CA Pub Util Code Section 2821.5

The Legislature finds and declares all of the following:

(a)

Small power producers provide important alternative sources of electrical energy.

(b)

The commission is required to approve and establish equitable charges to be paid by electrical corporations which purchase electricity or electrical generating capacity, or both, from qualifying small power producers.

(c)

The commission recognized the importance of developing standard offer contracts based on long-run avoided costs in order to encourage the development of qualifying small power producers. On September 7, 1983, in Decision 83-09-054, the commission approved interim standard offer No. 4, which established a long-term power purchase contract.

(d)

Many pioneer small power producers operating prior to September 7, 1983, did so under power purchase contracts based on short-term energy prices and long-term capacity prices. When interim standard offer No. 4 was approved, the commission allowed its provisions to be offered to qualified facility projects which had not yet obtained construction financing or otherwise entered a contract and started construction. Pioneer small power producers with existing contracts were not allowed to switch to the new interim standard offer No. 4 until their existing contracts were no longer in effect.

(e)

On April 17, 1985, pursuant to Decision 85-04-075, the commission suspended all payment options offered under interim standard offer No. 4 due to the contrasting of excessive energy capacity, and the conclusion that prices were too high.

(f)

Many qualifying small power producers who were operating under contracts made prior to September 7, 1983, were thus precluded by the commission from adopting interim standard offer No. 4, and may be required to accept new prices and terms which provide less compensation than the suspended interim standard offer No. 4.

(g)

These financially stressed qualifying small power producers assert they were unfairly denied the opportunity to adopt interim standard offer No. 4 by the commission. They also assert that much of the capacity contracted for under the suspended interim standard offer No. 4 will never be constructed. They further allege that they are being forced to close small powerplants which are currently in operation while producers with interim standard offer No. 4 contracts are constructing new plants.