Procedural Background
On January 17, 2001, the Governor of California declared that a state of emergency existed due to shortages of energy available to California utilities. On March 27, 2001, the Commission adopted D.01-03-067, which addressed modification of the formula for calculating utility energy payments to QFs. In D.01-03-067, the Commission noted that it was "aware that ongoing disputes between utilities and their suppliers and creditors has resulted in QFs not being paid, in some cases for months."1 In response to this problem, the Commission ordered that:
Southern California Edison Company, PG&E, and San Diego Gas and Electric Company (SDG&E) shall pay QFs for energy deliveries made on or after the effective date of this decision within 15 days of the end of the QFs billing period. QFs may establish a fifteen-day billing period. (D.01-03-067, mimeo., p. 35, Ordering Paragraph 10.)
On December 15, 2004, PG&E filed its Petition to modify D.01-03-067 to the extent that D.01-03-067 requires a payment within 15 days, rather than the 30-day payment schedule existing prior to adoption of D.01-03-067.2 PG&E explains that Ordering Paragraph 10 (D.01-03-067) changed the timing of payments as specified in PG&E's PPAs with QFs. Those PPAs require PG&E to make payment to QFs not later than 30 days after the end of each monthly billing period.3 However, in compliance with D.01-03-067, PG&E has continued to pay QFs according to the altered schedule (within 15 days of the end of the billing period).
PG&E estimates that it has paid $1.5 billion to QFs during the last two years, and that as result of the 15-day payment required by D.01-03-067 and the time value of money, PG&E's ratepayers have paid approximately $7.5 million4 more each year than would have been paid if payments were paid using a 30-day period. In addition, PG&E contends the accelerated billing schedule reduces the time for PG&E to review, validate, and approve metering data for all QFs, and to process, approve, and submit the QF billing statements to PG&E's accounting department, thereby adversely affecting the resolution time for problem accounts and quality control.
PG&E argues that the emergency conditions that induced the Commission to alter the payment timing provisions of PG&E's PPAs no longer exist, and therefore the Commission should permit PG&E and the QFs to return to their agreed-upon payment schedule. PG&E also argues that in D.02-01-0335 the Commission already has allowed Southern California Edison Company (Edison) to alter its QF payment terms in the context of approving a contract amendment.
1 See, D.01-03-067, mimeo., p. 25. 2 PG&E requests that the Section and text entitled "Payment of QFs Going Forward" (Mimeo., pp. 25-26), Conclusions of Law, Nos. 21 and 22, and Ordering Paragraphs 10 and 11 be deleted from the decision. 3 PG&E states that it reads the QF meters electronically on a calendar month basis, and therefore payments would normally become due on the 30th of the following month. 4 PG&E's estimate is based on a pre-tax rate of return of 12.25% adjusted for income tax effects. 5 Mimeo., p. 8, Finding of Fact 5 and Conclusion of Law 1.
