Exhibit D-3
[LETTERHEAD OF SKADDEN, ARPS, SLATE, XXXXXXX & XXXX LLP]
November 30, 2001
Xxxxx X. Xxxxxxxx
Secretary
Federal Energy Regulatory Commission
000 Xxxxx Xxxxxx, X.X.
Washington, D.C. 20426
RE: Agreements Among ETrans LLC, Pacific Gas and Electric
Company, and Electric Generation, LLC
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Dear Xx. Xxxxxxxx:
Pursuant to Section 205 of the Federal Power Act ("FPA"), 16 U.S.C.
(S) 824d, and Part 35 of the Commission's regulations, 18 C.F.R. Part 35
(2000), ETrans LLC ("ETrans") and Pacific Gas and Electric Company as the
reorganized debtor ("Reorganized PG&E") (together, "Applicants") hereby submit
for filing the following agreements:
1. a Back-to-Back Agreement between ETrans and Reorganized PG&E ("Back-to-
Back Agreement"),
2. a Transmission Availability Agreement for Offsite Power Supply between
ETrans and Electric Generation, LLC ("Gen") ("Transmission Availability
Agreement"),
3. an Interconnection Agreement between ETrans and Reorganized PG&E (the
"Load IA") providing for the interconnection between ETrans and
Reorganized PG&E's load serving facilities,
4. an Interconnection Agreement between ETrans and Gen (the "Gen IA")
providing for the interconnection between ETrans and Gen's generation
facilities,
Xxxxx X. Xxxxxxxx
November 30, 2001
Page 2
5. an Interconnection Agreement between ETrans and Reorganized PG&E (the
"Hunters/Humboldt Generation IA") providing for the interconnection
between ETrans and Reorganized PG&E's retained generation facilities,
and
6. an Interconnection Agreement between Reorganized PG&E and Gen (the
"Distribution Level Generation IA") providing for the interconnection
between Reorganized PG&E's distribution level facilities and Gen's
generation facilities (collectively, these six agreements are referred
to as the "Agreements").
Specifically, the Back-to-Back Agreement, Transmission Availability Agreement,
Load IA, Gen IA, and Hunters/Humboldt IA are being filed as ETrans rate
schedules or service agreements./1/ The Back-to-Back Agreement/2/ and
Distribution Level Generation IA are being filed as rate schedules and service
agreements of Reorganized PG&E./3/
The Agreements have been established as part of the plan of
reorganization ("Plan") filed by Pacific Gas and Electric Company ("PG&E") under
Chapter 11 of the United States Bankruptcy Code, which was filed with the United
States Bankruptcy Court for the Northern District of California ("Bankruptcy
Court") on September 20, 2001. This is one of a number of filings being made
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/1/ The Commission has held that interconnection is an element of transmission
service and, correspondingly, that interconnection agreements must be filed
as service agreements under a transmission provider's transmission tariff.
See, e.g. Tennessee Power Co., 90 FERC (P) 61,238 (2000); Southwest Power
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Pool, Inc., 92 FERC (P) 61,109 (2000). Accordingly, the Load IA,
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Hunters/Humboldt Generation IA, and Gen IA are being filed as Service
Agreement Nos. 21-23 to the PG&E Transmission Owner Tariff, Pacific Gas and
Electric Company FERC Electric Tariff, Sixth Revised Volume No. 5, which
will be transferred to ETrans.
/2/ The Back-to-Back Agreement is being filed as a rate schedule of both PG&E
and ETrans because both entities provide jurisdictional services under it.
Two copies of the identical agreement are being filed, one with the Order
No. 614 designations for the ETrans rate schedule and one with the Order
No. 614 designations for the Reorganized PG&E rate schedule. Designation of
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Elec. Rate Schedule Sheets, Order No. 614, FERC Stats. & Regs. (P) 31,096
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(2000).
/3/ The Distribution Level Generation IA is being filed as Service Agreement
No. 6 to PG&E's Wholesale Distribution Tariff, Pacific Gas and Electric
Company FERC Electric Tariff, Original Volume No. 4, which will be retained
by Reorganized PG&E.
Xxxxx X. Xxxxxxxx
November 30, 2001
Page 3
contemporaneously that will implement the various components of the Plan. Taken
together, the filings and agreements will restructure PG&E into separate,
affiliated generation, transmission, and gas companies, and a separate,
unaffiliated distribution company. The Plan, and related filings, are discussed
further below.
Each of the Agreements represents an important part of implementing
the Plan. They define important relationships between the disaggregated
companies related to interconnection, existing contracts, and Nuclear Regulatory
Commission ("NRC") requirements for the Diablo Canyon Nuclear Power Plant
("DCPP"). Applicants accordingly are filing these Agreements now,
contemporaneously with, among other things, the FPA Section 203 filing being
made by PG&E and PG&E Corporation to implement the Plan. The proposed effective
date is the effective date of the Plan, which is anticipated on or before
December 31, 2002. Any other jurisdictional agreements (or amendments thereto)
associated with the reorganization will be filed not less than 60 days prior to
consummation of the Plan.
I. BACKGROUND AND REASONS FOR THIS FILING
A. The PG&E Plan of Reorganization
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As the Commission is aware, PG&E filed a petition for relief under
Chapter 11 of the United States Bankruptcy Code on April 6, 2001. PG&E's goal
was to halt the deterioration of its financial position, restore the company to
financial health, and continue supplying electricity and gas in the normal
course of business. A Chapter 11 case was commenced, and on September 20, 2001,
PG&E filed the Plan and a Disclosure Statement with the Bankruptcy Court.
