Background

NRG provides steam service to approximately 180 customers in San Francisco's downtown and financial district. NRG is the last remaining steam utility in California regulated by the Commission as a heat corporation under Pub. Util. Code § 224. NRG's steam service and facilities were originally part of the Pacific Gas and Electric Company's (PG&E) system until 1993 when the Commission approved the sale of PG&E's steam generation and distribution business to NRG's predecessor, San Francisco Thermal, Limited Partnership.

According to NRG, today's application has its roots in the rise of distributed generation. ¹ In 1999, the Commission opened R.99-10-025 to explore alternative rate structure and interconnection options for distributed generation, with the objective of developing policies and rules regarding distributed generation deployment. After the electricity price spikes associated with the California energy crisis in 2000 and early 2001, commercial customers became more interested in options available to provide electricity without dependence on the investor-owned utilities. The Commission, recognizing the value of distributed generation resources in supporting electric supply reliability, has encouraged them through incentives and special interconnection allowances for installing distributed, net-metering generation resources at customer sites. More recently, the Commission has stated that it has made "a substantial effort to stimulate distributed generation installations by providing multiple technologies with financial incentives and exemption from [electricity] standby rates and DWR (Department of Water Resources) cost responsibility surcharges."²

As a result, NRG's customers have begun to consider on-site distributed cogeneration to provide electricity for their commercial buildings, and for those who will make the switch, NRG expects to feel the impacts. As cost-effective equipment to provide electricity is installed and used, a byproduct of that electricity production may be steam. That steam may allow customers to depart from NRG's steam system, creating the same economic burden on NRG's remaining customers as the Commission has found electric departing customers cause for the electric utilities.

Potential distributed generation customers have approached NRG seeking to procure steam to support partial loads rather than the full loads they currently support, or to utilize NRG's steam supply for standby and back-up service in the event their newly-installed equipment is not available to produce sufficient steam to meet their non-generation needs. NRG's Steam Tariff Schedule S-1 (General Service) provides for a $50 monthly customer charge and a commodity charge consisting of a base rate to cover fixed costs, a fuel cost component, and the CPUC-ordered reimbursement fee. Under NRG's Steam Rule No. 2.C (Availability), all of each customer's thermal load must be supplied by NRG unless the customer enters into a special contract which covers, at a minimum, the marginal cost of providing the service to protect the economic interests of NRG's remaining, full load customers.

With the prospect of more and more of its customers needing standby and partial load service that is today only available through contracts, NRG has filed this application seeking to establish a new tariff to provide those services on a uniform basis to all.