BILL NUMBER: SBX1 47 AMENDED
BILL TEXT
AMENDED IN SENATE MARCH 8, 2001
INTRODUCED BY Senator Battin
(Principal coauthor: Assembly Member Keeley)
FEBRUARY 22, 2001
An act to amend Section 1108 of the Food and Agricultural
Code, and to add and repeal Article 10.5 (commencing with
Section 391.1) of Part 1 of Division 1 of the Public Utilities Code,
relating to public utilities energy ,
and declaring the urgency thereof, to take effect immediately.
LEGISLATIVE COUNSEL'S DIGEST
SB 47, as amended, Battin. Public utilities: interim short-run
avoided cost methodology.
(1) Existing law provides for a short-run avoided cost methodology
for pricing electricity generated by a nonutility small power
production or cogeneration facility, as defined.
This bill, regarding a contract between the Pacific Gas and
Electric Company , or the Southern
California Edison Company, or the San Diego Gas and Electric
Company, all both California public utility
corporations, and qualifying small power production or cogeneration
facilities (QF), as defined, would specify the energy pricing
methodology, to be used under purchase power agreements for QFs. The
bill would require the commission to provide standard-form
review and approve amendments , as
specified, for to power purchase
agreements to implement the provisions of this act. The bill would
require the commission to include in those amendments for
permit full cost recovery for the entire
duration of the amendments. The bill would require the
commission at the time of approving the amendments to make an
irrevocable determination of per se reasonableness of the amendments,
including full cost recovery by the electrical corporation of the
resulting tests.
The bill would permit electrical corporations to use hedging
contracts as a method for managing the natural-gas-cost component of
its payments to gas-fired QFs. The bill would permit an electric
corporation to enter into fixed-price energy contracts with gas-fired
QFs that do not extend beyond January 31, 2006, if the corporation
uses the hedging provisions of the bill. The bill would require that
all costs associated with commission approved hedging transactions be
recovered from the generation-related portion of the retail rates
before any of these revenues are allocated to the California
Procurement Adjustment. The bill would require that all benefits
from hedging transactions be used solely to reduce the electrical
corporation's retail electric rates for electricity.
This bill would require permit the
Treasurer to approve natural gas prices for specified
implementation agreements for gas purchase options for
gas-fired QFs. The bill would require the Treasurer to find
the gas price to be permit the Treasurer to
disapprove an implementation agreement if the long-term gas price was
not in the best financial interest of the state.
The bill would require the Treasurer at least 3 times per year to
submit a report to the Governor and to appropriate committees of the
Legislature on the performance of each public utility
regarding results of gas-fired QFs under the gas
purchase options.
(2) Existing law establishes the Central Valley
Agricultural Biomass-To-Energy Incentive Grant Program.
This bill would provide additional funding for the program, upon
appropriation, and would extend the program until June 30,
2006 to July 1, 2006 .
(3) Because existing law makes it a crime to violate an order of
the Public Utilities Commission, this bill would expand the
definition of an existing crime by requiring the commission to issue
new orders, and thereby would impose a state-mandated local program.
The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
(4) The provisions of the bill would become in operation
inoperative on July 1, 2006, and would be
repealed as of January 1, 2007. The provisions of the bill
would become operative only if a statute is enacted, as specified.
(5) This bill would declare that it is to take effect immediately
as an urgency statute.
Vote: 2/3. Appropriation: no yes
. Fiscal committee: yes. State-mandated local program: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 1108 of the Food and Agricultural Code is
amended to read:
1108. This part shall remain in effect only until
January 1, 2004 July 1, 2006 , and as of that
date is repealed, unless a later enacted statute, that is enacted
before January 1, 2004 July 1, 2006 ,
deletes or extends that date.
SEC. 2. Article 10.5 (commencing with Section 391.1) is
added to Part 1 of Division 1 of the Public Utilities Code, to read:
Article 10.5. Interim Short-Run Avoided Cost Energy
Methodology
391.1. For the purposes of this article, the following terms have
the following meanings:
(a) "Burnertip price of gas" means the border price of
gas plus the interstate and intrastate gas transportation costs
cost of the commodity plus the cost of transporting
the commodity to the burnertip .
(b) "Contract" means a power purchasing
purchase agreement.
(c) "Gas-fired QF" means a qualifying cogeneration facility whose
primary fuel is natural gas.
(d) "GP" is "Gas Price" which means:
(1) For Southern California Edison Company, the burnertip price of
natural gas.
(2) For Pacific Gas & and Electric
Company, the border price of natural gas.
(3) For San Diego Gas and Electric Company, the border price of
natural gas.
(e) "GPn" means the border gas price as reflected in the
applicable indices for the period being considered.
(f) "Non-gas-fueled QF" means a qualifying small power production
facility or a qualifying cogeneration facility whose primary fuel is
other than natural gas.
