Fitch: Proposed Changes to California SRAC Methodology Should Lead to Lower Prices for QFs.CHICAGO -- According to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. a special report just issued by Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. , the state of California is currently considering a significant overhaul of its Short-Run Avoided Cost (SRAC SRAC Southern Regional Aquaculture Center SRAC Short-Run Average Cost SRAC System Realignment and Categorization SRAC Scenic Roads Advisory Committee SRAC Structural Research and Analysis Corporation ) methodology. Unique to the state, SRAC is a regulatory tariff that qualifying facilities receive for selling their output to a California utility including San Diego San Diego (săn dēā`gō), city (1990 pop. 1,110,549), seat of San Diego co., S Calif., on San Diego Bay; inc. 1850. San Diego includes the unincorporated communities of La Jolla and Spring Valley. Coronado is across the bay. Gas & Electric Co. (SDG&E), Pacific Gas & Electric Co. (PG&E), and Southern California Edison Southern California Edison (or SCE Corp), the largest subsidiary of Edison International (NYSE: EIX), is the primary electricity supply company for much of Southern California. It provides 11 million people with electricity. Co. (SCE SCE (in Scotland) Scottish Certificate of Education SCE n abbr (= Scottish Certificate of Education) → Schulabschlusszeugnis in Schottland ). Recalculated monthly based on a variety of market conditions, SRAC is primarily driven by the prevailing price of natural gas. Fitch expects SRAC tariffs will continue to reflect the considerable volatility in natural gas prices and now present the additional uncertainty introduced by the ongoing debate to modify the underlying calculations. The California Public Utility Commission (CPUC CPUC California Public Utilities Commission CPUC Current Procurement Unit Cost ) developed a series of standard offer contracts specifying terms and conditions under which California utilities were required to purchase power from qualifying facilities (QFs). The standard offer contracts specified that energy purchased from QFs would be priced at each utility's SRAC. The fundamental SRAC equation is the same for each California utility; however, individual components of the equation are tailored to each utility's market in order to approximate the utility's avoided cost. Accordingly, the utilities typically offer meaningfully different SRAC tariffs. The CPUC now appears ready to overhaul the SRAC methodology yet again. Several proposed decisions are being considered that share a common theme of indexing SRAC to a market heat rate that is regularly updated based on market prices. The primary difference in the proposals is the mechanism for calculating market heat rate. Fitch has been advised that the current market heat rate is roughly 8000, which appears to be lower than the heat rate implied by the current SRAC methodology for all utilities. Accordingly, Fitch believes that the proposed changes will lead to lower SRAC tariffs for all QFs that have not entered into separate agreements to fix prices. For full details on the proposed changes to California SRAC and Fitch's commentary, go to the Fitch Ratings web site, www.fitchratings.com, to download the Special Report 'California's SRAC - Anticipating the Overhaul'. A similar report titled 'Leveraged Leases: Different Structures, Different Metrics' was issued on Sept. 24, 2007. The report details the basic structure of leveraged lease transactions and Fitch's analytical considerations for these transactions. This report can also be found at www.fitchratings.com. Fitch's rating definitions and the terms of use Terms of Use are rules set up by the owner of an intellectual property or service to govern how they may be legally used. In many cases, terms of service are used as a contractual agreement between a company and users of a service they provide. of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from the 'Code of Conduct' section of this site. |
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