III. Discussion

We adopt the CRS found in D.03-04-030 for county and municipal water districts that self-generate. That CRS shall apply to both onsite and offsite generation. The exceptions contained in D.03-04-030 also shall apply to water districts' self-generation. We decline to address other issues raised by parties in this proceeding.

SB 1755 provides that any water district "that has purchased electricity from an electrical corporation on or after February 1, 2001...bear a pro rata share of the DWR's electricity purchase costs, that are recoverable from electrical corporation customers in commission-approved rates." (Water Code §§ 31149.7 (e)(1), 71663.5(e)(1).) A district generating its own electricity shall pay "[a] charge equivalent to the charges that would otherwise be imposed on the district by the [C]ommission to recover bond related costs pursuant to any agreement between the commission and the DWR." (Water Code §§ 31149.7(f)(1), 71663.5(f)(1).) We must determine whether existing decisions establish an appropriate framework for a CRS applicable to water districts.

Most parties agree that the CRS adopted in D.03-04-030 for customer generation departing load should apply to county and municipal water district customer generation on-site departing load. D.03-04-030 defines departing load as the customer's reduction in load purchased from the utility that is served by customer generation. D.03-04-030 defines customer generation as any type of generation dedicated to serve a specific customer's load in reliance on non-utility or dedicated utility distribution wires. SB 1755 similarly permits a water district to generate power for its own purposes. (Water Code §§ 31149.7(a) & (b), 71663.5(a) & (b).) D.03-04-030 provides an established methodology for applying a CRS to the self-generation permitted by SB 1755.

SDG&E recommends first considering the differences between SB 1755 and prior CRS decisions through further proceedings before applying D.03-04-030 to county and municipal water district customer generation. As discussed infra, SDG&E's recommendations need not be addressed in this proceeding.

The CRS adopted in D.03-04-030 for customer generation departing load shall apply to county and municipal water districts' on-site generation.

SB 1755 provides that districts are responsible for bond related costs. (Water Code §§ 31149.7 (f)(1), 71663.5(f)(1).) SB 1755 further provides "[i]f a district generates new offsite power, it shall be responsible for the additional costs of the DWR, equal to the share of the DWR's estimated net unavoidable electricity purchase contract costs attributable to the district . . . "

The parties agree that the CRS adopted for municipal departing load in D.03-07-028 does not automatically apply to county and municipal water district off-site generation. D.03-07-028 applies to retail customers of publicly owned utilities. SB 1755 expressly excludes districts from providing or selling electric power at retail. (Water Code §§ 31149.7(c), 71663(c).) Therefore, D.03-07-028 does not strictly apply to water districts' off-site generation.

PG&E, SCE , Chino Basin, and ORA concur that SB 1755 requires districts to pay a CRS, including both the DWR bond and power charges, for districts' offsite generation. SCE proposes we adopt an alternative CRS mechanism for off-site generation. PG&E states its municipal departing load tariff would not apply to water districts' offsite generation. ORA, Chino Basin, and Modesto agree that the CRS applicable to municipal departing load cannot apply to water districts' offsite generation. Instead, the CRS applicable to customer generation departing load should apply.

Pub. Util. Code § 9604(d) defines local publicly owned utility as a municipality or municipal corporation operating as a public utility furnishing electric service. D.03-07-028 by its terms applies to municipal departing load served by a publicly owned utility as defined under § 9604(d). County and municipal water districts cannot provide electricity at retail. Thus, D.03-07-028 does not apply.

SB 1755 delegates to us the authority to determine the power costs attributable to the districts' off-site generation and whether cost-shifting will occur. DWR's long-term power costs attributable to customer generation departing load were addressed in D.03-04-030. Based on DWR/Navigant's forcasting, we determined that setting an overall cap of 3,000 megawatts (MW) would avoid cost-shifting to bundled customers. (D.03-04-030, Finding of Fact 20.) Therefore, we shall apply the CRS adopted in D.03-04-030 for county and municipal water districts' off-site generation.

D.03-04-030 provides that a customer generation unit serving new and incremental load would not be considered departing if it passed the physical test adopted in D.98-12-067. (D.03-04-030, Conclusion of Law 14.) As discussed above, D.03-04-030's definition of customer generation departing load applies to county and municipal water districts that self-generate. In this proceeding, a number of parties oppose applying the CRS to new and incremental load. Reasons in support of this exception are encouragement of new water supplies, including desalination plants, and the fact that no cost-shifting occurs for new load at new facilities. Other parties find no basis for authorizing a specific exception for new and incremental load, since D.03-04-030 governs the applicability of a CRS to new and incremental load.

We agree that D.03-04-030's definition of customer generation departing load applies to water districts that self-generate. It is not necessary to authorize specific exceptions for new and incremental load in this proceeding.

Several parties recommend that exceptions from the CRS beyond those contained in D.03-04-030 should apply to water districts. D.03-04-030 provides an exception for clean systems under 1 MW and a partial exception for clean and low-emission systems over 1 MW. ACWA, CCWD, Chino Basin, and MMWD recommend that we expand the exceptions contained in D.03-04-030 to include new load and clean systems over 1 MW. ORA, PG&E, and SCE oppose expansion of those exceptions. ORA further states off-site self-generation is not eligible for the exception to the power charge portion of the CRS extended to the first 3000 MW of departing load or for the exception for clean off-site generation up to 1 MW.

SB 1755 neither authorizes exemptions for new load nor expands the 1 MW exception. SB 1755 explicitly requires water districts to pay applicable DWR and electrical company charges. SB 1755 delegates to us the authority to determine the CRS applicable to off-site power. In D.03-04-030 we determined that the 3000 MW exception for DWR power charges would not result in cost-shifting. (D.03-04-030, Finding of Fact 20.) Thus, we will apply the exceptions contained in D.03-04-030 without modification to county and municipal water districts' self-generation.3

3 Implementing SB 1755 by applying D.03-04-030's exceptions to county and municipal water districts' self-generation will result in an unanticipated increase in customer generation. That increase might necessitate an earlier review of the 3000 MW cap than the three-year review contemplated in that decision. (See D.03-04-030, Ordering Paragraph 12.) This is not the appropriate forum to address the expiration of or extension of D.03-04-030's exceptions.

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