(g) "Power purchase agreement" means an agreement entered into
pursuant to the PURPA between an electrical corporation and a QF that
provides for the sale and delivery of electricity from the QF to the
electrical corporation.
(h) "QF" means a qualifying small power production facility or a
qualifying cogeneration facility within the meaning of Sections 201
and 210 of Title II of the Public Utility Regulatory Policies Act of
1978 (16 U.S.C. Secs. 796(17), (18) and 824a-3), and the regulations
adopted for those sections under that act by the Federal Energy
Regulatory Commission (18 C.F.R. 292.101-292.602).
(i) "Public Utility Regulatory Policies Act of 1978" means federal
Public Law 95-617.
(j) "PURPA" means the Public Utility Regulatory Policies Act of
1978 and the regulations adopted under that act by the Federal Energy
Regulatory Commission.
(k) "SRAC" means the short-run avoided cost of energy.
(l) "SRAC methodology" means the short-run avoided cost of
energy methodology described in subdivision (b) of Section 390
that is used to determine energy prices paid to a QF. The
methodology implements PURPA .
(m) "Switching QF" means a QF that has elected to have energy
payments based on the hourly day-ahead constrained market clearing
price paid by the independent Power Exchange under subdivision (c) of
Section 390, as authorized by the commission in its Decision
99-11-025.
391.2. The Legislature finds and declares all of the following:
(a) The enactment of Chapter 4 of the Statutes of the 2001-02
First Extraordinary Session provides that the state will purchase all
of the electricity, and ancillary services provided by the
Independent System Operator, needed by consumers in excess of
investor-owned generation, inter-utility contracts, and purchases
from QFs. This article defines how the SRAC for QFs should be
computed on an interim basis , given the enactment of
Chapter 4 of the Statutes of the 2001-02 First Extraordinary Session.
(b) Subdivision (b) of Section 390 and Decision 96-12-028 of the
commission provide that the short-run avoided cost of energy within
the meaning of PURPA, paid by an electrical corporation to a QF, be
determined monthly based on an average of monthly indices of the
price of natural gas at the California border.
(c) The determination of the SRAC based on the monthly gas price
indices produces significant payment volatility and price instability
for electrical corporations and the QFs.
(d) Restatement of the SRAC for non-gas-fueled QFs from the
current monthly determination into a fixed value for a term of years
will benefit customers, electrical corporations, and the QFs, by
reducing payment volatility and increasing price stability.
(e) Restatement of the SRAC for gas-fired QFs from the current
reliance on monthly natural gas indices to the use of longer-term
natural gas prices will benefit customers, electrical corporations,
and QFs by reducing payment volatility and increasing price
stability.
(f) California's biomass-to-energy industry provides clean
renewable energy by converting millions of tons of waste wood and
related organic materials derived from agricultural, urban, and
forestry-related sources into electricity every year. However, this
energy is provided at substantial expense. It is in the public
interest to provide incentives to the biomass-to-energy industry to
offset the cost of biomass fuel and retain the environmental and
other benefits provided therefrom.
(g) The financial security and creditworthiness of California's
electrical corporations, and the assurance of their ability to make
timely payments to QFs pursuant to power purchase agreements
, is essential to the full effectiveness of this article.
391.3. (a) This section applies to QFs that operate under
Sections 391.4 to 391.8, inclusive. The purpose of Sections
391.4 to 391.8, inclusive, is to provide, from February 1, 2001, to
January 31, 2006, inclusive, the SRAC payments to be made under power
purchase agreements between QFs and investor owned public utilities
that are subject to commission regulation.
(b) Except in connection with the implementation of power purchase
agreement provisions related to SRAC payments and to other matters
expressly addressed in this article, nothing in this article shall be
interpreted to amend or modify any provision of a power purchase
agreement, including, but not limited to, contract capacity
provisions, nonstandard energy pricing terms, and fixed energy prices
under Interim Standard Offer 4, or any other power purchase
agreement. This subdivision does not prohibit mutual agreements to
changes in a power purchase agreement by the parties to the
agreement.
(c) Time-of-delivery and seasonal energy allocation factors in
effect on January 1, 2001, and specified in a power purchase
agreement shall be applied to the SRAC payment determined
pursuant to the applicable provision of this article following the
methodology in the purchase power agreement for applying those
allocation factors to the SRAC energy payment. The allocation
factors may not be modified, except upon mutual agreement of the
parties to a power purchase agreement.
(d) Energy line loss factors at both the transmission and
distribution level shall be set at 1.0, unless a different number is
otherwise specifically set forth in a power purchase agreement or
unless the parties to a power purchase agreement agree otherwise.
(e) The commission shall provide standard-form amendments to
implement the provisions of this article. All power purchase
agreements subject to this article shall be modified to include the
applicable standard-form amendments. The commission shall provide in
those amendments for full cost recovery for the entire duration of
the amendments.
