Responses to PG&E's Petition
On January 14, 2005, Juniper Generation, LLC (Juniper)7 and PE Berkeley, Inc. (Berkeley)8 submitted a joint response to PG&E's Petition. Juniper and Berkeley (Respondent QFs) state that revised payment schedules for PPAs were negotiated with PG&E allowing Juniper and Berkeley to be paid on the 15th of each month,9 thus providing timely payment of gas bills and good credit with gas suppliers. Respondent QFs contend that good reasons continue to exist for allowing PG&E to pay QFs on the 15th of each month, including maintaining QF credit ratings, and positive effects on the QF's ability to produce energy.
Respondent QFs disagree with PG&E's contention that it could not file its Petition earlier as a consequence of the Governor's emergency declaration, and PG&E's bankruptcy. Respondent QFs note that PG&E filed numerous other documents during this time period, and that there was nothing to prevent PG&E from filing its Petition months or even years ago. Therefore, Respondent QFs contend the Commission should deny PG&E's Petition as untimely.
On January 18, 2005, Edison submitted a response to the Petition. Edison states that although it has resolved payment issues with QFs under contract with Edison, Edison fully supports PG&E's Petition.
On January 31, 2005, PG&E replied to the objections of the Respondent QFs. PG&E points out that the arguments of Respondent QFs are indicative of the financial problems and extraordinary events that affected the timing of PG&E's Petition. Thus, PG&E notes that the "fragile credit relationships" used as an argument by Respondent QFs, would have been worse if the Petition was filed earlier, and Respondent QF objections would be greater. Furthermore, PG&E contends it is reasonable to assume that the end of the energy crisis is a starting point from which the Commission would take an initiative to return parties to pre-crisis contract payment terms.
Secondly, PG&E argues that potential problems with Respondent QF credit relationships do not justify the estimated $7.5 million10 in ratepayer costs incurred under the current payment terms. PG&E expects that Respondent QFs would apply prudence to future gas supplier contractual relationships given the knowledge that contract payment terms might return to the original PPA payment schedules.
Finally, PG&E contends there are no contractual impediments to return parties to their originally agreed-upon payment schedules as demonstrated by the following language from the agreements between PG&E and Juniper:11
"Monthly Payments under the Contract. Beginning January 1, 2002 and continuing for the remaining term of the Contract, PG&E shall pay QF once a month for energy and capacity deliveries under the payment terms set forth in the Contract. Notwithstanding the foregoing and unless otherwise directed by the California Public Utilities Commission, PG&E shall make payments to QF within 15 days of the end of each monthly billing period. (Emphasis added.)
PG&E contends this language further demonstrates that, to the extent the parties addressed the Commission-altered payment schedule at all, they plainly recogn ized that payments would be made on this altered schedule "unless otherwise directed by" the Commission. Thus, PG&E argues there is no contractual restriction prohibiting the return of the contract to the originally agreed-upon schedule.
An assigned Administrative Law Judge (ALJ) ruling on March 1, 2005, provided an opportunity for parties to comment on the issues in this proceeding, and to request hearings if necessary.
On March 11, 2005, SDG&E submitted comments stating that five QFs providing energy to SDG&E have agreements providing for semi-monthly payments. SDG&E contends the semi-monthly payments result in additional administrative burdens to SDG&E, the potential for errors in payment, and cost ratepayers an additional estimated $136,000 annually due to the time value of money. Therefore, SDG&E recommends that the Commission grant the Petition and apply the decision to all QFs under contract to California utilities.
In response to SDG&E's comments, an assigned ALJ ruling on May 17, 2005 provided parties an opportunity to comment on SDG&E's request that PG&E's Petition be applied to all California IOUs. On May 31, 2005, Edison filed comments supporting SDG&E's request to apply any modifications of D.01-03-067 to all QFs under contract with California IOUs.
No other comments were received and no party has requested hearings.
7 Juniper owns and operates eight gas-fired QFs who have PPAs with PG&E. 8 Berkeley is a QF that owns and operates a facility on the University of Berkeley campus, and has a PPA with PG&E. 9 Juniper and Berkeley note that natural gas bills from suppliers are due for payment on or before the 25th of each month. 10 The $7.5 million amount is calculated using a pre-tax rate of return of 12.25%, which is PG&E's authorized return on rate base, adjusted for the income tax gross-up on the equity rate of return (Declaration of Marc L. Renson, PG&E Manager of Counterparty Contract Settlements, attached to PG&E's Application). 11 PG&E states that similar language appears in PG&E's agreements with Berkeley.
