Decision ALTERNATE DRAFT DECISION OF COMMISSIONER DUQUE (Mailed 7/20/00)
BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
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In the Matter of the Application of Laguna Irrigation District for Modification of Resolution E-3531 to Revise Special Condition 2.e. of Pacific Gas and Electric Company's (U 39 E) Schedule E-Exempt to Extend the Eligibility Period for an Irrigation District Actively Engaged in the Process of Constructing or Purchasing Distribution Facilities
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Application 00-03-037 (Filed March 27, 2000) |
Laguna Irrigation District's (Laguna's) application to modify Resolution E-3531 is granted in part. Consistent with the intent of that resolution, we extend from 12 to 24 months the interim period established under Special Condition 2.e. of PG&E's Schedule E-Exempt during which Competition Transition Charge (CTC) exemptions apply to eligible irrigation districts.
Public Utilities Code Section 3741 (added in 1996 by Assembly Bill 1890, Stats. 1996, Ch.854) exempts certain loads served by irrigation districts from CTC payment responsibility during the period prior to April 2002. Section 374 (a)(1)(E) specifies that the CTC exemptions only apply to customer loads served by "distribution facilities owned by, or leased to" the district. Section 374 (a)(1)(C) assigned to the California Energy Commission (CEC) responsibility for assessing the viability of irrigation district plans, including arrangements for distribution facilities. In March 1997, the CEC granted CTC exemptions to five irrigation districts, including eight megawatts to Laguna.
Soon after receiving its CTC allocation, Laguna requested interconnection and transmission service from Pacific Gas and Electric Company (PG&E). PG&E, however, did not believe Laguna's proposed distribution facilities were sufficient to entitle it to wholesale transmission service under federal law. As a result, PG&E would not enter into a transmission interconnection agreement with Laguna.2 This precluded Laguna from utilizing the CTC exemption provided by Section 374.
In an attempt to allow the irrigation districts to benefit from CTC exemptions while avoiding a protracted dispute over the "wholesale" service issue at FERC, PG&E filed Advice Letter 1738-E in January 1998. This advice letter requested Commission authority to expand the applicability of Schedule E-Exempt to allow electric customers of certain irrigation districts to be exempt from paying CTC while taking direct access service from PG&E.
In September 1998, the Commission issued Resolution E-3531 allowing PG&E to voluntarily implement a modified version of Advice Letter 1738-E. The modified advice letter made the tariff applicable only to customers taking service over a service drop leased by an irrigation district which was diligently pursuing distribution facilities, and for a limited 12-month period prior to the districts acquiring such facilities.
In the same month, FERC issued a decision that granted Laguna's request for interconnection with PG&E (84 FERC ¶ 61,226 (1998)). In response to FERC's order, PG&E and Laguna negotiated an interconnection agreement which was effective on May 28, 1999. On August 3, 1999 FERC issued its Final Order Directing Interconnection and Conditionally Accepting Interconnection Agreement for Filing (88 FERC ¶ 61,164 (1999)).
Procedural History
Laguna filed an application for modification of Resolution E-3531 on March 27, 2000.3 In Resolution ALJ 176-3036 dated April 6, 2000, the Commission preliminarily categorized this application as ratesetting, and preliminarily determined that hearings were not necessary. On April 26, 2000, PG&E filed a protest to Laguna's application. Laguna submitted a motion for acceptance of a late-filed response to PG&E's protest on May 19, 2000. Under Rule 44.6, which applies to applications, the applicant is entitled to file a reply to a protest or response within 10 days. A reply to a protest or response of a petition for modification, however, is only permitted with special permission of the Administrative Law Judge. Laguna states that as a result of the confusion regarding the classification of the filing, it initially overlooked the fact that a reply was permitted to PG&E's protest under the rules. We accept Laguna's reply, notwithstanding the fact that it was filed out of time, due to the unusual nature of this filing and the fact that the reply did not unduly delay the decision in this proceeding.