(f) The provision of subdivision (c) of Section 390 that permits a
nonutility power generator subject to Section 390 to elect to
receive energy payments based upon the clearing price from the
Independent Power Exchange shall not be operative for the period of
January 1, 2001, and June 30, 2006, inclusive, except for a
nonutility power generator that elected under subdivision (c) of
Section 390 prior to January 1, 2001.
(g)
(e) (1) The implementation of this article is necessary so
that QFs and electrical corporations can make long-term commitments
that involve substantial risks. Further, there needs to be
assurances that these commitments will be honored, including full
cost recovery by the electrical corporations. The
commission shall promptly approve, without modification, the
agreements entered into by electrical corporations and QFs to
implement this article. The commission's decision shall be final and
the commission may not change the decision.
(2)
(2) If a power purchase agreement needs to be amended in
accordance with the provisions of this article in order for a QF to
obtain financing or for other legal needs, within 10 days of the
effective date of this article, the electrical corporation and the QF
may submit to the commission for approval mutually agreed upon
amendments. The commission shall promptly review the amendments upon
receiving them. Unless the amendments are in violation of this
article, the commission shall approve them. Once approved, the
commission may not require any changes in the amendments.
(3) At the time of approving an agreement
amendments necessary to implement this article, the
commission shall make an irrevocable determination of per se
reasonableness of the agreement amendments
, including full cost recovery by the electrical corporation of
the resulting costs.
(h) Energy
(f) SRAC payments to QFs, except switching QFs, for energy
delivered beginning November 1, 2000, to February 1, 2001, shall be
in accordance with the SRAC methodology and the avoided cost postings
of the electrical corporations made in accordance with that
methodology.
391.4. (a) Except as provided in Sections 391.5 and 391.6,
subdivision (d) of Section 391.7, and subdivisions (b), (c), and (d)
of this section, for the period of February 1, 2001, to June
30 January 31 , 2006, inclusive, SRAC
payments for energy delivered by non-gas-fueled QFs shall be
established at 5.37 cents ($0.0537) per kilowatthour, subject to
subdivision (c) of Section 391.3.
(b) (1) A QF with a power purchasing agreement with fixed energy
provisions, in which those fixed energy provisions will terminate
during the period of February 1, 2001, to June 30, 2006, inclusive,
may make the following elections regarding the electric power that is
the subject of the agreement:
(b) (1) If a QF has an Interim Standard Offer 4 contract with
forecast energy payments that will terminate during the period of
February 1, 2001, to January 31, 2006, inclusive, the QF may make the
following elections regarding the electric power that is the subject
of the contract:
(A) Terminate the fixed energy provisions of the
agreement forecast energy payments of the contract
as of February 1, 2001, and accept instead the pricing
provisions of subdivision (a).
(B) Wait until the fixed energy provisions of the
agreement forecast energy payments of the contract
terminate pursuant to the agreement
contract and the energy pricing converts to SRAC payments. If
the election is this subparagraph, the QF may elect SRAC payments
determined pursuant to one of the following methods:
(i) The SRAC methodology as determined by the commission.
(ii) The product of 5.37 cents ($0.0537) per kilowatthour times
the levelized cost of a forward burnertip natural gas strip at the
time of conversion to June 30, 2006, divided by six dollars
and fifty cents ($6.50) January 31, 2006, divided by
seven dollars and thirty cents ($7.30) per MMBtu.
(2) If a power purchasing agreement has both fixed energy
provisions an Interim Standard Offer 4 contract has
both forecast energy payments and energy payments subject to
subdivision (c) of Section 390, the fixed energy provisions
forecast energy payments shall be subject to
this subdivision and the energy payments subject to subdivision (c)
of Section 390 shall be subject to Section 391.6.
(3) A QF with respect to power purchasing agreements that
are a contract that is subject to this
subdivision shall make all elections required by this subdivision
within 30 days from the effective date of this article. If the
elections are not made within that 30-day period, then when the
fixed energy provisions of the power purchasing agreement
forecast energy payments of the contract
terminate pursuant to the agreement contract
and the energy payments convert to SRAC payments, the SRAC
payments shall be determined using the SRAC methodology as determined
by the commission.
(c) Notwithstanding subdivision (b), San Diego Gas and
Electric Company and Pacific Gas and Electric Company shall
pay any non-gas-fueled QF whose forecast energy payments under an
Interim Standard Offer 4 agreement terminate in 2001, 5.37 cents
($0.0537) per kilowatthour, subject to subdivision (c) of Section
391.3, for all energy delivered to San Diego Gas and
Electric Company or Pacific Gas and Electric Company, as
applicable, commencing on the date on which the QF's forecast energy
payments terminate and continuing through June 30
January 31 , 2006.
(d) For a QF with a contract with Southern California Edison
Company for electricity generated by wind that specifies Capacity
Payment Option B, the pricing for that contract shall be determined
by this subdivision. The contract shall be amended as follows:
(1) On the effective date of this article, the contract shall be
converted to Capacity Option A (forecast of as-available capacity).
