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STATE OF CALIFORNIA Edmund G. Brown Jr., Governor

PUBLIC UTILITIES COMMISSION

SAN FRANCISCO, CA 94102-3298

July 16, 2014 Advice Letter 2977-E and 2977-E-A

Megan Scott-Kakures

Vice President, Regulatory Operations

Southern California Edison Company

P O Box 800

Rosemead, CA 91770

Subject: Bilateral Resource Adequacy Capacity and Energy Tolling

Agreement Between SCE and Dynegy Moss Landing, LLC

and Supplemental Filing

Dear Ms. Scott-Kakures:

Advice Letter 2977-E and 2977-E-A are effective June 12, 2014 per Resolution E-4645.

Sincerely,

Edward F. Randolph, Director

Energy Division

* Note: reference – Decision D.02-02-049, dated February 21, 2002, and Rule 7.5 in appendix A of D.O7-01-024

ADVICE LETTER (AL) SUSPENSION NOTICE ENERGY DIVISION

Utility Name: Southern California Edison Date Utility Notified: December 2, 2013 Utility No. /Type: U338 E/ ELC E-Mail to:

[email protected] [email protected] Advice Letter Nos.: 2977-E Date AL filed: November 27, 2013 Fax No.: Utility Contact Person: Darrah Morgan ED Staff Contact: Megha Lakhchaura Utility Phone No.: (626) 302-2086 For Internal Purposes Only:

Date Calendar Clerk Notified _____/_____/_______ Date Commissioners/Advisors Notified ___/___/___

[X] INITIAL SUSPENSION (up to 120 DAYS)

This is to notify that the above-indicated AL is suspended for up to 120 days beginning November 27, 2013 for the following reason(s) below. If the AL requires a Commission resolution and the Commission’s deliberation on the resolution prepared by Energy Division extends beyond the expiration of the initial suspension period, the advice letter will be automatically suspended for up to 180 days beyond the initial suspension period. [ X ] Section 455 Hearing is required - A Commission resolution may be required to address the advice letter. [] Advice Letter Requests a Commission Order [ ] Advice Letter Requires Staff Review Expected duration of initial suspension period: 120 days

[X ] FURTHER SUSPENSION (up to 180 DAYS beyond initial suspension period) The AL requires a Commission resolution and the Commission’s deliberation on the resolution prepared by Energy Division has extended beyond the expiration of the initial suspension period. The advice letter is suspended for up to 180 days beyond the initial suspension period.

_____________________________________________ If you have any questions regarding this matter, please contact Megha Lakhchaura at [email protected]. cc: Maria Salinas - [email protected] Jeanie Chang - [email protected] Protestor/s

* Note: reference – Decision D.02-02-049, dated February 21, 2002, and Rule 7.5 in appendix A of D.O7-01-024

P.O. Box 800 8631 Rush Street Rosemead, California 91770 (626) 302-6855 Fax (626) 302-4829

Megan Scott-Kakures Vice President, Regulatory Operations

November 27, 2013

ADVICE 2977-E (U 338-E)

PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA ENERGY DIVISION

SUBJECT: Bilateral Resource Adequacy Capacity and Energy Tolling Agreement Between Southern California Edison Company and Dynegy Moss Landing, LLC

I. PURPOSE

Pursuant to Decision (“D.”) 12-04-046,1 the purpose of this Advice Letter is to seek California Public Utilities Commission (“Commission” or “CPUC”) approval of the bilaterally-negotiated Resource Adequacy (“RA”) Capacity and Energy-Only (“EO”) Tolling Purchase Agreement (the “Transaction” or “DML Contract”) between Southern California Edison Company (“SCE”) and Dynegy Moss Landing, LLC (“DML”).

A summary of the Transaction is included below.

Seller Resource Type

Location RA Capacity

Energy Tolling

Capacity

Product Term of Agreement

DML Natural Gas-Fired

Boiler (Moss

Landing Units

Moss Landing,

California. NP-15

Up to 1,500 MW (varies by

month)

1,509 MW Energy tolling rights, ancillary

services, and RA benefits (including all RA attributes such as system

12 months. January 1,

2016 through

December

1 D.12-04-046, at Ordering Paragraph (“OP”) 3.a. (“[The IOUs] are authorized to sign power purchase

agreements with power plants using once-through cooling, but those agreements may not commit to purchases beyond the applicable State Water Resources Control Board compliance deadline, and those agreements must be submitted to the Commission for approval via a Tier 3 advice letter for contracts of more than two years but less than five years. . . .”).

ADVICE 2977-E (U 338-E) - 2 - November 27, 2013

6&7) RA and the as yet to be determined

flexible RA product, to the extent the units

can provide them)

31, 2016

As discussed below and in the Appendices to this Advice Letter, the Commission should approve the Transaction because it will provide system RA capacity (including all yet-to-be determined flexibility attributes the units can provide) and energy tolling rights to SCE that:

• Fill a forecasted need with terms and conditions similar to what SCE would

negotiate through a Request For Offers (“RFO”) process;

• Provide benefits to customers at a price that is below SCE’s view of the market

when the Transaction was executed; and

• Helps resolve a significant piece of litigation at no cost to customers.2

SCE requests that the Commission issue a resolution containing the findings requested in this Advice Letter by no later than May 29, 2014.

In accordance with General Order (“GO”) 96-B, the confidentiality of information included in this Advice Letter is described below. This Advice Letter contains both confidential and public appendices as listed below.

Confidential/Public Appendix A: Contract and Valuation Information

Confidential/Public Appendix B: RA, Capacity, and Energy Positions

Confidential Appendix C: The Transaction Contracts3

Public Appendix D: Confidentiality Declaration

Public Appendix E: Proposed Protective Order

2 See Section III.D below and Appendix A for additional information regarding the litigation and

settlement. 3 The confidential Transaction documents are included in Appendix C. The public Transaction

document—the Edison Electric Institute Master Power Purchase and Sale Agreement—is available at http://www.eei.org/resourcesandmedia/mastercontract/Pages/default.aspx.


II. BACKGROUND

A. General Project and Transaction Description

The Transaction provides SCE with RA capacity and energy tolling rights to two 750 MW (nameplate) generating units (“Units 6 and 7”) at the Dynegy Moss Landing Energy Facility, in Moss Landing, California which is owned and operated by DML. Units 6 and 7 are existing natural gas-fired steam boiler electric generating units and utilize once-through cooling (“OTC”) and are therefore subject to the State Water Resources Control Board’s (“SWRCB’s”) OTC policy. The SWRCB OTC compliance deadline for the Moss Landing Energy Facility is December 31, 2017.

B. Dispute and Negotiation of Settlement

In May 2012, SCE terminated a contract with Dynegy Morro Bay, LLC (“DMB”) for RA and EO tolling capacity and a contract with DML for RA capacity.4 DMB and DML5 (collectively, “Dynegy”) disputed the validity of the terminations and initiated litigation against SCE, seeking substantial collective damages.

In October 2013, SCE and Dynegy reached an agreement to resolve the litigation and fill certain SCE forecasted RA and energy position needs through the two transactions described below. As a result of these two transactions, Dynegy has dismissed its litigation against SCE with prejudice, and SCE has met RA and energy needs at a cost-effective price for customers. Each of these results is a significant benefit to SCE’s customers.

1. 2014 and 2015 RA and Energy Toll

The first transaction (the “ERRA Transaction”) is a contract providing SCE with EO tolling capacity for the entire output of Units 6 and 7 for every month of 2014 and 2015, and with RA capacity for one or both units for certain months throughout 2014 and 2015.6 The RA capacity and EO tolling capacity included in the ERRA Transaction are listed in the table below.

4 The DMB contract, executed on October 27, 2007, was for a bundled toll (which included RA

capacity) of 325 MW each from DMB Units 3 and 4, to be delivered between January 1, 2012 and September 30, 2013. The DML contract, executed on October 28, 2010, was for RA capacity of various quantities from Units 1 and 2 of the Moss Landing facility, to be delivered between January 1, 2012 and September 30, 2013.

5 DML and DMB are affiliates of Dynegy Holdings, LLC f/k/a Dynegy Holdings, Inc. 6 DML retains the right to market RA capacity not under contract with SCE.


SCE will submit this transaction for a reasonableness review by April 1, 2014 as a part of the 2013 Energy Resource Recovery Account (“ERRA”) review proceeding.