Position of Laguna
According to Special Condition 2.e of Schedule E-Exempt, Laguna's customers will no longer be eligible for CTC exemptions after May 28, 2000, which is 12 months after the effective date of Laguna's interconnection agreement with PG&E. Because Laguna's condemnation suit against PG&E is ongoing and would not be completed under any circumstances by May 28, 2000, Laguna seeks Commission approval to extend the eligibility period. Specifically, Laguna proposes the Commission amend Special Condition 2.e.of Schedule E-Exempt to add:
...provided that Special Condition 2 shall continue to apply beyond this time limit if: (1) the Section 374 Irrigation district is actively engaged in the process of constructing or purchasing distribution facilities that will be used to serve customers eligible for CTC exemptions and (2) the Section 374 Irrigation District provides a signed affidavit attesting to this fact to PG&E, with a copy to the Director of the Energy Division.
Laguna requests that the Commission consider its application on an expedited basis, in order to ensure that customers may continue to receive their statutory CTC exemptions while Laguna completes its acquisition of facilities.
Position of PG&E
Procedurally, PG&E argues that Laguna's application does not comply with Rules 47(d), 6(a) (1) and 15 of the Commission's Rules of Practice and Procedure because it fails to explain why it could not have been presented within one year of the effective date of Resolution E-3531, and fails to discuss, among other things, the issues to be considered or a proposed schedule.
On a substantive basis, PG&E argues that Laguna's application proposal is inconsistent with Resolution E-3531, would not encompass the acquisition of distribution facilities through condemnation, and would not benefit ratepayers.
Laguna replied that PG&E's arguments are without merit. Laguna states that its application is timely and complies with all of the Commission's procedural requirements. It claims that PG&E's substantive arguments lack foundation in the language of Resolution E-3531, lack meaningful support, and ignore the regulatory and statutory context.
Discussion
Procedural Issues
PG&E alleges that Laguna has failed to comply with Rule 47(d) because it did file within one year of the September 17, 1998 effective date of the resolution. Rule 47(d) requires that a petition to modify explain why it could not have been presented within one year of the effective date of the decision it seeks to modify.
Laguna originally filed a petition to modify Resolution E-3531. Our Docket Office subsequently converted Laguna's filing to an application. Because Laguna's filing is being treating as an application, Rule 47 does not apply. Even assuming Laguna's filing was a petition to modify, it would not have violated Rule 47(d). We note the filing does explain that Laguna was not aware of the need to modify Resolution E-3531 until more than one year after the resolution became effective4.
Alternatively, PG&E alleges that Laguna's application violates Rules 6(a)(1) and 15 because it does not state the need for a hearing, the issues to be considered and a proposed schedule. We will not deny Laguna's application on these grounds. Laguna originally filed the application as a petition to modify after consulting with both the ALJ and Energy Divisions.5 The Commission's Docket offices subsequently converted Laguna's filing to an application. It is understandable that Laguna did not meet all of the requirements of Rules 6(a)(1) and 15 under these circumstances. In any event, in Resolution ALJ 176-3036, the Commission preliminarily categorized Laguna's application as ratesetting and preliminarily determined that hearings were not necessary. To now deny Laguna's application as being in violation of Rules 6(a)(1) and 15 would contradict the fact that the Commission made these determinations and accepted the application.
Length of the Interim Period
Section 374 exempts certain loads served by irrigation districts from CTC payment responsibility. Section 374 (a)(1)(E) requires that such load "shall be served by distribution facilities owned by, or leased to" the district. Resolution E-3531 broadly interpreted this statute to allow an irrigation district to utilize its CTC exemptions for an interim period by providing service as an energy service provider ("ESP") over a service drop leased from PG&E while diligently pursuing its plans for distribution facilities. This afforded the irrigation districts an alternative, although limited, opportunity to benefit from and utilize their CTC exemptions while interconnection disputes were being resolved and distribution facilities were constructed or acquired. In Resolution E-3531, we specifically stated that "[a]fter the interim period, the irrigation districts would either use their exemptions by serving customers through distribution facilities in competition with PG&E, or absent having distribution facilities of their own, they will not be able to use their exemptions" (Resolution E-3531, p. 17).
