California regulators last week turned down an emergencysix-month provisional avoided-cost measure that would have frozenthe gas prices used by utilities in their formula for payingmust-take qualifying facility (QF) electricity generators.

QF producers sought the rejection, noting the existing lawrequires a monthly change in the formula, but SDG&E alsowithdrew its earlier support for the measure, claiming QF output isbeing cutback.

Southern California Edison Co. made the initial request, and aCalifornia Public Utilities Commission administrative law judgeinitially recommended the regulators’ approve the action, butsubsequently the ALJ reversed that recommendation.

The CPUC is seeking longer-term relief through an ongoingregulatory proceeding in which the natural gas border price indicesand their components are being examined.

By its own internal estimates, the continuing record spikes inCalifornia-Arizona border natural gas prices at Topock, AZ, haveadded $44 million to its payments to so-called qualifying facility(QF) electricity generators the past two months, according toEdison.

The total impact on gas consumers, including California’selectric generation plants overall, was estimated to be $100million by the CPUC last spring when it challenged a FERC ruling onan El Paso Natural Gas Co. contract that it alleges is causing theprices at the California border to skyrocket.

“Those estimates were based on some relatively modest increasesin gas costs of 15 to 30 cents earlier in the year,” said Edison’sLars Bergmann, director of its QF contracts. “When prices explodedby a dollar or more, and then by three dollars or more inSeptember, we estimated that just for the September price bump, itwill increase our QF payments by $29 million and for Octoberanother $15 million.

“Unfortunately [the CPUC action] is going to have the potentialto make costs higher than they otherwise should be, and we’redisappointed. The filing, however, certainly served the purpose ofmaking the (CPUC) aware of the relationship between its Section 5(FERC) complaint against El Paso [Natural Gas and its merchantaffiliate] and how that immediately impacts the payments to QFgenerators. It is now an issue that is addressed in our petitionalong with the interstate transportation issue,” Bergmann said.

Edison filed its emergency request asking for the CPUC to, ineffect, freeze the border price used in the QF payment formula atAugust levels until the state regulators conclude a pendinginvestigation of the border price issue.

Richard Nemec, Los Angeles

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