2. 2016 RA and Energy Toll

The Transaction—for which SCE seeks Commission approval through this Advice Letter—is a contract providing SCE with EO tolling capacity for the entire output of Units 6 and 7 for every month of 2016, and with RA capacity for one or both units for certain months throughout 2016.7 The RA capacity and EO tolling capacity included in the Transaction are listed in the table below.

D. 12-04-046 requires that power purchase agreements with power plants using OTC that exceed two years but are less than five years must be submitted to the Commission for approval via a Tier 3 advice letter. Although the Transaction term is only one year, SCE has a separate power purchase agreement—the ERRA Transaction described above—with DML for the same facility for a two-year term. Due to the ERRA Transaction being with the same facility (Units 6 and 7) for 2014 and 2015, SCE is

7 DML retains the right to market RA capacity not under contract with SCE.

2014Resource Adequacy

Capacity (MW)Energy Only Tolling

Capacity (MW) 2015Resource Adequacy


Capacity (MW)January 0 1509 January 0 1509February 0 1509 February 0 1509March 0 1509 March 0 1509April 0 1509 April 0 1509May 0 1509 May 0 1509June 0 1509 June 1500 1509July 750 1509 July 1500 1509August 1500 1509 August 1500 1509September 750 1509 September 1500 1509October 1500 1509 October 1500 1509November 0 1509 November 750 1509December 0 1509 December 750 1509

2016Resource Adequacy


Capacity (MW)January 750 1509February 0 1509March 0 1509April 750 1509May 1500 1509June 1500 1509July 1500 1509August 1500 1509September 1500 1509October 1500 1509November 1500 1509December 1500 1509


submitting the Transaction through this Advice Letter to help ensure compliance with the requirement in D.12-04-046 that transactions of more than two years with OTC facilities be submitted through a Tier 3 advice letter.

Furthermore, D. 12-04-046 requires that power purchase agreements that terminate one year or less prior to the applicable SWRCB OTC compliance deadline must be submitted to the Commission for approval via a Tier 3 advice letter that includes a showing that the agreement helps facilitate compliance with the SWRCB policy regarding OTC.8 The Transaction terminates exactly one year prior to the OTC compliance deadline for Units 6 and 7. SCE therefore seeks Commission approval of the Transaction through this Advice Letter. SCE addresses the requirement to show how the agreement helps facilitate compliance with the SWRCB policy regarding OTC in Section VI.

Additional information regarding negotiation of the Transaction is included in Appendix A.

III. BENEFITS OF THE TRANSACTION

As discussed below and in Appendix A, the Transaction provides significant benefits.

A. The Transaction Fills a Forecasted Need for RA and Energy and Helps Mitigate Future RA Price Increases.

The Transaction provides SCE with energy, ancillary services, and all current and future RA flexibility benefits from Units 6 and 7 (as applicable)9 that fill a forecasted SCE need for these products. Absent the Transaction, SCE would otherwise need to procure these products through RFOs, bilateral agreements, Brokered or Exchange Traded Transactions or through the California Independent System Operator (“CAISO”) markets.

RA contracts in California are negotiated bilaterally rather than through a centrally cleared market and RA prices therefore are not transparent. Because of this, SCE’s RA price forecasts rely on historical prices paid for RA contracts in the market. However, there are two changes to the RA program that are likely to lead to higher RA prices going forward.

First, the CAISO has filed and FERC has approved generator replacement rules in the CAISO Tariff. These new replacement obligations introduce new risk to sellers of RA, and thus are likely to lead to higher RA prices. The recently adopted CAISO Tariff regarding RA replacement requires, depending on when the outage is requested, either

8 D.12-04-46, p.25 & OP 3.b. 9 As explained in Section II.B.2, the Transaction only provides for RA from Unit 6 and/or Unit 7 in

certain months.


the load-serving entity (“LSE”) or the generator provide replacement RA for any scheduled outages for the days that the outage occurs. The prior Commission regulation allowed for derating of the resource, rather than requiring full replacement.

It remains to be seen whether parties will be willing to transact RA for terms of less than one month to accommodate outage replacements. If not, the only method for an LSE to comply is to over-procure for the month with a replacement resource that will only be necessary for part of the month. In addition, since the burden of the replacement obligation is dependent on when the generator requests the outage, it is not certain how generators will alter their RA bids to account for this potential increase in cost. While this process can be effectively managed, it leaves some uncertainty in the market with regard to the effects on RA pricing. The Transaction will help mitigate that risk by locking in RA capacity at a reasonable negotiated price for a period of time that will allow the new market rules to develop and mature.

Second, the Commission is also actively engaged in efforts to develop a flexible RA attribute, which would not only create another mandatory procurement obligation analogous to local RA, but will likely lead to new obligations with regard to bidding a generating unit in the CAISO market. This is likely to lead to an increase in prices associated with RA units that provide flexibility. The fact that the Transaction includes all capacity attributes applicable to the units, both current and future, means that SCE will be entitled to any flexibility the resources provide.

B. The Terms and Conditions of the Transaction Are Similar to What SCE Would Negotiate and Accept Through an RFO Process.

SCE’s most current EO tolling and RA pro forma contracts were used as a basis for negotiating the Transaction (and the ERRA Transaction). These pro forma contracts contain SCE’s most up-to-date provisions incorporating necessary market, regulatory and tariff changes as well as improvements from past and existing SCE contracts. Certain modifications made to the pro forma for the Transaction are discussed in Appendix A.

C. The Transaction Represents a Below Market Price at the Time of Execution.

The price of the Transaction was below SCE’s view of the market when the Transaction was executed and therefore offers a significant cost savings for SCE’s customers. Additional information regarding the price of the Transaction is included in Appendix A.

D. The Submittal of this Advice Letter Requesting Approval of the Transaction Resolved a Significant Piece of Litigation at No Cost to Customers.

As discussed above, in May 2012, SCE terminated contracts with Dynegy. Dynegy disputed the validity of the terminations. SCE and Dynegy met in both informal and


formal meditation but were unable to resolve the dispute. Dynegy initiated litigation against SCE, seeking substantial collective damages.

After months of attempts to resolve the dispute, SCE and Dynegy agreed to enter into two transactions for RA and EO capacity: (1) the ERRA Transaction which is effective and which SCE will submit for a reasonableness review by April 1, 2014 as a part of the 2013 ERRA review proceeding and, (2) the Transaction for which SCE seeks approval of through this Advice Letter. As of a result of entering into the ERRA transaction and submitting the Transaction for approval,10 Dynegy dismissed its litigation against SCE with prejudice. The resolution of this litigation provides a substantial benefit to SCE’s customers.

IV. EVALUATION METHODOLOGY AND RESULTS

A. Evaluation Methodology

SCE’s offer evaluation process is generally the same whether the evaluation is conducted within a RFO process or outside a RFO process. In either case, SCE follows Least Cost-Best Fit principles. The only difference is that within a RFO process comparisons can be made against other offers.

SCE employs a net present value (“NPV”) analysis when it values offers submitted through a RFO or bilaterally. This methodology is consistent with valuations performed by SCE in other solicitations such as All-Source and Combined Heat and Power RFOs. The quantitative valuation entails forecasting (1) the value of contract benefits, (2) the value of contract costs, and (3) the net value of both (1) and (2). Once all of the valuation elements are calculated, they are discounted to a present value using a 10% discount rate. SCE then subtracts the present value of expected costs from the present value of expected benefits to determine the expected NPV of the offer. NPVs are normalized by dividing them by the number of kW-months of capacity offered to SCE.

In addition to quantitative benefits, many contracts also have qualitative benefits that are evaluated separately. The qualitative benefits of the Transaction are discussed in Section IV.C below.

The elements used in the quantitative valuation of the Transaction are described below. Additionally, further details about the quantitative valuation of the Transaction are included in Appendix A.

10 See Appendix A for additional information regarding the litigation and settlement.


1. Contract Benefits • Energy and Ancillary Service Benefits

SCE utilizes a fundamental production-cost model (ProSym), along with a stochastic price process via a Monte Carlo simulation, to value the energy and ancillary service benefits of a generating unit. Inputs to the fundamental model include unit characteristics such as capacity, heat rate curve, ramp rate, start-up fuel and start-up cost, minimum and maximum run-time, variable operation and maintenance (“O&M”) costs, CO2 cost, congestion and losses, fuel costs, and emission constraints, among others. SCE uses the economic dispatch principle, wherein a unit is dispatched if its forecasted benefits exceed its costs, i.e., if it is “in the money.” ProSym compares the forecast cost of running a unit against energy and ancillary services price forecasts to determine whether a unit is in the money.

