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PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

ID #10579

ENERGY DIVISION RESOLUTION E-4335

REDACTED

RESOLUTION

Resolution E-4335. San Diego Gas & Electric (SDG&E) requests approval of two renewable energy credit purchase and sale agreements with Cabazon Wind Partners LLC and Whitewater Hill Wind Partners LLC.

PROPOSED OUTCOME: This Resolution approves with modification cost recovery for SDG&E's renewable energy credit purchase and sale agreements with Cabazon Wind Partners LLC and Whitewater Hill Wind Partners LLC. The Commission makes no determination in this resolution regarding the purchase and sale agreements classification for the purposes of their contribution towards SDG&E's RPS compliance obligations.

ESTIMATED COST: Costs of these purchase and sale agreements are confidential at this time.

By Advice Letter 2118-E filed on October 28, 2009, Advice Letter 2118-E-A filed on June 2, 2011, and Advice Letter AL 2118-E-B filed on June 10, 2011.

__________________________________________________________

SUMMARY

SDG&E's proposed renewable energy credit purchase and sale agreements (PSAs) with Cabazon Wind Partners LLC and Whitewater Hill Wind Partners LLC comply with the Renewables Portfolio Standard (RPS) procurement guidelines and are approved with modifications.

SDG&E filed Advice Letter (AL) 2118-E on October 28, 2009, AL 2118-E-A on June 2, 2011, and AL 2118-E-B on June 10, 2011 requesting Commission review and approval of two renewable energy credit (REC)-only PSAs executed with Cabazon Wind Partners LLC and Whitewater Hill Wind Partners LLC. The bilaterally negotiated short-term PSAs provide RECs from operating wind facilities for a period of three years. The wind facilities associated with the PSAs are located in Palm Springs, California in the San Gorgonio wind resource area. The null power associated with the REC-only PSAs is procured separately by SDG&E.

The following table summarizes the REC-only agreements:

Generating Facilities

Project Technology Type

Contract Term

(Years)

Minimum Capacity

(MW)

Minimum Energy

(GWh)

Contract Delivery

Start

Date

Project Location

Cabazon I

Wind, existing

3

42.9

119

1/1/2009

Palm Springs

Whitewater Hill

Wind, existing

3

61.5

166

1/1/2009

Palm Springs

The proposed PSAs are consistent with SDG&E's 2011 RPS Procurement Plan. The RECs procured under the PSAs are reasonably priced and fully recoverable in rates over the life of the PSAs, subject to SDG&E's administration of the PSAs.

SDG&E also requests that the REC-only transactions be classified as "bundled generation" and be eligible for use towards its 2011 RPS compliance obligations The Commission makes no determination in this resolution regarding the PSAs classification for the purposes of their contribution towards SDG&E's RPS compliance obligations.

BACKGROUND

Overview of the Renewables Portfolio Standard (RPS) Program

The California RPS Program was established by Senate Bill (SB) 1078, and has been subsequently modified by SB 107 and SB 1036.1 The RPS program is codified in Public Utilities Code Sections 399.11-399.20.2 The RPS program administered by the Commission requires each utility to increase its total procurement of eligible renewable energy resources by at least one percent of retail sales per year so that 20 percent of the utility's retail sales are procured from eligible renewable energy resources no later than December 31, 2010.3 Furthermore, SB 2 (1x)4 mandates that the amount of electricity generated per year from eligible renewable resources be increased to an amount that equals an average of 20% of the total electricity sold to retail customers in California for the period 2011-2013; 25% of retail sales by December 31, 2016; and 33% of retail sales by December 31, 2020.5

Additional background information about the Commission's RPS Program, including links to relevant laws and Commission decisions, is available at http://www.cpuc.ca.gov/PUC/energy/Renewables/overview.htm and http://www.cpuc.ca.gov/PUC/energy/Renewables/decisions.htm.

NOTICE

Notice of AL 2118-E, AL 2118-E-A, AL 2118-E-B was made by publication in the Commission's Daily Calendar. SDG&E states that a copy of the Advice Letter was mailed and distributed in accordance with Section 3.14 of General Order 96-B.

