V. Assignment of Proceeding
Michael R. Peevey is the Assigned Commissioner and Carol A. Brown is the assigned Administrative Law Judge in this proceeding.
1. Petitions to Modify (PTM) D.04-12-048 were filed by SCE, SSJID, PG&E and IEP.
2. WPTF, IEP and TURN responded to PG&E's PTM; PG&E responded to SSJID's PTM; ORA, CAC/EPUC, AReM/WPTF, CLECA and CMTA, CRA, IEP, and DWR responded to SCE's PTM; and TURN, PG&E, SCE and WPTF responded to IEP's PTM.
3. Modifications adopted by the Commission to D.04-12-048 are set forth herein.
4. We are replacing the first sentence of OP #10 that currently reads: "We adopt the 15-year standard for new fossil-fueled resources acquired by the utilities." with "We adopt a ten-year, or life of the contract standard, whichever is less, for new fossil-fueled resources acquired by the utilities." (New language in italics.)
5. As discussed in this Decision, OP 16 is modified to read as follows: "We grant eight of SCE's proposed twelve requested modifications, with the exception of modifications one, five, seven and nine." (New language in italics.)
6. Language on p. 165 is changed to read as follows: "However, since that time SCE has modified its stance and now supports the GHG adder to the evaluation of new utility commitments or contracts with terms greater than five years. SCE believes, however, that application of GHG adders only to California IOUs is a "sub-optimal program." SCE believes that there should be a broader national or regional program and has called in a press release for "comprehensive national programs" to address GFG." (New language in italics)
As set forth herein, it is reasonable to grant in part, and deny in part, the modifications requested to D.04-12-048 by SCE, SSJID and SDG&E in their respective PTM.
IT IS ORDERED that:
1. Southern California Edison Company's (SCE) Petition to Modify (PTM) Decision (D.) 04-12-048 is denied except for the following modifications: (1) Ordering Paragraph (OP) # 10 is modified to correct an inadvertent error as follows: with "We adopt a ten-year, or life of the contract standard, whichever is less, for new fossil-fueled resources acquired by the utilities." (New language in italics.); (2) OP 16 is modified to read as follows: We grant eight of SCE's twelve requested modifications, with the exception of modifications one, five, seven and nine, . . . in place of "We grant ten of SCE's twelve requested modifications, with the exception of modifications seven and nine, . . . ." ; and (3) p. 165 is modified as requested by SCE as follows: However, since that time SCE has modified its stance and now supports the GHG adder to the evaluation of new utility commitments or contracts with terms greater than five years. SCE believes, however, that application of GHG adders only to California IOUs is a "sub-optimal program." SCE believes that there should be a broader national or regional program and has called in a press release for "comprehensive national programs" to address GHG. (New language in italics.)
2. Pacific Gas and Electric Company (PG&E) and Independent Energy Producers' (IEP) PTM is denied and D.04-12-048 is not modified on the capital cost cap structure and the sharing mechanism.
3. South San Joaquin Irrigation District's (SSJID) PTM D.04-12-048 is denied and the treatment established for Community Choice Aggregations (CCA) is not extended to irrigation districts and municipalities.
4. Independent Energy Producer's (IEP) PTM requesting clarification on the Independent Evaluator or the evaluation method for competitive solicitations is denied.
5. We do not modify our directives in D.04-12-048 for all-source solicitations, but we do encourage the Investor Owned Utilities to be inclusive so their solicitations encompass all existing and future resources.
6. In all other respects, D.04-12-048 remains unchanged or modified.
This order is effective today.
Dated , at San Francisco, California.
APPENDIX A
CHANGES PROPOSED IN SCE'S PETITION FOR
MODIFICATION OF THE 2004 PROCUREMENT PLAN DECISION
SHOULD BE ADOPTED AS SOON AS POSSIBLE
On February 19, 2004, SCE filed a Petition for Modification (PFM) of Decision 03-12-062, (the 2004 Short Term Procurement Plan (STPP) Decision). The PFM detailed twelve separate problems with the 2003 STPP Decision that affects SCE's ability to procure power and make it difficult for SCE to comply with portions of the decision as it is written. SCE asked the Commission to modify the Decision to:
· Establish a specific time for issuing a resolution for the approval of the Investor-Owned Utilities' (IOUs) quarterly compliance filings, or state that the absence of a resolution after a defined length of time (such as 90 days) forecloses the opportunity for further review and establishes eligibility for cost recovery. This is needed because the decision presently would allow the Commission to indefinitely conduct further investigation and entertain challenges relating to procurement activities that occurred many years prior to the Commission's decision to conduct the investigation, giving SCE no finality.