SCE creates an expansive lookup library of various ProSym dispatch results to avoid the need to perform multiple runs for each analysis. SCE then deploys a stochastic Monte Carlo simulation process to generate a large number of gas price and implied market heat rate pairs by applying a volatility process to the base case price forecasts. The volatility process estimates correlation, volatility, mean reversion, stochastic volatility, and seasonal parameters. The simulated price pairs are used to look up the forecasted gross energy benefits and costs from the “lookup library” of various dispatch results identified above. SCE defines the expected energy and ancillary service benefits as the average of the simulated cases.

SCE utilizes a blended approach to forecasting base case power, gas, and CO2 allowance prices. Specifically, forward market prices are used for the near-term forecast period and fundamental model-derived prices are used for the longer-term periods. The forward market and fundamental prices are “blended” (i.e., averaged using various weights) for the forecast period between the near-term and longer-term periods. Forward power prices are also adjusted for location in the final valuation.

• RA Capacity Benefits

RA capacity benefits are derived by first developing a forecast of expected forward RA prices and then applying this forecast to the total RA capacity provided by the contract. SCE typically builds its RA price forecast from data collected from its most recent All-Source RFOs (similar to the way Energy Division staff analyzed recently executed RA contracts for its widely cited “2010 Resource Adequacy Report”).

2. Contract Costs • Dispatch Costs

Dispatch costs include unit start-up costs, variable O&M costs, CO2 cost, and fuel costs. Start-up costs include the fixed cost of starting a unit, and are typically differentiated by “hot” and “cold” starts, depending on how long the unit has been offline. Variable O&M


costs are costs which are directly proportional to the output of the unit, measured in $/MWh. CO2 cost is the compliance cost of the allowances required for a unit emitting greenhouse gases (“GHG”). Fuel costs include the variable cost of generating power and the fixed cost of the required fuel amount used to start up a unit. These cost components are accounted for in the ProSym modeling and used to make the economic dispatch decisions.

• Contract Payments

This represents the total contract payments SCE is expected to make under the contract for delivery of the energy and capacity benefits.

• Debt Equivalence

Debt equivalence is the term used by credit rating agencies to describe the fixed financial obligation resulting from purchased power contracts. Pursuant to D.04-12-048, the Commission permitted the utilities to recognize costs associated with the effect debt equivalence has on the utilities’ credit quality and cost of borrowing in their valuation process. In D.07-12-052, the Commission reversed this position. SCE filed a petition for modification of D.07-12-052. In November 2008, the Commission issued D.08-11-008, which authorized the investor-owned utilities to recognize the effects of debt equivalence when valuing power purchase agreements. Therefore, SCE now considers debt equivalence in the valuation process.

Additional contract-specific costs valued for the Transaction are discussed in Appendix A.

B. Quantitative Benefits

As explained above, SCE calculated the quantitative benefits of the Transaction by subtracting the present value of expected costs from the present value of expected benefits to determine the expected NPV of the Transaction. As detailed in Appendix A, the quantitative valuation results demonstrate that the Transaction is priced below market.

C. Qualitative Benefits

As discussed above, the Transaction will mitigate against future potential capacity price increases and provide protection from uncertainties in the market. These benefits are challenging, if not impossible, to quantify and are explained in more detail in Section III above.

V. IMPACT ON SCE’S RA, CAPACITY, AND ENERGY POSITIONS

The position charts in Appendix B show the impacts to SCE’s system RA, and on-peak and off-peak capacity and energy positions as a result of the execution of the


Transaction, as well as a comparison to SCE’s authorized procurement limits and ratable rates.

VI. CONSISTENCY WITH COMMISSION DECISIONS AND POLICIES

A. Consistency with OTC Procurement Rules

The Transaction is a power purchase agreement with power plants using OTC technology. D. 12-04-046 requires that power purchase agreements with power plants using OTC that exceed two years but are less than five years must be submitted to the Commission for approval via a Tier 3 advice letter. Although the Transaction term is only one year, SCE has a separate power purchase agreement—the ERRA Transaction described above—with DML for the same facility for a two-year term. Due to the ERRA Transaction being with the same facility (Units 6 and 7) for 2014 and 2015, SCE is submitting the Transaction through this Advice Letter to help ensure compliance with the requirement in D.12-04-046 that transactions of more than two years with OTC facilities be submitted through a Tier 3 advice letter.

Furthermore, D. 12-04-046 requires that power purchase agreements that terminate one year or less prior to the applicable SWRCB OTC compliance deadline must be submitted to the Commission for approval via a Tier 3 advice letter that includes a showing that the agreement helps facilitate compliance with the SWRCB policy regarding OTC.11 The Transaction terminates exactly one year prior to the OTC compliance deadline for Units 6 and 7. SCE therefore seeks Commission approval of the Transaction through this Advice Letter. SCE addresses the requirement to show how the agreement helps facilitate compliance with the SWRCB policy regarding OTC below.

The Commission implemented additional requirements for contracts with power plants using OTC technology.12 These rules and requirements are also included in SCE’s Assembly Bill (“AB”) 57 Bundled Procurement Plan.13 Specifically, in D.12-04-046, the Commission stated:

In order to provide guidance to Energy Division in evaluating these agreements and the utilities in preparing and submitting these agreements, the applicable criteria shall include the following: 1) how the contract helps facilitate compliance with the SWRCB OTC policy, or at a minimum why it does not delay compliance; 2) the expected operation of the OTC facility under normal load (1 in 2) and high load (1 in 10) conditions, including number of starts and run time after each start; 3) the LCR net position with and without the OTC facility over the contract

11 D.12-04-046 at 25 & OP 3.b. 12 See id. at 26-27 & OP 3. 13 See SCE’s AB 57 Conformed 2010 Bundled Procurement Plan, Appendix P at Sheets P-1-P-2.


duration and two years beyond the contract duration; and 4) how any other available generation resources compare under these criteria.14

SCE addresses the four applicable criteria set forth in D.12-04-046 below.

• How the contract helps facilitate compliance with the SWRCB OTC policy, or at a minimum why it does not delay compliance

The SWRCB OTC final compliance deadline for the Moss Landing Energy Facility is December 31, 2017. The Transaction for 2016 will help facilitate compliance with the SWRCB OTC policy by providing proceeds that will be used, in part, to fund baseline impingement and entrainment studies that are required to be completed prior to the final compliance date. The Transaction will also help facilitate compliance with the OTC policy by providing funding, in part, for the evaluation and testing of alternative measures, including both operational and technological controls, that will enable the plant to achieve compliance with the SWRCB OTC policy impingement and entrainment reduction standards by the final compliance deadline. That evaluation and testing, including the design, engineering and installation of any necessary or appropriate control technologies, must be completed before the final compliance deadline. Because this contract will terminate on December 31, 2016, it will not delay compliance by the later final compliance deadline of December 31, 2017. Nor will the Transaction delay the Moss Landing Energy Facility’s compliance with the immediate and interim requirements set forth in SWRCB’s Stateside Water Quality Control Policy on the Use of Coastal and Estuarine Waters for Power Plant Cooling (“OTC Policy”). The plant is currently in compliance with OTC Policy Section 2.C(2) and will comply with OTC Policy Section 2.C(3) by October 1, 2015.15

• The expected operation of the OTC facility under normal load (1 in 2) and high load (1 in 10) conditions, including number of starts and run time after each start

In its valuation approach, SCE does not estimate the number of starts or run-hours per start under normal or high load conditions. SCE evaluates offers under least cost dispatch principles, which is consistent with how SCE is required to operate the units if the contracts are signed. SCE uses the stochastic Monte Carlo simulation process described in Section IV to value energy and ancillary services under thousands of scenarios. Some of these scenarios are representative of normal or high load conditions, but cannot be viewed individually. In addition, dispatch for reliability purposes (i.e., ED) is not captured in the quantitative valuation, since, while individual units are compensated for their operating costs, they do not receive any additional revenues. In order to be responsive to D.12-04-046, SCE has estimated an expected case capacity factor for the two units included in the Transaction. To perform this

14 D.12-04-046 at 25-26. 15 Some information in this section was provided by DML and not independently verified by SCE.


calculation, SCE calculated the expected fuel burn. The expected fuel burn value was then divided by the total possible fuel burn of the two units assuming maximum dispatch to estimate the forecast expected capacity factor. The forecasted expected capacity factor over the term of the Transaction is 3.54% for Unit 6 and 4.05% for Unit 7.

