647 1 SAN FRANCISCO, CALIFORNIA, APRIL 10, 2000 - 11:17 A.M. 2 * * * * * 3 ADMINISTRATIVE LAW JUDGE COOKE: Let's be on the 4 record. Before we resume with the cross, Mr. Kerner has a 5 request or a motion or something. 6 Mr. Kerner. 7 MR. KERNER: Your Honor, thank you very much and I 8 appreciate Mr. Woodruff's discretion of taking this. 9 My specific request, to get right down to it, is 10 related to your request of the parties to provide an exhibit 11 which would compare the recommendations in this proceeding 12 with PX pricing over some historical period. I have for a 13 few days been thinking just on the sole basis that it would 14 harm no one and benefit everyone to delay the time for filing 15 of that document until April 28th which is the day for filing 16 testimony on line loss issues. 17 My basis for that is simply -- as I understand it, 18 cross-examination of that material would be taken up in those 19 hearings and there's no particular advantage that I can see 20 in providing that material that much earlier and additional 21 time would be helpful. That's where I began. 22 I have to tell you that my enthusiasm for some 23 additional time to prepare that document has been heightened 24 in the last couple of days, in particular over the weekend 25 based on what from my perspective has been a fantastically 26 frustrating experience, most particularly if not exclusively 27 with Southern California Edison in getting a cooperative -- 28 in having some cooperation with respect to access to data. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 648 1 We have asked them repeatedly in a number of 2 contexts, in formal data requests and informally and 3 otherwise for information regarding the megawatt hours of QFs 4 specifically which are being put into the market and in what 5 hours which, as you know, in our approach which would compare 6 QF generation which is presumed to be in the market within 7 one hour with what would occur were they not there. This 8 would be extremely useful to our participation and your 9 consideration of the case. 10 Mr. Branchcomb, as you know, picked 5,000 megawatt 11 hours per hour and he picked that because, as he put it and 12 the Commission reiterated, it's something between a guess and 13 an estimate. We've been told -- I have a couple points. 14 ALJ COOKE: Before we get into the problems with 15 getting the data, the question of getting the data at this 16 point is not -- is somewhat independent of whether parties' 17 input on whether the additional time would prove useful for 18 preparation of these exhibits. Let me take up that first. 19 Do any parties have objections to a delay in 20 producing these exhibits? 21 MR. WOODRUFF: I have a question. I don't have a 22 copy of the scoping memo in front of me so I don't recall, 23 and maybe somebody else has it. I would like to make sure 24 that the proposal Doug is making is not one that impairs our 25 ability, for example, to begin preparation of briefs. 26 ALJ COOKE: Let's be off the record. 27 (Off the record) 28 ALJ COOKE: Let's be back on the record. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 649 1 Mr. Woodruff, did you have any additional 2 comments? 3 MR. WOODRUFF: Given the research into the scoping 4 memo and the schedule off the record, we have no objection to 5 Mr. Kerner's proposal. 6 ALJ COOKE: Do any other parties have any objections 7 to receipt of the exhibit of your proposal or joint exhibit? 8 If given the extra time, I strongly encourage the parties to 9 get together and make it a joint exhibit. Delay until April 10 28th? 11 MS. REID: I have no objection. 12 ALJ COOKE: Given that, we'll extend the due date of 13 that exhibit. Instead of it being due at the close of 14 hearings, it will be due on April 28th along with testimony 15 on the line loss issues and you can incorporate rebuttal 16 testimony in the next round. We'll have hearings May 11th 17 and 12th. I assume if there are any discovery problems that 18 you need to bring up that you'll do so. 19 MR. KERNER: Yes. Thank you for your ruling and based 20 on that -- 21 MR. WOODRUFF: I do have one point of clarification. 22 Is that your understanding, that there would be a sponsoring 23 witness for the exhibit who would be available for 24 cross-examination at the line loss hearing or that it would 25 be simply put in the record and for consideration? 26 ALJ COOKE: I'm assuming that if the parties are able 27 to reach a joint agreement then they'll have an understanding 28 of the underlying data without the necessity of cross, but to PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 650 1 the extent that you can't get together, I'll have a 2 fundamental understanding, I assume, you'll have a witness 3 available to have people go into the underlying data. So get 4 together is what I'm saying. All right. 5 At this point we will resume with 6 cross-examination. Let's be off the record for just a 7 moment. 8 (Off the record) 9 ALJ COOKE: Let's be back on the record. 10 Mr. Woodruff. 11 CROSS-EXAMINATION (resumed) 12 BY MR. WOODRUFF: 13 Q Mr. Beach, I'm going to move on to a different 14 hypothetical. I obviously had too much time on my hands this 15 weekend so I've got another hypothetical. This one actually 16 comes from recent headlines concerning Microsoft and 17 something that Bill Gates said a few months ago about Pepsi 18 and Coca-Cola and he was trying to describe the government's 19 approach on bundling. 20 The hypothetical is that I want you to assume a 21 market for carbonated beverages and the unit of production in 22 that market is a can of soda but the transaction unit in the 23 market is a six-pack of soda. Okay? Now, because of the 24 unique properties of this carbonated beverage market, every 25 six-pack has five cans of Coke and one can of Pepsi. Got 26 that? 27 A Okay. 28 Q All right. This comes from Bill Gates. I PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 651 1 couldn't have thought this up myself. 2 MR. KARP: And this isn't evidence you had too much 3 time over the weekend? 4 MR. WOODRUFF: It's truly evidence of that. 5 (Laughter) 6 MR. WOODRUFF: Q I want to you assume this market 7 clears a dollar 20 a six-pack. 8 A Okay. 9 Q If you're a Coca-Cola buyer in this market, what 10 is the unit cost per can for Coca-Cola? 11 A And you're assumption is that you only drink Coke. 12 Q Yes. Is it 24 cents or 20 cents? 13 A 24 cents. 14 Q Now I want you to assume that you're both a Pepsi 15 drinker and a Coke drinker. What is the unit cost for a can 16 of Coke? 17 A 20 cents. 18 Q Okay. I'd like to turn to Section 390(d). 19 COMMISSIONER NEEPER: That was it? 20 MR. WOODRUFF: That was it. 21 COMMISSIONER NEEPER: Let me predict there isn't one 22 Commissioner including me that will understand what that was 23 about. 24 MR. WOODRUFF: I'm going to try to try to explain it, 25 Commissioner. 26 Q At page 19 of your rebuttal testimony you indicate 27 that Edison and ORA commit a fundamental error by trying to 28 equate capacity value with fixed cost that a generator is PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 652 1 recovering through PX sales. Do you see that? 2 A Yes. 3 Q Now, looking at 390(d), I would appreciate it if 4 you would explain to me what your understanding of the first 5 sentence of Section 390(d) is. 6 A Could I look at the statute? 7 MR. WOODRUFF: May I approach? 8 ALJ COOKE: Yes. Off the record. 9 (Off the record) 10 ALJ COOKE: We'll be back on the record. 11 THE WITNESS: The first sentence of 390(d) basically 12 says that per QFs with certain kinds of contracts that are 13 described in the sentence, that the value of capacity in the 14 clearing price, if any, should not be paid to QFs who have 15 those kinds of contracts. 16 MR. WOODRUFF: Q Do you have an understanding of 17 how the firm capacity of payments received by the generators 18 described in 390(d) were originally created, what the 19 assumptions were underlying those firm capacity payments? 20 A In other words, on what they were based? 21 Q Yes. 22 A I believe originally they were based on the 23 levelized costs of the combustion turbine. 24 Q And so that would be the essentially the 25 non-variable operating costs of a combustion turbine, capital 26 costs and the like? 27 A Yes. 28 Q And what was done was you assumed a combustion PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 653 1 turbine, figured out what it cost to build one, spread that 2 over the life of the contract, and then came up with a 3 levelized payment? 4 A Yes. 5 Q Would it be fair to say what the first sentence of 6 Section 390(d) is designed to do is to avoid paying a 7 non-utility generator twice for the payment that it already 8 receives for firm capacity under this contract? 9 MR. ALCANTAR: Object as assuming a fact not in 10 evidence, what is it that is being paid for. 11 MR. WOODRUFF: Q What I understand of the structure 12 of Section 390, and tell me if you agree with me, firm 13 capacity under SO2 and SO4 contracts are going to continue to 14 be paid no matter what? 15 A Assuming the QF earns them. 16 Q Correct. It needs to generate and meet its 17 capacity targets -- 18 A Yes. 19 Q -- to get paid. And those capacity payments are 20 based on the fixed operating cost of the avoided unit as 21 determined back in the 1980s sometime; correct? 22 A They're based on the non-variable issue costs of a 23 combustion turbine. 24 Q If you -- is it a fair statement that the purpose 25 of Section 390, the first sentence in 390(d), is avoid paying 26 the non-utility generator a value or component out of the 27 Market Clearing Price that would be duplicative of the firm 28 capacity payment that it already receives? PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 654 1 MR. KARP: Let me object for a second. Are you 2 reading 390(d) the first sentence without reference to the 3 second sentence? 4 MR. WOODRUFF: Yes. 5 MR. ALCANTAR: In that instance, your Honor, I would 6 object to the question as irrelevant. 7 ALJ COOKE: I'll allow it. 8 Do you have the question in mind? I said I would 9 allow the question. 10 THE WITNESS: I'm sorry. I didn't hear you. 11 MR. WOODRUFF: Q Do you still have the question in 12 mind? 13 A Yeah. Well, certainly the types of contracts 14 which are specified in here have some kind of contractual 15 capacity payment, and the determination was made here that 16 there should -- if there is capacity value in the clearing 17 price, that that should not also be paid to the QF. Whether 18 it's duplicative or not, I'm not sure. I would agree that's 19 necessarily duplicative capacity value, but the statute says 20 what it says. 21 Q Okay. Would you agree with the statement that the 22 second sentence in Section 390(d) is a formula that is 23 designed to calculate capacity when there is a shortage in 24 the market? And you can refer to Mr. Kerner's chart behind 25 you. 26 A Generally, yes. 27 Q Just a few more questions. You stated Friday that 28 you're generally familiar with the positions taken by the PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 655 1 parties in the case; correct? 2 A Yes. 3 Q And I take it you understand the methodology that 4 was proposed by Mr. Branchcomb in his testimony? 5 A Yes. 6 Q And is that a QF in-out methodology? 7 A Yes. 8 Q Do you believe that that methodology complies with 9 PURPA as presented in this proceeding? 10 A I think that there is certainly language in PURPA 11 or in the rules implementing PURPA about SRAC reflecting the 12 aggregate value of QFs and that language certainly would 13 support a QF-in QF-out methodology. 14 Q Did you consider that methodology as an available 15 methodology for you to propose in this proceeding on behalf 16 of CCC? 17 A Yes. 18 Q But you did not propose that methodology. Is 19 there any reason why? 20 MR. KARP: Objection, your Honor. That's going to get 21 into the attorney-client privilege communications. 22 ALJ COOKE: Sustained. 23 MR. WOODRUFF: No further questions. Thanks. 24 ALJ COOKE: Okay. 25 COMMISSIONER NEEPER: Can we -- 26 ALJ COOKE: Let's be off the record. 27 (Off the record) 28 ALJ COOKE: Let's be back on the record. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 656 1 Mr. Ramos. 2 CROSS-EXAMINATION 3 BY MR. RAMOS: 4 Q Good morning, Mr. Beach. 5 A Good morning. 6 Q I'm looking at the transcript from April 6th in 7 this proceeding and in response to a question from 8 Commissioner Neeper you stated that, I quote, "That there 9 will be relatively few hours where there's a significant 10 capacity value subtracted from the clearing price pursuant to 11 Section 390(d)," end of quote. I would just like the basis 12 for that statement. 13 A The basis for that statement is I believe my 14 testimony cites the fact that one of the market monitoring 15 reports, the second PX monitoring report to be specific, 16 reports that in 1998 the PX market experienced about a 17 hundred hours in which supply and demand curves might not 18 have crossed but for the IOUs underscheduling practices. So 19 I took that as evidence of roughly how often this Section 20 390(d) formula could come into play. 21 Q So your statement is based essentially on an ISO 22 report from 1998? 23 A It's a PX Market Monitoring Committee report from 24 1999. 