10. Cogeneration QFs and Renewable Contract Administration and Costs
For cogeneration QFs and renewable contract administration and costs, ORA identified one issue related to hydro spill provisions. ORA asserts that SCE did not take the opportunity to minimize costs by implementing the hydro spill contract provision that enforces the hydro savings price for the affected QFs, for the amount of hydro curtailed. ORA recommends a disallowance of $450,000, which is equal to the amount of the difference between the existing price of the affected QF and the hydro savings price for 9,772 megawatt-hour of SCE hydro that was curtailed.
In response, SCE states that when the ISO assumed responsibility for managing the grid and dispatching generation resources on April 1, 1998, SCE lost the ability to ensure compliance with the Commission's hydro spill policy, because the ISO makes the decisions to dispatch SCE's resources. SCE claims it is now unable to determine when the prerequisites are met under the Commission's definition of hydro spill,16 since the ISO is statutorily precluded from providing SCE the necessary information to make that determination. SCE also states that under the current market structure, the ISO dispatch orders can change and often do change every 10 minutes, making it impossible for SCE to give the Commission required "adequate notice" to QFs when a hydro spill condition exists.
It appears that ISO management of the grid and dispatch of resources seriously impedes SCE's ability to enforce the hydro spill provisions. There is no evidence or argument to counter SCE's position regarding the problems in determining when a hydro spill condition exists and in providing adequate notice to QFs, when it exists. We will therefore not impose a disallowance as recommended by ORA.
SCE asserts, and ORA agrees, that the Commission's existing hydro spill provisions are outdated and that resolution of the associated problems can and should be addressed in Rulemaking (R.) 04-04-025.17 SCE should seek such resolution in that proceeding.
16 In D.82-04-071, the Commission defined a hydro spill condition as occurring when all the following conditions are met: (1) all utility-owned non-hydro plants are shut down or are operated at the minimum level practical; (2) all non-QF electricity purchases are curtailed to the maximum amount possible without breaching contract terms; (3) the utility is making all feasible economy sales; and (4) if it accepts full QF power, the utility must spill its own hydro resources. 17 This rulemaking was issued to promote consistency in methodology and input assumptions in the application of short-run and long-run avoided costs, including pricing for QFs.