In approving the interim provision in Resolution E-3531, the Commission recognized that the statutory intent of Section 374 (a)(1)(E) was that irrigation districts using CTC exemptions actually provide distribution service. (Id. at p.17, ¶ 8.) Under Schedule E-Exempt, by contrast, customers purchase energy from the irrigation district acting as an ESP, but take distribution service under a PG&E distribution tariff, albeit over service drops leased to the ESP-irrigation district.
The Commission also recognized in Resolution E-3531 that service over a service drop leased by the irrigation district arguably satisfied as a technical matter the requirement in Section 374(a)(1)(E) that loads "be served by distribution facilities owned by, or leased to" the irrigation district, that the Section 374 CTC exemptions were of limited duration, and that provision of distribution service could not happen overnight for many districts. Reading Section 374 as a whole, the Commission concluded that, on balance, it was appropriate to read Section 374(a)(1)(E) to permit irrigation districts to utilize their CTC exemptions for a limited time by leasing a service drop while diligently pursuing development of their own distribution facilities necessary to meet the statutory intent of actually providing distribution service. . See e.g. Id., p. 21, ¶ 23.
An earlier draft of Resolution E-3531 would have denied Advice Letter 1738-E altogether (Resolution E-3531, p.10).6 In response, some irrigation districts, including Laguna, proposed amendments that had the effect of limiting the applicability of the exemptions to customers that meet specific requirements. One such limitation was the irrigation districts' specific suggestion that the exemption only apply for an interim period of 12 months (as compared to PG&E's proposal for an open-ended tariff). We considered and ultimately adopted many of the irrigation district's proposed amendments (including the 12-month period) because they allowed "Section 374 irrigation districts to use the CTC exemptions granted to them by the legislature for an interim period, while remaining consistent with the intent of the statute and the CEC's allocation process." (Resolution E-3531, p. 17).
The Commission's intent in Resolution E-3531 was to establish a reasonable period of time during which irrigation districts could resolve interconnection disputes and acquire distribution facilities. Laguna's request would remove the interim nature of the tariff since the language it proposes has no time limit. That would be contrary to our intentions in Resolution E-3531. We therefore cannot adopt Laguna's suggested changes to Special Condition 2.e. of Schedule E-Exempt.
Yet it is now apparent that the 12 month period proposed by the parties and adopted in Resolution E-3531 did not allow enough time for irrigation districts to resolve interconnection disputes and acquire distribution facilities. We will therefore extend the interim period from 12 to 24 months. We will require PG&E to file an advice letter within 10 days of the effective date of this order to modify the tariff language in Special Condition 2.e. of Schedule E-Exempt by changing the phrase "twelve months" (or "12 months") to "24 months" in each location in which the phrase "twelve months" (or "12 months") appears in that section of its tariffs. We also make the following modifications to the Discussion Section of Resolution E-3531:
- Insert the phrase "which shall last 24 months" after the words "an interim period" in the first sentence of paragraph number 10; and,
- Change the phrase "12 months" to "24 months" in every place the phrase "12 months" occurs in paragraph number 11, including the language in quotations at the end of that paragraph.
This modification is consistent with the Commission's intent in Resolution E-3531 as it maintains the limited and interim nature of Special Condition 2.e. of PG&E's Schedule E-Exempt. In addition, it comports with the Legislature's intent to maximize the use of CTC exemptions granted under Section 374 during the transition period.7 We note, however, that if Laguna has not acquired its distribution facilities at the end of the 24 month interim period, it will not be able to use its CTC exemptions.
Since we find the change in the length of the interim period to be consistent with the intent of Resolution E-3531, and the Legislature's intent to maximize Section 374 CTC exemptions, it should be made retroactive back to May 28, 2000. PG&E questions whether Laguna's proposed changes should be retroactive back to May 28 in view of its belief that Laguna has not been diligent in pursuing distribution facilities. Laguna has chosen the course it believes is best for acquiring distribution facilities. It is not necessary that we make a determination as to whether and how Laguna pursued its condemnation case, or that we take a position on that case. Regardless, we find it difficult to believe that Laguna intentionally put itself in the position of protracted litigation against PG&E. Laguna did not expect the acquisition process to take this long. For purposes of complying with Resolution E-3531, Laguna has been diligent in pursuing distribution facilities. This is illustrated by Laguna's willingness to submit an affidavit to Energy Division to this effect.