The Plan involves a system-wide corporate restructuring of PG&E
Corporation and a complete restructuring of PG&E's businesses and operations.
Through the proposed restructuring, PG&E anticipates that value created will
provide necessary cash and increased debt capacity to enable it to repay valid
creditor claims, restructure existing debt, and emerge from the Chapter 11
bankruptcy case. PG&E anticipates that the restructuring will create new
businesses, including ETrans and Gen, that will be financially sound going
forward.
Pursuant to the Plan, PG&E will disaggregate its current businesses
and divide its operations and assets among four separate operating companies.
PG&E will contribute certain assets to each of the entities. The majority of
the assets associated with the current electric transmission business of PG&E
will be contributed to ETrans, the majority of the assets associated with the
generation business of PG&E will be contributed to Gen and its subsidiaries, and
PG&E's interstate gas transmission and storage assets will be contributed to
GTrans, LLC ("GTrans"). In addition, PG&E has created a separate corporation
called Newco
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November 30, 2001
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Energy Corporation ("Newco") to hold the membership interests of each of ETrans,
Gen, and GTrans. PG&E is the sole shareholder of Newco. After the assets are
transferred to the newly formed entities, PG&E will declare and pay a dividend
of the outstanding common stock of Newco to PG&E Corporation, and each of
ETrans, GTrans, and Gen will thereafter be an indirect, wholly-owned subsidiary
of PG&E Corporation.
While certain other assets of PG&E will be sold, the remaining assets
will be retained by PG&E. PG&E, as a reorganized company, will continue to
conduct local electric and gas distribution operations and associated customer
services. Upon consummation of the disaggregation of PG&E's business as
described above, PG&E Corporation (which will change its name as part of the
Plan) will declare a dividend and distribute all of the common stock of PG&E to
its public shareholders, effectively separating PG&E from PG&E Corporation (and
ETrans, GTrans, and Gen).
B. The Need for the Agreements
---------------------------
Following the restructuring of PG&E, there will be a number of
services required or desired, as well as relationships that must be defined,
among ETrans, PG&E, and Gen. The Agreements being filed herein represent
jurisdictional agreements that are integral to the post-reorganization
relationship between the companies or are important for other reasons, such as
to continue the service provided to wholesale customers today under their
existing contracts or to maintain NRC requirements necessary for the safe
operation of DCPP. PG&E is filing these agreements now to facilitate timely
Commission consideration and approval of the overall package of filings related
to the Plan that are being filed today (see Section C).
Applicants expect that there will be other jurisdictional agreements
(or amendments thereto) filed in the future under Section 205 to implement
certain aspects of the Plan. For example, to the extent that one of the
disaggregated business lines provides jurisdictional operation and maintenance
services to the others following consummation of the Plan, the related
agreements will be filed with the Commission for approval under Section 205.
Other filings could include any amendments to PG&E's ISO-related tariffs that
are necessary to accommodate the assignment of these tariffs to ETrans. Any such
agreements or amendments will be filed not later than 60 days prior to
consummation of the Plan.
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C. Other Related Filings Being Made Today
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In addition to approval of the Plan by the Bankruptcy Court, among
other filings that are being made, one or more of PG&E, Gen (and its
affiliates), ETrans, and PG&E Corporation are seeking contemporaneously herewith
the following authorizations from the Commission under the FPA:
. under Section 203, the transfer of certain Commission-jurisdictional
facilities to ETrans and Gen;
. pursuant to Section 8, PG&E's transfer of all of its Commission-licensed
hydroelectric projects to subsidiaries of Gen (with the exception of
certain non-primary transmission line segments, for which the applicants
are requesting Commission approval to transfer title to ETrans subject to
use rights in the proposed new licensees) and transmission line only
licenses to ETrans;
. under Section 204, certain issuances of securities and assumptions of
liability by PG&E, Xxx, and ETrans; and
. under a separate Section 205 filing, a power sales agreement pursuant to
which Gen will sell power to Reorganized PG&E./4/
PG&E and PG&E Corporation also will seek declaratory orders that the proposed
transaction does not violate Section 12 of the Natural Gas Act or Section 305(a)
of the FPA, and that the subsidiaries of Gen are not jurisdictional public
utilities under Section 201(e) of the FPA, and, in the future, for
reclassification of certain assets to be transferred to ETrans./5/ Approvals or
notices necessary to comply with FPA Section 305(b) for new officers and
directors holding interlocking directorates also will be sought in the future,
if they become necessary.
In addition to authorizations from this Commission, PG&E and PG&E
Corporation will seek the approval of the U.S. Securities and Exchange
Commission under Section 9(a)(2) of the Public Utility Holding Company Act of
___________________________
/4/ In addition, GTrans is making a number of filings under the Natural Gas
Act.
/5/ There are certain limited, discrete facilities - primarily associated with
substations that interconnect the transmission and distribution systems -
that may require reclassification to ensure that ETrans and Reorganized
PG&E, respectively, can safely operate the transmission and distribution
systems following consummation of the Plan.