· State specifically that the target guideline for spot market procurement does not apply to procurement of capacity to meet WECC operating reserve requirements. IOUs may self-provide their operating reserves, allow their operating reserve requirements to be served from the ISO's markets one day-ahead or hour-ahead basis, or utilize a combination of both. The Decision is presently unclear on this issue.
· Delete language that could be interpreted to allow the Department of Water Resources (DWR) to perform "after-the fact reasonableness reviews." The Decision presently contains ambiguous language which could be interpreted to allow DWR to act outside its jurisdiction.
· Change language that requires utilities to consult with their Procurement Review Groups (PRGs) for transactions greater than 90 days to require utilities to consult with their PRGs for transactions greater than one calendar quarter, or 92 days. This language must be modified to more accurately reflect the term of the typical products available in the market, lest SCE and its PRG members find themselves meeting to discuss the transaction options for every quarterly product.
· Modify language that directs SCE to assume a "pro rata" allocation of DWR costs. At present, the language of the decision is inconsistent with the way SCE treats DWR costs in its adopted procurement plan. SCE proposed a seven-step process for treating DWR costs: (1) DWR avoidable contract costs are allocated to the customers of the utility to which the Commission allocated the contract, consistent with D.02-09-053; (2) DWR's pro rata share of utility wholesale sales revenue is allocated to the customers of the utility that made the sale; (3) the allocation of DWR's unavoidable contract costs to SCE's customers does not depend on the actual dispatch levels of any DWR resources or on any utility's procurement selections; (4) the net gains/losses from all hedge transactions SCE recommends or enters into as DWR's limited agent are allocated to SCE's customers; (5) SCE's customers do not bear the net gains/losses of any hedge transactions recommended or entered into by the other utilities as DWR's limited agents; (6) the unavoidable gas costs incurred under the DWR contracts allocated to SCE - i.e., the Sempra contract, the Dynergy contract, and SCE's share of the Williams gas contract - are allocated to SCE's customers; and (7) the unavoidable gas costs incurred under the DWR contracts allocated to other utilities are not allocated to SCE's customers. The Commission should adopt this allocation process for SCE.
· Allow IOUs to enter into contracts of up to five years in length where delivery begins in 2004 or later and termination occurs prior to 2009. This is consistent with the term of SCE's Existing AB57 PP. Given the passage of time and the submittal of SCE's proposed rolling five-year term in its Revised AB57 PP, SCE recommends that the Commission modify D.03-12-062 to allow contact terms up to five years in duration, but not constrain procurement deliveries to terminate by a date certain.
· Modify language that would require an "unqualified certification" as a basis for authorizing SCE's proprietary risk model. The language of the decision must be modified because a certification of this level would be extremely difficult to obtain.
· Modify language that restricts bilateral transactions to less than one calendar quarter in length and clarify that the term "less than 90 days forward" refers to the start of the transaction.
· Eliminate the requirement that SCE demonstrate that identified over-the-counter (OTC) brokers provide prices equivalent to those of exchanges. Allowing transactions from brokers only when the same transaction can be made with an exchange at an equivalent price is impractical.
· Clarify how to measure the level of TeVaR which triggers a PRG meeting. At present, the Decision is ambiguous and could be read at least three different ways.
· Delete the sentence which states that a utility should not "arbitrage" in energy markets. The term "arbitrage" could apply to many different situations, and could result in a ban of practices the Commission intended to permit.
· Clarify that SCE's compliance filing is due at the same time as PG&E's and SDG&E's compliance filings. At present, the Decision is unclear on this point.
A complete explanation of why SCE needs each of these modifications is found in the PFM. In general, it remains difficult to comply with many portions of Decision 03-12-062 as it is presently worded. Other provisions of the Decision are ambiguous or unclear, and open to several interpretations. The modifications requested in SCE's PFM are needed to ensure that SCE will be able to enter into the best available transactions for its customers and to provide a clear regulatory framework. SCE urges the Commission to grant its PFM as soon as possible.
(END OF APPENDIX A)