25 Q I'm referring now to your rebuttal testimony. At 26 the top of page 19 you discuss opportunity costs. Within the 27 context of this proceeding, what do you mean by "opportunity 28 costs"? PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 657 1 A Well, in the context I meant basically the price 2 that a generator could realize selling into some market other 3 than the California Power Exchange. 4 Q So that opportunity cost -- in other words, that 5 opportunity cost would be the maximum amount of -- the 6 maximum amount of price that the generator could otherwise 7 sell at. Would that be fair to say? 8 A Well, it's the price that it would realize by 9 taking advantage of another opportunity, shall we say, by 10 selling into a different market. 11 Q Would that be in essence your discussion there of 12 efficient and arbitrage? 13 A My discussion here basically says that if the 14 markets are efficient and there is efficient arbitrage, then 15 the generator is not unlikely to get more selling into 16 another market than it would get selling into the Power 17 Exchange. 18 Q I'd like to discuss a little bit more the 19 efficient arbitrage issue. Are we talking about arbitrage 20 from the supply side, the demand side, both? 21 A I believe in this case we're talking about 22 generators, so it's the supply side. 23 Q Supply side? So let's assume that supply side 24 arbitrage opportunities do exist within the California energy 25 market. Will suppliers continue to bid into the PX based on 26 marginal costs in that context? 27 A Well, I would assume that they would continue to 28 bid into the PX which is a very large and in most hours a PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 658 1 very competitive market on the basis of marginal costs. 2 It -- it's possible that if there was some market distortion 3 or inefficiency and they had a pretty certain bet on being 4 able to sell into another market at a higher price, they 5 might take advantage of that alternative opportunity. 6 Q So they would bid if they had, like you just 7 described, there was a distortion within the market, they 8 would, in fact, sell their generated product at above 9 marginal costs then? 10 A Possibly, but those obviously are fleeting 11 opportunities, and if the market is efficient a lot of 12 generation would jump into that new opportunity and bring 13 prices back. 14 Q So the principal assumption is that the market 15 is -- is it efficient or that's it functioning properly? 16 A I guess I would say it's workably competitive. 17 Q Workably competitive. And in your testimony, 18 workably competitive is the equivalent of functioning 19 properly? 20 A Yes. 21 Q When you discuss on line 6 substantial difference 22 over time, "There should be no substantial differences over 23 time between the day-ahead PX price and generators' 24 opportunity costs in other markets," what time frame -- do 25 you have a time frame in mind when you state "over time"? 26 A Well, certainly based upon my tracking of the 27 markets in California and surrounding states. The markets 28 track each other very closely on certainly a monthly basis. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 659 1 Obviously from day-to-day you can have fluctuations between 2 markets, but on a monthly basis the PX and COB and Palo Verde 3 track each other very closely. 4 Q So the "over time" statement would basically 5 roughly be monthly -- 6 A Yes. 7 Q -- figures? Going back to the issue of efficient 8 arbitrage, do we have efficient arbitrage presently in the 9 generating market in California? 10 A Not in all hours. For example, the fact that 11 there's a systematic and rather large difference between the 12 real-time and day-ahead prices during peak demand periods 13 indicates that arbitrage is not always efficient in those 14 hours. Generally above 36,000 megawatts. 15 Q At the bottom of page 10 and top of page 11 of 16 your rebuttal testimony you state that conventional gas-fired 17 thermal generation will remain in most hours. Do you recall 18 that testimony? 19 A Yes. 20 Q My question then would be in which hours would 21 conventional gas-fired thermal generation not be the marginal 22 units? 23 A During the spring months when demand is relatively 24 low and there is a lot of hydropower available on the market, 25 those typically are the hours in which gas-fired generation 26 in California may not be on the margin, and I guess also 27 during off-peak hours. Even during the summer sometimes you 28 can get imported coal-fired power that's on the margin in PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 660 1 California. 2 Q Is it your understanding that conventional 3 gas-fired thermal generation provides various ancillary 4 services including operation and spending reserves? 5 A Those units can provide those services, yes. 6 Q At page 19 of your rebuttal testimony you 7 basically contend that in a properly functioning market 8 suppliers will bid their marginal costs of production, so 9 would it therefore follow that in a properly functioning 10 market these marginal units would set the PX price at their 11 marginal cost of production. 12 A Yes. 13 Q Could you state the hours and duration of, quote, 14 "summer peak periods," end quote, as that term is used at 15 page 15, line 3 of your rebuttal testimony? 16 A I guess I was generally referring there to summer 17 on-peak hours, which I think they vary slightly between the 18 various utilities, but I know for Edison, I believe, it's 19 noon to 6:00 p.m. weekdays in June, July, August and 20 September. 21 Q Thank you. You state in your rebuttal testimony 22 page 19 line 25, and I quote, "In today's market, capacity is 23 not a category of costs, it is a service," end of quote. Is 24 there a time period when capacity was not a service? 25 A No. 26 Q Is there a market in which capacity was not a 27 service? 28 A I don't think so. None comes to mind. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 661 1 Q At page 21 of your rebuttal testimony you state 2 that CCC and Watson would support allowing the PX to recover 3 from the IOUs the PX's cost for the software modifications 4 required to comply with Section 390(d). 5 A I see that. 6 Q Would the PX incur such costs but for the presence 7 of QFs? 8 MR. KARP: I'm going to object as to the relevance of 9 the question. 10 ALJ COOKE: Overruled. You can ask the question. Do 11 you have the question in mind? 12 THE WITNESS: I do. I guess it's possible that the PX 13 might make some similar modifications for some other purpose. 14 There's been some discussion about the fact that the ISO uses 15 stair-step supplier bids whereas the PX uses piece-wise 16 linear bids. Perhaps if they wanted to reconcile if there's 17 some problem with that, with those two different 18 methodologies, that PX might want to modify its software 19 along the lines that I suggested here. 20 Q But I'm referring specifically to a situation as 21 pertaining to QFs, so again I pose my question. Would the PX 22 incur such costs but for the presence of QFs? 23 MR. KARP: Can I object to asked and answered, your 24 Honor? 25 MR. RAMOS: He stated similar situations. I believe he 26 stated it's possible that the PX might do it but for the 27 presence of QFs if it's trying to reconcile with the 28 software. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 662 1 ALJ COOKE: I'll allow the question to be asked. Do 2 you have an answer with the narrowing that Mr. Ramos just 3 provided? 4 THE WITNESS: Well, what -- the modifications that 5 we're talking about here are obviously for the purpose of 6 establishing -- helping to establish QF prices. My point was 7 that it's possible that those modifications also might be 8 useful for other purposes as well. 9 MR. RAMOS: I'll move on. 10 Q Do the utilities have to perform hourly settlement 11 of QF contracts today? 12 A I don't believe they're done hourly today. 13 Q So your answer is "no"? 14 A Today they do not do it on an hourly basis. They 15 do it on a time-of-use-period basis. 16 Q To the best of your knowledge, do the utilities 17 have systems which have the capability to perform hourly 18 settlement? 19 A My understanding is that some of the utilities may 20 have implemented systems which at least are capable of 21 handling hourly. I don't know the exact status of their QF 22 systems, but it's been obvious since the preferred policy 23 decision at the end of 1995 that the Commission wanted to 24 move eventually to QF pricing based upon PX prices which are 25 hourly. 26 Q But you could not specify exactly which systems 27 those may be? 28 A I don't know the details of where each utility is PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 663 1 on implementing systems that can do hourly settlements for 2 QFs. 3 Q On page 22 of your rebuttal testimony you describe 4 certain consequences for QF for failing to produce power. Do 5 those consequences apply to QFs on all standard offers or 6 just some standard offer contracts? 7 A Are you referring to lines 18 through 20? 8 Q Yes. 9 A Let me -- well, let me break the sentence up. 10 Okay? 11 Q Sure. 12 A I said, "A QF has a stronger incentive to produce 13 power, particularly during on- and mid-peak periods, it faces 14 the loss of capacity payments," that applies to all QFs. 15 Firm capacity QFs, their capacity payments are based on on- 16 and mid-peak production as available QFs there, as available 17 capacity payments are heavily weighted to -- in particular to 18 the summer on-peak period. So they face the loss of most of 19 their capacity payments if they don't produce during summer, 20 the summer on-peak period. And the second part of the 21 sentence says, "...and, in the summer, risks being put on 22 probation unless it produces." I believe that probation 23 provisions apply only to firm capacity QFs. 24 Q Do you know the consequences of being put on 25 probation? 26 A I think it's a reduction in your capacity payment 27 for a period of time. I don't remember the specifics of it, 28 though. It may differ between utilities, too. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 664 1 Q These adverse impacts that would result from 2 non-supply, would those consequences that you identify in 3 your testimony apply for the failure to produce in a given 4 day or hour? 5 A Possibly, yes, unless the QF could make up the 6 lost generation. 7 Q What's the basis for your answer there? 8 A Well, there's certain thresholds below which if a 9 QF falls below a certain threshold, it gets put on probation. 10 So if you're right on that threshold and you failed to 11 produce in a certain day, you can get put on probation. 12 Q Wouldn't those consequences apply for the failure 13 to produce over a given multi-month or on a mid-peak time 14 period? 15 A I don't understand your question. 16 Q You don't understand the question. I'll move on. 17 Is it true that you disagree with ORA's contention that there 18 is capacity value in the PX price at times when the 390(d) 19 formula has not been triggered? 20 MS. URICK: I'll object as to the vagueness. It's 21 unclear what capacity value is in their definition. I think 22 it's important to clarify that for this witness to be able to 23 answer this question and I can -- 24 ALJ COOKE: Mr. Beach, if Section 390 did not exist, 25 how would you define capacity value? 26 THE WITNESS: So you're looking for a definition of 27 capacity value that basically is independent of 390(d). 28 ALJ COOKE: Yes. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 665 1 MR. KARP: Your Honor, may I interpose? Within the 2 PX price or just in the market generally? 3 ALJ COOKE: Within the PX price. 4 THE WITNESS: I mean my testimony states that 5 economically I agree with the Section 390(d) formula as the 6 economically correct way to calculate the capacity value in 7 the PX price. So independent of 390(d), I would recommend 8 the 390(d) formula. 9 ALJ COOKE: Thank you. Let's be off the record for 10 just a moment. 11 (Off the record) 12 ALJ COOKE: Let's be back on the record. 13 Mr. Ramos. 14 MR. RAMOS: Q Would you agree or disagree that a 15 description of the 390(d) formula is that it basically 16 contains a value of a supply shortage? 17 A I would add a few words to your definition. It is 18 the value to -- 19 Q I don't mean to cut you off, but you would agree 20 with the caveat of interposing an additional -- 21 A I was going to describe how I was going to take 22 your definition and add a few words to it and then agree with 23 you. 24 Q Okay. Go ahead. 25 A Could you read your definition again? 26 Q Sure. 390(d) formula contains basically a 27 description of a value of a supply shortage. 28 A Yes, and I would characterize that it contains the PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 666 1 value to an end-use customer of avoiding a supply shortage. 2 Q My final question, if the Commission nonetheless 3 finds there is capacity value in the PX price at times when 4 the Section 390(d) formula has not been implicated, would 5 that have any effect on your recommendations for setting a 6 PX-based price? 7 A I would think that would be contrary to Section 8 390(d) and therefore illegal. 9 Q Thank you. 10 MR. RAMOS: No further questions. 11 ALJ COOKE: All right. Thank you. Let's take a lunch 12 break and we will resume at 1:30. 13 Off the record. 14 (Whereupon, at the hour of 12:00 noon, 15 a recess was taken until 1:35 p.m.) 16 * * * * * 17 18 19 20 21 22 23 24 25 26 27 28 PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 667 1 AFTERNOON SESSION - 1:35 P.M. 2 * * * * * 3 ALJ COOKE: Let's be on the record. 