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November 30, 2001
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1935, 15 U.S.C. (S) 79i(a)(2), (because the transaction will result in the
ownership by PG&E Corporation of more than one public-utility company), and the
NRC, for the transfer of DCPP to a subsidiary of Gen and the indirect transfer
of the Humboldt nuclear power plant as a result of the spin-off of PG&E from
PG&E Corporation. Application to transfer environmental permits, rights of way
over federal lands, and minor licenses and permits necessary to implement the
transaction will be made to other federal, state, and local agencies as
required.
PG&E hopes to make the necessary filings and obtain all of the
necessary approvals to effectuate the Plan by the end of 2002.
D. Filing of Unexecuted Agreements
-------------------------------
Pending Bankruptcy Court approval of the Plan, the Agreements are
being filed unexecuted. Once the Plan is approved, the Agreements will be
executed and filed. Such filing will be made prior to the effective date of the
Agreements.
II. DISCUSSION
Each Agreement being filed herewith is discussed below. In addition,
the Agreements are discussed and supported in the attached Direct Testimony of
Xxxx X. Xxxxxx, PG&E's Director of Interconnection Services.
A. Back-to-Back Agreement
----------------------
The primary purpose of the Back-to-Back Agreement is to enable PG&E's
reorganized business lines to continue to provide service under the rates,
terms, and conditions of PG&E's existing wholesale contracts. PG&E currently
provides a substantial amount of unbundled transmission service to its wholesale
customers under agreements that pre-date the California Independent System
Operator ("California ISO"). These agreements are referred to as PG&E's
"Existing Contracts." Some of the Existing Contracts will be assigned to
ETrans, the entity that will own PG&E's transmission assets and that will be the
"Participating Transmission Owner" ("PTO") under the ISO Tariff. Others,
however, will remain with Reorganized PG&E because they provide a range of
services that are more akin to, or are integrated with, the service provided to
PG&E's retail customers. (These are referred to herein as the "Reorganized PG&E
Contracts.") In either case, PG&E's Existing Contracts will be honored
following implementation of the Plan.
The Back-to-Back Agreement provides Reorganized PG&E the ability to
continue to provide service under the Reorganized PG&E Contracts pursuant to the
rates, terms, and conditions set forth therein. The Agreement is necessary
because Reorganized PG&E will not own transmission facilities and will
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November 30, 2001
Page 7
not have a contractual relationship with the California ISO as a transmission
owner. Specifically, the California ISO has accommodated Existing Contracts by
accepting them as "Encumbrances" under the ISO transmission tariff and complying
with operational protocols established to permit continued service under those
agreements. To continue that treatment, the Back-to-Back Agreement requires
ETrans, as the PTO that will be party to the Transmission Control Agreement
("TCA") with the California ISO, to use all reasonable efforts to maintain the
Reorganized PG&E Contracts as Encumbrances and to update the operational
protocols that have been established for the Reorganized PG&E Contracts.
Back-to-Back Agreement, (S) 2.1.1. The result is that Reorganized PG&E can
continue to provide service under its Existing Contracts pursuant to the rates,
terms, and conditions in those agreements. It is important to note in this
regard that the Back-to-Back Agreement specifically provides that no additional
Encumbrances, Existing Contracts, or "Existing Rights" are being established by
the Agreement itself. Id. (S) 2.1.2. The Back-to-Back Agreement thus does not
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result in any additional grandfathered treatment of contracts.
The Back-to-Back Agreement also allows ETrans to continue to provide
service pursuant to the rates, terms, and conditions of certain Existing
Contracts assigned to it under which wholesale distribution service is offered
(referred to herein as "ETrans Contracts"). Because Reorganized PG&E, not
ETrans, will own the distribution facilities over which wholesale distribution
service must be provided, ETrans must arrange for such service with Reorganized
PG&E. The Back-to-Back Agreement provides the arrangements for such service in
a manner that continues the existing treatment of these ETrans Contracts.
Specifically, the Back-to-Back Agreement obligates Reorganized PG&E to use all
reasonable efforts to provide such service to ETrans under the same rates,
terms, and conditions as are included in the ETrans Contracts. Id. (S) 3.1.
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Again, these arrangements will ensure that ETrans will be able to meet its
obligations under the ETrans Contracts, and that customers under those contracts
will continue to receive the same service they do today, without expanding
grandfathering.
The other purpose of the Back-to-Back Agreement is to give ETrans all
rights PG&E currently has to transmission services under PG&E's Contract No.
2947A with the federal Western Area Power Administration ("WAPA"). Id. (S)2.4.
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As explained in the testimony of Xx. Xxxxxxx in the contemporaneous Section 203
filing, Contract No. 2947A will remain with Reorganized PG&E. That contract
includes rights for PG&E to receive transmission services that currently are
"Entitlements" under the California ISO tariff./6/ As Entitlements, those
transmission
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/6/ These transmission services involve the use of one of the two line segments
of the Pacific AC Intertie extending across the California-Oregon border.
Xxxxx X. Xxxxxxxx
November 30, 2001
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rights have been placed under the California ISO's operational control pursuant
to the TCA and are made available to all users of the California ISO's grid
under its open-access tariff. The Back-to-Back Agreement will ensure that PG&E's
transmission rights under Contract No. 2947A will remain Entitlements by
transferring those rights to ETrans, which as a PTO will be a party to the TCA,
and thus that such rights will remain available to the California ISO's
transmission service customers. In exchange for the right to the transmission
service, ETrans will pay to Reorganized PG&E all amounts owed by Reorganized
PG&E to WAPA under Contract No. 2947A.
