III. Settlement Agreement
The Settlement Agreement4 addresses issues in three open Commission proceedings, R.99-11-022; R.04-04-003; and R04-04-025 and resolves those issues only as they relate to PG&E and the settling IEP QF members. Each QF that settles with PG&E executes an Amendment. As of the date of the Joint Motion, April 18, 2006, 41 QFs had executed Amendments. By May 10, 2006, when the First Amendment to the Joint Motion was filed, an additional 74 Amendments had been executed, and as of May 24, 2006, when the Second Amendment was filed, an additional three Amendments had been executed. In total PG&E represents that it has now obtained executed Amendments for 121 projects, including 14 cogeneration projects, representing 28% of that portfolio, and 107 non-gas fired projects, representing 83% of that portfolio. That represents almost 52.04% of generation deliveries from all QFs currently under contract with PG&E.
This Settlement Agreement represents the culmination of negotiations that have been on-going between PG&E and the IEP QFs for a considerable time period and are a comprehensive compact as between these parties only. The Commission is adopting and approving this Settlement Agreement without prejudice to the decision it will issue on the remaining outstanding issues.
As represented by PG&E and IEP in their Joint Motion, for PG&E and all the QFs that sign an Amendment, the Settlement Agreement resolves all subjects at-issue in the two QF policy and pricing proceedings, R.04-04-003 and 04-04-025. The settlement also settles the following issues in R.99-11-022: (1) PG&E's claims for a retroactive adjustment of SRAC payments made to QFs from December 1, 2000 to March 31, 2001 arising from the Court of Appeal remand; (2) PG&E's claims for a retroactive adjustment of energy payments made to QF Switchers from June 1, 2000 through January 18, 2001; and (3) QF claims that PG&E should recalculate the SRAC energy payment as related to transmission line loss factors for QF Switchers.
In summary, the Settlement Agreement provides the following:
· A variable energy price option derived from an average annual heat rate of 8,700 British Thermal Unit (Btu)/kilowatt-hour (kWh) (Summer and Winter) to which revised time of delivery factors are applied, and monthly burner-tip gas prices plus a variable Operations and Maintenance (O&M) adder of $2 megawatt-hour (MWh); this option is available to natural gas-fired QFs and effective until September 30, 2009.
· A fixed energy price option equal to $64.50/MWh for the first year of the Fixed Price Period, with a 1% annual escalation factor starting on the day one year after the Fixed Price Periods begins; this option is available to Renewable QFs and QFs whose fuel source is not natural gas for a term of up to five years.
· The Amendment for Renewable QFs is conditioned on a Commission finding that PG&E will continue to receive full credit for its purchases of energy and capacity toward meeting PG&E's Renewable Portfolio Standard (RPS) requirements and thereby furthers the Commission's policy promoting renewable energy resources.
· An as-delivered capacity price of $50/kW-year that will remain effective for a specified period of time, and conditioned on a Commission finding that such capacity qualifies for Resource Adequacy purposes based on the historic deliveries methodology the Commission adopted for QFs in D.04-10-035.
· Energy line loss factors equal to the QF's project GMM divided by the system average GMM as defined in D.01-01-007, provided that the loss factor for renewable QFs shall not be less than 95% and conditioned further on a Commission finding that PG&E is entitled to and shall receive full credit for all energy PG&E purchases pursuant the Amendments with Renewable QFs for purposes of complying with RPS requirements.
· A mutual release and waiver of claims arising from the settled issues as fully described in the settlement agreement.
· Agreement that SRAC pricing for QFs operating under PPAs should transition to an electricity market-based mechanism following a Commission determination that the California Independent System Operator's (CAISO) Day-Ahead Energy Market or an equivalent market is functioning properly for purposes of SRAC pricing.
· Agreement that each QF executing an Amendment thereby agrees, for itself and all of its successors and assigns, that following the expiration of its PPA, such QF shall be entitled to exercise of the mandatory purchase obligation available to QFS under Public Utility Regulatory Policies Act (PURPA) solely by invoking the following options: (1) participation in PG&E's all-source or renewable solicitations or; (2) execution of a one-year PPA with PG&E (renewable for successive one-year terms) under which PG&E shall pay for energy deliveries a price equal to the CAISO Day-Ahead Market Price for the applicable delivery period or such other market-based mechanism as specified by the Commission. The Parties remain free to negotiate mutually acceptable bilateral agreements independent of the exercise of the QF's rights under PURPA.
The Amendment to the Settlement Agreement is the same for all signing QFs except for the following exceptions: Wheelabrator has a "switch month" of November rather than July; Fresno Cogen's switch month is January; Rio Bravo will receive an expense reimbursement; and Calpine needs to obtain bankruptcy court approval.
4 The Settlement Agreement, including the amendments filed May 10 and May 24, 2006, is marked for identification as Exhibit Settlement 1, and is received into evidence as part of the record in this proceeding.