4 While we were off the record, we identified two 5 exhibits. First is marked for identification as Exhibit 13. 6 It's a two-page document entitled "CCC Watson Additional 7 Direct Examination Exhibit." 8 (Exhibit No. 13 was marked for 9 identification.) 10 ALJ COOKE: The next item will be for the next 11 witness which has been marked as Exhibit 14. That's a 12 three-page document entitled "Errata to the Prepared Rebuttal 13 Testimony of James A. Ross." 14 (Exhibit No. 14 was marked for 15 identification.) 16 ALJ COOKE: At this point we'll turn to cross by the 17 Cal PX. 18 Ms. Urick. 19 MS. URICK: Thank you, your Honor. 20 CROSS-EXAMINATION 21 BY MS. URICK: 22 Q Good afternoon, Mr. Beach. 23 A Good afternoon. 24 Q My name is Lisa Urick. I'm with the California 25 Power Exchange. I just had a couple of questions relating to 26 your direct testimony which has been marked as Exhibit 3, I 27 believe, at page 13 where you discuss market arbitrage. 28 A Okay. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 668 1 Q You mentioned "seven closely interrelated 2 markets." Did you consider including the Cal PX 3 block-forward market in that discussion here? 4 A No I didn't, but I would agree that that is 5 another closely interrelated market. 6 Q Now, in order to compare prices in related 7 markets, do you believe it's necessary to make adjustments to 8 account for differences in the product types among these 9 various markets? 10 A Yes, possibly you would need to consider that. 11 Q So even though we are talking about what you 12 describe as similar products, there will be an assessment of 13 considering the different features of the products with 14 respect to the price comparison; is that right? 15 A Yes. Some of them are capacity-type markets and 16 the prices are in dollars per kilowatt or dollars per 17 megawatt. Others are energy markets with prices in dollar 18 per megawatt. 19 Q Now, looking at page 16 of that same exhibit where 20 you discuss the thickness and liquidity of the market, if I 21 understand this section of your testimony correctly you are 22 talking about thinness in terms of the potential affect that 23 zero bids might have on the PX price; is that correct? 24 A Yes. 25 Q So you're not speaking about thickness of the 26 market in terms of how it relates to the amount of volumes or 27 the number of transactions in the market; is that correct? 28 A No. I'm not really talking about the volume. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 669 1 What I'm really focusing on is what is the -- for example, 2 what is the percentage of the volumes that are bidded at 3 prices of zero. 4 Q Okay. And similarly with liquidity, you're not 5 talking in a general sense about the ease by which 6 transactions take place or that the commodity is bought and 7 sold? 8 A No. I'm not really referring to the mechanics of 9 buying and selling. I'm referring more to the amount of 10 power that is bid into the market at a non-zero price. 11 Q Okay. Thank you. Then my last questions concern 12 the discussion you have beginning at page 28. You're talking 13 about the utilities potentially filing reports comparing the 14 PX price to a broad market basket of other available indices. 15 Do you see that area of your testimony? 16 A Yes. 17 Q Similar to my earlier question to you, would you 18 agree that such an analysis in comparing these prices would 19 again need to account for differences in the product types? 20 A Yes. Some of these prices vary in terms of the 21 blocks of time that they're reported for and you need to 22 adjust for that. I've indicated here that some of the 23 markets that are physically located either on or just beyond 24 the border of California you need to adjust for congestion 25 and losses and things like that. 26 Q And you would need to, of course, recognize, for 27 example, that in the PX the prices are for hourly prices 28 whereas the prices for some of these other products are not PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 670 1 necessarily so; is that right? 2 A Yes. 3 Q Now, if you know the answer to this question, are 4 you familiar with the Dow Jones and the Power Markets Week 5 (phonetic) indexes such that are you aware as to whether they 6 are based on survey data or are they participant-based 7 indexes? 8 A I think the Power Markets Weeks is based on 9 surveys. I think the Dow Jones may be as well. 10 Q These indexes don't track, for example, all of the 11 transactions at a given location, for example, at COB or Palo 12 Verde but they are attempting to derive some survey sample; 13 is that correct? 14 A That -- I believe that's likely to be the case. 15 You know, I point out that all -- just about all price 16 indices that we've relied on for years in the gas market are 17 based on similar survey-type price reporting. 18 Q Okay. Thank you very much Mr. Beach. 19 MS. URICK: Those are all my questions. Thank you, 20 your Honor. 21 ALJ COOKE: Thank you, Ms. Urick. Let's be off the 22 record. 23 (Off the record) 24 ALJ COOKE: Let's be back on the record. 25 At this time we'll proceed with the additional 26 direct for Mr. Beach. 27 Mr. Karp. 28 MR. KARP: Thank you, your Honor. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 671 1 DIRECT EXAMINATION (resumed) 2 BY MR. KARP: 3 Q Mr. Beach, do you have before you a copy of what 4 has been marked as Exhibit 14? 5 A Yes, I do. 6 Q Does this exhibit show four "formulae" is the 7 right way to say that? 8 A Yes, it does. 9 Q And referring to formula one, could you explain 10 what that formula is? 11 A Formula one is my understanding of Edison's 12 proposal for calculating short-run avoided costs as they 13 presented their revised proposal in their errata, and 14 basically formula one shows the calculation of four monthly 15 ratios between the New Entrant Energy Cost and the PX Market 16 Clearing Price and taking the simple average of those four 17 monthly ratios and multiplying by the current PX Market 18 Clearing Price. 19 Q And did you confirm your understanding that this 20 formula represents Edison's revised proposal off the record 21 with Edison? 22 A Yes. 23 Q Referring to formula two, what does that formula 24 reflect? 25 A Formula two is my understanding of Edison's 26 original proposal. Formula two is the ratio of two averages. 27 The enumerator is the average of the four monthly New 28 Entrant Energy Costs and the denominator is the average of PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 672 1 the four monthly PX Market Clearing Prices. Basically the 2 difference between formula one and formula two is that 3 formula one is the simple average of four ratios, whereas 4 formula two is the ratio of two averages. 5 Q Do you expect that formula two would yield similar 6 results as formula one? 7 A If you work out the algebra, basically formula two 8 and formula one are equivalent except that formula one is a 9 simple average of the monthly ratio. If you took a weighted 10 average of the four monthly ratios weighted by the Power 11 Exchange Market Clearing Price, formula one becomes formula 12 two. So that's the difference between the two formulas. 13 Basically formula one uses a simple average of monthly ratios 14 and formula two uses a weighted average. 15 Q And how similar would the results be if formula 16 one was applied versus formula two being applied? 17 A Edison's witness, Mr. Davis, presented a simple 18 two-month example in his cross-examination. In month one he 19 had, I think, a New Entrant Energy Cost of three and a PX 20 price of four, so in the first month the ratio was .65. In 21 the second month he had a New Entrant Energy cost of four and 22 a PX cost of -- PX price of 5 for a ratio of .8. 23 Under formula one, the simple average of .75 and 24 .8 is .775. Then if you used the other methodology and took 25 the ratio of averages, the enumerator, you would get three 26 plus four and in the denominator you would get four plus 27 five, so it would be seven-eighths, and that is equal to 28 .778. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 673 1 So the difference in his example between the two 2 approaches is one yields .775 and the other yields .778. 3 Q So we should expect, Mr. Beach, that formula one 4 and formula two would yield similar results? 5 A Yes, I would expect similar results. 6 Q Turning to formula three, can you tell us what 7 that reflects? 8 A Formula three is simply a restatement of formula 9 two and the enumerator there is the four-month average New 10 Entrant Energy Cost and the denominator is the four-month 11 average Market Clearing Price. 12 Q What does formula four represent? 13 A Formula four is again a simple a restatement of 14 formula two rearranging formula three into an average of 15 four-month New Entrant Energy Costs time an escalator that is 16 the ratio of the current PX Market Clearing Price to the base 17 PX Market Clearing Price over a four-month period. 18 Q Putting aside Exhibit 13, last week you were asked 19 questions by Mr. Woodruff and Mr. Barnes comparing your 20 proposed SRAC to the PX Market Clearing Price. Do you recall 21 those questions? 22 A Yes. 23 Q And you testified at certain times your proposal 24 could yield payments of the PX Market Clearing Price. Do you 25 recall that? 26 A Yes. 27 Q Putting aside for the moment your alternative 28 proposal which would rely on the ISO real-time price, is it PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 674 1 possible for your SRAC energy pricing proposal to yield 2 values in excess of PX Market Clearing Price? 3 A Not for energy, no. 4 Q So when you were responding to Mr. Barnes and 5 Mr. Woodruff, you were talking about total payments to QFs? 6 A Yes. 7 Q Okay. This morning you were asked some questions 8 by Mr. Woodruff comparing a firm that has two QF projects 9 with a firm that has two merchant projects. Do you recall 10 those questions? 11 A Yes. 12 Q And I believe you testified that under certain 13 circumstances the firm owning QF projects might be better off 14 getting more revenues than the firm with two merchants. Do 15 you recall that? 16 A Yes. 17 ALJ COOKE: Let's be off the record. 18 (Off the record) 19 ALJ COOKE: Back on the record. 20 MR. KARP: Q The firm that owns two merchant plants, 21 does this have the opportunity to obtain revenues from the 22 ancillary services market? 23 A Yes, it does. Merchant generators can also sell 24 power into the ancillary services market. 25 Q And does the firm owning QFs have that 26 opportunity? 27 A The only limited opportunity to do that today is 28 in PG&E's territory. You can sell excess energy into the PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 675 1 ancillary services market but probably they would not have 2 that opportunity. 3 Q In response to questions from Mr. Woodruff, you -- 4 in connection with your underscheduling proposal, you 5 discussed the possibility that the ISO would provide data to 6 determine the extent of any underscheduling. Do you recall 7 that? 8 A Yes. 9 Q Is it fair to say that the IOUs would also know 10 the amount of their scheduled load with the PX? 11 A Yes. 12 Q And would they ultimately learn the amount by 13 which their scheduled load was inaccurate, if it was 14 inaccurate? 15 A Of course. They will learn that during the 16 settlements process. 17 Q So can the IOUs perform this calculation on their 18 own behalf? 19 A Yes. 20 Q For the purposes of SRAC, what in your view is the 21 relevance of the heat rate of inframarginal resources? 22 A It really is not relevant at all because what 23 we're trying to calculate here are the costs avoided by QF 24 power and those costs are all on the margin so the heat rate 25 of an inframarginal generator really has nothing to do with 26 the calculation of SRAC. 27 Q Mr. Woodruff asked you some questions earlier 28 today about the effect of demand in elasticity on prices. Do PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 676 1 you recall that? 2 A Yes, I do. 3 Q And I believe that you responded that demand would 4 lead to higher prices. Do you recall that? 5 A Yes, I did. 6 Q Did you wish to change that response? 7 A I've thought about that now and demand that is -- 8 that has some elasticity to it compared to a completely 9 inelastic demand does not necessarily lead to higher prices. 10 Basically what you're doing is changing the shape of the 11 demand curve from a completely vertical line to one that has 12 some shape to it, and it depends completely on what the shape 13 of the demand curve becomes if demand is more elastic as far 14 as exactly where the supply and demand curves cross. 15 That doesn't necessarily always have to cross. 16 They could continue to cross at the same point they did when 17 there was elastic demand. 18 MR. KARP: Okay. I have no further questions at this 19 time. 20 ALJ COOKE: Let me ask a clarifying question, 21 Mr. Beach, on your additional direct. 22 EXAMINATION 23 BY ALJ COOKE: 24 Q When you were describing your simple example with 25 two months of data, when you described formula two, you said 26 that it was three plus four over four plus five. 27 A Right. 28 Q Would it be more accurate to say that it should be PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 677 1 three plus four divided by two over four plus five divided by 2 two based on the exhibit? 