California on QF Buyout Costs

Fortnightly Magazine - July 15 1996
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The California Public Utilities Commission (CPUC) has approved a request by Pacific Gas and Electric Co. (PG&E), an electric utility, to extend balancing account treatment to payments it makes for settlements or judgments rendered in litigation of purchased-power contract disputes with qualifying cogeneration facilities (QFs).

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[An earlier CPUC order authorized the utility to record payments to QFs to terminate agreements and to settle contract disputes in its adjustment-clause balancing account. PG&E argued that the balancing clause should be expanded to provide a similar incentive to litigate QF disputes.]

In approving the modification, the CPUC found that under existing rules the utility might prefer nonlitigation options at ratepayer expense. The CPUC also noted that its electric restructuring plan (see, Re Proposed Policies Governing Restructuring California's Electric Services Industry and Reforming Regulation, 166 PUR4th 1 (Cal.P.U.C. 1996).) will permit utilities to include 10 percent of the net ratepayer benefit associated with renegotiated QF contracts as a recoverable "transition cost." Re Pacific Gas and Electric Co., Application 95-04-002, Decision 96-04-034, Apr. 10, 1996 (Cal.P.U.C.).

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