The Back-to-Back Agreement thus provides necessary arrangements to
maintain the current treatment of the Commission-jurisdictional wholesale
transmission services (including over distribution facilities) that are included
under the Existing Contracts, as well as the arrangements necessary to ensure
that Entitlements are maintained. It defines an important relationship between
PG&E and ETrans. At the same time, the Back-to-Back Agreement has been
structured to ensure that there is no additional grandfathering of services
(i.e., no additional Encumbrances, Existing Contracts, or Existing Rights are
----
established). That is, the Back-to-Back Agreement is structured to do nothing
more than ensure the status quo is maintained.
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PG&E recognizes that the Commission currently is undertaking a number
of initiatives that could result in the establishment of one or more Regional
Transmission Organizations ("RTOs") in the West. In the event ETrans' facilities
are transferred to an RTO different from the California ISO, the Back-to-Back
Agreement obligates ETrans to make all arrangements with that RTO necessary to
allow Reorganized PG&E to satisfy its transmission obligations under the
Reorganized PG&E Contracts. Also, ETrans must use all reasonable efforts to
permit PG&E, on a basis comparable to the treatment of existing contracts of
other customers or members of such RTO, including ETrans, to obtain any
necessary services from such RTO under the same rates, terms, and conditions
applicable to the transmission services under the Reorganized PG&E Contracts,
for the life of those contracts. Id. (S) 2.2.1. Like the treatment of
---
Encumbrances under the California ISO, this commitment will ensure that the
transmission services under the Reorganized PG&E Contracts will be maintained,
to the extent possible consistent with RTO rules and on a comparable basis. It
thus represents an important protection to Reorganized PG&E and its wholesale
customers. It helps ensure that such customers will be treated no differently
than they would have been absent the Plan.
The Back-to-Back Agreement seeks to maintain the status quo with
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respect to the rates and charges under the Existing Contracts. Thus, the payment
obligations of ETrans or Reorganized PG&E to the other will initially reflect
pass-
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November 30, 2001
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throughs of the payments under the Existing Contracts for the relevant services.
That is, Reorganized PG&E will pay to ETrans the amounts Reorganized PG&E
receives for transmission services from its wholesale customers under the
Reorganized PG&E Contracts. Id. (S) 4.1.1. Similarly, ETrans will pay to
---
Reorganized PG&E the amounts it receives from its wholesale customers under the
ETrans Contracts for wholesale distribution service. Id. (S) 4.2.1. Again,
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nothing will change from the treatment of these services today; the Back-to-Back
Agreement only ensures that the right to payments properly tracks the ownership
of the relevant facilities.
In the event either Reorganized PG&E or ETrans believes that a
different rate under the Back-to-Back Agreement is warranted, it may file with
the Commission to change that rate. Id. (S) 4.3. The only limitation is when the
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other party to the Back-to-Back Agreement is not entitled to seek a change in
the rate under the underlying Existing Contract; in that event Reorganized PG&E
and ETrans have agreed that a rate change under the Back-to-Back Agreement is
not warranted. See id. (S) 4.3.1. This is to protect either party that may be
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restricted from seeking a rate change under any fixed rate (Mobile-Sierra)
-------------
provisions in the Existing Contracts assigned to or retained by that party. This
limitation does not affect any customer under an Existing Contract.
To the extent Reorganized PG&E or ETrans seeks a rate change under the
Back-to-Back Agreement, the party subject to the changed rate could, if it so
desired and if permitted under the Existing Contract, seek a corresponding
change under the underlying Existing Contract. Reorganized PG&E and ETrans
recognize that the customers under the Existing Contracts therefore may be
interested in any proposal to change rates under the Back-to-Back Agreement and
may wish to participate in any proceeding associated with such a rate change
proposal. To ensure that those customers receive adequate notice of any
proposed change under the Back-to-Back Agreement, Reorganized PG&E and ETrans
agree that they will provide those customers with the same notice that would be
provided if the customers were direct customers under the Back-to-Back
Agreement. Id. (S) 6.1.4.5.
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B. Transmission Availability Agreement
-----------------------------------
The purpose of the Transmission Availability Agreement is to maintain
the grid conditions necessary to meet NRC requirements for the safe and reliable
operation of DCPP. Under DCPP's operating license and other NRC requirements, an
offsite power supply must be available and sufficient for safe shutdown and
design basis accident mitigation. See, e.g., 10 C.F.R. Part 50, Appendix A,
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Criterion 17. These NRC requirements and implementing guidance
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November 30, 2001
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documents include standards for sufficient transmission system conditions and
operations.
Currently, because PG&E has transferred operational control of its
transmission facilities to the California ISO, license and NRC requirements are
addressed in Appendix E to the TCA. Following the reorganization, the TCA will
be assigned to ETrans, while a subsidiary of Gen will take ownership of DCPP. It
thus is necessary for Gen to have arrangements in place to ensure that the NRC's
requirements for grid operations associated with DCPP will be satisfied. The
Transmission Availability Agreement provides those arrangements. It does not,
however, provide transmission service to deliver DCPP output to retail or
wholesale loads; rather, transmission service must be acquired for those
purposes under the California ISO tariff.
