VI. Comments on Draft Decision

The draft decision of the ALJ in this matter was mailed to the parties in accordance with Pub. Util. Code § 311(g)(1) and Rule 77.7 of the Rules of Practice and Procedure. Comments and/or replies were timely filed by: Aglet, AReM, CAC/EPUC, CAISO, CARE, Calpine, CEC, CLECA/CMTA, CMUA/NCPA, Constellation, DRA, IEP, Indicated Parties, Joint Parties, Mirant, MID, NRG, PG&E, SCE, SDG&E, Sempra, TURN and WEM.

We make the following changes to the draft decision, and conforming changes to the findings of fact, conclusions of law, and ordering paragraphs:

· We refine the definition of "benefiting customers" to indicate that it does not include POU customers, unless the customer is subject to D.04-12-048, as modified by D.05-12-022. (Section IV.B.1 and IV.C.13.)

· We provide that this transitional cost allocation mechanism will be in place for the term of the contract or 10 years, whichever is less, but that the mechanics of the mechanism may change depending on the new market-based system which may evolve. (Section IV.B.3.) We require the IOUs to make the election at the time they seek contract approval from the Commission whether or not they intend the cost allocation mechanism adopted by this decision should apply to the contract. The Commission's decision on the IOUs'application will determine the applicable cost allocation mechanism. (Section IV.B.5 and Conclusion 6.)

· We now require, instead of encourage, the IOUs to utilize a third-party IE to oversee the RFO for new resources for long-term contracts. (Section IV.B.6.)

· In the draft decision, the IOU could determine that it no longer wanted to auction the rights to the energy. In response to comments, that option has been removed. (Section IV.B.17.)

· We refine the direction given to the IOUs regarding filing their Implementation Proposals regarding the energy auction and direct the Energy Division, in consultation with the Assigned Commissioner, to hold a workshop prior to the IOUs filing their Implementation Proposals, and subsequent workshops as needed. (Section IV.B.16.)

· We now require, instead of encourage, the IOUs to utilize a third-party IE to administer the energy auction. (Section IV.B.16.)

· We do not change our need determination but elaborate on the discussion. (Section IV.C.5.)

· The changes to the draft decision permit SCE to go forward with one fast-track and one standard-track solicitation, instead of just a fast-track solicitation. However, if SCE's application filed by February 2007 for approval of MW subject to its fast track solicitation does not seek approval of 1,500 MW, SCE must justify in its application why it does not do so, including, inter alia, stating whether or not it received other bids in the fast track solicitation that are not included in the application (and the bid details), and why it is preferable for SCE to wait to seek approval of the remaining MW under its standard track solicitation. (Section IV.C.5 and 11.)

· We clarify that we decline to extend this cost allocation mechanism to SDG&E's Otay Mesa facility at this time, given that we limit application of this cost allocation mechanism in this decision to the need findings in the LTPP proceeding. (Section IV.C.12.)

· We change the ordering paragraphs to require that PG&E shall not withdraw all or any part of its application for Commission approval of certain long-term contracts in A.06-04-012 without explicit Commission approval.

· We clarify that the utilities should be mindful of the Commission's greenhouse gas policy, as enunciated in R.06-04-009, as they design and conduct RFOs and as they choose the winning bidders. (Section IV.C.11.)

We also make non-substantive changes to the draft decision to more fully set forth the parties' positions, to clarify or improve the flow of the discussion, and to correct typographical errors.