2. Procedural Background
SDG&E filed the present application on May 11, 2007, seeking approval of the projects offered by J-Power and Wellhead. More specifically, SDG&E sought the following relief: (1) approval of the PPAs and lease option agreements; (2) approval of recovery of costs under the PPAs by inclusion in its ERRA account; (3) rebalancing of its capital structure related to Financial Accounting Standards Board (FASB) Interpretation Number 46(R) (FIN 46(R)); and finding of a limited exemption for the leases from the requirements of § 851 pursuant to § 853(b).
The Commission's Division of Ratepayer Advocates (DRA) filed a protest on June 21, 2007. Merced Irrigation District and Modesto Irrigation District (Districts) jointly filed a protest on June 21, 2007 directed to stranded cost recovery issues.
Administrative Law Judge (ALJ) Victoria S. Kolakowski issued a ruling on June 26, 2007 scheduling a prehearing conference (PHC) and requesting a joint PHC statement to identify and address issues that were under consideration in other proceedings.
The parties filed a joint PHC statement on July 5, 2007, which contains a stipulation between the Districts and SDG&E regarding the stranded cost recovery issues raised by the Districts.9 Based upon this agreement, Districts entered requested to change their appearance to "information only" and did not attend the PHC.
The PHC statement also noted several areas of agreement and disagreement between DRA and SDG&E. Areas of agreement included the lack of a need for evidentiary hearings and the ultimate result of approving the PPAs.10 Areas of disagreement related to the basis for the approval, which shall be discussed in more detail below. The other area of DRA concern was with the language in SDG&E's testimony regarding the treatment of the lease payments due to SDG&E. In response to DRA's concerns, SDG&E filed an amendment to page 4 of the testimony of Michael M. Schneider on July 23, 2007.11
The PHC was held on July 9, 2007. SDG&E and DRA attended the PHC, and offered and moved testimony into the record. The testimony was accepted, as described below.
SDG&E filed additional testimony on July 30, 2007 regarding the CAISO's estimates of transmission costs that were received after the PHC. These transmission costs will be recovered through charges tariffed by the Federal Energy Regulatory Commission (FERC) and will not be included in costs approved in this decision.
9 Joint PHC Statement, pp. 5-6.
10 Joint PHC Statement, p. 6.
11 This amendment is identified as Exhibit 5 below.