3 A Yes. I was leaving out the divided by two. 4 Q Thank you. 5 ALJ COOKE: At this time does anybody have any 6 additional cross based on the additional direct or any 7 recross as a result of the redirect? Okay. I have some 8 questions, then. 9 Q Mr. Beach, could you please point me to where in 10 CCC's testimony you propose to apply the same methodology to 11 Edison as you do to San Diego for as-available capacity 12 payments? 13 A I believe it's on page 35. Basically my -- 14 Q Of your -- 15 A Of my direct testimony where I explain that the 16 CCC continues to support the commitment it made in the Edison 17 principals agreement that the PX clearing price would be that 18 the total compensation for as-available QFs so long as the 19 Commission adopts that agreement, but if the Commission does 20 not adopt it or if Edison feels that it's no longer bound in 21 the terms of that, then the CCC's, I guess, litigation 22 proposal, if you will, is to use the methodology that we 23 proposed for SDG&E. 24 Q Okay. Thank you. Does CCC-Watson have a position 25 on the use of the QFs in-and-out approach recommended by IEP 26 and CAC? 27 A No, we haven't taken a position. 28 Q If CCC's self-scheduling proposal is adopted and PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 678 1 QFs retained must take status, if a QF's bid is not selected 2 and the QF would operate, what price would it receive? 3 A I think in that case, I believe, it would receive 4 the real-time price. 5 Q All right. 6 MR. KARP: Are you checking something, Mr. Beach? 7 THE WITNESS: What I'm checking is what my proposal 8 would be to use their two QF bidding options included in the 9 settlement agreement. That was negotiated with Edison and I 10 was checking to see if that agreement was specifically in 11 that specific to that point, and I believe under option two 12 it says the QF bids into the Power Exchange at any price 13 subject to Power Exchange protocols, and I would assume that 14 might include ISO protocols as well. So that suggests that 15 they might receive the real-time price if they operate under 16 that schedule. 17 ALJ COOKE: Q All right. When you were discussing 18 your functioning properly criteria, I believe it was with 19 Mr. Woodruff earlier today, I was curious whether CCC 20 proposes to apply the functioning properly criteria one time 21 or would it be reevaluated on a periodic basis under your 22 proposal? 23 A I believe under my proposal these criteria will be 24 applied in phase two of this proceeding, and then the 25 Commission needs to make -- will need to assess that 26 evaluation and at the end of phase two see if it could make 27 the functioning properly finding specified in Section 390. 28 If it can make that finding, then I assume we would have a PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 679 1 transition of the general body of QFs to PX-based pricing and 2 I did not contemplate a, you know, use of the same -- 3 necessarily of the same criteria on a continuing basis. 4 Certainly if the Commission were to in phase two 5 decides the market is not functioning properly, then it might 6 have to come back in a year or something and do the 7 evaluation again using the same criteria. 8 Q Thank you. 9 ALJ COOKE: Do you have any redirect? 10 MR. KARP: No, your Honor. 11 ALJ COOKE: Thank you, Mr. Beach. You are finally 12 excused. Let's be off the record. 13 (Off the record) 14 ALJ COOKE: We'll be back on the record. 15 Mr. Ross, please stand and raise your right hand. 16 JAMES A. ROSS, called as a witness by Mid-Set Cogeneration Company, et al., having been sworn, 17 testified as follows: 18 ALJ COOKE: Thank you. Please be seated. State your 19 name and place of business for the record. 20 THE WITNESS: My name is James A. Ross, R-o-s-s. My 21 business address is 500 Chesterfield Center, Suite 320, 22 Chesterfield, Missouri, 63017. 23 ALJ COOKE: Mr. Alcantar. 24 MR. ALCANTAR: Thank you, your honor. 25 Previously distributed was a document of James A. 26 Ross on behalf of Mid-Set Cogeneration Company, et al. in 27 this docket. May I have that marked for purposes of 28 identification if it has not been so? PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 680 1 ALJ COOKE: It has been marked. 2 MR. RAMOS: May I have the number? 3 ALJ COOKE: Exhibit 14. 4 DIRECT EXAMINATION 5 BY MR. ALCANTAR: 6 Q Mr. Ross, do you have your prepared direct 7 testimony submitted in February of 2000 in this proceeding 8 and previously marked as Exhibit 2 before you? 9 A I do. 10 Q Do you also have Exhibit 6, your prepared rebuttal 11 testimony offered in this proceeding in March of 2000? 12 A Yes. 13 Q And finally do you have Exhibit Number 14, your 14 errata to the prepared rebuttal testimony submitted in April 15 in this proceeding before you? 16 A Yes, I do. 17 Q With respect to all of those three documents, were 18 they prepared by you or under your direction? 19 A Yes, they were. 20 Q And subject to the errata noted in Exhibit 14, do 21 you have any other corrections, changes or modifications to 22 this testimony? 23 A No, I do not. 24 Q Is it true and correct to the best of your 25 position and belief? 26 A Yes, it is. 27 Q And do you adopt it as your sworn testimony here 28 today? PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 681 1 A I do. 2 MR. ALCANTAR: Thank you, your Honor. The witness is 3 prepared for cross-examination. 4 ALJ COOKE: All right. 5 Mr. Woodruff. 6 CROSS-EXAMINATION 7 BY MR. WOODRUFF: 8 Q Good afternoon, Mr. Ross. 9 A Good afternoon. 10 Q My name is Jim Woodruff. I represent Southern 11 California Edison Company. I confess I am having a little 12 bit of a difficult time understanding exactly what your SRAC 13 proposal is. If I could turn you to page 6 of your prepared 14 direct testimony, beginning at line 11 you state that for 15 each hour during the day-ahead market the PX would calculate 16 a, quote, "avoided cost," end quote, clearing price by 17 removing the supply bids associated with the QFs receiving an 18 SRAC energy payment from the hourly supply bids available to 19 meet the PX demand. 20 A That's correct. 21 Q So if I understand that correctly, you're talking 22 about removing the total block of QF energy bid into the 23 market at any given hour? 24 A No. My recommendation is to remove the SO1 and 25 SO3 QFs that would be bid into the market. 26 Q Okay. Was that the recommendation that you 27 originally proposed? 28 A When I wrote this testimony I had not -- I didn't PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 682 1 indicate what QFs were being removed. It would be 2 SRAC-related QFs. 3 Q Okay. Is the intention of your errata to make 4 that clarification where you've included -- in the errata 5 you've included the words "the SRAC" at line 11? 6 A That's correct. I could see how it could be 7 confusing between the rebuttal testimony and the errata. 8 Q I have to confess I'm still confused because the 9 SRAC QF energy would also include SO2 and SO4 on SRAC; would 10 it not? 11 A That's correct. And you could take those out, but 12 I'm recommending that it be the SO1 and the SO3. 13 Q Okay. Why would you take the SO1 and SO3 SRAC out 14 for purposes of calculating the SO2 and SO4 SRAC? 15 A Well, the calculation that we're trying to make 16 here is the short-run avoided cost calculation. The SO1 and 17 SO3 are as available resources. Edison should not have 18 procured any resources other than additional generation or to 19 purchase as available short-run energy to replace these types 20 of resources. Therefore, this should be a non-disputed set 21 of QF resources that would establish the SRAC, the short-run 22 of what it costs, the energy. 23 Q Would not removing the SO1s and SO3s for purposes 24 of calculating the SRAC to be paid have the effect of 25 increasing the avoided costs over the base price used, the 26 clearing price? 27 A No. The avoided cost would be the price that 28 would result by removing those resources. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 683 1 Q Does this calculation result in SO1s and SO3s 2 being paid a different avoided cost than SO2s and SO4s? 3 A No. 4 Q Okay. So it would be exactly the same? 5 A It would be the same avoided Market Clearing 6 Price. 7 MR. KARP: Can I ask a clarification? Are you talking 8 about energy payment? 9 MR. WOODRUFF: Yes. 10 THE WITNESS: Energy payment. That's correct. 11 MR. WOODRUFF: Just one moment. 12 ALJ COOKE: Let's be off the record. 13 (Off the record) 14 ALJ COOKE: Let's be back on the record. 15 Mr. Woodruff. 16 MR. WOODRUFF: I don't believe I have any more 17 questions, Mr. Ross. 18 ALJ COOKE: Mr. Ramos. 19 MR. RAMOS: I have a couple questions also, your 20 Honor. 21 CROSS-EXAMINATION 22 BY MR. RAMOS: 23 Q On page 6, lines 11 and 13 of your testimony -- 24 A Excuse me. 25 Q -- Mr. Ross. 26 A Which set of testimony? 27 Q On your direct testimony. 28 A Exhibit 2? PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 684 1 Q Yes. 2 ALJ COOKE: What was the reference, Mr. Ramos? 3 MR. RAMOS: Page 6, lines 11, 13. 4 THE WITNESS: I have it. 5 MR. RAMOS: Q How would the PX identify that as 6 supply data that was attributable to a QF? 7 A The utility would tell them. 8 Q Have you discussed the costs and feasibility of 9 your proposal with the PX? 10 A Yes. 11 Q With who at the PX did you discuss this proposal 12 with? 13 A Dr. Dan Berry. 14 Q Was the PX favorable to your proposal? 15 MR. ALCANTAR: Was that Dr. Berry favorable or the 16 Board? I would like clarification to your question. 17 MR. RAMOS: Q Dr. Berry was the only person you spoke 18 to at the PX? 19 A That's correct. 20 Q What was that? 21 A That's correct. Dr. Berry is the only one I spoke 22 to with this specific question. 23 Q Was he favorable to your proposal? 24 MS. URICK: Objection, your Honor. I would like to 25 clarify that Mr. Ross is obviously not speaking on behalf of 26 the PX. Mr. Ross can explain his participation based on the 27 discussion with a certain individual, but I would caution not 28 to go further than that. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 685 1 ALJ COOKE: Please proceed with that clarification in 2 mind. 3 Can you answer the question? 4 THE WITNESS: I can't answer the question. Can you 5 rephrase it? 6 MR. RAMOS: I'll rephrase it. 7 Q I just wanted generalized understanding of the 8 conversations between you and Mr. Berry as to your proposal? 9 A I discussed it with Dr. Berry. I specifically 10 told him that I would not hold him to any specific cost 11 information that he provided, that I was merely trying to get 12 some idea of the general costs that would be associated with 13 this type of process. He spoke, I think, on behalf of 14 himself rather than making a representation for the PX. Any 15 ultimate decision on cost or implementation would have to be 16 the result of official PX management decision. 17 Q Did it seem from your conversations with 18 Mr. Berry that this proposal was in fact feasible? 19 A Yes. 20 Q Were any numbers associated with this proposal 21 discussion? 22 A Again, the numbers that were provided were broad 23 estimates and would -- I don't believe we could hold the PX 24 to those numbers and I don't know that they would provide 25 that much guidance. They did provide me with an idea of 26 whether or not it was feasible from a cost standpoint and I 27 considered that it is. 28 MR. RAMOS: Could we go off? PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 686 1 ALJ COOKE: Let's be off the record. 2 (Off the record) 3 ALJ COOKE: Let's be back on the record. 4 Mr. Ramos has indicated that he has no further 5 questions. Do you have any redirect, Mr. Alcantar? 6 MR. ALCANTAR: No. That would be hard for me to 7 imagine. 8 ALJ COOKE: All right. Thank you, Mr. Ross. You are 9 excused. Let's be off the record. 10 (Off the record) 11 ALJ COOKE: Let's be back on the record. 12 At this time I will swear the witnesses in 13 together. Please stand and raise your right hand. 14 STEVE LINSEY and PEARLIE SABINO, called as witnesses by the Commission Legal Division, having 15 been sworn, were examined and testified as follows: 16 ALJ COOKE: At this time please be seated and state 17 your names and place of business for the record. 18 WITNESS SABINO: My name is Pearlie Sabino. I am a 19 Regulatory Analyst with the Office of Ratepayer Advocates 20 here in San Francisco. 21 WITNESS LINSEY: My name is Steve Linsey. The last 22 name is spelled L-i-n-s-e-y. My business address is 505 Van 23 Ness at the California Public Utilities Commission Office of 24 Ratepayer Advocates. 25 ALJ COOKE: Mr. Ramos. 26 DIRECT EXAMINATION 27 BY MR. RAMOS: 28 Q Mr. Linsey, did you prepare parts of Exhibit 100 PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 687 1 and 101? 2 WITNESS LINSEY: A Yes I did. 3 Q Which parts? 4 A I prepared the executive summary, Chapter 1 in its 5 entirety. This refers to Exhibit 100. Chapter 2-B, Chapter 6 2-D, subsections 1 and 2, and the witness qualifications 7 stated in that exhibit. With respect to Exhibit 101, as 8 indicated in the table of contents I prepared Section 1-A, 9 all of Chapter 2 with the exception of 2-D, Chapter 3-C, 3-D 10 and all of Chapter 4. 11 Q Do you have any additions or corrections to make 12 to the exhibits? 