7. Comments on Draft Decision

The draft decision of the ALJ in this matter was mailed to the parties in accordance with Public Utilities Code Section 311 (g)(1) and Rule 77.7 of the Commission's Rules of Practice and Procedure.

Opening comments were filed on October 18, 2004 by PG&E and SDG&E. Reply comments were filed on October 25, 2004 by SDG&E. Opening and reply comments were also transmitted to the service list and assigned Commissioner by DWR.¹⁰

We have carefully reviewed the comments on the draft decision, and make changes and clarifications where appropriate. PG&E supports the modifications to the Operating Agreements approved in the Draft Decision, but requests that the modifications be made prospectively. PG&E states that the modifications should not be applied retroactively, because retroactive application could require "complex computations and correlative administrative adjustments" (PG&E Opening Comments, pg. 1). SDG&E opposes PG&E's suggestion, arguing that, in SDG&E's case, prospective application would require SDG&E to undo its prior calculations.

We agree with PG&E and clarify that the modified Operating Agreements should be applied prospectively. At no time since the filing of the petitions for modification have parties been assured that the petitions would be granted. All prior calculations should have been made in accordance with the Operating Agreements in effect at that time. No retroactive recalculations should be necessary.

In addition, although we have considered DWR's arguments for modifying the decision to state that SDG&E should remit the Power Charge remittance rate to DWR for the RMR energy, we do not find them persuasive. In its comments on the Draft Decision, DWR acknowledges that it is the Williams Product D Contract and not the Williams RMR Contract that has been allocated to SDG&E, but argues the Commission should "clarify that SDG&E has the responsibility to administer energy under the Williams Product D Contract, whether dispatched as a result of the CAISO RMR Contract or as a result of a dispatch decision of SDG&E as limited agent." (DWR Reply Comments, pg. 2).

As stated above, we disagree with DWR as to whether the Williams RMR Contract is part of the Williams Product D Contract. Although DWR has not submitted the renegotiated Williams Contract for our review in this proceeding, we understand DWR's position to be that the contract provides that DWR is to receive all energy and capacity and associated revenues from the Williams units, including any RMR energy. DWR argues that, since it has the contractual right to the RMR energy, and this energy is "must-take" when called upon by the CAISO, SDG&E should be required to treat this energy as must take, and pay the remittance rate because it administers the Product D Contract that applies to the same Huntington Beach units.

DWR further argues that if SDG&E's suggested approach of having SDG&E take the RMR energy and pay market rates is adopted, there would be a cost shift to ratepayers in other service territories. On the contrary, we believe that requiring SDG&E to pay the remittance rate, which exceeds the market rate, for energy necessary to ensure local reliability in SCE's service territory, would shift costs from SCE's ratepayers to SDG&E's ratepayers because the RMR energy is subject to contractual arrangements that are entirely separate from the Williams Product D Contract and that are designed to place the financial responsibility for the RMR Contract on the "responsible utility, which, in the case of the Huntington Beach units, is SCE. Williams receives a reasonable price for the RMR energy it provides to the CAISO, and California's ratepayers should not be required to pay a significantly higher price for that energy (i.e., the DWR Power Charge) than Williams' RMR contract with the CAISO specifies. 

We emphasize that pursuant to D.02-09-053, SDG&E is still operationally responsible for the Williams Product D energy. Moreover, while we believe that the responsibility for dispatching the RMR energy should remain with Williams, and not SDG&E, we agree with SDG&E's comment that the affected parties should be permitted to reach an acceptable arrangement as to how RMR energy dispatched from the Williams Huntington Beach units can be most efficiently accommodated.