PROTESTS

Advice Letter 2118-E was timely protested on November 17, 2009 by the Division of Ratepayer Advocates (DRA).

SDG&E responded to the protest of DRA on November 24, 2009.

DISCUSSION

SDG&E requests approval of two REC-only PSAs, classification of the "re-bundled" RECs and associated energy as "bundled generation," and use of the "bundled" RECs for its 2011 RPS compliance obligations

On October 28, 2009, SDG&E filed AL 2118-E requesting Commission approval of bilaterally negotiated REC-only purchase and sale agreements with Cabazon and Whitewater Hill. On June 2, 2011, SDG&E filed AL 2118-E-A to update AL 2118-E to include amendments to the PSAs; provide delivery data from 2009 through April 2011; and address the classification of the transactions for RPS compliance purposes. 6 On June 10, 2011, SDG&E filed AL 2118-E-B to include additional information as required by D.10-03-021, as modified by D.11-01-025.

The Cabazon and Whitewater Hill wind facilities began operating in 2002 and 2003, respectively, and are RPS-certified by the California Energy Commission (CEC). Both wind facilities are located in Palm Springs, California. The Cabazon facility is 42.9 megawatts (MW) and the Whitewater Hill facility is 61.5 MW. SDG&E estimates that the facilities will generate a minimum of 285 gigawatt-hours (GWh) annually.

The PSAs considered herein are for the RECs associated with the null power7 that SDG&E has been procuring and will be procuring simultaneously from the Cabazon and Whitewater Hill wind facilities. Specifically, the null power is being procured through previously executed and approved power purchase agreements (PPAs) that the California Department of Water Resources (CDWR) negotiated during the California Energy Crisis.8 These CDWR PPAs expressly did not convey the RECs from the wind farms to CDWR.9

SDG&E requests that the Commission issue a resolution that:

We will address SDG&E's requests in two parts. First, we will address its request for approval of the PSAs. Second, we will address SDG&E's request for classification of the re-bundled product as "bundled generation," and the subsequent use of the "bundled" RECs for its 2011 RPS compliance obligations.

Energy Division Review of the Proposed PSAs

Energy Division evaluated the PSAs for the following criteria:

Consistency with Bilateral Contracting Guidelines

In D.06-10-019, the Commission determined that bilateral contracts were permissible provided that they were at least one month in duration, submitted for approval by advice letter, do not receive above-market funds (AMFs), and that the contracts be deemed reasonable. In D.09-06-050, the Commission determined that bilateral contracts should be reviewed according to the same processes and standards as contracts that are the result of a competitive solicitation.10 Accordingly, as described in this Resolution, Energy Division reviewed the PSAs using the same standards used to review contracts resulting from an annual solicitation. Applying the above standards, the PSAs are consistent with the bilateral contracting guidelines established in D.06-10-019 and D.09-06-050.

Consistency with SDG&E's 2011 RPS Procurement Plan

Pursuant to statute, SDG&E submitted its 2011 RPS Procurement Plan (Plan) on May 4, 2011. The Plan included an assessment of SDG&E's supply and demand to determine the optimal mix of renewable generation resources, consideration of flexible compliance mechanisms established by the Commission, and a bid solicitation protocol setting forth the need for renewable generation of various operational characteristics.11 SDG&E's 2011 Plan was approved by D.11-04-030 on April 14, 2011.

California's RPS statute also requires that the Commission review the results of a renewable energy resource solicitation submitted for approval by a utility.12 The Commission reviews the results to verify that the utility conducted its solicitation according to its Commission-approved procurement plan.

SDG&E's 2011 Plan discussed plans to procure renewable energy generation through an annual solicitation, unsolicited bilaterals, and utility-owned generation as well as renewable energy credits to meet its 20 percent RPS mandate and stated goal of 33 percent of its retail sales from renewable resources. The bilateral contracts are for RECs from RPS-certified facilities. Thus, the PSAs are consistent with SDG&E's 2011 RPS Procurement Plan, approved by D.11-04-030.