13 A I noticed a few grammatical errors which I'm not 14 going to correct at this time. However, there's one 15 substantive correction I have to make. In Exhibit 100 in the 16 executive summary at page IV, line 19, the final word in that 17 line should read "390(c)" rather than "390(b)." 18 Q Are the facts and opinions set forth in Exhibits 19 100 and 101 true and correct to the best of your knowledge? 20 A Yes. 21 Q Witness Sabino, did you prepare all or part of 22 Exhibit 100, 101 and 102? 23 WITNESS SABINO: A I have prepared parts of Exhibit 24 100 and 101 and all of 102. 25 Q Which parts? 26 A On Exhibit 100, I prepared Chapter 2-A, -C, -E, 27 -F, -G and all the remaining sections until -K. In Exhibit 28 101, I prepared Chapter 1-B, 2-D, 3-A and -B and the entire PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 688 1 of Exhibit 102. 2 Q Do you have any additions or corrections to make 3 to Exhibit 100 and 101? 4 A Yes, I have, and they are marked as Exhibit 102 5 and they pertain to lines 26 and 27 in Chapter 2, Section G, 6 Item 4, and that line -- on that correction on line 26, the 7 numerical result should be 65.85 percent instead of 55.8 8 percent. And on line 27, the sentence should read, "This 9 ratio of 65.85 indicates a 34.1 percent discount to the PX 10 MCP to arrive at the energy value of the PX MCP." 11 Q Are the facts and opinions set forth in Exhibits 12 100, 101 and 102 true and correct to the best of your 13 knowledge? 14 A Yes, they are. 15 MR. RAMOS: Your Honor, at this time I tender the 16 witnesses for cross-examination. 17 ALJ COOKE: Thank you, Mr. Ramos. All right. Let's 18 proceed with Mr. Karp. 19 MR. KARP: Thank you, your Honor. 20 CROSS-EXAMINATION 21 BY MR. KARP: 22 Q Good afternoon. My name is Joe Karp. I'm an 23 attorney representing the California Cogeneration Council and 24 and Watson Cogeneration Company. 25 WITNESS LINSEY: A Good afternoon. 26 Q I'm going to endeavor as hard as I can to speak 27 slowly today for everyone's benefit. I would like to start 28 by referring Mr. Linsey to page 4 of the executive summary. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 689 1 A Page IV? 2 Q Yes. And on line 27 you referred to the PX as 3 providing firm energy. Do you see that? 4 A Yes. 5 Q It's my understanding that the Power Exchange 6 provides balanced schedules to the ISO; is that correct? 7 A Yes. 8 Q And a balanced schedule is one where loads, 9 generally speaking, match supplies; correct? 10 A Yes. 11 Q Now, take a hypothetical. If you can assume that 12 in a given hour every PX participant performs in real-time as 13 it was scheduled to perform in the PX's schedule except for 14 one generator, and this generator is 50 megawatts short of 15 its schedule, do you have that in mind? 16 A Yes. 17 Q Now, in real-time, it's the ISO that provides this 18 balance energy to make up the difference in this generator's 19 schedule; correct? 20 A The reason I'm hesitating is I believe that may 21 not always be the case, that to the extent that there are 22 interscheduling coordinator trades, the source of energy 23 could be something other than the ISO's real-time market. 24 Q Well, let me ask you this way. Does the Power 25 Exchange recalculate its Market Clearing Price at that time? 26 A At which time? 27 Q In real-time. 28 A Not to my knowledge. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 690 1 Q Does the Power Exchange go out into the market and 2 try to procure an additional 50 megawatts or is that 50 3 megawatts provided by other sources? 4 A I think your question is assuming some reference 5 to historical practices and what the PX is doing is kind of a 6 moving target. They constantly introduce new products and 7 various other things. So based on my knowledge they have not 8 gone out in the market, but they could. 9 Q Is it fair to say that today it's the ISO's 10 responsibility to provide reliability services, not the Power 11 Exchange's responsibility? 12 A It depends on the scope of reliability services. 13 Certainly -- well, so far as I know the ISO doesn't really 14 provide anything. It does not own any generation or 15 resources. It controls operation of the transmission system 16 so it operates various resources in a way designed to 17 provide, in its moniker, reliability through market. It 18 tends to rely on those market -- on markets in order to 19 provide certain services. 20 Your question addressed reliability services. 21 There's a certain number of premium-type services in the 22 ancillary services market, spending reserve, very short-term, 23 basically instantaneous reliability services and then certain 24 of the hour-to-hour reliability services that are the ISO's 25 responsibility. I would say that the PX provides reliability 26 service in the sense that it's providing firm energy 27 supplying the vast majority of the daily market. 28 Q What's your definition of "firm energy"? PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 691 1 A With reference to the PX and the use of the term 2 "firm energy," I'm specifically looking at the generator or 3 seller side and it's energy that's a committed offer from a 4 seller to provide a specific quantity at a specific point at 5 a specific point in time. 6 Q If the generator fails to provide its scheduled 7 energy, I understand your prior testimony the PX isn't the 8 responsible body for making up that shortfall; is that 9 correct? 10 A The PX is not responsible. The energy shortfall, 11 in this case it's a shortfall, would be met and the real-time 12 market, based on what has happened, the seller who has a 13 shortfall will be responsible for the economic consequences 14 of that shortfall. 15 Q If I could refer to you footnote 2 on page V. 16 A Yes. 17 Q You state that ORA's testimony may on occasion 18 refer to the PX as shorthand for product market revenues 19 which would include both the ISO and PX. 20 A Yes. 21 Q I understand from that that at times when you're 22 referring to the PX you're really referring to both the ISO 23 and the PX. Is that what you meant there? 24 A Yes. 25 Q In AB 1890 there are references both to the PX and 26 the ISO. Are you familiar with those references? Or let me 27 rephrase that. Are you familiar there are such references? 28 A Yes. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 692 1 Q And in PU Code Section 390(d) there are specific 2 references to the Power Exchange. Are you familiar with 3 those references? 4 A The reason I'm hesitating is at least with respect 5 to 390(d) I think Power Exchange is almost always a modifier 6 of some other term. 7 ALJ COOKE: Let's be off the record. 8 (Off the record) 9 ALJ COOKE: We'll be back on the record. Mr. Linsey 10 indicated that he sees the reference to the Power Exchange -- 11 MR. KARP: Thank you, your Honor. 12 ALJ COOKE: -- in Section 390. 13 MR. KARP: Thank you. 14 Q Do you believe that the legislature, when it 15 referred to the Power Exchange, was referring both to the 16 Power Exchange and the ISO or just the Power Exchange? 17 A In this context I believe they were referring to 18 the Power Exchange. 19 Q Now as I reviewed your testimony, is there any way 20 for me to know when you're referring to the PX as the PX 21 versus when you're referring to the PX and the ISO? 22 A Footnote 2 refers to product market revenues so 23 it's a little difficult to go through and specifically say in 24 each instance, particularly with characterizing the operation 25 of the market whether it refers both to the ISO and PX. 26 Usually when -- my recollection is that there is a discussion 27 of specific revenues which will identify in this testimony 28 which refers to the ISO and which refers to the PX. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 693 1 Q If you could turn to Arabic number -- Arabic page 2 number 6. 3 A Any particular line number? 4 Q Yes, line 25. 5 A Yes. 6 Q You state in the event that the Commission 7 determines PX-based price which utilizes the capacity 8 subtracter in 390(d), is it ORA's belief that the Commission 9 could determine a PX-based SRAC price which does not utilize 10 the capacity subtracter 390(d)? 11 A It is ORA's position that the Commission is not 12 limited only to the second formula sentence of Section 13 390(d). That second sentence constitutes a formula which 14 applies conditionally and not unconditionally. 15 Q So it's your position that the Commission could 16 choose not to apply the second sentence of 390(d); correct? 17 A Yes. 18 Q If could I refer you back to page 3 of your 19 testimony. At line 22 and line 23 you referred to "a long 20 established principal of statutory construction that effect 21 should be given to each word of the statute." 22 A Yes. 23 Q How would your proposal not to implement the 24 second sentence of 390(d) give effect to each word of the 25 statute? 26 A What we would note is that the second sentence of 27 390(d) specifically refers to the value of capacity in the 28 clearing price. That reference is different than other PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 694 1 references in Section 390(c) and (d) which refer to a 2 PX-based price. Therefore, it's our understanding of Section 3 390, the second sentence which provides a formula, that that 4 sentence would be prescriptively applied if and only if the 5 Commission determines that the PX-based clearing price is set 6 equal to the independent Power Exchange clearing price. 7 Q So the second sentence of 390(d) only applies to 8 the extent that the Commission sets SRAC equal to the PX 9 clearing price? 10 A Yes. 11 Q Would you read the second sentence of 390(d) as 12 modifying the first sentence of 390(d)? 13 A No. I would view it as a formula that is a way of 14 carrying out Section 390(d) or the overall principal stated 15 in -- I would view the second sentence as a means the 16 Commission -- the legislature provided for to carry out the 17 first sentence of 390(d) which states a general principal so 18 that the legislature provided for but did not necessarily 19 solely prescribe a means of implementing the principal that 20 capacity value should not be paid. 21 Q If you could turn to page 11 of your testimony at 22 line 20, you state that RMR generation influences the PX 23 Market Clearing Price? 24 A Yes. 25 Q Could you explain how? 26 A Not easily. The ISO has precontracted for a 27 substantial amount of reliability must run generation and 28 there's a variety of complicated contracts that provide for PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 695 1 some crediting of RMR revenue to cover the ISO's price so 2 that the ISO pays for reliability must run generation. So 3 the owners of that reliability must run generation will 4 consider any revenue that might be credited back to the ISO 5 in terms of their market participation as well as their 6 possible bids and the amount of capacity they might commit to 7 the PX. 8 Q And how does that influence the clearing price? 9 A Well, any time capacity is not bid or there's an 10 incentive to be bid at certain prices or to the extent that 11 reliability must run generation would become available at 12 certain prices, based on the contract that enters into the 13 supply and demand equation and has some ultimate difficult to 14 predict effect of the ultimate clearing price. 15 Q So the effect of the RMR on the PX clearing price 16 is difficult to predict; is that right? 17 A At least it's difficult for me to predict. 18 Q It's my understanding that there was recently 19 approved an ISO proposal to dispatch RMR units before 20 finalizing they had PX schedules. Do you recall that or know 21 of that? 22 A I'm unfamiliar with that development. I know 23 there's a whole lot of things going on at the ISO in terms of 24 reliability must run and congestion management. ORA mentions 25 for shorthand the markets that are evolving at a pretty rapid 26 clip. If I tried to keep abreast of what all those 27 developments were, I couldn't have written this testimony. 28 Q Let me ask you this. Is it true that there are PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 696 1 fixed monthly payments provided under the RMR contracts? 2 A That's my understanding. 3 Q And these fixed payments are designed to ensure 4 that the owners of RMR units are available when needed by the 5 ISO? 6 A Yes. 7 Q And would you call these capacity-type payments? 8 A Yes. 9 Q If you could turn to page 15, please. At line 27 10 you state the PX's performance requirements are more 11 stringent than those of QFs. Would you agree that a 12 substantial amount of QF power is provided to the IOUs under 13 firm capacity contracts? 14 A Yes. 15 Q And these firm capacity contracts have minimum 16 performance requirements? 17 A Yes. 18 Q And if a QF fails to meet its performance 19 requirements, it does not receive its full capacity payments; 20 is that correct? 21 A It would depend upon the degree of shortfall as 22 well as your definition of full capacity payments. At 23 certain points of capacity, bonus becomes lower. At other 24 points that are, I believe, significantly lower, could call 25 into question some portion of its capacity payments. 26 Q And at some point the QF also might be required to 27 repay the utility for capacity payments previously made under 28 the contract; isn't that right? PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 697 1 A That sounds generally correct but I haven't 2 recently reviewed the capacity repayment provisions of those 3 standard offers. 