Mandatory Changes
PG&E notes in its protest to Laguna's application that Resolution E-3531 allowed it to voluntarily implement a modified version of Advice Letter 1738-E. According to PG&E, Laguna's proposed changes are in conflict with the Resolution because they are not voluntary on the part of PG&E. The changes we adopt in this decision are, however, mandatory.
First, we note that the changes we adopt are more limited than those proposed by Laguna. We have simply extended the interim period by 12 months which is entirely consistent with Resolution E-3531. We also note that PG&E previously submitted language like that now proposed by Laguna.
Additionally, under Section 1708, the Commission may at any time, with proper notice to parties, and opportunity to be heard, amend any order it makes. We address the need for hearings in this Order below and conclude that they are not necessary.
Need for Hearings
PG&E states in its protest to Laguna's application that unless the application is summarily dismissed, evidentiary hearings are required to address:
- Laguna's failure to file its application/petition within one year of the effective date of Resolution E-3531;
- Whether the changes proposed by Laguna are consistent with Resolution E-3531;
- Whether the decision should be given retroactive effect to May 28 in light of Laguna's failure to proceed in an expeditious manner, and;
- If Laguna's proposed change is adopted, whether Laguna and its condemnation efforts would qualify Laguna for an extension of the 12 month limit in Schedule E-Exempt.
We conclude that hearings are not required on these issues. To begin with, PG&E has no absolute right to an evidentiary hearing. (D.00-03-020.) There are also no issues of material fact that we need to address in hearings. We have addressed the first three of the four issues identified by PG&E in previous portions of this decision. The fourth, regarding whether Laguna's condemnation efforts would qualify Laguna for an extension of the 12 month limit, is moot.
We do not adopt Laguna's proposed changes, but merely extend from 12 months to 24 months the interim period during which Special Condition 2.e. of PG&E's Schedule E-Exempt applies. In all other respects, Resolution E-3531 remains intact. This includes the applicability of the tariffs adopted in the Resolution to irrigation districts that are diligently "pursuing" distribution facilities. Laguna's efforts to condemn PG&E's facilities means they are pursuing them.
Hearings were unnecessary when we adopted 12 months as a reasonable period for irrigation districts to resolve interconnection disputes and acquire distribution facilities. For the same reasons, hearings are unnecessary here to simply extend this interim period an additional 12 months.
Comments on Alternate Draft Decision
The draft alternate decision in this matter was mailed to the parties in accordance with Section 311(g) (1). Comments were filed on (date) by (parties).
Findings of Fact
1. Resolution E-3531 broadly interpreted Section 374 to allow an irrigation district acting as an energy service provider to utilize its CTC exemptions for an interim period if it was diligently pursuing its plans for distribution facilities.
2. Resolution E-3531 afforded the irrigation districts an alternative, although limited, opportunity to benefit from and utilize their CTC exemptions while interconnection disputes were being resolved and distribution facilities were constructed or acquired.
3. Laguna originally filed a petition to modify Resolution E-3531 after consulting with the Commission's ALJ and Energy Divisions. The Commission's Docket office subsequently converted Laguna's filing to an application.
4. In Resolution E-3531, we specifically stated that "[a]fter the interim period, the irrigation districts would either use their exemptions by serving customers through distribution facilities in competition with PG&E, or absent having distribution facilities of their own, they will not be able to use their exemptions."
5. The Commission's intent in Resolution E-3531 was to establish a reasonable period of time during which irrigation districts could resolve interconnection disputes and acquire distribution facilities.
6. Laguna's requested modifications to PG&E's Schedule E-Exempt would remove the interim nature of the tariff adopted in Resolution E-3531.