Under this Agreement, ETrans must use all reasonable efforts,
including entering into appropriate arrangements with an ISO or RTO that
controls ETrans' facilities, to maintain grid conditions consistent with DCPP
licensing and other applicable NRC requirements. Transmission Availability
Agreement, (S) 2.1. Initially, ETrans must take all reasonable steps necessary
to ensure that the same protocols contained in Appendix E of the TCA remain in
effect. Id. (S) 2.1.1. Thus, the purpose is to maintain the status quo.
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In addition, DCPP operating personnel must receive certain information
to ensure that system conditions continuously satisfy NRC requirements. That
information is addressed today in Appendix E to the TCA, under which certain
information is made available to DCPP operating staff. The Transmission
Availability Agreement provides that such information will continue to be
provided to the DCPP operating personnel to the extent necessary to ensure that
NRC requirements are being satisfied. Specifically:
. ETrans will notify DCPP operating staff of impaired or potentially degraded
grid conditions that would impact DCPP's compliance with NRC requirements,
and when grid conditions have been restored following such an impairment or
degradation. Id. (S) 3.1.
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. ETrans will transfer to DCPP operating staff the results and conclusions of
all system studies and audits that impact DCPP's compliance with NRC
requirements. Id. (S) 4.2.
---
As noted, the provisions of the Transmission Availability Agreement
are designed to maintain the status quo. Appendix E of the Transmission Control
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Agreement provides that system operating procedures must be in place to ensure
that system operating conditions are evaluated, assessed, and immediately
communicated
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November 30, 2001
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to DCPP operating staff. See TCA, Appendix E at Original Sheet No. 197 (included
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as Attachment 1 to the Transmission Availability Agreement). It also provides
that procedures and programs will be in effect to ensure that DCPP operating
staff is notified of any condition which renders necessary power supply
unavailable for safe shutdown and emergency purposes. Id. at 198. Finally, PG&E
---
must receive study results, including revisions, updates, and annual
assessments. Id. These requirements are necessary to satisfy NRC licensing
---
rules. In fact, as noted in paragraph 14 of Appendix E, DCPP must submit to the
NRC information PG&E receives under that Appendix. Id. at 200. The Transmission
---
Availability Agreement is designed to support this required exchange of
information./7/
Because Gen may not have direct privity of contract with an ISO or
RTO, it is necessary to ensure that ETrans seek to enforce any pertinent
obligations of an ISO or RTO. The Agreement provides that ETrans will take all
reasonable steps (or, if Gen elects, will use the higher best efforts standard)
necessary to enforce the obligations of an ISO or RTO established in accordance
with the Agreement.
____________________
/7/ PG&E also notes that the Transmission Availability Agreement specifies that
ETrans will share information only with DCPP operating personnel. Although
the DCPP personnel are located within Gen, they are not themselves wholesale
merchant function personnel, because they do not engage in wholesale
merchant activities (i.e., they do not direct, organize, or execute trades).
-----
See American Elec. Power Serv. Corp., 81 FERC (P) 61,332, at 62,513 (1997).
-------------------------------------
Rather, these personnel need access to the information in question solely to
preserve the reliability of the Diablo plant and surrounding transmission
system in accordance with NRC requirements. To the extent the function they
perform may be considered a reliability function within the ambit of Order
No. 889, they are not prohibited from conducting it and having access to
transmission information to conduct it so long as they are not "conduits" to
pass transmission information to personnel engaged in wholesale merchant
functions. See Dayton Power & Light Co., 87 FERC (P) 61,327 (1999)
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(approving reliability function of, including access to transmission
information by, generation plant personnel who reported ultimately to an
officer responsible for the wholesale merchant function, so long as they did
not act as conduits) ("Dayton"). As in Dayton, the DCPP operators will not:
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(1) perform wholesale merchant functions; (2) report to a wholesale merchant
function employee engaged in directing, organizing, or executing wholesale
merchant function activities; or (3) act as conduits to pass transmission
information to employees of Gen or affiliates who are engaged in wholesale
merchant function activities. These protections, as well as any others that
may be required to ensure compliance with the standards of conduct
commitments in the 203 application referenced above, will be set forth in
the standards of conduct that will be filed prior to the effective date of
the Plan.
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November 30, 2001
Page 12
Because such action ultimately is for the benefit of Gen, Gen will reimburse
ETrans for the reasonable costs ETrans incurs when enforcing such obligations.
Id. (S)(S) 2.5, 2.6.
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The Agreement generally does not provide for any payments from Gen to
ETrans. As noted above, grid requirements associated with DCPP currently are
addressed in the TCA, which does not include any payment obligations in this
regard. There thus initially is no need to require payments from Gen to ETrans.
The limited exception is in those circumstances when ETrans will incur
additional costs to satisfy the requirements of the Agreement, specifically:
. As noted above, Gen is responsible for the reasonable costs incurred by
ETrans when enforcing an ISO's or RTO's obligations related to DCPP. Id.
---
(S) 2.5.
. Gen is responsible for costs charged by an ISO or RTO associated with
disseminating information directly to Gen. Id. (S) 3.2.
---
. Gen is responsible for the cost of studies or audits related to DCPP. Id.
---
(S)(S) 4.1, 4.3.
To the extent ETrans is allocated or otherwise incurs costs under the Agreement
and such costs are not otherwise recovered by ETrans, it can seek to include
costs under the Agreement through a filing with the Commission, which Gen may
contest. Id. (S)(S) 8.2, 8.3.