SCE is not able to provide a meaningful 1 in 10 load case scenario for dispatch because SCE uses a price-based economic dispatch process. SCE is, however, able to report expected dispatch across price percentiles, which loosely correspond to load percentiles. The forecasted capacity factors over the term of the Transaction for the 85th and 95th percentiles are 4.67% and 21.84% for Unit 6 and 5.69% and 25.90% for Unit 7, respectively.

• The LCR net position with and without the OTC facility over the contract duration and two years beyond the contract duration

Units 6 and 7 are not within a designated LCR area and therefore SCE’s LCR net position is the same with and without the units.

• How any other available generation resources compare under these criteria.

The Transaction was bilaterally negotiated. As such, these resources are not being compared to other resources directly as they would in a RFO. However, as explained in Section III above and throughout this Advice Letter, the Transaction price is forecast to be below market and provide a benefit to customers over its term. Given that the contract will not violate SWRCB compliance, SCE believes the Transaction should be approved.

B. Consistency with Energy Action Plan and Loading Order

SCE continues to follow the State’s Energy Action Plan II and Loading Order through its efforts to plan, implement, and administer cost-effective and reliably-achievable demand-side management programs, including energy efficiency, and its continued national leadership in procurement from renewable resources. Execution of the Transaction will not displace other preferred resources from the grid. The Transaction ends one year before the units’ OTC compliance deadlines and will not delay OTC compliance, and as such will not address local need in the future that could be met by preferred resources. SCE believes that the Transaction is consistent with the Energy Action Plan II and the Loading Order.

C. Consistency with Emissions Performance Standard

In D.07-01-039, the Commission established an Emissions Performance Standard (“EPS”) for new long-term financial commitments to baseload generation undertaken by


all LSEs. A new long-term financial commitment is defined as a commitment when the LSE enters into “a new or renewed contract with a term of five or more years.”16

SCE acknowledges that, for purposes of the EPS rules, the Transaction is considered “linked” with the ERRA Transaction because the two contracts are for the same facilities with the same counterparty and outside of AB 57 procurement. D.07-01-039 stated:

For the purpose of determining the “term” of a contract under these EPS rules, two or more contracts, including contractual options, are treated as one (“linked”), where:

A. (1) They specify the same powerplant as the primary delivery source or, (2) for an unspecified source, they are with the same counter-party; and

B. They are negotiated or executed within any three consecutive month period, except if entered into as a result of separate RFOs and the contract from the earlier RFO is executed before the later RFO has received any bids (either indicative or final).17

Therefore, as a “linked” transaction as defined by D.07-01-039, the term of the contract for EPS purposes is three years. A three-year term is less than the maximum five year requirement under the EPS and therefore the EPS does not apply.18

VII. SAFETY CONCERNS

SCE is strongly committed to safety in all aspects of its business. Sellers are responsible for the safe construction and operation of their generating facilities and compliance with all applicable safety regulations. While the contract cannot address every safety regulation under which DML operates, there are a number of general provisions in the contract that require the seller to comply with certain operational and maintenance obligations in accordance with industry standards and CAISO mandated standards, as well as requirements to comply with accepted electrical practices, applicable laws and permits, and other governmental authorities.

DML is also committed to promoting health and safety and maintains an effective safety compliance program where employee involvement, procedure adherence, consistent training, visual aids and employee recognition are combined with clear expectations and accountability to promote a healthy and safe environment. Dynegy Moss Landing Power Plant has gone 650 days and 315 days without an employee and contractor

16 D.07-01-039 at 4. 17 Id. at p. 181 18 SCE notes that it is reporting both the Transaction and the ERRA Transaction for informational

purposes only in its Q3, 2013 Quarterly Compliance Report as multiple contracts with the same supplier and facility.


Occupation and Health Safety Administration recordable incident, respectively. This safety record is accomplished by endeavoring in a program where employees are held accountable, are consistently communicated with and are encouraged to engage in the program. The Dynegy ACE (Accountability-Communication-Engagement) Action Plan sets achievable goals based on leading indicators and empowers the Safety Committee to administer the plan. Promoting hazard recognition, gaining feedback through safety surveys, learning new ways to communicate with all employees, encouraging employee wellness and reassessing historical modes of injury are examples of how Moss Landing Power Plant is committed to safety and wellness.

Safety also plays a significant role in decommissioning and demolition for DML as is demonstrated by the successful decommissioning activities at Dynegy’s South Bay plant in Chula Vista, California. Dynegy implemented an effective decommissioning-focused safety plan that was administered to and indoctrinated by the subcontractors performing work. During this timeframe, the plant has been razed, 19,753 tons of recyclable material has been removed, and various excavation and reclamation activities have been performed. The final phase of decommissioning is underway and is scheduled to be completed by 2014.19

VIII. CONSULTATION WITH PROCUREMENT REVIEW GROUP

SCE’s Procurement Review Group (“PRG”) includes participants from certain non-market participants, including the Commission’s Energy and Legal Divisions, the Division of Ratepayer Advocates, The Utility Reform Network, California Utility Employees, and the California Department of Water Resources. SCE briefed the PRG on the Transaction on September 3, 2013, September 24, 2013 and October 9, 2013.

IX. CONFIDENTIALITY

SCE requests confidential treatment of Appendix C and the confidential versions of Appendices A and B to this Advice Letter. This confidential information is entitled to confidentiality protection pursuant to the Investor-Owned Utility Matrix adopted by the Commission in D.06-06-066 and modified by D.07-05-032. Appendix D contains a Confidentiality Declaration specifying why the information for which SCE is seeking confidential treatment is, in fact, confidential market sensitive information consistent with Commission decisions. It also identifies the period for which SCE seeks confidential treatment. It is appropriate to accord confidential treatment to the information for which SCE requests confidential treatment in the advice letter process because such information is entitled to confidentiality protection pursuant to D.06-06-066 as modified by D.07-05-032, and is required to be filed by advice letter as part of the process for obtaining Commission approval of the Transaction. SCE objects to the disclosure of the confidential information in an aggregated format.

19 Some information in this section was provided by DML and not independently verified by SCE.


In accordance with GO 96-B, Appendix E contains a proposed Protective Order modeled on the Protective Order adopted by the Commission in D.08-04-023. Upon adoption of this Protective Order by the Commission, any appropriate party signing the Non-Disclosure Certificate attached to the Protective Order can obtain access to the confidential information. Until the Commission adopts the Protective Order, the attached confidential materials will be made available to appropriate parties (in accordance with SCE’s Proposed Protective Order) upon execution of a non-disclosure agreement. Parties wishing to obtain access to the confidential version of this Advice Letter may contact Joni Templeton in SCE’s Law Department at [email protected] or (626) 302-6210 to obtain a copy of a non-disclosure agreement.

X. REQUEST FOR COMMISSION APPROVAL

The terms of the Transaction are conditioned on the occurrence of “CPUC Approval,” as that term is defined in the Transaction. SCE requests that the Commission issue a resolution no later than May 29, 2014, containing:

1. Approval of the Transaction in its entirety;

2. A finding that the Transaction, and SCE’s entry into the Transaction, is reasonable and prudent for all purposes, including, but not limited to, recovery in rates of payments made pursuant to the Transaction, subject only to further review with respect to the reasonableness of SCE’s administration of the Transaction; and

3. Any other and further relief as the Commission finds just and reasonable.

XI. TIER DESIGNATION

Pursuant to D.12-04-046, this Advice Letter is submitted with a Tier 3 designation (effective upon Commission approval).

XII. EFFECTIVE DATE

This Advice Letter will become effective upon Commission approval.

