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SDG&E Seeks Nonbypassable Cost Recovery for 450 MW in Peaking PPAs
May 24, 2011
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San Diego Gas & Electric has sought approval at the California PUC for three power purchase tolling agreements (PPTAs) totaling 450 MW of local peaking power which SDG&E said are needed for local reliability, and accordingly sought to recover costs through a nonbypassable surcharge.
The capacity to be procured includes Apex Power's Pio Pico Energy Center (305 MW), Wellhead's Escondido Energy Center (45 MW), and Cogentrix's Quail Brush Generation Project (100 MW).
SDG&E said that approval of the PPAs is required now to address the PUC's "clear directive" to avoid "just in time" resource additions.
"SDG&E believes it is not only prudent but essential to proceed with the three PPTAs in this Application even though some may argue that they are a year or two in advance of the latest possible date and in an amount above the minimum need. To the contrary, this 'cushion' is necessary to safeguard against the type of 'reliability crisis' the Commission seeks to avoid, which could otherwise occur in the event of delays for the new units, possible cancellation of planned new generation additions, changes in load forecast, and other unpredictable and currently unforeseeable changes in circumstances or events," SDG&E said.
SDG&E proposed implementation of a Local Generation Charge (LGC) for recovery of the new generation costs, pursuant to D.06-07-029. SDG&E cited the prior cost-allocation mechanism order, as well as SB 695, as requiring that the net capacity costs of resources, such as the instant PPAs, that are needed to meet system or local reliability needs, shall be allocated to all benefiting customers on a nonbypassable basis.
SDG&E proposed the LGC as a nonbypassable charge applicable to benefiting customers defined as all bundled service, Direct Access (DA) and Community Choice Aggregation (CCA) customers. The use of a nonbypassable charge would extend for the duration of the contracts, which range from 20-25 years.
Consistent with D.06-07-029, SDG&E proposed that the LGC be recovered as a per kilowatt-hour charge developed by allocating the applicable annual revenue requirement, the total annual contract costs net of the market revenues, among all customer classes based on the 12-month coincident peak (12 CP) demand methodology, including bundled, DA and CCA customers, and then dividing the resulting customer class revenue by current authorized sales by customer class.
The applicable revenue requirement is based on the net cost of capacity, determined as a net of the total cost of the contract minus the energy revenues associated with dispatch of the total contract. Pursuant to D.08-09-012, the LGC is identified separately and is not included as a component of the Cost Responsibility Surcharge (CRS).
SDG&E proposed to include the LGC in tariffs as a component of the Utility Distribution Company (UDC) charge, which is applicable to bundled service, DA, and CCA customers.
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