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As the description above makes clear, this Agreement provides for the
maintenance of grid conditions, not for the provision of transmission or power
services. However, practices that significantly affect jurisdictional rates and
services must be filed. See, e.g., City of Cleveland v. FERC, 773 F.2d 1368,
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1376 (D.C. Cir. 1985). The Commission has significant flexibility to determine
which practices satisfy this standard. See Prior Notice and Filing Requirements
--- ------------------------------------
under Part II of the Federal Power Act, 64 FERC (P) 61,139 at 61,987 (1993).
--------------------------------------
ETrans is filing the Transmission Availability Agreement because it believes
that this contract meets the standard requiring a filing with the Commission.
The terms and conditions of grid operations under NRC licenses and requirements
significantly affect Commission-jurisdictional transmission services. For
example, requirements relate to the number of transmission lines that must be
maintained into the DCPP switchyard and minimum grid voltages that must be
maintained. See TCA Appendix E. Further, as noted above these requirements
---
currently are included in the TCA, which is on file with the Commission. These
terms and conditions thus currently are on file with the Commission.
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November 30, 2001
Page 13
C. Generation Interconnection Agreements
-------------------------------------
There are three generation interconnection agreements included in this
filing: (1) the Gen IA; (2) the Hunters/Humboldt IA; and (3) the Distribution
Level Generation IA (collectively, the "Generation Interconnection Agreements").
The purpose of the Generation Interconnection Agreements is to provide for the
interconnection and coordinated operation of the equipment that forms the
interconnection between the PG&E transmission/distribution system and the
existing generation connected to that system.
. The Gen IA governs the 78 Points of Interconnection between the generation
facilities that will be owned by Gen and the ETrans transmission system,
including 75 conventional hydroelectric projects, Xxxxx Pumped Storage
Power Plant, and Diablo Canyon Nuclear Power Plant (which has two
interconnections).
. The Hunters/Humboldt IA governs the interconnection of the Hunters Point
Power Plant and Humboldt Bay Power Plant generation facilities (each of
which will be retained by Reorganized PG&E) to the ETrans transmission
system.
. The Distribution Level Generation IA governs the interconnection of 11
Points of Interconnection between hydroelectric generating facilities that
will be owned by Gen and the distribution level facilities that will be
owned by Reorganized PG&E.
All three agreements are based on a form of agreement that PG&E
currently uses as the basis for interconnection agreements with non-affiliated
generators. This form of agreement addresses the issues typically addressed in
generation interconnection agreements, including the right to interrupt service
to or disconnect a Point of Interconnection, standards for interconnections,
operating responsibilities of the parties, and modifications to Points of
Interconnection. The form of agreement does not provide for transmission service
or the sale of power or ancillary services.
In reviewing the existing form of agreement, the parties determined
there were a number of provisions that are somewhat outdated or which could be
improved upon, and the Generation Interconnection Agreements therefore are
somewhat different from the form of agreement that PG&E recently has used for
other generation interconnection agreements. The Applicants recognize that they
are required to offer to third parties the same terms and conditions that they
negotiated among themselves. See Michigan Electric Transmission Co., 97 FERC
--- ----------------------------------
(P) 61,186
Xxxxx X. Xxxxxxxx
November 30, 2001
Page 14
(2001). Accordingly, PG&E commits to offer the same terms and conditions that
are in the Generation Interconnection Agreements to any eligible customer that
seeks to establish a new generation interconnection; this offer is effective
immediately (i.e., applies prior to consummation of the Plan)./8/ PG&E
----
also commits to modify, at the request of any customer, any existing generation
interconnection agreement as necessary to incorporate provisions included in the
Generation Interconnection Agreements.
One of the provisions in the Generation Interconnection Agreements
that is consistent with the PG&E form of agreement is the treatment of technical
standards for existing generating facilities. When PG&E divested much of its
thermal generation to non-affiliates in 1998 and 1999, it did not require those
existing generating facilities to conform to the technical requirements that
apply to new generators that connect to the PG&E transmission system. (Those
standards, applicable to new generators, are set forth in the PG&E
Interconnection Handbook.) PG&E has provided similar "waivers" to existing
qualifying facilities under PURPA ("QFs") that converted to merchant plant
status and, in the process, were required to sign an interconnection agreement
based on the PG&E form of agreement./9/ The Generation Interconnection
Agreements therefore continue this practice and do not require PG&E's existing
generation facilities to conform to any new technical requirements simply
because of the corporate reorganization. However, as is the case with PG&E's
current form of agreement, the Generation Interconnection Agreements allow
ETrans to require existing facilities be upgraded to meet current standards if
ETrans later determines that is necessary for safety or reliability purposes.
Further, for new Points of Interconnection Gen will be required to meet current
Handbook standards to the same extent as non-affiliated generators.
PG&E recognizes that the Commission has issued an Advance Notice of
Proposed Rulemaking ("ANOPR") in Docket No. RM02-1 that proposes to develop a
form generation interconnection agreement for use by all transmission
_________________
/8/ ETrans also is willing to commit to offer the same terms and conditions to
its new generation interconnection customers after the Plan effective date.
However, ETrans expects that by that time the Commission will have issued
its form generation interconnection agreement in Docket No. RM02-1 and that
ETrans will be required to use the Commission's form agreement.