The conversion shall not obligate the QF to make any capacity payment
refund to Southern California Edison, or subject the QF to any other
penalty or repayment obligation.
(2) For the five-year period commencing as of the
effective date of this article February 1, 2006
, a fixed, combined payment for both energy and capacity in the
total amount of 7.8 cents ($0.078) per kilowatthour shall be paid for
each kilowatthour of electricity delivered pursuant to the contract.
The fixed payment shall be the total compensation payable by
Southern California Edison for electricity delivered under the
contract during the five-year period. No allocation factor,
including, but not limited to, time-of-delivery, may be applied to
the fixed payment during the five-year period. After the five-year
period, the price for energy shall revert to a price determined by
using the then-current commission-approved SRAC methodology.
Capacity payments following the five-year period shall be made as set
forth in paragraph (3). Energy and capacity payments following the
conclusion of the end of the five-year period shall be subject to
commission-approved time-of-delivery allocation factors that are then
being applied generally to SRAC payments.
(3) Commencing on the day following the five-year period that
commences on the effective date of this article, capacity payments
shall commence and be payable for the remaining term of the contract
at an annual rate equal to the annual rate specified in the
applicable contract for payment under the firm capacity option. That
annual rate shall be converted to a cents per kilowatthour rate
pursuant to Southern California Edison's general methodology for
making forecast as-available capacity payments.
(4) It is the intent of the Legislature that, on the effective
date of this section, Southern California Edison Company and the QFs
subject to this subdivision mutually waive any and all pending claims
arising from or related to compliance with firm capacity on-peak
performance requirements, compliance with annual capacity
demonstration requirements, or failures to deliver contract capacity
during system emergencies. It is further intended by the Legislature
that no payments, refunds, or penalties shall be due or owing from a
QF to Southern California Edison Company with respect to the pending
claims on any claims of the same nature that arose between the
parties prior to the effective date of this section.
391.5. (a) Commencing on February 1, 2001, and ending on June 30,
2006, payments for energy deliveries by QFs employing solar thermal
technology shall be based 75 percent on the pricing methodology
described in subdivision (a) of Section 391.4, and 25 percent based
the energy pricing formula as established pursuant to subdivision (c)
of Section 391.8, even if the contract is not with the Southern
California Edison Company.
(b) If a non-gas-fueled QF whose primary energy source is solar
energy has received final Federal Energy Regulatory Commission
certification orders, the commission shall not oppose the use of
natural gas by the QF within the limits of those certification
orders.
391.5. (a) If a non-gas-fueled QF whose primary energy source is
solar energy has received final Federal Energy Regulatory Commission
certification orders, the commission shall not oppose the use of
natural gas by the QF within the limits of those certification
orders.
(b) From February 1, 2001, to January 31, 2006, inclusive, the
payments for electrical energy delivered to the Southern California
Edison Company by QFs employing solar thermal technology shall be
based 75 percent on the pricing methodology of subdivision (a) of
Section 391.4, and 25 percent on the energy pricing methodology of
subdivision (c) of Section 391.8.
(c) This section is only applicable to certification requests made
prior to, and to power purchase agreements entered into prior to,
the effective date of this section.
391.6. (a) The provisions of subdivision (c) of Section 390
that permit a nonutility power generator subject to Section 390 to
elect to receive energy payments based upon the clearing price from
the Independent Power Exchange shall not be operative for the period
of January 1, 2001, to January 31, 2006, inclusive. A QF that became
a switching QF prior to January 1, 2001, shall be paid for energy
deliveries pursuant to this section.
(b) For the month of January 2001, a switching QF shall be
paid for energy deliveries under the SRAC methodology, as that
methodology was being implemented by the commission on January 1,
2001.
(b)
(c) The "switch date" for each switching QF shall be the
date on which the switching QF began to receive energy prices based
on the day-ahead clearing price paid by the independent Power
Exchange under subdivision (c) of Section 390. Subdivision
(c) or (d) (d) or (e) shall apply to a switching
QF for the following terms, based on the QF's switch date:
(1) If the switch date is June 1, 2000, the term is 54 months.
(2) If the switch date is July 1, 2000, the term is 48 months.
(3) If the switch date is August 1, 2000, the term is 42 months.
(4) If the switch date is September 1, 2000, the term is 36
months.
(5) If the switch date is October 1, 2000, the term is 30 months.
(6) If the switch date is November 1, 2000, the term is 24 months.
(7) If the switch date is December 1, 2000, the term is 18 months.
(c)
(d) Notwithstanding Section 391.4, commencing on February 1,
2001, and continuing for the term required under subdivision (b),
the price for energy deliveries to an electrical corporation by a
switching QF that is non-gas-fueled shall be 5.02 cents ($0.0502) per
kilowatthour. Following the expiration of that term, the price for
energy deliveries by that QF shall be established pursuant
to in accordance with the methodology set forth
in subdivision (a) of Section 391.4.
