Article 10. Nonutility Power Generators of California Public Utilities Code >> Division 1. >> Part 1. >> Chapter 2.3. >> Article 10.
(a) Subject to applicable contractual terms, energy prices
paid to nonutility power generators by a public utility electrical
corporation based upon the commission's prescribed "short run avoided
cost energy methodology" shall be determined as set forth in
subdivisions (b) and (c).
(b) Until the requirements of subdivision (c) have been satisfied,
short run avoided cost energy payments paid to nonutility power
generators by an electrical corporation shall be based on a formula
that reflects a starting energy price, adjusted monthly to reflect
changes in a starting gas index price in relation to an average of
current California natural gas border price indices. The starting
energy price shall be based on 12-month averages of recent,
pre-January 1, 1996, short-run avoided energy prices paid by each
public utility electrical corporation to nonutility power generators.
The starting gas index price shall be established as an average of
index gas prices for the same annual periods.
(c) The short-run avoided cost energy payments paid to nonutility
power generators by electrical corporations shall be based on the
clearing price paid by the independent Power Exchange if (1) the
commission has issued an order determining that the independent Power
Exchange is functioning properly for the purposes of determining the
short-run avoided cost energy payments to be made to nonutility
power generators, and either (2) the fossil-fired generation units
owned, directly or indirectly, by the public utility electrical
corporation are authorized to charge market-based rates and the
"going forward" costs of those units are being recovered solely
through the clearing prices paid by the independent Power Exchange or
from contracts with the Independent System Operator, whether those
contracts are market-based or based on operating costs for particular
utility-owned powerplant units and at particular times when reactive
power/voltage support is not yet procurable at market-based rates at
locations where it is needed, and are not being recovered directly
or indirectly through any other source, or (3) the public utility
electrical corporation has divested 90 percent of its gas-fired
generation facilities that were operated to meet load in 1994 and
1995. However, nonutility power generators subject to this section
may, upon appropriate notice to the public utility electrical
corporation, exercise a one-time option to elect to thereafter
receive energy payments based upon the clearing price from the
independent Power Exchange.
(d) If a nonutility power generator is being paid short-run
avoided costs energy payments by an electrical corporation by a firm
capacity contract, a forecast as-available capacity contract, or a
forecast as-delivered capacity contract on the basis of the clearing
price paid by the independent Power Exchange as described in
subdivision (c) above, the value of capacity in the clearing price,
if any, shall not be paid to the nonutility power generator. The
value of capacity in the clearing price, if any, equals the
difference between the market clearing customer demand bid at the
level of generation dispatched by the independent Power Exchange and
the highest supplier bid dispatched.
(e) Short-run avoided energy cost payments made pursuant to this
section are in addition to contractually specified capacity payments.
Nothing in this section shall be construed to affect, modify or
amend the terms and conditions of existing nonutility power
generators' contracts with respect to the sale of energy or capacity
(f) Nothing in this section shall be construed to limit the level
of transition cost recovery provided to utilities under electric
industry restructuring policies established by the commission.
(g) The term "going forward costs" shall include, but not be
limited to, all costs associated with fuel transportation and fuel
supply, administrative and general, and operation and maintenance;
provided that, for purposes of this section, the following shall not
be considered "going forward costs": (1) commission-approved capital
costs for capital additions to fossil-fueled powerplants, provided
that such additions are necessary for the continued operation of the
powerplants utilized to meet load and such additions are not
undertaken primarily to expand, repower or enhance the efficiency of
plant operations; or, (2) commission-approved operating costs for
particular utility-owned powerplant units and at particular times
when reactive power/voltage support is not yet procurable at
market-based rates in locations where it is needed, provided that the
recovery shall end on December 31, 2001.
Any nonutility power generator using renewable fuels that
has entered into a contract with an electrical corporation prior to
December 31, 2001, specifying fixed energy prices for five years of
output may negotiate a contract for an additional five years of fixed
energy payments upon expiration of the initial five-year term, at a
price to be determined by the commission.