II. Procedural Background

On October 29, 2001, the Commission issued an Order Instituting Rulemaking (OIR), designated as Rulemaking (R.) 01-10-024, to

(1) establish ratemaking mechanisms to enable California's three major investor-owned electric utilities, Edison, SDG&E, PG&E to resume purchasing electric energy, capacity, ancillary services and related hedging instruments to fulfill their obligation to serve and meet the needs of their customers, and

(2) consider proposals on how the Commission should comply with Section 701.3 which requires that renewable resources be included in the mix of new generation facilities serving the state.

A preliminary scoping memo contained in the OIR set a schedule for respondent utilities to file procurement proposals and for interested parties to comment on the proposals, and scheduled a prehearing conference (PHC) for January 8, 2002. SDG&E and PG&E filed their proposals on November 21, 2001 and Edison late-filed its proposal on November 27, 2001. Interested parties requested and were granted a one-week extension until December 21, 2001 to file comments. In their comments, many parties urged the Commission to develop a fully integrated resource planning process but to only decide quickly those issues that need to be in place for the utilities to resume full procurement responsibilities no later than January 1, 2003, as anticipated by ABX1 1.

The procedural schedule and scope for the initial proceeding was adopted in the April 2, 2002 Assigned Commissioner Ruling (ACR) Establishing Category and Providing Scoping Memo (April 2nd Scoping Memo). The ruling explicitly emphasizes interim procurement methods for the immediate issue of restoring the utilities' obligation to serve and meet the needs of their customers no later than January 1, 2003. The ruling requested briefs on transition issues that needed to be resolved and set a schedule for the respondent utilities to file procurement plans for 2003 with accompanying testimony. The April 2^nd Scoping Memo schedule anticipates a proposed decision in September, with a final Commission decision in October 2002. The only consideration of procurement practices post-2003 was for procurement of renewable resources to address our mandate under Section 701.3.

The respondent utilities served their testimony on May 1, 2002. As part of this testimony, Edison proposed the Commission adopt a process by which it could immediately begin contracting for up to a five-year term for capacity and related products in conjunction with the DWR. On May 6, 2002, Edison filed a motion requesting that this proposal be approved on an expedited basis outside of the hearing process. By ruling on May 15, 2002, the scope of this initial phase was expanded to consider Edison's May 6^th proposal in the hearing process.

Evidentiary hearings were held from June 10 through July 3, 2002. A bifurcated briefing schedule was set, with briefs on transitional procurement

issues, to include Edison's May 6^th Motion and how the Commission should address renewable energy procurement and Qualifying Facilities (QFs) under any authority granted, due first on July 12, 2002.⁶ These issues are the subject of D.02-08-071 issued August 22, 2002. We address all remaining issues relating to utilities resuming procurement in January 2003 here.

As addressed in the April 2, 2002 scoping memo, additional issues relating to the assessment of long-term resource needs still need to be addressed in subsequent phases of this proceeding.