/9/ See, e.g., Pacific Gas and Electric Co., Docket No. ER01-2904 (Letter Order
--- ---- ----------------------------
dated October 17, 2001)(Interconnection Agreement between PG&E and Los
Alamos Energy, LLC); Pacific Gas and Electric Co., Docket No. ER01-932
-----------------------------
(Letter Order March 6, 2001)(Interconnection Agreement between PG&E and Aera
Energy, LLC).
Xxxxx X. Xxxxxxxx
November 30, 2001
Page 15
owners. The ANOPR, and the form agreement attached to it, principally address
issues associated with new generation, such as the queue for interconnection
requests and cost responsibility for upgrades associated with the
interconnection. It is therefore not clear at present whether this form
agreement will apply to Gen's and Reorganized PG&E's existing generators and, if
so, exactly what provisions will be included in the final version of the form
agreement. PG&E is therefore filing its three Generation Interconnection
Agreements to ensure that the necessary contractual arrangements are in place to
facilitate a timely consummation of the Plan. However, in the event a Final Rule
issues that would apply a generic form agreement to Gen's and Reorganized PG&E's
existing generators, Applicants will conform the Generation Interconnection
Agreements to the requirements of the Final Rule.
Finally, it is expected that there will be Generator Special
Facilities Agreements ("GSFAs") required for at least some of the Points of
Interconnection. The purpose of these GSFAs will be to allocate to specific
generators those interconnection costs that are not properly included in ETrans'
transmission rates under current Commission policy. Any such GSFAs will be filed
no less than 60 days prior to consummation of the Plan.
D. Load IA Between ETrans and PG&E
---------------------------------
The purpose of the Load IA between ETrans and Reorganized PG&E is to
establish the contractual arrangements that will govern the interconnection and
coordinated operation of their respective transmission and distribution systems
following consummation of the Plan. The Load IA addresses the issues that are
typically addressed in such agreements, such as determination of interconnection
capacity, modification of Points of Interconnection, defining the operational
responsibilities of the parties, access, and metering. Consistent with the
Commission's policy on interconnection agreements, the Load IA does not provide
for transmission service, nor does it include any provisions regarding the sale
of power or ancillary services.
The Load IA was modeled on PG&E's current interconnection agreements
with non-affiliates. PG&E recently has filed several interconnection agreements
with load serving entities such as the Northern California Power Agency ("NCPA")
and the Lassen Municipal Utility District ("LMUD"), and the Load IA is based
largely on these agreements./10/ The NCPA and LMUD Agreements have some
_____________________
/10/ PG&E was unable to reach agreement on all terms with NCPA, and that
agreement therefore was filed in unexecuted form. Pacific Gas and Electric
------------------------
Co., Docket No. ER01-2998 (filed Aug. 31, 2001). The LMUD agreement was
----
filed
Xxxxx X. Xxxxxxxx
November 30, 2001
Page 16
differences among themselves, so the Load IA of necessity will vary from one or
the other of these agreements. However, those differences for the most part are
not material.
PG&E describes below the few material differences that exist between
these existing agreements with non-affiliates and the Load IA. To the extent
PG&E's existing wholesale customers believe these modifications should apply to
their interconnection agreements as well, PG&E commits to amend those agreements
as necessary to accomplish that objective.
The first difference relates to the scope of the agreement. There are
over 900 Points of Interconnection under the ETrans/PG&E Agreement, whereas no
other interconnection agreement deals with more than 10 Points of
Interconnection. This difference in scope requires changes to be made for
contract administration purposes. For example, rather than file an amendment
with the Commission every time the interconnection capacity of one of these 900+
Points of Interconnection changes, ETrans will list the Points of
Interconnection on a Web site that will be accessible by the Commission and
Reorganized PG&E and make changes to the information on the Web site, much as
changes to available transmission capacity currently are tracked on OASIS.
The second difference relates to the requirements for metering the
existing Points of Interconnection. PG&E's existing agreements with wholesale
customers require those customers to install adequate metering to enable
accurate information on the loads of the wholesale customers to be obtained for
purposes of billing these customers for jurisdictional services. This
requirement, embodied in each such agreement, was accepted by the Commission.
Following consummation of the Plan, existing wholesale customers will be billed
using the same meters that are used for such billing today. Reorganized PG&E
will be billed for jurisdictional services by deducting, or "netting out," the
loads of wholesale customers(including Reorganized PG&E's Contracts loads) from
the total load on the ETrans system, as is done today in apportioning costs
between PG&E's wholesale and retail customers.
ETrans therefore is not permitted under the Load IA to require the
construction of new metering or other equipment by Reorganized PG&E for existing
Points of Interconnection. PG&E currently has an agreement with the California
ISO that governs the necessary metering, protective devices and other equipment
that is required at each Point of Interconnection with its distribution system.
The current configuration has been found by the ISO to be adequate for the safe,
reliable
___________
as a bilateral contract in executed form. Pacific Gas and Electric Co.,
-----------------------------
Docket No.ER00- 2599 (Letter Order dated July 10, 2000).
