ALJ/JJJ/epg DRAFT Item 3

12/7/2000

Decision DRAFT DECISION OF ALJ ECONOME (Mailed 11/6/2000)

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Application of Pacific Gas and Electric Company for an Ex Parte Order Approving Settlement Agreements Between Pacific Gas and Electric Company and Certain Winning Bidders in Pacific Gas and Electric Company's Biennial Resource Plan Update Auction. (U-39-E)

Application 99-12-038

(Filed December 27, 1999)

TABLE OF CONTENTS

TITLE PAGE

OPINION 2

I. Summary 2

II. The Update 2

III. This Application 6

IV. Parties' Positions 8

A. PG&E and the Settling Parties 8

B. Aglet 9

V. Request for Supplemental Briefing 9

VI. Reasonableness of the Settlements 10

A. Standard of Review 10

B. The July ACR 11

C. Reasonable Bid Preparation Costs or Reliance Costs 12

D. The PG&E/AES Settlement 14

1. Costs incurred before PG&E declared Aglet a "winning bidder" in the Hunters Point auction 15

2. NOx Offsets 16

3. Letter of Credit Fees 16

4. Discounting of AES' costs 17

a) January 10, 1994, when PG&E announced AES as a winning bidder 18

b) April 20, 1994, when the Commission commenced electric industry restructuring efforts 19

c) February 23, 1995, when FERC concluded that the Update auction violated federal law 20

d) June 1995, when FERC denied reconsideration 21

e) July 5, 1995, when the July ACR issued 22

f) June 19, 1996, when the San Francisco Board of Supervisors urged the mayor and all city agencies to refrain from action that would result in development of the AES project 23

VII. The Effect of California's Current Capacity Need on this Proceeding 23

Comments to the Draft Decision 26

Findings of Fact 26

Conclusions of Law 29

ORDER 31

OPINION

I. Summary

This decision addresses the application of Pacific Gas and Electric Company (PG&E) requesting that the Commission approve as reasonable the package of settlements it has achieved with certain bidders in the Biennial Resource Plan Update (Update) auction. The aggregate principal amount of the settlement package is $ 9,525,000. We find that PG&E's settlement package is reasonable, consistent with the law, and in the public interest, and approve it.