2. SCE's Request
SCE seeks approval of a settlement between SCE, CES, and Geysers regarding CES's attempted rejection of an existing, below market renewable PPA (the Existing PPA) with SCE.1
The agreements that set forth the terms of the settlement and replace the Existing PPA include the following:
1. The Contingent Settlement (CSA).
2. A new Power Purchase and Sale Agreement between SCE and Geysers (the Geysers or New PPSA).
3. A Resource Adequacy Confirmation for 2007 (the 2007 RA Confirmation).
4. A Resource Adequacy Confirmation for 2008 (the 2008 RA Confirmation).
5. A Resource Adequacy Confirmation for 2009 through 2011 (the 2009-2011 RA Confirmation).
6. A new Energy Trading Agreement (the New ETA).2
On April 12, 2007, SCE, CES, and Geysers executed the CSA, the New PPSA, the 2007 RA Confirmation, the 2008 RA Confirmation, and the 2009-2011 RA Confirmation. CES filed a motion with the Bankruptcy Court on April 13, 2007 seeking approval of the agreements. The Bankruptcy Court issued an order on May 9, 2007, approving the agreements. The Court's approval became final and non-appealable on May 19, 2007. SCE and Geysers Power began performing under the terms of the New PPSA on June 1, 2007.3
SCE's application request is for Commission approval of the CSA, the Geysers PPSA, and the 2009-2011 RA Confirmation. SCE indicates that it is currently authorized to enter into the 2007 RA Confirmation, the 2008 RA Confirmation, and the New ETA pursuant to its approved LTPP, and is therefore not requesting approval of these agreements in this application.
SCE requests that the Commission grant approval of the CSA, Geysers PPSA (referred to by SCE as the New PPSA), and the 2009-2011 RA Confirmation as the term "CPUC Approval" is defined in the CSA:
"CPUC Approval" means a final and Non-Appealable order of the CPUC, without conditions or modifications unacceptable to SCE, which contains the following terms:
(a) Approves the [CSA], the New PPSA, and the 2009-2011 RA Confirmation in their entireties and without modification, including payments to be made by SCE, subject to CPUC review of SCE's administration of the New PPSA and the 2009-2011 RA Confirmation; and
(b) Finds that any procurement pursuant to the New PPSA is procurement from an ERR [eligible renewable energy resource] for purposes of determining SCE's compliance with any obligation that it may have to procure electric energy from ERRs pursuant to the RPS Legislation, CPUC Decision 03-06-071], or other applicable laws.
While there were no protests to SCE's application request, Calpine Corporation (Calpine) filed a response on July 6, 2007. Calpine indicated that it supports approval of the application and requested that the Commission issue a decision approving the application no later than November 16, 2007.4 Calpine stated that it filed its reorganization plan on June 20, 2007 and expects to successfully emerge from bankruptcy in the fourth quarter of 2007 or the first quarter of 2008, and Commission approval of SCE's application prior to Calpine's emergence from bankruptcy will provide certainty regarding the settlement for both SCE and Calpine, as Calpine moves forward with its reorganization plan.
On October 3, 2007, SCE filed a Notice of a Stipulation of Dismissal of the Appeal of Calpine Corporation and Calpine Energy Services in the United States Court of Appeals for the Second Circuit. In this notice, SCE states that CES recently concluded a settlement agreement with the last of the counterparties to the group of contracts it had sought to reject when it filed its bankruptcy case in late 2005. As part of this recent settlement, CES agreed to withdraw its appeals in the Second Circuit and to effectively waive its right under the bankruptcy code to pursue the rejection of the contracts that are the subject of the appeals, including its Existing PPA with SCE. On September 18, 2007, CES and all other parties to the appeal proceedings in the Second Circuit filed a stipulation to dismiss the appeals. The Court has not yet entered an order dismissing the appeals, but is expected to do so.5
The dismissal of the appeals would leave intact the District Court decision dismissing the CES rejection motion and ruling that if CES were to pursue relief from performing the contracts, it must present its request to the FERC. However, Calpine's plan of reorganization that it has filed in Bankruptcy Court6 provides for its assumption of the contracts, which indicates its intention to continue performing under the contracts. Thus, the issues raised by Calpine's attempt to reject the contracts have effectively been resolved whether or not the CPUC approves SCE's new agreements with CES. Nevertheless, since SCE believes the new agreements provide substantial customer value, it urges the Commission to promptly approve the CSA and associated contracts.
In this decision, we will evaluate the reasonableness of the Geysers PPSA and the RA Confirmation for 2009-2011 and whether each should be approved. We will also evaluate whether the CSA as a whole provides ratepayer benefit when compared to the Existing PPA and should be approved.
1 On October 18, 2005, CES submitted a bid to SCE's 2005 Renewable RFP for renewable energy from the Geysers Project in northern California. On December 20, 2005, CES filed for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code, and on the same day filed a motion to reject the Exiting PPA with SCE. On January 27, 2006, the U.S. District Court for the Southern District of New York granted SCE's motion to dismiss CES's rejection motion, and ruled that CES must present its claim for rejection of the Existing PPA to the Federal Energy Regulatory Commission (FERC). CES appealed the District Court decision to the U.S. Court of Appeals for the Second Circuit. The parties briefed the appeal and oral argument was heard on April 10, 2006. The matter is still pending.
2 The New ETA between SCE and CES is intended to provide the contractual means by which the parties can periodically buy and sell energy under the terms and conditions set forth in a standard EEI Agreement. SCE indicates that it has been authorized under its Commission-approved Long Term Procurement Plan (LTPP) to execute such agreements with counterparties.
3 Although performance under the PPA has begun, some terms providing ratepayer benefits, including SCE's option to purchase renewable power above the baseload amounts contemplated by the PPA, do not become effective until the Commission has approved the PPA.
4 In its application, SCE requested an expedited schedule with a final Commission decision date of December 6, 2007.
5 SCE states that, in the event that the Court does not enter an order dismissing the appeals, the status of Calpine's litigation attempting to reject the contracts will be as set forth in SCE's application, and the Commission should approve the new agreements with CES for the reasons stated therein.
6 Calpine's plan of reorganization has not yet been approved by the Court.