(d)
(e) Beginning on February 1, 2001, and continuing for the
term required under subdivision (b) (c)
, the price for energy deliveries to an electrical corporation by a
switching QF that is gas-fired shall be adjusted by subtracting 3.5
mils ($0.0035) per kilowatthour from the rate set forth under Section
391.8. Following the expiration of that term, prices for energy
deliveries by that QF shall be established in accordance with the
methodology set forth in Section 391.8, without adjustment.
(e)
(f) The price per kilowatthour for each switching QF for
energy delivered between the QF's switch date and December 31, 2000,
shall be equal to the independent Power Exchange's hourly day-ahead
constrained market clearing price for the zone in which the QF is
located, and shall not be subject to adjustment, revision, or true-up
of any kind.
391.7. (a) For purposes of this section, "program" means the
Central Valley Agricultural Biomass-to-Energy Incentive Grant Program
established under Part 3 (commencing with Section 1101) of Division
1 of the Food and Agricultural Code.
(b) Upon Notwithstanding Part 3
(commencing with Section 1101) of Division 1 of the Food and
Agricultural Code, upon appropriation, the sum of twenty
million dollars ($20,000,000) per year shall be transferred from the
General Fund to the California Trade and Commerce Agency for the
purposes of providing funding, commencing on July 1, 2001, to offset
the costs of certain qualified solid biomass fuels, including, but
not limited to, urban wood waste and forest-related materials
resulting from timber harvesting and other vegetation
conducted in full compliance with the Z'
berg-Nejedly Forest Practice Act of 1973 (Chapter 8 (commencing with
Section 4511) of Part 2 of Division 4 of the Public Resources Code)
utilized by any biomass-to-energy facility , and to extend
until June 30, 2006, the funding of the program, both as established
under those provisions and as expanded under this section .
This funding shall be provided in addition to any other funding
provided for the existing program.
(c) The program shall continue to be administered by the Trade and
Commerce Agency.
(d) Notwithstanding subdivision (b) of Section 391.4, the
Southern California Edison Company shall pay a biomass QF
company, whose forecast energy payments under an Interim Standard
Offer 4 contract terminate during the period of February 1, 2001, to
June 30, 2006, inclusive, January 31, 2006,
inclusive, a SRAC payment for energy of 5.37 cents ($0.0537)
per kilowatthour subject to subdivision (c) of Section 391.3, for all
energy delivered to the Southern California Edison Company from the
termination date of the forecast energy payments to June 30
January 31 , 2006, inclusive.
391.8. (a) The purpose of the pricing methodology applicable to
gas-fired QFs in this section is to link the SRAC price for energy
provided by a gas-fired QF to the long-term cost of natural gas for
the period from February 1, 2001, to June 30, 2006
January 31, 2006 , inclusive, or if the gas-fired QF's
power purchase agreement terminates after commencement of that period
and prior to June 30, 2006 January 31, 2006
, then the period from that termination date to June
30, 2006 January 31, 2006 , inclusive, by
offering to the gas-fired QF the benchmark option, the
portfolio option, and the actual cost option, pursuant to subdivision
(g). a benchmark option, a portfolio option, and an
actual cost option, pursuant to subdivision (e).
(b) For a gas-fired QF selling energy to Pacific Gas and Electric
Company, the SRAC payment shall be determined in accordance with the
SRAC methodology as it was being implemented by the commission on
February 1, 2001, except that the GPn in the formula shall be
replaced with a long-term GP. A long-term GP shall be established
for the QF in accordance with subdivision (g). Until the time that a
long-term GP is established under the agreement on long-term gas
purchase arrangements, or following expiration of a long-term GP and
prior to the establishment of a new long-term GP, if any, the
gas-fired QF shall be paid for energy deliveries in accordance with
the SRAC methodology as it was being implemented by the
commission on February 1, 2001 , as may be revised by
the commission .
(c) For a gas-fired QF selling energy to Southern
California Edison Company, the SRAC payment for the QF shall be set
equal to the sum of the following:
(1) The product of 9,821 Btu per kilowatthour, subject to
subdivision (c) of Section 391.3, and the applicable long-term GP in
dollars per MMBtu for that QF determined pursuant to subdivision (g),
and divided by 10,000.
(2) Three mils ($0.003) per kilowatthour multiplied by the average
California Consumer Price Index as of December 31 of the year prior
to the payment determination, and divided by the average California
Consumer Price Index as of December 31, 2000.
Until the time that a long-term GP is established for the QF, or
following expiration of a long-term GP and prior to the establishment
of a new long-term GP, if any, the QF shall be paid for energy
deliveries in accordance with the SRAC methodology, as that
methodology was implemented by the commission on February 1, 2001
as may be revised by the commission .