Xxxxx X. Xxxxxxxx
November 30, 2001
Page 17
operation of the transmission system. As described above, PG&E's current
practice for generation interconnection agreements is to permit existing
facility configurations to be retained without modification if those
configurations do not threaten safety or system reliability, and the Load IA
adopts this practice to preserve existing load interconnection arrangements. The
cost of installing additional metering on the large number of existing points of
interconnection would likely exceed $200 million and could approach $300
million. This enormous expense is not necessary for the safe and reliable
operation of the ETrans transmission system, as noted above. In addition, such
an expense could affect the financial viability of the Plan, as well as
substantially affect the rates charged to PG&E's customers.
Applicants wish to emphasize that Reorganized PG&E will be treated the
same as any other wholesale customer with respect to new Points of
Interconnection that are similar to the Points of Interconnection that PG&E has
established with its other customers. The Load IA obligates PG&E to install the
same equipment at its new Points of Interconnection that other load
interconnection customers have been obligated to install at their own Points of
Interconnection.
Finally, as is the case under the Generation Interconnection
Agreements, the Load IA obligates PG&E to upgrade or install new equipment at
its existing Points of Interconnection if it is necessary to do so for safety or
system reliability purposes. Thus, the initial decision to leave existing Points
of Interconnection unmodified from their current configuration cannot have an
adverse impact on safety or reliability.
The third difference concerns the issue of cost allocation. The form
of agreement used for other entities does not explicitly address responsibility
for upgrades to the transmission network. To provide greater certainty, and to
conform with existing Commission policy, the Load IA adopts the current
Commission policy that upgrades to the transmission network will be rolled in to
ETrans' generally applicable revenue requirement. In the event that the
Commission decides that such treatment is not appropriate for a specific
facility, the agreement also provides that ETrans will provide for different
treatment of the upgrade costs if so directed by the Commission.
Finally, to comply with the Michigan Electric decision and ensure
-----------------
comparable treatment to other wholesale customers, ETrans hereby commits to
amend any Interconnection Agreement with any load serving entity to incorporate
provisions in the Load IA, upon that entity's request. This includes changes
that would permit the retention of existing configurations at Points of
Interconnection, subject to the same requirement applicable to PG&E that ETrans
can order an upgrade to existing equipment in order to ensure the safe and
reliable operation of
Xxxxx X. Xxxxxxxx
November 30, 2001
Page 18
the transmission system./11/ ETrans also is willing to include the language
regarding cost allocation in the agreements with other load serving entities.
III. OTHER REQUIRED INFORMATION
A. Effective Date
--------------
As noted above, the Applicants request the Commission to place the
Agreements into effect on the Plan effective date, which is expected to be on or
before December 31, 2002. The Applicants request a waiver of Section 35.3 of
the Commission's regulations to permit such an effective date.
B. Remaining Requirements and Waivers
----------------------------------
All requisite agreements to this filing have been obtained. See 18
---
C.F.R. (S) 35.13(b)(6). The Commission's regulations require a statement
showing any expenses or costs that have been alleged or judged in any
administrative or judicial proceeding to be illegal, duplicative, or unnecessary
costs that are demonstrably the product of discriminatory practices. Id. (S)
---
35.13(b)(7). ETrans and Reorganized PG&E state that there are no such costs
associated with the Agreements filed herewith.
The Commission's regulations also require statements comparing sales,
services, and revenues associated with the rate schedule change. See id. (S)
--- ---
35.13(c). This filing, however, does not propose any rate change.
A form of notice suitable for publication in the Federal Register is
------- --------
attached hereto in hard copy and on diskette.
To the extent necessary, ETrans and Reorganized PG&E request the
Commission to waive any and all other requirements under Part 35 of the
Commission's regulations.
C. Posting
-------
ETrans and Reorganized PG&E are serving a copy of this filing on each
of the wholesale customers that are currently a party to an Existing Contract
with PG&E, as well as on the California Public Utilities Commission.
_________________
/11/ Of course, ETrans does not have the authority to waive whatever independent
rights the California ISO may have to order an entity to install new
facilities.
Xxxxx X. Xxxxxxxx
November 30, 2001
Page 19
IV. COMMUNICATIONS
The names and addresses of the persons authorized to receive notices
and communications with respect to this filing are as follows:
Xxxxxx Xxx-Xxx Xxxx Xxxx
Xxxxxx X. Xxxxxxxx* Xxxxxxx Xxxxx
Pacific Gas and Electric Company Xxxx Xxxxxxxxx*
Law Department, Mail Code B30A Skadden, Arps, Slate, Xxxxxxx
00 Xxxxx Xxxxxx & Xxxx LLP
P.O. Box 7442 0000 Xxx Xxxx Xxx., X.X.
San Francisco, California 94120 Washington, D.C. 20005
000-000-0000 000-000-0000
Xxxxx X'Xxxxxxx
Xxxxx Xxxxxxxxx*
Xxxxx Xxxxxxxxxx, LLP
0000 Xxxxxxxxxxxx Xxx., X.X.
Washington, D.C. 20006
000-000-0000
*Persons designated for official service pursuant to Rule 2010. ETrans and
Reorganized PG&E request the Commission to permit inclusions of three
persons on the official service list.
Respectfully submitted,
/s/ Xxxxxxx X. Xxxxx
Xxxx Xxxx
Xxxxxxx Xxxxx
Xxxx Xxxxxxxxx
Skadden, Arps, Slate, Xxxxxxx
& Xxxx LLP
0000 Xxx Xxxx Xxxxxx, X.X.
Washington, D.C. 20005
000-000-0000
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