XIII. NOTICE

Anyone wishing to protest this Advice Letter may do so by letter via U.S. Mail, facsimile, or electronically, any of which must be received by the Energy Division and SCE no later than 20 days after the date of this Advice Letter. Protests should be mailed to:


CPUC, Energy Division Attention: Tariff Unit 505 Van Ness Avenue San Francisco, California 94102 E-mail: [email protected]

In addition, protests and all other correspondence regarding this Advice Letter should also be sent by letter and transmitted via facsimile or electronically to the attention of:

Megan Scott-Kakures Vice President, Regulatory Operations Southern California Edison Company 8631 Rush Street Rosemead, California 91770 Facsimile: (626) 302-4829 E-mail: [email protected] Leslie E. Starck Senior Vice President, Regulatory Policy & Affairs c/o Karyn Gansecki Southern California Edison Company 601 Van Ness Avenue, Suite 2030 San Francisco, California 94102 Facsimile: (415) 929-5544 E-mail: [email protected]

With a copy to: Joni Templeton Attorney Southern California Edison Company 2244 Walnut Grove Avenue, 3rd Floor Rosemead, California 91770 Facsimile: (626) 302-3990 E-mail: [email protected]

There are no restrictions on who may file a protest, but the protest shall set forth specifically the grounds upon which it is based and shall be submitted expeditiously.

In accordance with Section 4 of GO 96-B, SCE is furnishing copies of this Advice Letter to the interested parties shown on the attached GO 96-B, R.11-10-023 and R.12-03-014 service lists. Address change requests to the GO 96-B service list should be directed to [email protected] or at (626) 302-4039. For changes to any other service list, please contact the Commission’s Process Office at (415) 703-2021 or at [email protected].


Further, in accordance with Public Utilities Code Section 491, notice to the public is hereby given by filing and keeping the Advice Letter at SCE’s corporate headquarters. To view other SCE advice letters filed with the Commission, log on to SCE’s website at https://www.sce.com/wps/portal/home/regulatory/advice-letters.

All questions concerning this Advice Letter should be directed to Eric Little at (626) 302-6607 or by electronic mail at [email protected].

Southern California Edison Company

/s/ Megan Scott-Kakures Megan Scott-Kakures

Enclosures MSK;jt/el:jm

CALIFORNIA PUBLIC UTILITIES COMMISSION

ADVICE LETTER FILING SUMMARY ENERGY UTILITY

MUST BE COMPLETED BY UTILITY (Attach additional pages as needed)

Company name/CPUC Utility No.: Southern California Edison Company (U 338-E)

Utility type: Contact Person: Darrah Morgan

ELC GAS Phone #: (626) 302-2086

PLC HEAT WATER E-mail: [email protected]

E-mail Disposition Notice to: [email protected]

EXPLANATION OF UTILITY TYPE

ELC = Electric GAS = Gas PLC = Pipeline HEAT = Heat WATER = Water

(Date Filed/ Received Stamp by CPUC)

Advice Letter (AL) #: 2977-E Tier Designation: 3

Subject of AL: Bilateral Resource Adequacy Capacity and Energy Tolling Agreement Between Southern California Edison Company and Dynegy Moss Landing, LLC

Keywords (choose from CPUC listing): Compliance, Procurement

AL filing type: Monthly Quarterly Annual One-Time Other

If AL filed in compliance with a Commission order, indicate relevant Decision/Resolution #:

Decision 12-04-046

Does AL replace a withdrawn or rejected AL? If so, identify the prior AL:

Summarize differences between the AL and the prior withdrawn or rejected AL1:

Confidential treatment requested? Yes No

If yes, specification of confidential information: See Appendix D Confidential information will be made available to appropriate parties who execute a nondisclosure agreement. Name and contact information to request nondisclosure agreement/access to confidential information:

Joni Templeton, Law Department, (626) 302-6210 or [email protected]

Resolution Required? Yes No

Requested effective date: Upon Commission Approval

No. of tariff sheets: -0-

Estimated system annual revenue effect: (%):

Estimated system average rate effect (%):

When rates are affected by AL, include attachment in AL showing average rate effects on customer classes (residential, small commercial, large C/I, agricultural, lighting).

Tariff schedules affected: N/A

Service affected and changes proposed1:

Pending advice letters that revise the same tariff sheets: None

1 Discuss in AL if more space is needed.

Protests and all other correspondence regarding this AL are due no later than 20 days after the date of this filing, unless otherwise authorized by the Commission, and shall be sent to:

CPUC, Energy Division Attention: Tariff Unit 505 Van Ness Avenue San Francisco, California 94102

E-mail: [email protected]

Megan Scott-Kakures Vice President, Regulatory Operations Southern California Edison Company 8631 Rush Street Rosemead, California 91770 Facsimile: (626) 302-4829 E-mail: [email protected] Leslie E. Starck Senior Vice President, Regulatory Policy & Affairs c/o Karyn Gansecki Southern California Edison Company 601 Van Ness Avenue, Suite 2030 San Francisco, California 94102 Facsimile: (415) 929-5544 E-mail: [email protected] With a copy to: Joni Templeton Attorney Southern California Edison Company 2244 Walnut Grove Avenue, 3rd Floor Rosemead, CA 91770 Facsimile: (626) 302-3990 E-mail: [email protected]

Public Appendix A

Contract and Valuation Information

Confidential Protected Materials – Public Disclosure Prohibited

A-1

CONTRACT AND VALUATION INFORMATION1

I. Dispute and Negotiation of the Settlement

In May 2012, SCE terminated certain prior transactions with DMB and DML (collectively, the “Original Dynegy Transactions”)—a contract with DMB for RA and an energy toll and a contract with DML for RA2—pursuant to an early termination provision in each that had been triggered by the bankruptcy of DMB’s and DML’s affiliate, Dynegy Holdings, LLC f/k/a Dynegy Holdings, Inc., in November 2011.

.3 In late 2012, Dynegy initiated litigation against SCE over the terminations.4 Dynegy alleged that SCE had no right to terminate either contract, claiming SCE was in breach of each as a result, and disputed the value of the termination payment it had received from SCE for each contract. Dynegy sought approximately in collective damages from SCE through the litigation. In October 2013, SCE and Dynegy entered into two PPAs—the Transaction and the ERRA Transaction.

1 The confidential information in the confidential version of this Appendix is generally highlighted in

gray. However, certain confidential information in tables and charts could not be highlighted in gray, but is redacted in the public version of this Appendix.

2 The DMB contract, executed on October 27, 2007, was for a bundled toll (which included RA capacity) of 325 MW each from DMB Units 3 and 4, to be delivered between January 1, 2012 and September 30, 2013. The DML contract, executed on October 28, 2010, was for RA capacity of various quantities from Units 1 and 2 of the Moss Landing facility, to be delivered between January 1, 2012 and September 30, 2013. DMB and DML are referred to collectively herein as Dynegy.

3

4 Dynegy filed two separate lawsuits—one in private arbitration (over the DMB contract) and one in federal court (over the DML contract)—but the claims alleged in each were very similar.

A-2

II. Summary of the Transaction

A summary of the major terms and conditions of the Transaction is included below. The confidential contracts for the Transaction can be found in Appendix C.

Seller DML

Buyer SCE

Transaction Overview

Seller is providing Buyer with energy, capacity, ancillary services, and all current and future RA benefits from the Units listed below.

5

A-3

Deal Term January 1, 2016 – December 31, 2016

Units Moss Landing Units 6 & 7

Capacity

Moss Landing Unit 6

Moss Landing Unit 7

Total

2016 RA

CapacityTolling Capacity

RA Capacity

Tolling Capacity

Total RA Capacity

Total Tolling Capacity

Jan 750 754 0 755 750 1509

Feb 0 754 0 755 0 1509

Mar 0 754 0 755 0 1509

Apr 750 754 0 755 750 1509

May 750 754 750 755 1500 1509

Jun 750 754 750 755 1500 1509

Jul 750 754 750 755 1500 1509

Aug 750 754 750 755 1500 1509

Sep 750 754 750 755 1500 1509

Oct 750 754 750 755 1500 1509

Nov 750 754 750 755 1500 1509

Dec 750 754 750 755 1500 1509

Toll Product Tolls will be physical gas (i.e., SCE provides the gas to the Units), with energy delivery at the individual project busbar.

A-4

Consent Rights

N/A

A-5

III. EVALUATION METHODOLOGY AND RESULTS

A. Evaluation Methodology

SCE’s evaluation methodology is summarized in the main portion of this Advice Letter. In general, the quantitative valuation entails forecasting (1) the value of contract benefits, (2) the value of contract costs, and (3) the net value of both (1) and (2). Once all of the valuation elements are calculated, they are discounted to a present value using a 10% discount rate. SCE then subtracts the present value of expected costs from the present value of expected benefits to determine the expected net present value (“NPV”) of the offer. NPVs are normalized by dividing them by the number of kW-months of capacity offered to SCE. In addition to quantitative benefits, many contracts also have qualitative benefits that are evaluated separately. The qualitative benefits of the Transaction are discussed in the main portion of this Advice Letter.

