COM/CXW/tcg DRAFT H-8

1/18/2001

Decision DRAFT DECISION OF COMMISSIONER WOOD
(Mailed 1/10/2001)

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Order Instituting Rulemaking into Implementation of Pub. Util. Code § 390.

Rulemaking 99-11-022 (Filed November 18, 1999)

DECISION MODIFYING DECISION 96-12-028

This decision resolves the petition to modify the "factor" adopted in Decision (D.) 96-12-028 filed by Southern California Edison Company (SCE). The Administrative Law Judge (ALJ) further expanded the scope of the proceeding to consider modifications to the natural gas price indices adopted in D.96-12-028. This decision adopts a formula, to be updated monthly, to revise SCE's factor adopted in D.96-12-028 and adopts an alternative gas index to replace the Topock index adopted in D.96-12-028. This decision also establishes a ceiling price for payments to qualifying facilities of $67.45 per megawatt-hour (MWh) based on the reasonableness standard described by the Federal Energy Regulatory Commission in 93 FERC ¶ 61,294.

Procedural Background

D.96-12-028 governs short-run avoided cost (SRAC) payments made by SCE, San Diego Gas & Electric Company (SDG&E), and Pacific Gas and Electric Company (PG&E) to qualifying facilities (QFs). The avoided cost posting is based on a Transition Formula adopted in D.96-12-028 that incorporates various border price indices. Each Transition Formula contains a utility specific "factor" designed to compare historical SRAC prices to historical gas border prices for that utility.

On July 28, 2000, SCE filed a petition to modify D.96-12-028 to revise its Transition Formula. On August 28, 2000, in comments on SCE's petition, the Office of Ratepayer Advocates (ORA) recommended that the Commission review the border gas indices used in SCE's Transition Formula on an emergency basis. In addition, ORA referenced a complaint filed by this Commission at the Federal Energy Regulatory Commission (FERC) that seeks recision of certain contracts that the Commission contends have permitted natural gas suppliers and their affiliates to increase prices through the withholding of capacity. On September 1, 2000, the Assigned ALJ issued a ruling adding the question of the reliability and validity of the border prices to the issues raised in SCE's petition to modify D.96-12-028. Comments and replies were filed on September 27, 2000 and October 30, 2000, respectively, on these issues. Comments on additional options for border prices were solicited by ruling on December 1, 2000. Comments and reply comments on these additional options were received on December 11 and 15, 2000, respectively.

On August 31, 2000, SCE filed an emergency motion seeking authorization for a provisional qualifying facility avoided cost posting for September 2000 and future months while the underlying petition was pending. That motion was denied in D.00-10-030. On November 28, 2000, SCE filed a second emergency motion, this time seeking an order modifying D.96-12-028 in several respects and requesting an expedited schedule for Commission action on the underlying petition to modify. The Commission has not addressed the November 28, 2000 emergency motion.