Consistency with SDG&E's least-cost best-fit (LCBF) methodology

In D.04-07-029, the Commission directs the utilities to use certain criteria in their LCBF selection of renewable resources.13 The decision offers guidance regarding the process by which the utility ranks bids in order to select or "shortlist" the bids with which it will commence negotiations. In D.10-03-021, as modified by D.11-01-025, the Commission notes that LCBF evaluation of REC-only transactions will be considered in Rulemaking (R.)11-05-005, and until such a consideration takes place the utilities should explain in their advice letters seeking approval of REC-only contracts their methodology for evaluating the contracts.

As described in its 2011 RPS Procurement Plan, SDG&E's LCBF bid evaluation includes a quantitative analysis and qualitative criteria for bundled contracts and a quantitative analysis for TREC contracts. SDG&E's quantitative analysis or market valuation for bundled contracts includes evaluation of price, time of delivery factors, transmission costs, congestion costs, and resource adequacy. SDG&E's qualitative analysis focuses on comparing similar bids across numerous factors, such as location, benefits to minority and low income areas, resource diversity, etc.

SDG&E negotiated the PSAs bilaterally and therefore they did not compete directly with other RPS projects. However, in AL 2118-E, SDG&E explains that it evaluated the bilateral agreements using the same LCBF evaluation methodology it employs for evaluating its RPS solicitation. To compare the REC-only contracts against the bundled offers from SDG&E's recent solicitation, bilateral offers and recently approved contracts, SDG&E added the price of the CDWR contracts to the Cabazon and Whitewater Hill contract prices. While the IE agreed that SDG&E's comparison to other offers is valid, he disagreed on the appropriateness of adding the CDWR contracts to the REC-only contracts and suggested that a more appropriate null power substitute would be a forecast of the price of as-available qualifying facility (QF) energy.

In AL 2118-E and AL 2118-E-A, SDG&E also provided a comparison of the Cabazon and Whitewater Hill REC-only contracts to other REC-only contracts that had been offered to SDG&E. This comparison is consistent with SDG&E's 2011 LCBF evaluation for REC-only contracts, which compares TREC bids solely on their price. The IE found that this evaluation methodology is reasonable for evaluating the Cabazon and Whitewater Hill contracts. Energy Division agrees that this evaluation methodology is reasonable at this time, but we note again that LCBF evaluation of REC-only contracts will be reviewed in R.11-05-005 and that the methodology used for evaluating these contracts is not precedent setting.

(See the "Cost Reasonableness" section of this Resolution for a discussion of how the PSAs compare to SDG&E's recent RPS solicitation and bilateral offers and Confidential Appendix A for SDG&E's LCBF evaluation of the PSAs.)

The PSAs were evaluated consistent with the LCBF methodology identified in SDG&E's 2011 RPS Procurement Plan.

Consistency with RPS Standard Terms and Conditions

The Commission adopted a set of standard terms and conditions (STCs) required in RPS contracts, four of which are considered "non-modifiable." The STCs were compiled in D.08-04-009 and subsequently amended in D.08-08-028. More recently in D.10-03-021, as modified by D.11-01-025, the Commission further refined these STCs.

The PSAs include all of the Commission adopted RPS "non-modifiable" standard terms and conditions, as set forth in D.08-04-009, D.08-08-028, and D.10-03-021, as modified by D.11-01-025.

Consistency with Commission rules governing the use of TRECs for RPS compliance

On March 11, 2010, the Commission approved D.10-03-021, which authorizes the procurement and use of TRECs for compliance with the California RPS program.

The decision also established a temporary price cap of $50/TREC, a temporary TREC usage limit, and requirements for advice letters requesting approval of TREC contracts.14 Under the temporary TREC usage limit, the amount of TRECs an investor-owned utility (IOU) may use for its annual RPS compliance obligations is limited to no more than 25 percent its annual procurement target (APT). However, if an IOU acquires more TRECs than 25 percent of its APT in any year, though, it may carry over the excess TRECs for compliance in future years (subject to any TRECs usage limitation applicable to the later year).15

In AL 2118-E and AL 2118-E-B, SDG&E provided a showing that the PSAs' prices are below the interim $50 price cap. (See Confidential Appendix A of this Resolution for more information about how the PSA prices compare to the REC-price cap.)