(d) (1) For purposes of this subdivision, "QF Companies" mean Kern
River Cogeneration Company, Sycamore Cogeneration Company, Midway
Sunset Cogeneration Company, and Watson Cogeneration Company,
individually or collectively.
(2) Notwithstanding any other provision of this article, the
energy payments to QF companies shall be pursuant to the QF company's
power purchase agreement with Southern California Edison Company
existing as of February 1, 2001, modified only in accordance with the
agreement on long-term gas price determined pursuant to subdivision
(g).
(2) Nothing in this article shall be interpreted to amend or
modify any provision of a power purchase agreement of any of the QF
Companies. This subdivision does not prohibit mutual agreements to
changes in a power purchase agreement by the parties to the
agreement. The energy payments to a QF Company shall be determined
pursuant to a QF Company's
power purchase agreement with Southern California Edison Company
existing as of February 1, 2001, modified only pursuant to an
agreement negotiated between Southern California Edison Company and
the QF Company. The agreement to modify may provide for long-term
gas procurement, contract extensions or other contract terms
necessary to reduce the energy payment volatility resulting from the
volatility in monthly natural gas prices, to produce lower
electricity prices in the near term for consumers, or to sustain or
increase the delivery of power to promote system reliability, while
otherwise preserving existing contracts and their economic value to
the QF Company. Any agreement to amend a power purchase agreement
consistent with this subdivision shall be approved by the commission
in accordance with subdivision (e) of Section 391.3.
(3) Notwithstanding paragraph (2) of subdivision (a) of Section
367, the implementation and administration of these agreements and
contract modifications shall, in accordance with paragraph (2) of
subdivision (g) of Section 391.3, be approved by the commission as
reasonable per se for cost recovery purposes and otherwise.
(e) For a gas-fired QF selling energy to San Diego Gas and
Electric Company, the SRAC payment shall be determined in accordance
with the SRAC methodology as it was being implemented by the
commission on February 1, 2001, except that GPn in the formula shall
be replaced with a long-term GP. A long-term GP shall be established
for the QF in accordance with subdivision (g). Until the time that
a long-term GP is established for the QF, or following expiration of
a long-term GP, and prior to the establishment of a new long-term GP,
if any, the gas-fired QF shall be paid for energy deliveries in
accordance with the SRAC methodology as it was being implemented by
the commission on February 1, 2001.
(f)
(e) A gas-fired QF with a power purchase agreement that
contains nonstandard energy pricing terms may be included in the gas
purchase arrangements described in subdivision (g)
(f) if its power purchase agreement is conformed, by
mutual agreement of the parties, to reflect the applicable energy
pricing methodology set forth in this section.
(g)
(f) (1) The long-term gas price GP
shall be determined for a QF pursuant to one of the
options of this subdivision. A public utility may
submit to the commission an agreement with the QFs with whom it has
power purchase agreements to implement the gas purchase options
described in this subdivision not later than 10 days after the
effective date of this section. The commission shall promptly review
the implementation agreement in the same manner that amendments are
reviewed pursuant to subdivision (e) of Section 391.3. A public
utility shall inform each gas-fired QF with whom it has a power
purchase agreement of the process for the a
benchmark, portfolio, and actual cost gas options
purchase option . Each gas-fired QF within 30
days of the effective date of this section shall select the gas
purchase option to be used to determine the long-term gas
price GP for purposes of this section. If the
QF does not make the selection within the 30 days, the
public utility shall select the option to be used for the QF
then payments to the QF for electricity delivered to
the electrical corporation under the applicable power purchase
agreement shall be made in accordance with the SRAC methodology, as
may be revised by the commission . Once a gas purchase option
is selected, neither the QF nor the public utility may change the
option.
(2) Benchmark gas purchase option:
(A) Each public utility and the gas-fired QFs with whom it has a
power purchase agreement shall, within 10 days of the effective date
of this section, select a procurement manager. If the parties cannot
agree on the procurement manager, the Treasurer shall appoint the
procurement manager.
(B) Each gas-fired QF shall provide the procurement manager with
its gas requirements, timing, constraints, and any other pertinent
information within 10 days of the procurement manager being selected.
(C) The procurement manager, working with the public utility,
shall divide the gas-fired QFs into tranches, and shall determine
when to send those tranches out for bid. The procurement manager and
the public utility shall work to obtain the best gas price.
(D) When the procurement manager obtains a bid, he or she shall
provide the bid to the public utility and to the Treasurer. Both
shall have one hour of receipt of the bid to either accept or reject
the bid. The Treasurer may only reject a bid if he or she determines
the bid is not in the state's best interest for recovering the
moneys the state has borrowed to finance the purchase of electric
power.
(E) If both the public utility and the Treasurer accept the bid,
the procurement manager shall present the bid to all the gas-fired
QFs with whom the public utility has a power purchase agreement.
Until the bid expires, but in no event less than two hours, each
gas-fired QF may accept the natural gas and the price or only the
price.
