PROTESTS

SCE's Advice Letter AL 1701-E was timely protested on April 28, 2003 by the Office of Ratepayer Advocates (ORA), the Cogeneration Association of California (CAC), and the California Department of Water Resources (DWR)¹³ although DWR requested more review time. On May 2, 2003, SCE filed both a public and a confidential response to the three protests. Also on May 2, 2003, DWR submitted both a redacted and a confidential memo that set forth DWR's specific concerns ("DWR Supplemental Protest") with SCE's proposed Gas Supply Plan. On May 9, 2003, SCE filed both a redacted and a confidential response to DWR's May 2, 2003 memo. On May 21, 2003, SCE filed additional "Substitute Sheets for 1701-E" which amounted to a revised copy of the Gas Supply Plan from that submitted on April 18, 2003. The May 21, 2003 version of the Gas Supply Plan includes certain "editorial corrections to the original Appendix A" which are itemized in the transmittal letter.

The following is a more detailed summary of the major issues raised in the protests. CAC would have the Commission reject SCE's entire Gas Supply Plan because it was filed under seal. The redacted version of DWR's Supplemental Protest did not present any specific issues. However, DWR's confidential Supplemental Protest sets forth a number of specific concerns where DWR states its intent to develop and implement the "DWR Fuels Protocols in the form of instructions from principal to agent."¹⁴ DWR considers SCE's proposed transaction strategy too general because it provides SCE with maximum flexibility. DWR would prefer, instead, to see more specific procurement strategies.¹⁵ In addition, DWR has some concerns with SCE's market assessment, and requests a consultation finding from the Commission per the Rate Agreement.

In the interest of clarity, and due to its brevity, ORA's protest is essentially shown here in its entirety:

"Based on its review, ORA supports Commission approval of SCE's plan with the following modifications:


1. "Natural gas transactions should not be subject to a five-year limit. Rather, they should be limited only be (sic) the length of the relevant CDWR contract."

2. "The calculation of portfolio risk should not be limited to a two-year period. Instead, portfolio risk should be calculated over the length of the longest DWR contract."

3. "Estimates of portfolio risk should not be used to evaluate individual contracts as SCE suggests. Instead, a less prospective approach should be used."


"SCE proposes (page iii) that it 'will perform an analysis that demonstrates that the prospective transaction reduces the risk of the combined SCE/DWR portfolio before recommending that DWR execute that transaction.' In other words, no contract will be recommended that does not reduce portfolio risk as measured by SCE."

"SCE's portfolio risk will be estimated with some error as will the effect on overall portfolio risk of a specific contract. Thus, a contract may be rejected because it increases the estimate of portfolio risk when the contract might actually decrease portfolio risk. Even if a given contract leads to an increase (on average) of portfolio risk, it might offer excellent protection during months in which natural gas prices are high even though it might offer poor protection in other months and on average increase portfolio risk." (ORA Protest, page 1)

In its May 2, 2003 response to protests, SCE stated that CAC's request (to reject SCE's entire GSP because it was filed under seal) exceeds the scope of this compliance filings review process, and that such concerns relating to QF contract costs could not legally be resolved through issuance of a resolution. With regard to ORA, SCE stated that it was willing to accept the first ORA recommendation on transaction term limits, but noted that to do so would exceed the term of the GSP. SCE did not accept the other two ORA recommendations regarding calculation of portfolio risk and contract evaluation.

In its May 9, 2003 response to DWR's Supplemental Protest, SCE proposed to accept a subset of DWR's recommendations. SCE accepts the proposed DWR Protocols, as long as they do not conflict with Commission decisions and orders.