2.2. Long-Term Procurement Plans

As indicated in the OIR, review and adoption of the utilities' long-term procurement plans is the centerpiece of this proceeding.¹ This exercise, including the adoption of upfront standards and criteria for rate recovery, constitutes the last major step remaining for implementation of Assembly Bill (AB) 57 (Stats. 2002, Ch. 835). Completion of this review and approval of utility plans by the end of this year is of critical importance so that the utilities can make the investment decisions that are crucial to the reliable energy future of this state. Accordingly, I will establish an aggressive litigation schedule that provides for evidentiary hearings later this summer and issuance of a final decision approving the utilities' plans and resolving associated issues in December of this year.

This ruling directs San Diego Gas & Electric Company (SDG&E), Southern California Edison Company (SCE), and Pacific Gas and Electric Company (PG&E) to submit their proposed long-term procurement plans on July 9, 2004. To facilitate review and analysis, the utilities should follow the common plan outline that they jointly filed on May 7, 2004. They should of course observe the loading order specified in the State's Energy Action Plan, as supplemented in D.04-01-050, at p. 54 mimeo.

Appendix A to this ruling, prepared by the Commission's Energy Division in cooperation and consultation with staff of the California Energy Commission, provides further direction and guidance to the utilities regarding the form and content of those proposals. In particular, Appendix A describes how the utilities should address the many demand and resource uncertainties they face by using three supply/demand scenarios: high-, medium-, and low-incremental need. This should help the Commission to understand how each utility intends to respond to a wide range of load scenarios. The focus is not on forecasts, but rather on the adoption of long-term plans that can accommodate many possible outcomes. I endorse this approach, and expect the utilities to observe the direction and guidance in Appendix A in preparing their plan submittals.

In conjunction with the review of the long-term procurement plans, this proceeding will consider proposals for how the Commission will review and approve individual procurement actions (such as certificates of public convenience and necessity applications and requests for approval of long-term power purchase agreements) under the adopted long-term plans. I am particularly interested in proposals that address the need for reasonable certainty of cost recovery. In addition, proposals to modify existing limits on the utilities' procurement authority will be considered.

On March 26, 2004, PG&E filed a petition seeking several modifications to D.04-01-050. Among them is a request to modify the decision to authorize utilities to operate until December 31, 2008, in accordance with their adopted 2004 short-term plans, consistent with the five-year contracting authority already approved in D.03-12-062. As proposed by PG&E, these plans would be periodically reviewed or prospectively modified by advice letter, application, or other means approved by the Commission. I recognize PG&E's position that "[n]o efficiencies would be created by combining the Commission's review of revised short term (i.e., AB 57) procurement plans with the Commission's review of long term plans..." (PG&E petition, p. 11.) Nevertheless, I am persuaded that such combined review is necessary. Accordingly, utilities and intervenors should address PG&E's request to extend the short-term plan authorizations in their testimony on long-term procurement plans.

¹ I note that parties as well as decisionmakers have sometimes referred to "procurement plans" and "resource plans" interchangeably. The OIR is clear that the major focus is to review and adopt long-term procurement plans. However, the plans must be based on an integrated resource strategy that is consistent with Commission policy, reflects reasonable assumptions, and covers a rational range of scenarios.