SDG&E also provided a comparison of the PSAs and any previous REC-only contracts against SDG&E's annual TREC usage limit. SDG&E's position relative to the TREC usage limit is dependent on actual generation delivered, its actual retails sales, as well as applicable RPS rules at the time of its RPS compliance filings and determinations. Thus, the Commission cannot determine at this time how the procurement pursuant to the PSAs impacts SDG&E position against its TREC usage limit (See Confidential Appendix A for SDG&E's projected TREC position.)

Cost Reasonableness

Based on SDG&E's multiple LCBF evaluations of the transactions, SDG&E determined that the PSAs are favorable relative to proposals received in response to its recent solicitations, bilateral offers, and recently executed contracts. As noted above, however, we agree with the IE that the evaluation and comparison of the proposed contracts to other REC-only offers is a more appropriate LCBF methodology for comparisons and determining cost reasonableness.

The Commission's reasonableness review for RPS contract prices includes comparisons of proposed contracts to other proposed RPS projects from recent RPS solicitations, recent bilateral offers, and recently approved contracts. Applying this analysis and the confidential analysis provided by SDG&E in AL 2118-E and 2118-E-A, we determine that the PSAs' costs are reasonable.16 However, SDG&E's and the Commission's determination of cost reasonableness in this resolution is not precedent setting. As noted above in this resolution, LCBF evaluation of REC-only contracts is under consideration in R.11-05-005 which could provide additional or different rules for determining cost reasonableness in the future. For more information on the contractual pricing terms see Confidential Appendix A for a detailed discussion.

The total expected costs of the PSAs are reasonable based on their relation to recent bids, bilateral offers, and executed contracts.

Provided the RECs are from an eligible renewable energy resource, payments made by SDG&E under the PSAs are fully recoverable in rates over the life of the PSA, subject to Commission review of SDG&E's administration of the PSA.

Cost Containment

Pursuant to statute, the Commission calculates a market price referent (MPR) to assess above-market costs of individual RPS contracts and the RPS program.17 Contracts that meet certain criteria are eligible for above-MPR funds (AMFs).18 Since the PSAs are for only RECs, they are not eligible for AMFs. Furthermore, SDG&E has exhausted its AMFs provided by statute;19 thus, SDG&E is not required to procure RPS-eligible generation at above-MPR costs but may voluntarily choose to do so.20

Procurement Review Group (PRG) Participation

The Procurement Review Group (PRG) was initially established in D.02-08-071 as an advisory group to review and assess the details of the IOUs' overall procurement strategy, solicitations, specific proposed procurement contracts and other procurement processes prior to submitting filings to the Commission.21 SDG&E asserts that the PSAs were discussed at nine different PRG meetings prior to submittal of AL 2118-E. Discussions at PRG meetings began in 2004 and continued at subsequent meetings until the filing of AL 2118-E in 2009.

Pursuant to D.02-08-071, SDG&E's Procurement Review Group participated in the review of the PSAs.

Independent evaluator (IE) Oversaw SDG&E's RPS Procurement Process

The Commission requires the use of an IE to ensure that solicitation processes are undertaken in a consistent and objective manner. Specifically, the IE's role is to review SDG&E's bid evaluation, monitor negotiations, and review the resulting agreements. SDG&E retained PA Consulting (PA) as the IE for SDG&E's 2008, 2009 and 2011 RPS solicitations. Also, as required, SDG&E submitted IE Reports prepared by PA with AL 2118-E.

According to the IE Report submitted with AL 2118-E, PA reviewed SDG&E's evaluation of the contracts and the resulting contracts. In its Independent Evaluator Report, PA concludes that the Cabazon and Whitewater Hill contracts are reasonably priced in comparison to SDG&E's other options. The IE came to his conclusion, however, using a different methodology than SDG&E used to evaluate the contracts. While the IE agreed that SDG&E's conclusions and methodology were valid and reasonable, he was of the opinion that an alternative methodology was more appropriate. The IE compared the contract price plus null power price against the fast-track approval benchmark adopted in D.09-06-050. The IE's conclusion, based on his alternative analysis, supports SDG&E's assertion that the contracts are reasonable and that the contracts merit Commission approval.