7. An extension of the interim period of applicability of Special Condition 2.e. of PG&E's Schedule E-Exempt from 12 to 24 months maintains the limited and interim nature of the tariff adopted in Resolution E-3531.
8. It is the intent of the Legislature to maximize the use of CTC exemptions granted under Section 374 during the transition period.
9. Laguna did not expect the acquisition of distribution facilities to extend beyond May 28, 2000.
Conclusions of Law
1. Laguna's application should not be denied on procedural grounds.
2. Laguna's proposed modifications are contrary to the Commission's intentions in Resolution E-3531 as they would remove the interim nature of the tariffs adopted in that resolution.
3. Extending the interim period applicable to Special Condition 2.e. of PG&E's Schedule E-Exempt adopted in Resolution E-3531 from 12 to 24 months maintains the limited and interim nature of the tariffs and is consistent with the Commission's intent in that resolution.
4. If Laguna has not acquired distribution facilities at the end of the 24 month interim period adopted in this decision, it will not be able to use its CTC exemptions granted under Section 374.
5. Extension of the interim period applicable to Special Condition 2.e. of PG&E's Schedule E-Exempt adopted in Resolution E-3531 from 12 to 24 months should be made retroactive back to May 28, 2000.
6. Public hearing is not necessary and it is not necessary to alter the preliminary determinations made in Resolution ALJ 176-3036.
7. This order should be effective today in order to expeditiously resolve this issue.
O R D E R
IT IS ORDERED that:
1. Laguna Irrigation District's Application for Modification of Resolution E-3531 is granted in part to extend the interim period from 12 to 24 months set forth in Special Condition 2.e. of PG&E's Schedule E-Exempt for eligible irrigation districts. This extension of the interim period is made retroactive back to May 28, 2000. All other aspects of Laguna's application are denied.
2. Within 10 days of today's date, PG&E shall file an advice letter to modify Special Condition 2.e. of its tariff Schedule E-Exempt by changing the phrase "twelve months" (or "12 months") to "24 months" in each location in which the phrase "twelve months (or "12 months") currently appears in that section of the tariffs. This advice letter shall be effective on May 28, 2000, subject to Energy Division's finding that it complies with this Order.
3. The Discussion Section of Resolution E- 3531 is modified as follows:
- The phrase "which shall last 24 months" shall be inserted after the words "an interim period" in the first sentence of paragraph number 10, and;
- The phase "12 months" shall be changed to "24 months" in every place the phrase "12 months" occurs in paragraph number 11, including the language in quotations at the end of that paragraph.
4. A copy of this Decision shall be attached to the Energy Division file copy of E-3531.
5. Application 00-03-037 is closed.
This order is effective today.
Dated , at San Francisco, California.
CERTIFICATE OF SERVICE
I certify that I have by mail this day served a true copy of the original attached Draft Alternate Decision of Commissioner Duque on all parties of record in this proceeding or their attorneys of record.
Dated July 20, 2000, at San Francisco, California.
/s/ ARLENE C. GASPAR
Arlene C. Gaspar
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2 Although Laguna eventually took the issue to the Federal Energy Regulatory Commission (FERC), it also examined other options to acquire a more extensive system of facilities. Beginning in September 1997, Laguna offered to purchase portions of PG&E's distribution system. PG&E rejected Laguna's offer. As a result, in October 1997, Laguna opted to pursue acquisition through eminent domain. After further unsuccessful efforts at settlement with PG&E, Laguna filed its Complaint in Eminent Domain in the Kings County Court on May 14, 1999.
3 Laguna initially characterized its filing as a Petition for Modification of Resolution E-3531 but was advised by the Commission's docket office that it should be classified as an Application. 4 A.00-03-037, pp. 8 - 10. 5 Reply of Laguna to PG&E's Protest to A.00-03-037, pp. 2, 3. 6 However, Resolution E-3531 passed by a unanimous vote of the Commission. 7 Resolution E-3531, p.4, paragraph 10; D.97-09-047, p. 43.