SCE discusses confidential information related to the quantitative valuation of the Transaction below, but does not repeat the discussion of all elements of its evaluation methodology.

1. Contract Benefits

Energy and Ancillary Service Benefits

As noted in the main portion of this Advice Letter, in valuing energy and ancillary service benefits, SCE uses the economic dispatch principle, wherein a unit is dispatched if its forecasted benefits exceed its costs, i.e., if it is “in the money.” ProSym compares the forecast cost of running a unit against energy and ancillary services price forecasts to determine whether a unit is in the money. SCE creates an expansive lookup library of ProSym dispatch results to avoid the need to perform multiple runs for each analysis.

SCE then deploys a stochastic Monte Carlo simulation process to generate a large number of gas price and implied market heat rate pairs, using SCE’s blended power and gas price curves as the expected case (see below for more details), by applying a volatility process to the blended price forecasts. The volatility process estimates correlation, volatility, mean reversion, stochastic volatility, and seasonal parameters . The simulated price pairs are used to look up the forecasted gross energy benefits and costs,

. SCE defines the expected energy and ancillary service benefits as the average of the simulated cases.

SCE utilizes a blended approach to forecasting power, gas, and CO2 allowance prices.

A-6

Forward power prices are also adjusted for location in the final valuation.

For this valuation effort, SCE obtained broker quotes for power, gas, and CO2 allowances as of July 24, 2013.

The following series of charts show the monthly breakout of the price forecasts used in the valuation of the Transaction.

A-8

RA Capacity Benefits

Even though the Transaction provides all of the flexible capacity associated with the two units, SCE did not apply any additional quantitative value for the flexible capacity provided by the Transaction because “flexibility” has not yet been fully defined and therefore it is uncertain to what extent SCE will require the Transaction to meet any flexibility need or what the quantitative value of flexible capacity will be. All of the RA capacity MW procured under the Transaction are filling a system RA need and therefore receive full RA value.

The total RA capacity provided by the Transaction is 13,500 MW-months, .

A-9

2. Contract Costs

Contract Payments

Debt equivalence

B. Quantitative Benefits

As explained in the main portion of this Advice Letter and above, SCE calculated the quantitative benefits of the Transaction by subtracting the present value of expected costs from the present value of expected benefits to determine the expected NPV of the offer.

In addition to that stand-alone benefit, the Transaction has also helped resolve the parties’ litigation over SCE’s termination of the Original Dynegy Transactions.

A-10

o

Public Appendix B

RA, Capacity, and Energy Positions


B-1

RA, Capacity, and Energy Positions

The position charts below show the potential impacts to SCE’s system RA, and on-peak and off-peak capacity and energy positions as a result of the execution of the Transaction.1

As can be seen in the chart below SCE only procured

capacity from DML if it filled a need. The Transaction does not cause SCE to be long for system RA capacity.

1 The confidential information in the confidential version of this Appendix is generally highlighted in

gray. However, certain confidential information in tables and charts could not be highlighted in gray, but is redacted in the public version of this Appendix.

B-3

Finally, SCE’s AB 57 Bundled Procurement Plan contains procurement limits and ratable rates tables for energy and capacity procurement.2 The limits are dependent on the current ratable rate for the given product. SCE has monthly maximum purchase limits for on-peak and off-peak energy transactions in addition to annual rolling ratable procurement limits for energy transactions.

The following table shows the base-case on-peak dispatch of the DML units as well as SCE’s current monthly on-peak purchase limits.

2 See SCE’s 2010 AB 57 Bundled Procurement Plan, Appendix J and Sheets J-1-J-3 (submitted in

Advice 2823-E on December 11, 2012 and approved by the Energy Division effective as of January 1, 2013).

B-4

Similarly, the table below shows the same data for the off-peak dispatch periods.

Both tables show that the monthly procurement limit is always greater than the

base-case dispatch of the DML units for the entirety of the contract term. Additionally, the effective rolling-year ratable rates are greater than the base-case dispatch of the DML units, as shown in the following table.

The Transaction provides up to 1,500 MW of RA capacity that counts against SCE’s ratable electrical capacity procurement authority. Ratable rates apply to electrical capacity transactions for delivery months that occur two or more calendar years beyond the transaction year (e.g., for transactions occurring in 2013, limits shall apply to contract deliveries in 2015 and beyond).

Consequently, the Transaction does not exceed SCE’s approved

electrical capacity procurement authority for 2016 as highlighted in the following table.

Confidential Appendix C

Transaction Documents


Appendix D

Confidentiality Declaration

Appendix E

Proposed Protective Order

1

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Bilateral Resource Adequacy Capacity and Energy Tolling Agreement Between Southern California Edison Company and Dynegy Moss Landing, LLC

) ))

Advice 2977-E

PROPOSED PROTECTIVE ORDER

1. Scope. This Protective Order shall govern access to and the use of Protected

Materials, produced by, or on behalf of, any Disclosing Party (as defined in Paragraph 2 below)

in this proceeding.

2. Definitions.

In addition to the terms defined and capitalized in other sections of this Protective Order,

the following terms are defined for the purposes of this Protective Order:

A. For purposes of this Protective Order, the term “Protected Materials”

means: (i) trade secret, market sensitive, or other confidential and/or proprietary information as

determined by the Disclosing Party in accordance with the provisions of Decision (“D.”) 06-06-

066 and subsequent decisions, General Order 66-C, Public Utilities Code section 454.5(g), or

any other right of confidentiality provided by law; or (ii) any other materials that are made

subject to this Protective Order by the Assigned Administrative Law Judge (“Assigned ALJ”),

Law and Motion Administrative Law Judge (“Law and Motion ALJ”), Assigned Commissioner,

the California Public Utilities Commission (“Commission”), or any court or other body having

appropriate authority. Protected Materials also include memoranda, handwritten notes,

spreadsheets, computer files and reports, and any other form of information (including

information in electronic form) that copies, discloses, incorporates, includes or compiles other

2

Protected Materials or from which such materials may be derived (except that any derivative

materials must be separately shown to be confidential). Protected Materials do not include: (i)

any information or document contained in the public files of the Commission or any other state

or federal agency, or in any state or federal court; or (ii) any information that is public

knowledge, or which becomes public knowledge, other than through disclosure in violation of

this Protective Order or any other nondisclosure agreement or protective order.

B. The term “redacted” refers to situations in which Protected Material in a

document, whether the document is in paper or electronic form, have been covered, blocked out,

or removed.

C. The term “Disclosing Party” means a party who initially discloses any

specified Protected Material in this proceeding.

D. The term “Requesting Party” means any party that is requesting receipt of

Protected Material from a Disclosing Party.

E. The term “Party” refers to the Requesting Party or the Disclosing Party

and the term “Parties” refers to both the Requesting Party and the Disclosing Party.

F. The term “Market Participant” refers to a Requesting Party that is:

1) A person or entity, or an employee of an entity, that engages in the wholesale purchase, sale or marketing of energy or capacity, or the bidding on or purchasing of power plants, or bidding on utility procurement solicitations, or consulting on such matters, subject to the limitations in 3) below.

2) A trade association or similar organization, or an employee of such organization,

a) whose primary focus in proceedings at the Commission is to advocate for persons/entities that purchase, sell or market energy or capacity at wholesale; bid on, own, or purchase power plants; or bid on utility procurement solicitations; or

b) a majority of whose members purchase, sell or market energy

3

or capacity at wholesale; bid on, own, or purchase power plants; or bid on utility procurement solicitations; or

c) formed for the purpose of obtaining Protected Materials; or

d) controlled or primarily funded by a person or entity whose primary purpose is to purchase, sell or market energy or capacity at wholesale; bid on, own, or purchase power plants; or bid on utility procurement solicitations.