4 Q But it sounds generally like you understand what 5 the contracts provide? 6 A Yes. 7 Q Do you have an idea as to how reliable QFs under 8 firm capacity contracts have been in the past? 9 A There's always reliability compared to what? 10 You've -- Mr. Beach's rebuttal testimony indicated that there 11 are these various performance requirements to be met and I 12 would certainly agree that they have a fair probability in 13 bringing about a reasonably high level of reliability for 14 those contracts. My contention is that nonetheless they're 15 strong, they're just not as strong as the current market 16 which requires essentially 100 percent performance of meeting 17 schedules. Those firm contracts have about an 85 percent 18 performance requirement. Furthermore, that doesn't have to 19 be met in every hour, it only has to be met over a total 20 period. So relative to a market where one must meet one's 21 schedule and every hour, there is a relative shortfall by 22 even those firm QFs. 23 The area I would expect to see a greater 24 difference between scheduling and availability would be for 25 more intermittent QFs rather than for the those QFs 26 delivering pursuant to a firm capacity contract. 27 Q Okay. Is it fair to say that merchant plants 28 currently comprise a portion of the PX? PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 698 1 A Yes. 2 Q And merchant plants don't have to bid into the PX 3 at any given time; do you agree? 4 A No. 5 Q They might choose to bid on a given day and then 6 make a direct access sale outside of the PX on the next day; 7 correct? 8 A Yes. 9 Q They also might choose not to run on a given day; 10 right? 11 A Yes. 12 Q On page 16 at line 23 you have a chart which, I 13 believe, illustrates what happens to a PX supplier if it does 14 not match its deliveries to its schedule. Is that a fair 15 characterization of it? 16 A Yes. 17 Q And in the first line of the chart you demonstrate 18 or you show what would happen to a PX bidder whose deliveries 19 are less than its bid when the day-ahead price is greater 20 than the real-time price; is that right? 21 A Yes. 22 Q And in this case, even though the generator 23 delivers less than its scheduled bid -- I'm sorry -- 24 scheduled deliveries, it receives the PX clearing price for 25 the full amount of its scheduled deliveries; correct? 26 A Yes. 27 Q Even if the bidder delivered none of its scheduled 28 deliveries it would still get the full clearing price; PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 699 1 correct? 2 A Yes. 3 Q Now, you state that they would be responsible for 4 paying the replacement reserve charge of the ISO; is that 5 right? 6 A Yes. 7 Q Do you have an idea as to how much the replacement 8 reserve charge has been recently? 9 A I haven't been following that. 10 Q Let's take a hypothetical, if we could. Let's 11 assume the PX price is 3.5 cents per kilowatt hour in a given 12 hour and the ISO real-time price is 2 cents a kilowatt hour 13 and the replacement reserve price is a mill per kilowatt 14 hour. Do you have that? 15 A Actually, no. 16 ALJ COOKE: Let's be off the record. 17 (Off the record) 18 (Recess taken) 19 ALJ COOKE: Let's be back on the record. 20 Mr. Karp. 21 MR. KARP: Q I think I'll restate the terms of the 22 hypothetical that I was putting to you before. Assume that 23 there is a PX price of 3.5 cents per kilowatt hour, an ISO 24 real-time price of 2 cents a kilowatt hour and a replacement 25 reserve price of one mill per kilowatt hour. In this -- with 26 these terms, if the generator doesn't deliver any of the 27 electricity that was included in its schedule, the generator 28 would get paid the full 3.5 cent clearing price; correct? PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 700 1 A Yes. 2 Q The generator would avoid all the of its variable 3 costs because it isn't running; correct? 4 A Yes. 5 Q And the only payment the generator would have to 6 make is the one mill replacement reserve price? 7 A As I looked at this I realized that I had probably 8 not included all the PX consequences. Essentially my 9 understanding is that the bidders are responsible for the 10 differences between their bids and deliveries, and if there's 11 a shortfall in that price between the bid and delivery that 12 they need to make it up. It looks like the PX consequences 13 listed on the first line do not reflect all the consequences 14 that would visit upon this particular situation. 15 Q All right. And by making it up do you mean they 16 would have to purchase the energy at the ISO real-time price? 17 A I believe so. 18 Q So in the hypothetical example, the generator gets 19 paid 3.5 cents and it pays 2.1 cents; correct? 20 A Yes. 21 Q So this generator actually makes money by not 22 honoring a schedule with the PX; correct? 23 A In this hypothetical, which probably means that I 24 may not have accurately interpreted the PX -- 25 Q Well, let me -- in my hypothetical did the 26 generator make money? 27 A Yes. 28 Q Your second line shows what happens when a PX PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 701 1 participant again underdelivers based upon its bid but the 2 day-ahead price is less than the real-time price; correct? 3 A Uh-huh. 4 Q Okay. And here the generator pays the real-time 5 in-balance price for the underdelivered quantity; correct? 6 A Yes. 7 Q Does the generator also get paid the PX price for 8 its full scheduled quantity? 9 A Probably, but I'm not sure. 10 Q Okay. Let's assume that it does. I'll take 11 another hypothetical. Okay? 12 A Okay. 13 Q Assume the PX price again is 3.5 cents, the ISO 14 real-time price now is 4 cents and the real-time price 15 again -- I'm sorry. The replacement reserve price is one 16 mill. In this case, if a generator underdelivers it's going 17 to owe 4.1 cents but get paid 3.5 cents; correct? 18 A Right. 19 Q So it's only out-of-pocket costs is to the tune of 20 .6 cents a kilowatt hour; correct? 21 A Yes. 22 Q It has no obligation to repay the ISO or the PX 23 for prior payments made to the generator; correct? 24 A Correct. The charges it would bear would relate 25 to its specific failure to perform. 26 Q If could you please turn to page 17 and -- 17 27 beginning at line 15 through page 18, line 6. You refer to a 28 specific QF project which I think is called the Beowawe PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 702 1 project; is that right? 2 A Yes. I think I usually pronounce it "Beowawe" but 3 probably there are several pronunciations. 4 Q We'll try "Beowawe." You discuss that Edison 5 bought firm transmission rights for Beowawe; is that right? 6 A They received permission to purchase. I did not 7 keep track of whether they were ultimately successful in 8 winning on the auction or not. 9 Q But if they did purchase these firm transmission 10 rights, you believe that subtracted from Beowawe's payments 11 should be the cost of these firm transmission rights; 12 correct? 13 A Yes. 14 Q You note at line 3 on page 18 that Edison has the 15 right to receive congestion revenues. Would these congestion 16 revenues received by Edison offset the subtracted from the 17 QFs payments? 18 A I'm going to have to break that question in two. 19 I'm trying to recollect exactly who Edison would pay. The 20 Beowawe path may not be one that they control and would hence 21 get all the revenues from in terms of their ownership of 22 transmission for that path. So your question had that -- 23 Edison had the right and I'm not sure that's the case in this 24 instance. It depends who actually controls the path or more 25 specifically who controls the firm transmission rights as to 26 which entity the firm transmission revenues would be credited 27 to. 28 Q If Edison owned 50 percent of the firm PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 703 1 transmission rights, would it be fair to say that they would 2 receive 50 percent of the congestion revenues? 3 A No. It would be fair to say that they would 4 receive 50 percent of the revenues from the sale of the firm 5 transmission rights. The actual congestion revenues that are 6 generated likely will differ from the actual auction price of 7 the firm transmission rights. 8 Q To the extent that Edison were to receive revenues 9 associated with its ownership or sale of firm transmission 10 rights, would those revenues be credited back against the 11 subtracter to Beowawe's avoided cost payments in your 12 proposal? 13 A No because the firm transmission revenues are 14 credited against the transmission owner revenue requirement 15 which is reflected to all the end users of -- all the people 16 who pay the imbedded transmission revenue requirement so the 17 accounting is really different than generation accounting. 18 This charge that Edison's conferring for this particular 19 generation increases its generation cost relative to the 20 alternatives that could otherwise avail itself in terms of 21 that generation. 22 Q As I understand your proposal, Beowawe is 23 effectively going to pay for these firm transmission rights; 24 isn't that right? 25 A Either there would be a payment for the firm 26 transmission rights or the QF could supply firm transmission 27 rights to the utility such that the transmission situation is 28 equivalent to that between the utility and other generation PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 704 1 purchases. 2 Q So in either case either Beowawe pays Edison for 3 the rights and gives them the rights and you're proposing if 4 Edison sells the rights and gives money, Edison is going to 5 keep all those monies and not credit anything back to 6 Beowawe? 7 A I think you combined a lot of stuff. To the 8 extent the QF could sell transmission rights to the utility, 9 the utility would keep those transmission rights and use them 10 for the purpose of scheduling Beowawe. 11 Q But if the utility sold transmission rights -- 12 ALJ COOKE: Could you repeat your question? 13 MR. KARP: Q But to the extent that the utility sells 14 those rights that were provided by the QF, the utility 15 wouldn't credit any revenues back to the QF? 16 A Is the situation you've laid out one where the QF 17 is supplied the FTRs to the utility and the utility has 18 re-sold those same FTRs? 19 Q Yes. 20 A I haven't addressed that situation in my 21 testimony. I don't envision that if the QF is supplying FTRs 22 to the utility that it would then go on resale and be 23 vulnerable to the over-scheduling that the FTRs were intended 24 to address. 25 Q When Edison buys FTRs, who gets the revenues for 26 the FTR purchases? 27 A The -- well, it depends from whence they buy them. 28 To the extent they have been purchased out this last auction, PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 705 1 the firm transmission revenues would be credited to the 2 transmission owner and in turn those firm transmission 3 revenues would reduce the otherwise applicable imbedded 4 transmission revenue requirement. 5 Q So if Edison owns the transmission system, the 6 revenues that Edison pays for the FTRs goes back to Edison; 7 correct? 8 A It goes back to Edison but Edison doesn't retain 9 those revenues. Edison passes through those revenues as a 10 transmission, as a revenue requirement credit. 11 Q Beowawe is located in Nevada; is that right? 12 A Yes. 13 Q And they fall within the Silver Peak Zone? 14 A Well, I didn't know that Silver Peak was a zone, 15 but I know that they are in Silver Peak and I know that they 16 are transmitting over a small transmission line. 17 Q Do you know that there is a separate PX Market 18 Clearing Price for Silver Peak? 19 A No. I do know that Edison indicated that it was 20 vulnerable to having to pay very high congestion revenues, so 21 that would tend to indicate that there's a separate price 22 applicable to deliveries from that area. Whether it only 23 includes Silver Peak or whether it's more expensive than 24 that, I don't know. 25 Q Do you know the difference in price between power 26 generated in Silver Peak versus power in SP 15? 27 A My understanding is that power generated in Silver 28 Peak is essentially attributable to the Beowawe QF, that the PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 706 1 line is so small that it's not a meaningful import line so it 2 would be the QF's -- the price that has to be paid to QF 3 versus the SP 15. 4 Q Is it fair to say that the price difference 5 between the Silver Peak price and the SP 15 price is the cost 6 of transmission from Silver Peak to SP 15? 7 A The cost of congestion and apparently some parties 8 schedule huge quantities over the Silver Peak line, 9 quantities that could not possibly be delivered for. In a 10 way that would indicate a market anomaly and that 11 disadvantaged Edison in terms of delivering its quantity of 12 that PX power to its customers that it was obligated to 13 purchase. 14 Q Do you know how often that happens, that there's 15 that much congestion it creates a marketing anomaly? 16 A I know it happened at least once. Whether that 17 pattern is continuing, whether the various market monitoring 18 committees or boards have done anything about it to date, I 19 don't know. I do know that Edison felt that they were 20 sufficiently exposed such that it made sense for them to 21 participate in the firm transmission rights auction for this 22 particular path. 23 Q If I can, on page 18 beginning at line 7 through 24 page 9 at line 5 you make a proposal to subtract from SRAC 25 the cost of the utility administration QF contracts; correct? 