An excerpt from the IE Report's contract-specific evaluation of the PSAs can be found in confidential Appendix B to this resolution.

Consistent with D.06-05-039 and D.09-06-050, an independent evaluator (IE) reviewed the contracts.

Project Viability

The Cabazon and Whitewater Hill facilities are currently in operation, thus there are no project viability concerns associated with the facilities.

Energy Division review of SDG&E's request for "bundled generation" classification and use for RPS compliance obligations

In AL 2118-E-A, SDG&E asserts that the PSAs "re-bundle" the RECs from the Cabazon and Whitewater Hill facilities with their underlying energy to create "bundled" transactions. In support of its assertion that the transactions should be considered "bundled," SDG&E argues that the transactions do not meet the definition of an unbundled REC transaction as defined in D.10-03-021, as modified by D.11-01-025, which defines a REC-only transaction as one that the buyer receives RECs, but not the underlying energy. SDG&E also says that the classification of the PSAs as "bundled" is consistent with SB 2 (1x) based on SDG&E's assumption that the transactions would be considered a bundled transaction pursuant to the product categories and definitions in Public Utilities Code § 399.16(b) and § 399.16(d).

As described above, the Commission reviewed and evaluated the proposed PSAs as REC-only contracts pursuant to current RPS program rules. The AL could not be reviewed pursuant to the rules or definitions in SB 2 (x1) since SB 2 (x1) is not yet effective. Similarly, we make no determination regarding the classification of the approved agreements (or the classification of the approved agreements with other agreements) based on SB 2 (1x). Thus, under current rules, the PSAs are REC-only contracts because they are for the procurement of only RECs. D.10-03-021, as modified by D.11-01-025, does not contain rules about "rebundled" transactions. If SDG&E would like to pursue a different classification, it may request clarification from the Commission through the implementation of SB 2 (1x) about the classification of transactions for RECs that are procured from facilities already delivering power to a utility under a CDWR contract.

The Commission also makes no determination regarding the PSAs' contribution towards SDG&E's 2011 RPS compliance obligations. RPS compliance determination is a separate process from the RPS contract evaluation process and requires consideration of several factors based on various showings. In addition, the implementation of SB 2 (1x) may affect the compliance rules for 2011. Thus, making a compliance determination in this resolution regarding SDG&E's 2011 RPS procurement obligations and the procurement considered herein is not appropriate. SDG&E should incorporate the procurement approved in this resolution in its appropriate compliance showing(s) consistent with RPS program rules and, if necessary, include any assertions regarding its classification or definition within those compliance filings.

DRA protests AL 2118-E

On November 17, 2009, DRA filed a protest to AL 2118-E. DRA made the recommendation to hold AL 2118-E in abeyance until the Commission has sufficient time to consider SDG&E's Petition for Modification of D.06-10-019 or until the Commission issues a final decision on the issue of TRECs for RPS compliance. On March 11, 2010, the Commission issued a decision on TRECs, which was subsequently modified on January 13, 2011 by D.11-01-025, which authorized the use of TRECs for California RPS compliance; therefore, DRA's protest of AL 2118-E is denied.

RPS ELIGIBILITY AND CPUC APPROVAL

Pursuant to Pub. Util. Code § 399.13, the CEC certifies eligible renewable energy resources. Generation from a resource that is not CEC-certified cannot be used to meet RPS requirements. To ensure that only CEC-certified energy is procured under a Commission-approved RPS contract, the Commission has required standard and non-modifiable "eligibility" language in all RPS contracts. That language requires a seller to warrant that the project qualifies and is certified by the CEC as an "Eligible Renewable Energy Resource," that the project's output delivered to the buyer qualifies under the requirements of the California RPS, and that the seller use commercially reasonable efforts to maintain eligibility should there be a change in law affecting eligibility.22

