ALJ/TRP/eap Date of Issuance 11/24/2008
Decision 08-11-056 November 21, 2008
BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
Rulemaking Regarding Whether, or Subject to What Conditions, the Suspension of Direct Access May Be Lifted Consistent with Assembly Bill 1X and Decision 01-09-060. |
Rulemaking 07-05-025 (Filed May 24, 2007) |
DECISION AUTHORIZING MEASURES TO FACILITATE
REMOVAL OF DEPARTMENT OF WATER RESOURCES FROM
THE ROLE OF SUPPLYING ELECTRIC POWER
DECISION AUTHORIZING MEASURES TO FACILITATE REMOVAL OF DEPARTMENT OF WATER RESOURCES FROM THE ROLE OF SUPPLYING ELECTRIC POWER 2
1. Introduction 2
2. Procedural Background 4
3. Framework for Considering Plan to Accelerate DWR's Departure 6
3.1. Scope of the Inquiry 6
3.2. Options to Facilitate and Expedite DWR Release from Contracts 8
3.2.1. Novation Provisions in DWR Contracts 9
3.2.2. Renegotiation of Contracts that Lack Novation Clauses 10
3.2.3. Assignment of DWR Contracts 10
3.3. Merits and Feasibility of Pursuing Contract Revisions 11
4. Net Costs/Benefits of Expediting DWR's Removal as Supplier of
Power 18
4.1. Framework for Assessing Net Cost/Benefits 18
4.2. Potential Categories of Savings 29
4.2.1. Early Release of Reserves 29
4.2.2. Potential Cost Savings from Renegotiated Contracts 30
4.2.3. Potential Benefits from Price-Responsive Load 32
4.2.3.1. Discussion 33
4.2.4. Claimed Portfolio Management Savings 33
4.3. Potential Categories of Cost 34
4.3.1. Debt Equivalence Costs 34
4.3.2. Collateral Requirements 39
4.3.2.1. Discussion 41
4.3.3. Incremental Administrative and General Costs 43
4.4. Cash Working Capital 43
4.4.1. Discussion 44
4.5. Transactional Costs 44
5. Addressing Other Potential Impediments to Contract Novation/Renegotiation 46
5.1. Legal Authority for DWR to Enter Into a Novation Agreement 46
5.2. Satisfying Minimum Credit Rating Conditions 47
5.2.1. Parties' Positions 47
5.3. DWR Contract Novation and Long Term Procurement
Planning 49
5.4. Effects on Resource Adequacy Requirements 53
5.5. Effects of Novation on Cost Allocation Among IOUs 54
6. Adopted Plan for Going Forward 60
6.1. General Framework for Formulating a Plan 60
6.2. Formation of Working Group 62
6.3. Setting Priorities and Contingencies 63
6.4. Negotiating Replacement Agreements to Retain Existing Terms "As Is" Versus Concurrent Revisions to Existing Terms 70
6.5. Novation to Third Parties other than IOUs 75
6.6. "Just and Reasonable" Review Approval of Replacement Agreements before the California Public Utilities Commission (CPUC) 78
7. Comments on the Proposed Decision 84
8. Assignment of Proceeding 84