26 A Yes. 27 Q Do the costs the utility incurs to administer QF 28 contracts vary with differences in generation on an PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 707 1 instantaneous basis by QFs? 2 A Do they vary second to second? No. Do they vary 3 over the period of a year for scheduling and dispatch? 4 Certainly. 5 Q So if a -- if QFs generate more than the utility 6 expected in a given year, the utility is going to incur more 7 administration costs than it otherwise would? 8 A I'm not addressing deviations here. What I'm 9 saying is that the utility must set up administrative systems 10 necessary to schedule and dispatch QFs, and if those are 11 variable -- 12 Q So this proposal on page 18 only deals with 13 administrative costs for scheduling and dispatch purposes? 14 A Subsequent to filing this testimony I reviewed 15 Edison's annual transition cost proceeding. Therein there's 16 three categories of transition costs or administration costs. 17 One is called administration, the second is scheduling and 18 dispatch, and a third is dispute resolution. 19 Having reviewed Mr. Beach's rebuttal, it seemed 20 like a fair point that dispute resolution really related to 21 preexisting contracts and was not a short-run of loaded cost. 22 However, scheduling and dispatch and administration in the 23 form of meter reading, making up settlement statements, 24 sending out payments, all those things seemed to be the kinds 25 of costs that would vary in a short-run and hence are 26 reasonably attributable to QFs. 27 Q You say meter reading would vary based upon the 28 level of QF production? PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 708 1 A I'm saying each year you've got to go out and read 2 meters. That involves some cost and that you don't know what 3 energy production is going to be beforehand, that it is a 4 variable cost. 5 Q But if a QF could generate 30 megawatts in a given 6 month versus 40 in that month, would the utility incur 7 different meter reading costs as a result? 8 A Probably not. 9 Q And would the utility incur any different costs in 10 preparation of settlement statements based upon how much the 11 QF produces? 12 A Probably. There's more to the extent that 13 production varies. There's more production to fill in and 14 account for. 15 Q Do you know where the costs of handling QF 16 buy-outs are? Are those in administrative costs or dispute 17 resolution costs? 18 A Based on the magnitude of the numbers, I believe 19 those would be in dispute resolution costs. 20 Q Are these kind of contract buy-outs and 21 negotiations the kind of costs that you would think should be 22 assessed to QFs? 23 A No. 24 Q You have a proposal to establish a -- as one 25 alternative to establish a heat grade cap; is that right? 26 A Yes. 27 Q And the heat rate employs in part the incremental 28 energy rate of the least efficient units that you expect to PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 709 1 be in the PX at a given time; correct? 2 A Yes. 3 Q Is this your testimony, Mr. Linsey, or 4 Ms. Sabino's? 5 A To some extent it's mine, in terms of the 6 executive summary. The conceptual details of the heat rate 7 ratio are being sponsored -- 8 Q I'll ask and whatever person can answer, please 9 do. Is there a difference between the incremental energy 10 rate for these units and incremental heat rate for these 11 units? 12 WITNESS SABINO: A the incremental heat rate, as we 13 have used it in our proposal, is based on that incremental 14 heat rate used by the Commission prior to the SRAC concession 15 formula. That would be a heat rate which is composed of the 16 utility resources operating on the margin. 17 Q So you're referring really to incremental heat 18 rate; correct? 19 A Yes. 20 Q So if you could turn to page 41 at line 26, and 21 at line 25 when you refer there to incremental energy rates, 22 do you really mean heat rates? 23 A Yes. 24 Q And heat rate of a given unit will vary depending 25 upon certain operating conditions; correct? 26 A Yes. 27 Q And if a generator is trying to get every last 28 kilowatt hour out of a unit and subjecting it to a lot of PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 710 1 stress, the heat rate would be higher relative to optimal 2 operating conditions, what they might consider optimal 3 operating conditions; correct? 4 A Possibly, yes. 5 Q And when a unit is being started up for the first 6 time in a day, the heat rate would be higher than it would 7 otherwise operating at optimal conditions; is that correct? 8 A Maybe. I don't know for sure. 9 Q Would you imagine it would be lower in a start-up 10 phase than what the unit is running at an even keel, using 11 nautical terms? 12 A ORA's assumptions here are basically those of a 13 unit which is operating uniformly without consideration of 14 differences in the loading of that unit, so the heat rate 15 would be basically uniform over the period. 16 Q And essentially an average incremental heat rate? 17 A In the sense that the incremental heat rate is an 18 average as used by the Commission, yes, it is. 19 Q Okay. Now, you're using heat rates for plants 20 that were formerly owned by the utilities; correct? 21 A I have not checked whether all of these plants -- 22 we have used in the assumption have in fact been divested by 23 the utilities, but we are assuming that these are still in 24 the system. 25 Q Okay. But the plants either were owned in the 26 past or are currently owned by the utilities; correct? 27 A Yes. 28 Q Because if the least efficient units weren't at PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 711 1 one time owned by the utilities, the Commission wouldn't have 2 any heat rate data; isn't that right? 3 A Yes. 4 Q Does your methodology account for variable O&M 5 costs? 6 A Yes. Both approaches actually account for 7 variable O&M. 8 Q Can you explain how the heat rate cap proposal 9 accounts for the O&M of the least efficient units? 10 A Variable O&M in the sense of fuel costs because 11 operating and maintenance expenses can be both fuel and 12 non-fuel. So in the heat rate capacity subtracted approach, 13 that would be the fuel costs. And in the new market entrant 14 approach, it will be the part of the variable energy cost of 15 the new market entrant. 16 Q Okay. But the heat rate cap proposal, did that 17 account for the non-fuel variable O&M costs? 18 A I would say not. 19 Q Okay. With respect to fuel, your methodology 20 assumes that gas is the marginal fuel; correct? 21 A Correct. 22 Q And at times hasn't it been the case that oil has 23 become the marginal fuel in California? 24 A I understand they were before, yes. 25 Q And are there times of the year when coal can be 26 the marginal fuel? 27 A That's possible, but I'm not aware of it 28 specifically. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 712 1 Q And on a BTU basis, the price of oil doesn't 2 always compare equally with the price of gas; correct? 3 A Yes. 4 Q And the same would be true of coal; correct? 5 A Yes. 6 Q Does your heat rate cap proposal reflect start-up 7 costs? 8 A Likely not. 9 Q And how about air emissions costs or air emissions 10 credit costs? 11 A Likely not. 12 Q If I could turn now to Exhibit 101, the rebuttal 13 testimony, I believe it's Mr. Linsey's testimony at page 8. 14 WITNESS LINSEY: A Yes. 15 Q Is it fair to say that one of your concerns with 16 the CCC's proposal is that -- strike that. 17 MR. KARP: I have no further questions. Thank you. 18 ALJ COOKE: Let's be off the record. 19 (Off the record) 20 ALJ COOKE: Let's be back on the record. 21 Mr. Kerner. 22 MR. KERNER: Thank you, your Honor. 23 CROSS-EXAMINATION 24 BY MR. KERNER: 25 Q Good afternoon, Ms. Sabino, Mr. Linsey. I'm 26 Douglas Kerner. I'm one of the lawyers for IEP in this 27 matter. I believe my questions are directed to Ms. Sabino, 28 but we shall see. Turn to page 43 of the direct testimony PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 713 1 please. You opine in the material at the beginning at line 8 2 and more specifically in the sentence that is included in 3 line 10 that the incremental energy rates embedded in the 4 SRAC starting price are outdated. Do you see that? 5 WITNESS SABINO: A Yes. 6 Q What has changed in the resource systems since the 7 calculation of those IERs? 8 A I understand that some generating units were 9 divested by the utilities. 10 Q Have any new resources been built in that period 11 of time? 12 A I'm not specifically aware of any. 13 Q Has load grown in that period of time? 14 A I would assume it has. 15 Q Would you agree as a general proposition that a 16 combination of load growth and the absence of new resource 17 additions would tend to increase an IER? 18 A I would assume with load growth, but without 19 additional resources on-line or built and put on-line there 20 would be a strain on the existing resources to work harder. 21 Q Thank you. In this same section you note that the 22 IER embedded in the SRAC starting prices is based on a 23 production simulation using the QF-in and QF-out approach. 24 Do you recall that? 25 A Yes. I see it on line 11. 26 Q And you propose to use that as one element in the 27 ratio for ultimately calculating payments to QFs; is that 28 correct? PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 714 1 A That's correct. 2 Q The other portion of the ratio -- let me ask you 3 this: Would you agree with me that in order to have a 4 consistent ratio that you would need to compare the QF in-out 5 transition formula, IER to a PX IER which was also based on a 6 QF in-out approach? 7 A Are you saying that -- are you asking me if this 8 methodology implies a QF-in and QF-out I should have also 9 used that on a PX-based SRAC on a QF in-out? 10 Q For purposes of developing the ratio. 11 A I wouldn't know if they would be proper to use. 12 Would that be the IEP -- your proposal you're referring to? 13 Q Not at all. I'm here to talk about your material. 14 A You mean applying this IER which is derived based 15 on the QF in-out methodology to a PX based SRAC. 16 Q That's what you propose to do here; isn't it? 17 A No. 18 Q Have you reviewed the testimony of Southern 19 California Edison in this proceeding? 20 A Some parts of it. 21 Q And specifically -- I'm specifically interested in 22 their new market entrant proposal. 23 A Yes. 24 Q Does their proposal differ from your 25 recommendation? 26 A I would say there is some difference with respect 27 to implementing that new market entrant approach and that 28 difference is in deriving that ratio as a proportion of the PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 715 1 PX Market Clearing Price. I understand from Edison that they 2 are using four-month average of the ratios. 3 Q And what do you -- what's -- your proposal is 4 different how? 5 A Our proposal would use a ratio of the new market 6 entrants marginal cost of energy and the average PX clearing 7 price. 8 ALJ COOKE: Averaged over what time period? 9 THE WITNESS: In our testimony we used the average, a 10 monthly average for the year 1998. 11 MR. KERNER: Q On page 44, you refer with respect 12 to the new generator and you say it will incur marginal cost 13 of capital. What is marginal capital cost? 14 A Can you refer me to which line on page 44? 15 Q I'm sorry. 23, 24, specifically 22. 16 A The marginal cost of capital will refer to the 17 long-term investment cost required to undertake the project 18 including detailed engineering, construction, purchase of 19 equipment, purchase of land, or any amounts necessary for the 20 project developer to undertake the project. 21 Q Would you expect that those costs you've just 22 identified would vary between different new market entrants? 23 A It is possible. 24 Q Would you agree with me that it's almost -- almost 25 certainly the case that their development costs will differ? 26 A Yes. In our testimony we have identified that 27 these costs will likely vary with the selection of the plant 28 type or technology used or the resource used. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 716 1 Q Could vary based on location? 2 A Yes. As far as the site will affect costs, yes. 3 Q Could vary based on different fuel costs between 4 potential new market entrants? 5 A Yes, as far as it affects the choice of the 6 resource. 7 Q So there are -- do you agree with me there are 8 lots of reasons why the costs of one new market entrant as 9 opposed to another would differ? 10 A Yes. 11 Q Do you have a process in mind for figuring out all 12 of these costs elements for the variety of new market 13 entrants that we might consider? 14 A Are you referring to implementation of this 15 methodology? 16 Q Yes. How do we select cost characteristics of the 17 new market entrants? 18 A ORA was envisioning a Commission proceeding where 19 the various parties concerned would be asked to provide input 20 as to the choice of the new market entrants. 21 Q And would we update that process periodically? 