3) A person or entity that meets the criteria of 1) above is not a Market Participant for purpose of access to Protected Materials unless the person/entity seeking access to Protected Materials has the potential to materially affect the price paid or received for electricity if in possession of such information. An entity will be considered not to have such potential if:

a) the person or entity’s participation in the California electricity market is de minimis in nature. In the resource adequacy proceeding (R.05-12-013) it was determined in D.06-06-064 § 3.3.2 that the resource adequacy requirement should be rounded to the nearest megawatt (MW), and load serving entities (LSEs) with local resource adequacy requirements less than 1 MW are not required to make a showing. Therefore, a de minimis amount of energy would be less than 1 MW of capacity per year, and/or an equivalent of energy; and/or

b) the person or entity has no ability to dictate the price of electricity it purchases or sells because such price is set by a process over which the person or entity has no control, i.e., where the prices for power put to the grid are completely overseen by the Commission, such as subject to a standard offer contract or tariff price. A person or entity that currently has no ability to dictate the price of electricity it purchases or sells under this section, but that will have such ability within one year because its contract is expiring or other circumstances are changing, does not meet this exception; and/or

c) the person or entity is a cogenerator that consumes all the power it generates in its own industrial and commercial processes, if it can establish a legitimate need for Protected Materials.

4

G. The term “Non-Market Participant” refers to a Requesting Party that does

not meet the definition of Market Participant. The California Independent System Operator is

deemed a Non-Market Participant for purposes of this Protective Order.

H. “Reviewing Representatives” are limited to person(s) designated in

accordance with Paragraph 5 who meet the following criteria:

1) Reviewing Representatives may not currently be engaged in: (a) a transaction for the purchase, sale, or marketing at wholesale of electrical energy or capacity or natural gas (or the direct supervision of any employee(s) engagement in such a transaction); (b) the bidding on or purchasing of power plants (or the direct supervision of any employee(s) engagement in such a transaction); or (c) knowingly providing electricity or gas marketing consulting or advisory services to others in connection with a transaction for the purchase, sale, or marketing at wholesale of electrical energy or capacity or natural gas or the bidding on or purchasing of power plants (or the direct supervision of any employee(s) engagement in such a transaction or consulting).

2) Reviewing Representatives may not be an employee of a Market Participant. If the Market Participant or Non-Market Participant chooses to retain outside attorneys, consultants, or experts in the same law firm or consulting firm to provide advice in connection with marketing activities, then the attorney, consultant, or expert serving as a Reviewing Representative must be separated by an ethics wall consistent with the ethics wall requirements in D.11-07-028, as that decision may be subsequently modified or changed by the Commission, from those in the firm who are involved in wholesale commercial dealings.

3) Reviewing Representatives shall use Protected Materials only for the purpose of participating in the Commission proceeding in which they received the information.

4) Reviewing Representatives are permitted to participate in regulatory proceedings on behalf of Market Participants and Non-Market Participants.

5) All Reviewing Representatives are required to execute the Nondisclosure Certificate attached to this Protective Order and are bound by the terms of this Protective Order.

5

I. The term “Authorized Reviewers” refers to: (1) a Requesting Party that is

a Non-Market Participant; or (2) a Reviewing Representative of a Requesting Party. A

Requesting Party that is a Market Participant is not an Authorized Reviewer but it may designate

a Reviewing Representative in accordance with Paragraph 5.

J. The term “Nondisclosure Certificate” refers to the Nondisclosure

Certificate attached as Appendix A.

3. Designation, Filing, and Service of Protected Materials.

When filing or providing in discovery any documents or items containing Protected

Materials, a party shall physically mark such documents (or in the case of non-documentary

materials such as computer diskettes, on each item) as “PROTECTED MATERIALS SUBJECT

TO PROTECTIVE ORDER,” or with words of similar import as long as one or more of the

terms “Protected Materials” or “Protective Order” is included in the designation to indicate that

the materials in question are Protected Materials. All materials so designated shall be treated as

Protected Materials unless and until: (a) the designation is withdrawn pursuant to Paragraph 14

hereof; (b) an Assigned ALJ, Law and Motion ALJ, Assigned Commissioner, or the Commission

makes a determination that: (i) the document does not contain Protected Materials or does not

warrant confidential treatment or (ii) denies a motion to file the document under seal; or (c) the

document or information becomes public knowledge, other than through disclosure in violation

of this Protective Order or any other nondisclosure agreement or protective order.

All documents containing Protected Materials that are tendered for filing with the

Commission shall be placed in sealed envelopes or otherwise appropriately protected and shall

be tendered with a motion to file the document under seal pursuant to Rule 11.4 of the

Commission’s Rules of Practice and Procedure. All documents containing Protected Materials

that are served on parties in a proceeding shall be placed in sealed envelopes or otherwise

6

appropriately protected and shall be endorsed to the effect that they are served under seal

pursuant to this Protective Order. Such documents shall only be served upon Authorized

Reviewers and persons employed by or working on behalf of the Commission. Service upon

Authorized Reviewers and persons employed by or working on behalf of the Commission may

either be: (a) by electronic mail in accordance with the procedures adopted in this proceeding;

(b) by facsimile; or (c) by overnight mail or messenger service. Whenever service of a document

containing Protected Materials is made by overnight mail or messenger service, the Assigned

ALJ shall be served with such document by the same means and at the same time.

4. Redaction of Documents. Whenever a Party files, serves or provides in discovery

a document that includes Protected Materials (including but not limited to briefs, testimony,

exhibits, and responses to data requests), such Party shall also prepare a redacted version of such

document. The redacted version shall enable persons familiar with this proceeding to determine

with reasonable certainty the nature of the data that has been redacted and where the redactions

occurred. The redacted version of a document to be filed shall be served on all persons on the

service list, and the redacted version of a discovery document shall be served on all persons

entitled thereto.

5. Designation of Reviewing Representatives. The Requesting Party shall provide

written notice identifying its proposed Reviewing Representative(s) to the Disclosing Party

before the Disclosing Party provides any Protected Materials to the Requesting Party’s

Authorized Reviewers. The written notice shall include the information identified in this

paragraph. If the Requesting Party decides to designate any additional Reviewing

Representative(s) after the Requesting Party’s Authorized Reviewers receive Protected

Materials, the Requesting Party shall identify the additional proposed Reviewing

Representative(s) to the Disclosing Party before the Requesting Party provides Protected

7

Materials to the additional Reviewing Representative(s). Within five (5) business days after

receiving written notice of the identity of any Reviewing Representative, the Disclosing Party

may provide the Requesting Party with a written objection to a specific Reviewing

Representative stating the grounds for the objection. Any dispute concerning whether an

identified person or entity is an appropriate Reviewing Representative shall be resolved through

the dispute resolution procedures in Paragraph 11 of this Protective Order. If a Disclosing Party

objects to a specific Reviewing Representative within five (5) business days after the Reviewing

Representative is identified, the Parties shall not provide any Protected Materials to the disputed

Reviewing Representative until the Parties are able to resolve the dispute consistent with the

dispute resolution procedures in Paragraph 11. Failure by the Disclosing Party to object within

five (5) business days does not waive the Disclosing Party’s right to later object to the Reviewing

Representative, even if Protected Materials has already been disclosed. However, further

disclosure of Protected Materials would be stayed until the parties are able to resolve the dispute

consistent with the dispute resolution procedures in Paragraph 11.

Reviewing Representative(s) have a duty to disclose to the Disclosing Party any potential

conflict of interest that puts the Reviewing Representative in violation of D.06-12-030, as

modified by subsequent decisions of the Commission. A resume or curriculum vitae is

reasonable disclosure of such potential conflicts, and should be the default evidence provided in

most cases.

6. Nondisclosure Certificates. A Reviewing Representative shall not inspect,

participate in discussions regarding, or otherwise be granted access to, Protected Materials unless

and until he or she has first completed and executed a Nondisclosure Certificate, attached hereto

as Appendix A, and delivered the signed Nondisclosure Certificate to the Disclosing Party. The

Disclosing Party shall retain the executed Nondisclosure Certificates pertaining to the Protected

8

Materials it has disclosed and shall promptly provide copies of the Nondisclosure Certificates to

Commission Staff upon request.

7. Access to Protected Materials and Use of Protected Materials. Subject to the

terms of this Protective Order, Authorized Reviewers shall be entitled to access any Protected

Materials and may make copies of Protected Materials, but such copies become Protected

Materials. Authorized Reviewers may make notes of Protected Materials, which shall be treated

as Protected Materials if such notes disclose any Protected Materials. Protected Materials

obtained by a Party in this proceeding may also be requested by that Party in a subsequent

Commission proceeding, subject to the terms of any nondisclosure agreement or protective order

governing that subsequent proceeding, without constituting a violation of this Protective Order.

