Position of CVP Group

The motion of the CVP Group opposes the assessment of CRS on preference power that is or will be provided by WAPA. As described in the Declaration of Stuart Robertson, attached to the motion, WAPA markets 1470 MW to over 70 preference power customers including irrigation and water districts, federal installations, state universities, and prisons. Under the terms of a contract executed in 1967 between PG&E and WAPA, (identified as Contract 2948A), WAPA integrates its facilities with those of PG&E. Various services provided by PG&E support WAPA's sale of firm power to preference power customers. Contract 2948A is due to expire on December 31, 2004, coincidentally with the expiration of WAPA's existing firm power contracts with each of its preference power customers.

PG&E has indicated that it does not intend to renew Contract 2948A or replace it with a comparable product. PG&E also has informed preference power customers of its intent to apply the CRS to electricity sold by WAPA to such customers in the post-2004 period once existing WAPA contracts expire. By its motion, the CVP group seeks Commission confirmation that CRS does not apply to WAPA power sales to preference power customers, including sales of so-called "custom energy products" delivered by WAPA to "firm" or "shape" its deliveries of CVP hydropower generation.

The CVP Group objects to imposition of a CRS on WAPA customers once Contract 2948A expires at the end of 2004, arguing that there is no causal connection between WAPA's continued service of its preference power customers after 2004 and costs incurred by DWR and PG&E which are the subject of this proceeding. CVP Group argues that DWR did not enter into any power contracts in contemplation of serving preference power customers, and on that basis, such customers are not responsible for the recovery of the costs of those contracts.

CVP Group concedes that DWR has delivered some energy to some of the group's members for which they have not yet fully reimbursed DWR, and CVP Group acknowledges that its members consuming such power remain responsible for DWR Bond Charges. The CVP Group, however, does not believe that its members are responsible for paying any DWR Power Charges. The CVP group contends, moreover, that the "continuous" preference power customers (i.e., those who took all or some of their load from WAPA before DWR began buying power) should be exempt from CRS.

The CVP Group argues that no existing statutory or regulatory authority exists for PG&E to impose CRS on preference power customers served by a federal agency. The CVP Group claims that imposing CRS on WAPA preference power customers for costs incurred by DWR or PG&E prior to 2005 would amount to an unlawful, retroactive increase under Contract 2948A, which is a contract under Federal Energy Regulatory Commission (FERC) jurisdiction. CVP Group argues that pursuant to Docket No. ER01-1639, the FERC determined that regardless of the source from which PG&E acquires the energy that it sells to WAPA for resale to preference power customers, and regardless of PG&E's actual cost of that energy, the price of energy sales to WAPA must be based on PG&E's thermal production costs.

The CVP Group argues that the applicability of CRS to WAPA preference power customers has not been raised in previous phases of this proceeding, and that no notice has been provided to preference power customers alerting them that PG&E intends to impose a CRS levy on preference power sold by WAPA under the Post 2004 plan. WAPA is in the process of defining the power purchase offerings it will make after the contract expiration at the end of 2004. As argued in the Declaration of Stuart Robertson, it is difficult, if not impossible, for CVP Group members to determine whether they should accept "custom products" offered by WAPA when they do not know whether PG&E will attempt to levy CRS on such purchased power. As such, CVP Group argues that this matter needs to be resolved expeditiously through a Commission order in response to its motion in order to preserve the rights of its members.