2. Procedural Background
On May 24, 2007, the Commission initiated this Order Instituting Rulemaking (OIR) to consider whether and if so, how Direct Access could (or should) be restored. The rulemaking was segmented into three phases:
1. Commission Legal Authority to Lift the Direct Access Suspension in accordance with AB1X.
2. Public Policy Merits of Lifting the Direct Access Suspension and Applicable Wholesale Market Structure/Regulatory Prerequisites.
3. Rules Governing a Reinstituted Direct Access Market: e.g., Entry/Exit/Switching; Default Arrangements, and Cost Recovery Issues
On February 28, 2008, Decision (D.) 08-02-033 was issued in Phase I of this proceeding, finding that lifting the suspension on Direct Access was barred as long as DWR supplies power to retail customers as a party to its existing power contracts (Water Code § 80260). The last of the DWR contracts is scheduled to expire in 2015. The Commission also concluded that there was merit in considering ways to relieve DWR of its obligations to supply power on an expedited basis by supporting negotiations with DWR contract counterparties to enter into replacement agreements with the IOUs.
Phase II of this proceeding was thus bifurcated to consider, as Phase II(a), the feasibility and framework for a plan to accelerate the removal of DWR from its role of supplying power through novation and renegotiation of contracts. A prehearing conference (PHC) in Phase II(a) was held on April 11, 2008. An Assigned Commissioner's Ruling (ACR) issued on April 18, 2008, further refined the schedule into Phase II(a)(1) --to explore the feasibility and to consider the design of a plan to support arrangements to implement replacement contracts, as noted above--, and Phase II(a)(2)--to implement any plan that may be adopted in Phase II(a)(1). In defining this procedural scope, the ACR stated:
"A separate decision will be issued on Phase II(a)(1) issues, addressing the feasibility of going forward with a program to facilitate removing DWR from its role as supplier of power under AB1X, including addressing general timing considerations in conducting any subsequent negotiations. Phase II(a)(1) shall address whether novation/renegotiation efforts should be limited only to contracts that expire after a prescribed date, and the general criteria, constraints, conditions, and guidelines to be applied." (ACR at 9-10).
A technical workshop on Phase II(a)(1) issues was held on June 2, 2008. Parties filed post-workshop comments on June 9, 2008, with reply comments on June 16, 2008. A follow-up workshop was held on July 1 and 2, 2008. Parties presented their positions on Phase II(a)(1) issues in filed comments, as follows: Inter-utility cost allocation comments were filed on July 28, 2008, with replies on August 11, 2008. Comments on net costs-versus-benefits issues were filed on August 4, 2008, with replies on August 18, 2008. Summary closing comments on Phase II(a)(1) issues were filed on August 25, 2008, with replies on September 8, 2008. DWR submitted a final memorandum on September 10, 2008.
The major parties participating in Phase II(a)(1) were the IOUs: Pacific Gas and Electric Company (PG&E), San Diego Gas & Electric Company (SDG&E), and Southern California Edison Company (SCE); various industry and trade groups: Alliance for Retail Energy Markets/California Alliance for Creative Energy Solutions (AReM/CACES), Reliant Energy, Inc. (Reliant), California Large Energy Consumers Association (CLECA) and California Manufacturers and Technology Association (CMTA); various consumer advocate representatives: The Utility Reform Network (TURN), the Division of Ratepayer Advocates (DRA), Consumer Federation of California (CFC), and Californians for Renewable Energy (CARE). The DWR also participated through responding to data requests, attending workshops, and submitting memoranda on its positions.
A motion seeking evidentiary hearings on cost allocation issues was filed by PG&E. A motion seeking evidentiary hearings on the determination of net benefits was filed by DRA. The ALJ issued rulings denying each of these motions on the basis that neither motion raised factual issues for which evidentiary hearings were necessary. A motion seeking to dismiss the entire proceeding was filed by CARE, arguing that the issue of valid contract formation should be addressed before the proceeding goes forward. The ALJ issued a ruling denying the motion on the basis that CARE failed to provide any convincing rationale warranting dismissal of the proceeding. We affirm the rulings issued by the ALJ, and concur with the reasoning set forth therein.
