XIV. Are Differences Between SRAC Prices and
Avoided Costs Sufficient to Conclude
that PURPA Was Violated?

Although we have concluded that SRAC prices during the Remand Period meet the PURPA definition of avoided costs, as a matter of caution, we also consider whether there is a violation of PURPA as a result of any differences between avoided costs and SRAC prices. That is, whether SRAC prices in some hours during the Remand Period exceeded avoided costs in violation of PURPA.

In considering this matter, we again look to the applicable provisions in PURPA. FERC regulations provide that "[I]n the case in which the rates for purchases are based upon estimates of avoided costs over the specific term of the contract or other legally enforceable obligation, the rates for such purchases do not violate this subpart if the rates for such purchases differ from avoided costs at the time of delivery."⁷⁶ As we concluded in D.01-12-025, "the Commission can, consistent with PURPA, provide for avoided costs that differ from the utilities, so long as those costs are derived from consistent application of a formula. Therefore, it is not a per se violation of PURPA if the SRAC formula overstated Edison's avoided costs during that period."⁷⁷ Furthermore, as the Commission concluded in D.82-12-120," [t]he current procedure of prospectively establishing prices is preferable. This procedure gives QFs a clear price signal from which to determine its operations for the upcoming period. In reaching these prospective determinations, we will attempt, as accurately as possible, to project the fuel mix which will occur in the future quarter. Any variations in the projected price should likely be as high as they would be low, and deviations should cancel out over time. Retrospective adjustment would undoubtedly create significant controversy, be cumbersome and destabilize the market for small power producers."⁷⁸

In the present case, it is possible that in some hours during the Remand Period SRAC prices exceeded avoided costs, and in other hours avoided costs exceeded SRAC prices. However, the Transition Formula, determining SRAC prices, was consistently applied in the months and years preceding, and through the Remand Period. A comparison of spot market and SRAC prices that supports the constant application of the SRAC formula is provided in CCC's comments.⁷⁹ As shown in the Table E below, electric market prices exceeded posted SRAC prices in each of the respectively identified three-, two-, and one-year time periods which all include the Remand Period.

Table E Comparison of Electricity Spot Market and SRAC Prices All figures are in $ per MWh
	Electric Market		Posted SRAC					Difference
Period	PX and Border MMCPs 80		PG&E	Edison	SDG&E	Wtd. Avg.81		$/MWh	%
Apr-98 to Mar-01	67.3		45.5	49.3	48.7	48.7		-21.8	-32%
Apr-99 to Mar-01	88.8		55.3	59.7	58.4	57.7		-33.5	-38%
Apr-00 to Mar-01	147.0		80.9	87.2	84.3	84.4		-66.0	-43%
	PX and Basin-forward MMCPs 82
Apr-98 to Mar-01	51.4		45.5	49.3	48.7	47.6		-3.7	-7%
Apr-99 to Mar-01	64.9		55.3	59.7	58.4	57.7		-7.1	-11%
Apr-00 to Mar-01	99.1		80.9	87.2	84.3	84.4		-14.7	-15%

⁷⁶ 18 C.F.R. § 292.304(b)(5). ⁷⁷ D.01-12-025, pp.3-4. ⁷⁸ 10 CPUC 2d 553, p.621. ⁷⁹ CCC comments, February 17, 2004, p. 8. ⁸⁰ Uses PX prices to October 2000, then MMCPs based on border gas prices from October 2000 - March 2001. ⁸¹ Weighted average price is based pm QF capacity under contract to each utility in January 2001. ⁸² Uses PX prices prior to October 2000, then MMCPs based on basin forward gas prices from October 2000 - March 2001.