Summary of Proposed Standards in D.00-12-065

D.00-12-065 stated that the primary purpose for allowing utilities to enter into bilateral contracts is to lower costs to ratepayers. D.00-12-065 established increased supply as a secondary reason to enter into bilateral contracts.

D.00-12-065 proposed to modify how the Commission would pre-approve near-term and medium-term contracts. The proposed standards would require the utility to use uniform criteria to compare contracts to forecasted prices for the product or service. D.00-12-065 proposed to replace the "5% of average price" ceiling reasonableness standard adopted for SCE and SDG&E near-term contracts, the reasonable "pre-defined range" of prices for PG&E, and the specific price benchmark pre-approval for SCE medium-term contracts with specific price benchmarks. Given market conditions, D.00-12-065 proposed a standard whereby the Commission would regard any bilateral forward flat (7 days a week, 24 hours a day) contract with a 5-year term, with an energy price below 5¢/kWh to be per se reasonable with out further review. Contracts priced between 5¢/kWh and 6¢/kWh (for the same product) would also be reasonable unless the contract was entered into with an entity affiliated with a utility. Contracts priced above 6¢/kWh (for the same product) would be subject to reasonableness review at the Commission's discretion. The proposal would have the Commission conduct reasonableness reviews by considering the utility's portfolio of contracts, rather than individual contracts, assuming they meet or beat the appropriate price benchmark. Contracts that did not meet each of the criteria we proposed would be evaluated in the context of the utility's overall procurement strategy.