Summary of Standards Adopted in D.00-08-023 and D.00-09-075

The three utilities were granted authority to enter into bilateral forward contracts that expire on or before December 31, 2005, subject to previously adopted limits applicable to forward energy products, including capacity products. The Commission did not require that these bilateral forward contracts specify that the products go to physical delivery in the PX markets. The Commission stated that it should continue to oversee procurement practices, and put the utilities on notice that their bilateral forward contract purchasing decisions must meet the standards adopted.

The decisions articulated the circumstances under which reasonableness review of SCE and SDG&E near-term (power delivered through December 31, 2002) bilateral forward contracts would occur. Specifically, if the average price of SCE's or SDG&E's bilateral forward transactions, delivered or requiring delivery over the course of an annual period, exceeds the average price of SCE's or SDG&E's remaining portfolio of transactions, delivered or requiring delivery over the same period, by more than 5%, then the Commission will initiate a reasonableness review. The decisions imply but do not explicitly state that such transactions that are less than or equal to the 5% of average price ceiling are reasonable. A finding of reasonableness regarding such transactions would come in the context of a future proceeding. Any reasonableness review would take place as part of the utility's Annual Transition Cost Proceeding.

D.00-08-023 adopted an approach for developing, prospectively, a range of reasonable prices for PG&E near-term and "interim term" bilateral forward contracts. "Interim term" is not defined explicitly, but it can be inferred to parallel the timeframe applied to SCE's medium-term contracts. Contracts entered into by PG&E with prices within that predefined range would be reasonable. The decision implied but did not explicitly state that contracts with prices outside the predefined range would be subject to reasonableness review. Any reasonableness review would take place as part of the utility's Annual Transition Cost Proceeding.

D.00-08-023 provided a pre-approval process for SCE medium-term contracts (delivery after December 31, 2002). The pre-approval process provides that SCE make a compliance filing that includes the bilateral forward contract and justifying support for the contract. The filing would be accepted under Public Utilities Code Section 583 and held confidential. The Energy Division would then approve the contract within 30 calendar days, or, if the Energy Division believes modification to or rejection of the contract is required, it may place a resolution proposing to do so on the Commission's Business Agenda at the earliest possible date. If such an item is placed before the Commission, the contract will not be considered approved until a vote of the Commission, or Energy Division withdraws the item from consideration.

The decisions require the utilities to provide certain reports. All utilities provided reports to identify any markets in which affiliates or subsidiaries operate and in which the utilities intend to procure electricity or ancillary services. PG&E is required to submit to Energy Division and the Office of Ratepayer Advocates (ORA) monthly reports to a) update the sets of prices used by PG&E to establish the range of reasonable prices; and b) provide detailed information on its bilateral forward contracts. SDG&E is required to submit a monthly report to Energy Division on a confidential basis that discloses all bilateral forward contracts.