ALJ/MLC/eap DRAFT CA-36

2/22/2001

Decision DRAFT DECISION OF ALJ COOKE (Mailed 2/8/2001)

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)

INTERIM OPINION

Qualifying Facilities that exercised their one-time option to switch to Power Exchange pricing shall be paid short-run avoided cost payments based on the Transition Formula adopted in D.96-12-028, or as modified, for power produced as of January 19, 2001.

Procedural Background

In Decision (D.) 99-11-025, we set forth procedures for Qualifying Facilities (QFs) to exercise a one-time option to elect to receive energy payments based on the Power Exchange (PX) market-clearing price pursuant to Pub. Util. Code § 390(c).¹ Until such time as the Commission has adopted a PX-based price, QFs who exercised this option have been paid subject to true-up. Because we have not yet adopted a PX-based price, the true-up remains in place. We authorized the utilities to establish tracking accounts to track PX-based payments to QFs that exercised the one-time option in order to aid calculation of a true-up, should one occur. We established that any amount subject to true-up would earn the short-term commercial interest rate.

D.99-11-025 adopted the PX day-ahead zonal market-clearing price as the basis for payments for QFs exercising their one time switch option. The day-ahead zonal market-clearing price was selected because it held the most significant volumes, PX tariffs and protocols provided for transparent pricing in that market, and a single market price was administratively simple.

Unless a QF has made this election, short run avoided cost (SRAC) energy prices paid by public utilities are based upon a benchmark energy price adjusted for changes over time in a gas index, as described in Pub. Util. Code § 390(b). D.96-12-028 implemented the approach spelled out in § 390(b). The SRAC formula is known as the Transition Formula.

On January 10, 2001, Pacific Gas and Electric Company (PG&E) filed an emergency motion seeking a stay of D.99-11-025 and resolution of the true-up issue. On January 11, 2001, Commissioner Wood issued an Assigned Commissioner Ruling (ACR) imposing a moratorium on the ability of QFs to switch to PX pricing under § 390(c) and setting other aspects of PG&E's motion for comments. Comments were filed on January 24, 2001 by the Independent Energy Producers Association (IEP), California Cogeneration Council (CCC), Calpine Corporation (Calpine), and San Diego Gas & Electric Company (SDG&E). PG&E and CCC filed reply comments on January 31, 2001.