(F) If a QF does not accept the price, then the long-term gas
price for the QF shall be the GPn gas price used in the commission's
then posted SRAC price.
(3) Portfolio gas purchase option:
(A) Each public utility and the gas-fired QFs with whom it has a
power purchase agreement shall, within 10 days of the effective date
of this section, select a portfolio manager. If the parties cannot
agree on the procurement manager, the Treasurer shall appoint the
portfolio manager.
(B) Each gas-fired QF shall provide the portfolio manager with its
gas requirements, timing, constraints, and any other pertinent
information within 10 days of the portfolio manager being selected.
(C) The procurement manager, working with the public utility,
shall purchase natural gas on a long-term basis to minimize price.
(D) When the portfolio manager obtains a bid, he or she shall
provide the bid to the public utility and to the Treasurer. Both
shall have one hour of receipt of the bid to either accept or reject
the bid. The Treasurer may only reject a bid if he or she determines
the bid is not in the state's best interest for recovering the
moneys the state has borrowed to finance the purchase of electric
power.
(E) If both the public utility and the Treasurer accept the bid,
the portfolio manager shall buy the natural gas for the portfolio.
The gas price for natural gas in the portfolio shall be the weighted
average cost of the natural gas in the portfolio.
(F) A QF that agrees to the portfolio gas purchase option shall
purchase gas from the portfolio.
(4) Actual cost option:
(A) A gas-fired QF shall purchase natural gas for five years, or
the remaining term of the power purchase agreement, whichever is
less. The Treasurer may reject the purchase. The Treasurer may only
reject a purchase if he or she determines that the bid is not in the
state's best interest for recovering the moneys the state has
borrowed to finance the purchase of electric power.
(B) The gas-fired QFs shall choose for all of them an independent
auditor, and shall provide the independent auditor the actual natural
gas cost information and the energy payments due under this section
based on the purchase price of the gas for each gas-fired QF. The
independent auditor shall review and approve the bill.
(C) The independent auditor shall aggregate all participating
gas-fired QF bills under this option, and shall send the aggregated
bill to the public utility. The public utility shall pay the
independent auditor, who shall disaggregate the funds received, and
disburse the funds to each gas-fired QF.
(5)
(2) For purposes of this subdivision, "Treasurer" means the
Treasurer of the state, or his or her designee.
(6)
(3) The Treasurer may review an agreement submitted to the
commission pursuant to paragraph (1) and disapprove of the
implementation agreement if the long-term GP is not in the best
financial interest of the state. A review by the Treasurer shall be
done promptly.
(4) The Treasurer shall prepare and submit a report to the
Governor and to the appropriate committee's of the Legislature at
least three times a year on the performance of each public
utility in performing results of gas-fired QFs under
the gas purchase options. The report shall include, if
necessary, recommendations.
(h)
(g) No electrical corporation or gas corporation shall have
any obligation to serve as a portfolio manager under
paragraph (3) of subdivision (g) procurement manager
for the cost gas purchase options specified in subdivision (f).
, and the commission may not subject any corporation's decisions to
serve or not serve as portfolio procurement
manager to a reasonableness review. If any corporation serves
as a portfolio procurement manager, the
commission may not consider the results of that corporation's
portfolio procurement management
activities in connection with this section, in connection with any
other jurisdictional reasonableness review of the corporation's
natural gas procurement function.
(h) (1) Power purchase agreement for delivery of as-available
capacity and energy for the delivery of capacity and energy under a
firm QF power purchase agreement with a contract capacity of 10
megawatts or less shall be paid for capacity at the price currently
established under the power purchase agreement throughout the
remaining term of the agreement, and paid for energy at the SRAC
price in accordance with the SRAC methodology as it was being
implemented by the commission on February 1, 2001.
(2) Notwithstanding paragraph (1), for capacity and energy
deliveries to the Pacific Gas and Electric Company by a QF described
in paragraph (1), if the QF does not agree to modify existing
capacity payment terms to provide a 50 percent reduction in the
capacity payments, the price for capacity deliveries by the QF to the
Pacific Gas and Electric Company shall be calculated under the terms
and conditions of the agreement, and the energy price shall be
determined by the SRAC methodology, as determined by the commission.
(i) (1) An electrical corporation may manage the natural-gas-cost
component of its payments to gas-fired QFs by using gas-based and
electric-based contracts to manage the natural gas price risk
associated with QF contracts for the period from February 1, 2001
through January 31, 2006, inclusive. The volume covered by those
contracts shall be limited to the total volume of natural gas
included in the natural-gas-cost component of the payments to
gas-fired QFs selling electricity to the electrical corporation
during this period, as estimated from time-to-time by the electrical
corporation. An electrical corporation using the provisions of this
subdivision to manage the natural-gas-cost component of its payments
to gas-fired QFs may enter into fixed-price energy contracts with
gas-fired QFs that do not extend beyond January 31, 2006. A
gas-fired QF that enters into a fixed-price energy contract pursuant
to this subdivision is not subject to subdivisions (a), (b), (c),
(d), (e), or (f).
