Procedural Matters
Although D.00-12-065 was a decision adopted by this Commission, in essence it served the same purpose as a draft decision issued for comment. We have now received comments on the draft decision, and have modified the decision based on those comments. As such, the decision has already been subject to public review and comment as required by §311 and Rule 77.7. Therefore, additional comment has been waived pursuant to Rule 77.7(f)(9).
1. Adoption of a cost benchmark is likely to create a floor for seller bids.
2. The Commission cannot analyze the reasonableness of the utilities' portfolios using price as a criterion until it has determined the ratemaking applicable to retained generation assets.
3. The guidelines for bilateral contracts proposed by SDG&E, SCE, and PG&E would require the Commission to micromanage procurement decisions by specifying the appropriate resource mix, product mix, contract terms, and approve contracts prior to the utilities entering into them.
4. The existing procedures the utilities use to solicit competitive bids for power purchases can promote utility contracting while protecting utility ratepayers, if certain conditions are placed on the kinds of contracts that the Commission will consider reasonable per se.
5. The record in this proceeding suggests the reasonableness of bilateral power purchase contracts if they do not exceed 6¢/kWh and are part of a competitive bidding process.
1. The utilities' power purchase contracts should be presumed reasonable if they are (1) signed following a solicitation of competitive products; (2) among the least expensive 30% of power offered in solicited contract bids; (3) not signed with any unregulated affiliate of a California investor-owned utility; (4) provide an average cost of power not exceeding 6 cents for contract terms of up to three years or provide an average cost of power not exceeding 5.5 cents for contract terms of up to five years.
2. Power purchase contracts that do not meet the standards of Conclusion of Law 1 should be subject to subsequent reasonableness review.
3. The standard of review for determining the reasonableness of a power purchase contract should be whether utility exercised good business judgment in light of what was known, or should have been known, at that the time the utility executed the transaction.
IT IS ORDERED that:
1. The reasonableness standards for bilateral forward contracts adopted in Decision (D.) 00-08-023 and D.00-09-075 are modified as set forth herein.
2. The least expensive 30% of power offered in the competitive utility solicitations for power will be considered to be per se reasonable, subject to the following conditions:
d. The average contract price will not exceed a ceiling of 6 cents for contracts with terms of up to exceed three years or 5.5 cents for contracts with terms of up to five years;
e. Contracts signed with the unregulated affiliate of any California investor-owned utility will not be considered reasonable per se under any condition;
f. The presumption of reasonableness will lapse for contracts signed after 180 days of the effective date of the decision unless the utility receives approval to extend the 6 cent ceiling or receives approval for a different price ceiling.
3. Except for the additional contracting guidelines specifically adopted in Ordering Paragraph 2, this order does not change previous Commission orders.
This order is effective today.
Dated , at San Francisco, California.