8. Maintaining Confidentiality of Protected Materials. Each Authorized Reviewer

shall treat Protected Materials as confidential in accordance with this Protective Order and the

Nondisclosure Certificate. Protected Materials shall not be used except as necessary for

participation in this proceeding, and shall not be disclosed in any manner to any person except:

(i) Authorized Reviewers; (ii) an Authorized Reviewer’s employees and administrative

personnel, such as clerks, secretaries, and word processors, to the extent necessary to assist the

Authorized Reviewer, provided that they shall first ensure that such personnel are familiar with

the terms of this Protective Order and have signed a Nondisclosure Certificate; and (iii) persons

employed by or working on behalf of the Commission. Authorized Reviewers shall adopt

suitable measures to maintain the confidentiality of Protected Materials they have obtained

pursuant to this Protective Order, and shall treat such Protected Materials in the same manner as

they treat their own most highly confidential information.

Authorized Reviewers shall be liable for any unauthorized disclosure or use by

themselves and/or employees, paralegals, or administrative staff. In the event any Authorized

9

Reviewer is requested or required by applicable laws or regulations, or in the course of

administrative or judicial proceedings (in response to oral questions, interrogatories, requests for

information or documents, subpoena, civil investigative demand or similar process) to disclose

any of Protected Materials, the Authorized Reviewer shall immediately inform the Disclosing

Party of the request, and the Disclosing Party may, at its sole discretion and cost, direct any

challenge or defense against the disclosure requirement, and the Authorized Reviewer shall

cooperate in good faith with such Party either to oppose the disclosure of the Protected Materials

consistent with applicable law, or to obtain confidential treatment of the Protected Materials by

the person or entity who wishes to receive them prior to any such disclosure. If there are

multiple requests for substantially similar Protected Materials in the same case or proceeding

where an Authorized Reviewer has been ordered to produce certain specific Protected Materials,

the Authorized Reviewer may, upon request for substantially similar materials by another person

or entity, respond in a manner consistent with that order to those substantially similar requests.

9. Return or Destruction of Protected Materials. Protected Materials shall remain

available to Authorized Reviewers until an order terminating this proceeding becomes no longer

subject to judicial review. If requested to do so in writing after that date, the Authorized

Reviewers shall, within fifteen days after such request, return the Protected Materials to the

Disclosing Party that produced such Protected Materials, or shall destroy the materials, except

that copies of filings, official transcripts and exhibits in this proceeding that contain Protected

Materials, and notes of Protected Materials may be retained, if such Protected Materials are

maintained in accordance with Paragraph 8. Within such time period each Authorized Reviewer,

if requested to do so, shall also submit to the Disclosing Party an affidavit stating that, to the best

of its knowledge, all Protected Materials have been returned or have been destroyed or will be

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maintained in accordance with Paragraph 8. To the extent Protected Materials are not returned

or destroyed, they shall remain subject to this Protective Order.

In the event that a Reviewing Representative to whom Protected Materials are disclosed

ceases to be engaged to provide services in this proceeding, then access to such materials by that

person shall be terminated and the Reviewing Representative shall immediately return or destroy

all Protected Materials, or provide an affidavit stating that all Protected Materials and all notes of

Protected Materials will be maintained in accordance with Paragraph 8. Even if a Reviewing

Representative is no longer engaged in this proceeding, every such person shall continue to be

bound by the provisions of this Protective Order and the Nondisclosure Certificate.

10. Access and Use by Governmental Entities.

A. In the event the Commission receives a request from the California Energy

Commission (“CEC”) for a copy of or access to any Party’s Protected Materials, the procedure

for handling such requests shall be as follows. Not less than five (5) business days after

delivering written notice to the Disclosing Party of the request, the Commission shall release

such Protected Materials to the CEC upon receipt from the CEC of an Interagency Information

Request and Confidentiality Agreement (“Interagency Confidentiality Agreement”). Such

Interagency Confidentiality Agreement shall: (i) provide that the CEC will treat the requested

Protected Materials as confidential in accordance with this Protective Order; (ii) include an

explanation of the purpose for the CEC’s request, as well as an explanation of how the request

relates to furtherance of the CEC’s functions; (iii) be signed by a person authorized to bind the

CEC contractually; and (iv) expressly state that furnishing of the requested Protected Materials

to employees or representatives of the CEC does not, by itself, make such Protected Materials

public. In addition, the Interagency Confidentiality Agreement shall include an express

acknowledgment of the Commission’s sole authority (subject to judicial review) to make the

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determination whether the Protected Materials should remain confidential or be disclosed to the

public, notwithstanding any provision to the contrary in the statutes or regulations applicable to

the CEC.

B. In the event the Commission receives a request for a copy of or access to a

party’s Protected Materials from a state governmental agency other than the CEC that is

authorized to enter into a written agreement sufficient to satisfy the requirements for maintaining

confidentiality set forth in Government Code Section 6254.5(e), the Commission may, not less

than five (5) business days after giving written notice to the Disclosing Party of the request,

release such Protected Materials to the requesting governmental agency, upon receiving from the

requesting agency an executed Interagency Confidentiality Agreement that contains the same

provisions described in Paragraph 10.A above.

C. The CEC may use Protected Materials when needed to fulfill its statutory

responsibilities or cooperative agreements with the Commission. Commission confidentiality

designations will be maintained by the CEC in making such assessments, and the CEC will not

publish any assessment that directly reveals the data or allows the data submitted by an

individual load serving entity to be “reverse engineered.”

11. Dispute Resolution. All disputes that arise under this Protective Order, including

but not limited to alleged violations of this Protective Order and disputes concerning whether

materials were properly designated as Protected Materials, shall first be addressed by the parties

through a meet and confer process in an attempt to resolve such disputes. If the meet and confer

process is unsuccessful, either party may present the dispute for resolution to the Assigned ALJ

or the Law and Motion ALJ.

12. Other Objections to Use or Disclosure. Nothing in this Protective Order shall be

construed as limiting the right of a Party, the Commission Staff, or a state governmental agency

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covered by Paragraph 10 to object to the use or disclosure of Protected Materials on any legal

ground, including relevance or privilege.

13. Remedies. Any violation of this Protective Order shall constitute a violation of an

order of the Commission. Notwithstanding the foregoing, the parties and Commission Staff

reserve their rights to pursue any legal or equitable remedies that may be available in the event of

an actual or anticipated disclosure of Protected Materials.

14. Withdrawal of Designation. A Disclosing Party may agree at any time to remove

the “Protected Materials” designation from any materials of such Party if, in its opinion,

confidentiality protection is no longer required. In such a case, the Disclosing Party will notify

all Requesting Parties that the Disclosing Party has agreed to withdraw its designation of

Protected Materials for specific documents or material.

15. Modification. This Protective Order shall remain in effect unless and until it is

modified or terminated by the Commission or the Assigned ALJ. The identity of the parties

submitting Protected Materials may differ from time to time. In light of this situation,

modifications to this Protective Order may become necessary. The Parties shall work

cooperatively to develop such modifications and, to the extent the Parties are able to agree to

modifications, shall file a motion with the Assigned ALJ or the Commission seeking approval of

the modifications. To the extent Parties are unable to agree on modifications after a good faith

effort, each party governed by this Protective Order has the right to seek modifications in it as

appropriate from the Assigned ALJ or the Commission.

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16. Interpretation. Headings are for convenience only and may not be used to restrict

the scope of this Protective Order.

Entered: __________________________________

Administrative Law Judge

Date: __________________________________

APPENDIX A TO PROPOSED PROTECTIVE ORDER

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Bilateral Resource Adequacy Capacity and Energy Tolling Agreement Between Southern California Edison Company and Dynegy Moss Landing, LLC

) ))

Advice 2977-E

NON-DISCLOSURE CERTIFICATE

I hereby certify my understanding that access to Protected Materials is provided to me

pursuant to the terms and restrictions of the Protective Order in this proceeding, that I have been

given a copy of and have read the Protective Order, and that I agree to be bound by it. I

understand that the contents of the Protected Materials, any notes or other memoranda, or any

other form of information that copies or discloses Protected Materials shall not be disclosed to

anyone other than in accordance with that Protective Order. I acknowledge that a violation of

this certificate constitutes a violation of an order of California Public Utilities Commission. Signed: _______________________ Name ________________________ Title: _________________________ Organization: __________________ Dated: ________________________