22 WITNESS LINSEY: A I think the general procedural 23 recommendation would fall somewhat more in my area than 24 Ms. Sabino's. We did have in mind, at least with respect to 25 the initial demonstration, that it be made in phase two 26 pursuant to a Commission decision, that there were one or 27 more approaches that the Commission might wish to use for 28 price setting so that would help to limit the scope of PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 717 1 debate. 2 In many of these instances we don't have a 3 specific answer in mind but rather that the overall approach 4 provides a way that would provide a reasonable measure of the 5 energy valued and the PX price. In the case of the new 6 market entrant approach, since to some extent it's equivalent 7 to the QF in-out approach that at least I understand that IEP 8 is sponsoring. However, we're removing both the energy and 9 capacity and seeing what would happen if that in fact occurs. 10 So we would be looking for units that are representative of 11 new market entrants, and there would probably be some range 12 of differences in their costs, but looked at it in an overall 13 context. That change or that range would probably be a 14 manageable one. 15 Q Let's talk about new market entrants a little bit 16 more. Do new market entrants, or to the extent they existed, 17 sell into markets other than the PX or ISO markets or might 18 they? 19 A Yes. 20 Q And in order to evaluate the potential 21 participation in PX market, for example, you need to make an 22 assessment of how they would bid and be scheduled; wouldn't 23 you? 24 A Not necessarily. To the extent for the purpose of 25 allocating the Market Clearing Price between capacity and 26 energy, you could assume that they bid solely into the PX 27 market and make the determination based on that assumption. 28 Q All right. With respect to the PX market, a new PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 718 1 market entrant isn't required, I think we established 2 earlier, to bid in any particular hours; are they? 3 A It's not required to, but given the assumption 4 that it does bid wholly into the PX, you can then derive 5 based on, I understand, underlying cost characteristics, what 6 a reasonable allocator would be between capacity and energy 7 value and the PX price. 8 Q Do you think it is reasonable to assume a new 9 market entrant will build solely into the PX market? 10 A We don't know the business plans of all the new 11 market entrants. I think it would be reasonable to expect 12 that at least some, therefore others, that might be located 13 in local reliability areas, they likely would try and bid on 14 a local reliability contract or whatever the ISO might be 15 offering at the time. 16 Q You would -- do you propose to apply the results 17 of this proposal to every hour of PX pricing? 18 A Our proposal is that it's an hourly adjustment. 19 Q So the answer is "yes"? 20 A Yes. 21 Q The result of the proposal is to develop a ratio, 22 as I understand it, which would be applied to the PX clearing 23 price in some hour; is that correct? 24 WITNESS SABINO: A That's correct. 25 Q And is that number, your revised -- I'm looking at 26 page 46 as revised. The ratio would be about 65.85 percent? 27 A That's correct. 28 Q All right. So in a hypothetical situation in PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 719 1 which the PX clearing price were $10, you would propose to 2 pay six dollars and 58.5 cents. Is that basically how it 3 would work? 4 A Is that 65.85 percent of $10? 5 Q Yes. 6 A Yes. That's basically how it would apply. 7 Q Based on your -- I'm now looking at page 45 where 8 you're discussing a CEC staff report. You have a breakdown 9 of a potential new generator's estimated costs; don't you? 10 A On this page? 11 Q Yes. 12 A Yes. 13 Q And off which you describe as the variable cost 14 which we now understand is only fuel; is that right? 15 A Yes. There's -- in the breakdown there is a 16 variable fuel and a non-fuel variable component. 17 Q So the total variable costs of this potential new 18 market entrant are $15 and something per megawatt hour; is 19 that about right? 20 A That's right. 21 Q In my hypothetical for an hour in which the PX 22 cleared at $10, would the new market entrant be operating? 23 A Likely not operating. 24 Q Is that because its variable costs exceed the 25 clearing price in that hour? 26 A Yes. 27 Q So in that hour the existence of the new market 28 entrant has nothing whatsoever to do with the PX price, if we PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 720 1 were in existence? 2 A In that hypothetical, yes. 3 Q Wouldn't the new market entrant only affect the PX 4 price to the extent that it set the price? 5 WITNESS LINSEY: A I think the new market entrant 6 would always affect the PX price because it's a source of 7 additional supply so it would always affect the PX price 8 because it would always affect which plant is at the margin. 9 Q That would depend entirely, wouldn't it, on how 10 the new market entrant chose to participate? 11 ALJ COOKE: Mr. Kerner, your question is not clear to 12 me. Be a little more specific. 13 MR. KERNER: Q If you are correct that the new market 14 entrant would always affect the PX clearing price, the way in 15 which it would affect the PX clearing price in every hour 16 would really depend on what it was doing in that hour; 17 wouldn't it? 18 A Yes. 19 Q How do you propose we figure out what the new 20 market entrant would do in every hour? 21 A We're not proposing to figure out what the new 22 market entrant would do in every hour. What we're saying is 23 how can you go about determining what the energy and capacity 24 value is within the PX price? You can look at a plant that 25 can come into the market and based on its underlying cost 26 characteristics determine a composition of the PX price, so 27 it is used for allocating purposes. 28 Q So we're not -- you're not -- PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 721 1 MR. KERNER: Off the record please? 2 ALJ COOKE: Let's be off the record. 3 (Off the record) 4 ALJ COOKE: Let's be on the record. 5 Mr. Kerner. 6 MR. KERNER: Q I have an additional question which 7 also relates to the new market entrant at page 44 beginning 8 at line 23 and 24, Ms. Sabino. 9 WITNESS SABINO: A Yes. 10 Q You say the new generator is in the market to be a 11 viable going concern and not just a break-even. Do you see 12 that? 13 A Yes. 14 Q What's the difference between those two 15 conditions? 16 A Between the conditions of being a viable going 17 concern and the condition of just breaking even? 18 Q Yes. 19 A They would differ as to cost, the amount of 20 recovery that's going to be made relative to the investment 21 of the -- relative to the investment of the generator. 22 Q To be a viable -- would I be correct in supposing 23 that by being a viable going concern that the new market 24 entrant is earning a profit or rate of return? 25 A Yes. The rate of return is one indicator of 26 viability, yes. 27 Q And that's different from merely breaking even? 28 A Right. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 722 1 Q Would you expect that the required rates of return 2 would also be among the things which would differ depending 3 upon whom the market entrant was? 4 A Generally, yes, it would differ. 5 Q What is your -- do you propose to include in your 6 estimated cost of the new market entrant a rate of return? 7 A The rate of return would generally be already part 8 of the marginal capital costs because that capital cost 9 includes an element for capital costs recovery, and in that 10 cost category the returns would be included. 11 Q All right. So as an element of the estimated 12 marginal capital costs, we would make some assumption or 13 evaluation of a rate of return, would specify a rate of 14 return? 15 A Yes. 16 Q And what rate of return would you recommend we use 17 or how would we go about figuring it out? 18 A In our testimony we made use of the assumptions of 19 the CEC for capital recovery which is 15 percent. 20 Q Embedded within that you understand is a 21 15-percent rate of return? 22 A That would be a combination of different -- my 23 understanding of that 15 percent is that it would include the 24 different costs of the investors, costs for procuring 25 capital. That would include the cost of that and costs of 26 equity. That would be the shareholders' return. 27 Q The shareholders' return. So we're going to 28 set -- as part of this administrative process we're going to PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 723 1 go through to identify the new market entrant, we're going to 2 set its rate of return? 3 WITNESS LINSEY: A We're not going to set its rate of 4 return. We would be making some assumptions in order to 5 determine a capital recovery cost so that one could determine 6 an estimate of the overall costs of the new market entrant. 7 Q Well, within -- and part of that process is going 8 to be the specification of a rate of return. I think that 9 was Ms. Sabino's testimony; right? Did I properly 10 characterize your prior answer? 11 WITNESS SABINO: A Yes. 12 Q All right. Could you return please to page 25 of 13 the direct testimony? At the top of this page, and I think 14 this is repeated elsewhere in the material, this is a 15 paragraph numbered 14 which says in its introduction, "That 16 at this time the Commission not use a 390(c) PX-based price 17 for compensation to QFs because," and four reasons are stated 18 for that recommendation. Do you see that? 19 A Yes. 20 Q Your -- either of the ORA proposals, as I 21 understand them, whether it be the heat rate cap or the new 22 market entrant, would be -- calculate a ratio which would 23 then be applied to the PX Market Clearing Price in ever hour; 24 is that right? 25 A The new market entrant approach would apply to the 26 PX clearing price in every hour, yes. 27 Q And would it be reasonable for me to conclude then 28 that at this time the ORA does not propose that its PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 724 1 methodology be approved because a key element of it is the 2 Market Clearing Price which you say is not ready for use? Is 3 that a reasonable conclusion? 4 WITNESS LINSEY: A Right. In terms of process, we're 5 not proposing that the Commission adopt that price at this 6 time, that that would be coordinated with the necessary 7 390(c) determination. It's also -- well, it's a little 8 beyond the scope of this phase as might be pretty evident 9 from our testimony. We think that the market has a way to go 10 in terms of functioning properly so that there would be time 11 to develop this number prior to a finding of proper function. 12 Q All right. So for the time being we will pay QF 13 on the formula that's in place pending the outcome of this 14 process? 15 A Right. 16 Q Thank you, both of you, very much. 17 MR. KERNER: Your Honor, I am finished. 18 ALJ COOKE: All right. Let's be off the record. 19 (Off the record) 20 ALJ COOKE: Let's be on the record. 21 At this time given that there are no objections, I 22 will receive into evidence Exhibits 50, 53, 59 and 60 23 sponsored by Edison. 24 (Exhibit Nos. 50, 53, 59 and 60 were admitted 25 into evidence.) 26 ALJ COOKE: Let's be off the record. 27 (Off the record) 28 ALJ COOKE: Let's be on the record. PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 725 1 At this time I will receive into evidence given 2 that there are no objections Exhibit 4 and Exhibit 8 3 sponsored by IEP. 4 (Exhibit Nos. 4 and 8 were admitted into 5 evidence.) 6 ALJ COOKE: Let's be off the record. 7 (Off the record) 8 ALJ COOKE: Let's be on the record. 9 At this time given that there are no objections I 10 will receive into evidence Exhibits 150 and 152 sponsored by 11 the Automated Power Exchange. 12 (Exhibit Nos. 150 and 152 were admitted 13 into evidence.) 14 ALJ COOKE: Let's be off the record. 15 (Off the record) 16 ALJ COOKE: Let's be on the record. 17 At this time given that there are no objections I 18 will receive into evidence Exhibit 3, Exhibit 7 and Exhibit 19 13 which are the direct rebuttal and additional direct 20 testimony on behalf of CCC and Watson. 21 (Exhibit Nos. 3, 7 and 13 were admitted 22 into evidence.) 23 ALJ COOKE: Let's be off the record. 24 (Off the record) 25 ALJ COOKE: Let's be on the record. 26 At this time given that there are no objections I 27 will receive into evidence Exhibits 2, 6 and 14 which are the 28 direct, rebuttal and errata testimony on behalf of the PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA 726 1 Cogeneration Association of California, et al. 2 (Exhibit Nos. 2, 6 and 14 were admitted 3 into evidence.) 4 ALJ COOKE: Let's be off the record. 5 (Off the record) 6 ALJ COOKE: Let's be on the record. 7 At this time given that there are no objections I 8 will receive into evidence Exhibit 9 sponsored by IEP, 9 Exhibit 11 sponsored by CCC-Watson, Exhibit 12 sponsored by 10 CCC-Watson, Exhibit 62 sponsored by Edison, and Exhibit 63 11 sponsored by Edison. 12 (Exhibit Nos. 9, 11, 12, 62 and 63 were 13 admitted into evidence.) 14 ALJ COOKE: Let's be off the record. 15 (Off the record) 16 ALJ COOKE: Let's be back on the record. 17 With that, we are adjourned until tomorrow morning 18 at 9:00 a.m. 19 (Whereupon, at the hour of 4:00 p.m., 20 this matter having been continued to 9:00 a.m., April 11, 2000, at San Francisco, California, 21 the Commission then adjourned.) 22 * * * * * 23 24 25 26 27 28 PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIA