II. The Update
In this application, PG&E requests approval of a settlement package consisting of three settlements it has reached with certain bidders in PG&E's Update auction.1 In order to place this application in context, we set forth a brief summary of the Update.
In the late 1980s, the Commission was in the practice of reviewing the utilities' resource planning activities. On July 7, 1989, the Commission issued Order Instituting Investigation 89-07-004, which officially established the Update proceeding as the forum for reviewing the utilities' long-term resource plans during a designated planning period and addressing generic issues related to utility purchases of electricity from a broad class of nonutility energy producers called qualifying facilities or QFs.2 (See Decision (D.) 92-04-045, 44 CPUC2d 6, 22.) For each utility, the Commission specified a certain amount of capacity and the benchmark prices for that capacity to be offered for possible deferral through QF bidding. For PG&E, the Commission designated two identified deferrable resources: (1) the repower of Hunters Point Units 2 and 3 for a total of 221 megawatts (MW) net capacity, and (2) a variable speed wind project of 22.5 MW effective capacity (150 MW gross capacity). (See 44 CPUC2d at 15 and 37.)
In the fall of 1993, PG&E commenced its solicitation in the Update in compliance with our orders. On December 9, 1993, Southern California Edison Company (Edison) suspended its solicitation, informed the Commission of unanticipated bidding strategies, and reargued the wisdom of a number of policy implementation methods we had previously determined (e.g., second price auction, renewable set-aside). In response to PG&E's request for guidance regarding some of the same unanticipated bidding strategies raised by Edison, we issued D.94-01-020, 53 CPUC2d 35, where we directed PG&E to announce its auction winners for its Hunters Point solicitation as scheduled, because its request for guidance did not encompass this solicitation. We also directed PG&E not to announce the Final Standard Offer 4 (FSO4)3 auction winners for its wind solicitation until further order from the Commission. Several days after D.94-01-020 issued, PG&E designated AES Pacific, Inc.(AES) as the winning bidder in its Hunters Point solicitation.
In June 1994, we issued D.94-06-047, 55 CPUC2d 274, which modified portions of the FSO4 solicitation to address unanticipated bidding strategies and recommenced the solicitation schedule. In June 1994, we also issued D.94-06-050, 55 CPUC2d 291, which denied PG&E's motion that the Commission immediately suspend its Hunters Point solicitation while the Commission considered the remaining Update solicitation in light of its recently initiated rulemaking and investigation on electric industry restructuring. The Commission later stayed D.94-06-047, but not D.94-06-050, on its own motion in D.94-10-039, 56 CPUC2d 620.
A number of parties filed applications for rehearing or petitions to modify the June 1994 decisions. These pleadings culminated in D.94-12-051, 58 CPUC2d 300, which denied a petition by PG&E to modify D.94-06-047 and D.94-06-050 with respect to the Hunters Point solicitation, but granted a limited rehearing at the request of Flowind Corporation in order to review and determine the as-available wind bidders. The Commission also lifted the stay it issued in D.94-10-039, and (except for the Hunters Point solicitation) required PG&E to negotiate additional terms and to submit FSO4 contracts to the Commission for approval by advice letter filing.
Following the issuance of D.94-12-051, Edison and San Diego Gas & Electric Company (SDG&E) filed petitions for enforcement with the Federal Energy Regulatory Commission (FERC) challenging the Commission's reinstatement of the solicitation, seeking to enjoin the implementation of our orders and to be relieved from having to enter into contracts with the bidders designated as "winning bidders."
On February 23, 1995, FERC issued an Order on Petitions for Enforcement Action Pursuant to Section 210(h) of PURPA in Docket Nos. EL95-16-000 and EL95-19-000 (February 23 FERC Order).4 FERC ruled that this Commission's implementation of the Update violated PURPA and FERC's implementing regulations because this Commission did not consider all sources of electric capacity in setting avoided cost prices. The FERC concluded:
"Because the California Commission's procedure was unlawful under PURPA, Edison and San Diego cannot lawfully be compelled to enter into contracts resulting from that procedure. At this juncture, there are no executed contracts. However, in order to avoid parties spending further time and resources in pursuing contracts that would be unlawful under PURPA, we believe it would be appropriate for the California Commission to stay its requirements directing Edison and San Diego to purchase pending the outcome of further administrative procedures in accordance with PURPA. We also encourage the utilities and QFs to reach a settlement that would be consistent with PURPA." (February 23 FERC Order at 26-27.)
The February 23 FERC Order precipitated the filing of various motions to stay the Update. On March 7, 1995, the Assigned Commissioner issued an interim stay of the Update solicitation and called for comments on four alternative actions that the Commission might take. On March 16, 1995, the full Commission, on its own motion, extended the interim stay in D.95-03-019, 59 CPUC2d 52. We issued this interim stay "in order to permit additional time to assess the impact of the FERC order on the Update proceeding and to review the Commission's legal and policy options. A stay will also suspend the deadlines for signing of contracts by the utilities and will avoid what may be the needless expenditure of time and resources by the parties and the Commission in order to resolve the rehearing issues in this proceeding." (59 CPUC2d at 53.)
The Commission and numerous parties filed requests for rehearing or clarification of the February 23 FERC Order. FERC issued a notice stating its intent to treat these requests for rehearing as motions for reconsideration. FERC issued its Order on Requests for Reconsideration on June 2, 1995, upholding the February 23 FERC Order.
On July 5, 1995, the Assigned Commissioner issued a ruling (July ACR) that memorialized the public discussion among Commissioners at the June 21, 1995, meeting and stated that the Commission was unanimous in finding ratepayer interests were advanced and protected by the settlements. (July ACR at 7.5) The July ACR set forth criteria by which the Commission would evaluate settlements with bidders, and directed each utility to file a single application containing all the settlement agreements it wished the Commission to approve. (Id. at 11.)
1 On May 23, 2000, the Administrative Law Judge (ALJ) issued a protective order placing the amount of the individual settlements as well as the settling parties' individual cost information under seal for a limited period, because of the commercial and proprietary nature of the cost information, and because disclosure of the individual settlement amounts could adversely affect PG&E's ability to negotiate effectively with the settling parties in the event the Commission does not approve the settlements. 2 A QF is a small power producer or cogenerator that meets federal guidelines and thereby qualifies to supply generating capacity and electric energy to electric utilities. 3 The Final Standard Offer 4 contract was a standard offer contract where the pricing was derived from the utility's long-run marginal costs. These costs were determined from the respective utility's resource plan. 4 PURPA is the Public Utility Regulatory Policies Act of 1978. The utilities filed their petition for enforcement pursuant to Section 210 of PURPA, 16 U.S.C. § 824a-3(h)(1988). 5 According to the ACR, in an exercise of authority conferred by Article 12, Section 2 of the California Constitution, the Commission voted unanimously at the June 21, 1995 meeting to delegate to the Assigned Commissioner the task of memorializing the public discussion so that it might provide guidance to the settling parties. (July ACR at 1-2.) First enacted in 1879, that portion of the Constitution provides that: " . . . Any commissioner as designated by the commission may hold a hearing or investigation or issue an order subject to commission approval."
