the Commission pursuant to subdivision (d) is complete.

Parties, such as Silverado Power, SunEdison, and Sustainable Conservation, point out that the termination provision should be narrowly interpreted and not increase the level of uncertainty by subjecting a contract to unknown or subsequently imposed eligibility requirements. SCE suggests that the language of the statute be incorporated into the tariffs and form contracts together with several other provisions. FuelCell Energy agrees with Silverado Power, SunEdison, and Sustainable Conservation that the termination provisions should be interpreted narrowly and also suggests that the Commission adopt a process for administering termination matters, pointing to the procedure established by the CEC under AB 1613. Under AB 1613, the CEC certifies eligibility of all facilities in the first instance and administers a decertification process in the event a facility falls out of compliance. Alternatively, FuelCell Energy suggests that the contract could provide for a notice provision from the defaulting party and a dispute resolution process, such as arbitration. FuelCell Energy also asks for clarification on whether a termination results in returning the capacity back into the § 399.20 FiT Program. SCE requests the Commission clarify whether terminated capacity must be replaced by additional contracts under the § 399.20 Program or replaced with capacity in another RPS program.

Consistent with the plain language of § 399.20(l) and in the interest of promoting stability of this program, it is reasonable to interpret the statute as requiring termination of the two events described in subsection (l)(1) and (l)(2) to be included in the standard form contract and/or tariff but that the Commission will not exclude other termination rights currently being considered in this proceeding considering the joint standard form contract.⁸⁶ Regarding questions raised by parties about the need for a decertification program similar to the program under AB 1613 administered by the CEC, we find no need for such a program now. To the extent parties find that an alternative resolution process, such as that suggested by FuelCell Energy, might be appropriate, we direct parties to pursue this matter in the ongoing discussion concerning a single form contract for the program described in the January 10, 2012 ALJ ruling.

Accordingly, PG&E, SCE, and SDG&E shall add a provision reflecting contract termination to the FiT Program standard form contract and/or tariff that is being developed in this proceeding in accordance with the schedule set forth in the January 10, 2012 ALJ ruling. The Commission will review this provision submitted by the utilities and, in a separate decision accept, reject, or modify the provision. Related FiT tariff modifications will also be addressed in this separate decision.

⁸⁶ § 399.20(l) provides as follows: "An owner or operator of an electric generation facility electing to receive service under a tariff or contract approved by the commission shall continue to receive service under the tariff or contract until either of the following occur: (1) The owner or operator of an electric generation facility no longer meets the eligibility requirements for receiving service pursuant to the tariff or contract; (2) The period of service established by the commission pursuant to subdivision (d) is completed."