(2) Each electrical corporation shall submit to the commission its
plan, including its internal policies and procedures, for using
financial and other contracts for the purposes of this subdivision.
The commission shall review each plan and, unless a plan clearly
fails to address those purposes, shall, within 15 business days of
submission of the plan by the electrical corporation, approve the
plan. The commission shall maintain strict confidentiality regarding
the plans in accordance with Section 583. Concurrent with its
approval of an electrical corporation's plan, the president of the
commission shall designate a representative to review and pre-approve
specific transactions if the transactions are consistent with the
electrical corporation's plan. The commission president's designee
shall maintain strict confidentiality regarding an electrical
corporation's plan and any proposed transaction in accordance with
Section 583. Because the transactions proposed by the electrical
corporation will be time sensitive, the commission president's
designee shall review each proposed transaction within two hours
after receipt, if the electrical corporation presents the proposed
transaction on a commission business day, during normal business
hours. Failure to act on a proposed transaction within the specified
time period shall be deemed approval of the proposed transaction.
(3) All costs incurred by the electrical corporation associated
with the financial and other contracts needed to implement this
section, including any fees and other costs associated with retaining
a third party to manage and enter into those contracts on behalf of
the electrical corporation, shall be per se reasonable and shall be
fully recoverable by the electrical corporation in retail rates. The
electrical corporation's actions, with respect to timing, duration,
quantity or adequacy of transactions proposed under this subdivision,
or failure to propose such transactions, shall not be subject to
reasonableness review by the commission. Notwithstanding any other
provision of law, all costs associated with transactions that are
approved consistent with paragraph (2) shall, be recovered from the
generation-related portion of the retail rates before any such
revenues are allocated to the California Procurement Adjustment for
purposes of transfer to the Department of Water Resources as
specified in Section 360.5. All benefits derived from all such
transactions shall be used by the electrical corporation solely to
reduce the electrical corporation's retail rates for electricity.
391.9. (a) (1) If a QF has not been paid by the Southern
California Edison Company (SCE) or the Pacific Gas and Electric
Company (PG&E) in accordance with a purchase power agreement for the
month of November 2000, December of 2000, or January of 2001, SCE and
PG&E shall make the payments for those months in accordance with the
following schedule:
Month of delivery Payment Due Date
November 2000 On or before April 2, 2001
December 2000 On or before May 1, 2001
January 2001 On or before June 1, 2001
(2) If a QF is not paid by SCE in accordance with paragraph (1)
for moneys owed under all purchase power
power purchase agreements with SCE, notwithstanding any
provision of this article, the QF as of February 1, 2001, shall be
paid by SCE the posted SRAC price SRAC price
posted in accordance with the SRAC methodology or the SRAC
price determined pursuant to this article, whichever is greater,
until all the moneys owned owed for
November, December, and January are paid to the QF.
(3) PG&E owes no moneys to QFs for the month of November 2000. If
a QF is not paid by PG&E in accordance with paragraph (1) for moneys
owed under all purchase power power purchase
agreements with PG&E, then notwithstanding any provision of
this article, the QF as of February 1, 2001, shall be paid by PG&E
the posted SRAC price SRAC price posted in
accordance with the SRAC methodology or the SRAC price
determined pursuant to this article, whichever is greater, until all
moneys owned owed for December and
January are paid to the QF.
(b) This article shall not become operative until a statute
is enacted that authorizes the acquisition by the state from the
physical assets from the Pacific Gas and Electric Company, Southern
California Edison Company, and the San Diego Gas and Electric
Company.
(c) This article shall become inoperative on July 1, 2006,
and, as of January 1, 2007, is repealed, unless a later enacted
statute, that becomes operative on or before January 1, 2007, deletes
or extends the dates on which it becomes inoperative and is
repealed.
SEC. 2.
SEC. 3. The provisions of this article are severable. If
any provision of this article or its application is held invalid,
that invalidity shall not affect other provisions or applications
that can be given effect without the invalid provision or
application.
SEC. 3.
SEC. 4. The Legislature finds and declares that, because of
the unique circumstances applicable only to specified public
utilities and qualified facilities, a statute of general
applicability cannot be enacted within the meaning of subdivision (d)
of Section 16 of Article IV of the California Constitution.
Therefore, this special statute is necessary.
SEC. 4.
SEC. 5. No reimbursement is required by this act pursuant to
Section 6 of Article XIIIB of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIIIB of the California Constitution.
SEC. 5.
SEC. 6. This act is an urgency statute necessary for the
immediate preservation of the public peace, health, or safety within
the meaning of Article IV of the Constitution and shall go into
immediate effect. The facts constituting the necessity are:
To help avoid Stage 3 alerts in California, it is necessary that
this act take effect immediately.