The Commission requires a standard and non-modifiable clause in all RPS REC-only contracts that requires "CPUC Approval" of an agreement to include an explicit finding that "any procurement pursuant to this Agreement is procurement of Renewable Energy Credits that conform to the definition and attributes required for compliance with the California Renewables Portfolio Standard, as set forth in California Public Utilities Commission Decision 08-08-028, as may be modified by subsequent decision of the California Public Utilities Commission or by subsequent legislation, for purposes of determining Buyer's compliance with any obligation that it may have to procure eligible renewable energy resources pursuant to the California Renewables Portfolio Standard (Public Utilities Code Section 399.11 et seq.), Decision 03-06-071, or other applicable law."23

Notwithstanding this language, the Commission has no jurisdiction to determine whether a project is an eligible renewable energy resource, nor can the Commission determine prior to final CEC certification of a project, that "any procurement" pursuant to a specific contract will be "procurement from an eligible renewable energy resource."

Therefore, while we include the required finding here, this finding has never been intended, and shall not be read now, to allow the generation from a non-RPS eligible resource to count towards an RPS compliance obligation. Nor shall such a finding absolve a seller from its obligation to obtain CEC certification or absolve the purchasing utility of its obligation to enforce compliance with Standard Term and Condition 6, set forth in Appendix A of D.08-04-009 and included in the PSA. Such contract enforcement activities shall be reviewed pursuant to the Commission's authority to review the administration of such contracts.

CONFIDENTIAL INFORMATION

The Commission, in implementing Pub. Util. Code § 454.5(g), has determined in D.06-06-066, as modified by D.07-05-032, that certain material submitted to the Commission as confidential should be kept confidential to ensure that market sensitive data does not influence the behavior of bidders in future RPS solicitations. D.06-06-066 adopted a time limit on the confidentiality of specific terms in RPS contracts. Such information, such as price, is confidential for three years from the date the contract states that deliveries begin, except contracts between IOUs and their affiliates, which are public.

The confidential appendices, marked "[REDACTED]" in the public copy of this resolution, as well as the confidential portions of the advice letter, should remain confidential at this time.

COMMENTS ON THIS RESOLUTION

Pub. Util. Code § 311(g)(1) provides that this resolution must be served on all parties and subject to at least 30 days public review and comment prior to a vote of the Commission. Section 311(g)(2) provides that this 30-day period may be reduced or waived upon the stipulation of all parties in the proceeding.

The 30-day comment period for the draft of this resolution was neither waived nor reduced. Accordingly, this draft resolution was mailed to parties for comments, and will be placed on the Commission's agenda no earlier than 30 days from today.

FINDINGS AND CONCLUSIONS

1. The PSAs are consistent with the bilateral contracting guidelines established in D.06-10-019 and D.09-06-050.

2. The PSAs are consistent with SDG&E's 2011 RPS Procurement Plan, approved by D.11-04-030.

3. The PSAs were evaluated consistent with the LCBF methodology identified in SDG&E's 2011 RPS Procurement Plan.

4. The PSAs include the Commission-adopted RPS standard terms and conditions including those deemed "non-modifiable".

5. The total expected costs of the PSAs are reasonable based on their relation to bids received in response to SDG&E's recent solicitations, bilateral offers, and executed agreements.

6. Provided the Renewable Energy Credits are compliant with Standard Term and Condition 6, set forth in Appendix A of D.08-04-009 and included in the PSAs, payments made by SDG&E under the PSAs are fully recoverable in rates over the life of the PSAs, subject to Commission review of SDG&E's administration of the PSAs.

7. The PSAs are not eligible for AMFs.

8. Pursuant to D.02-08-071, SDG&E's Procurement Review Group (PRG) participated in the review of the PSAs.

9. Consistent with D.06-05-039 and D.09-06-050, an independent evaluator (IE) oversaw SDG&E's RPS procurement process and reviewed the contracts.

10. There is no project viability risk associated with the PSAs because the associated wind facilities are currently operating.

11. A compliance determination in this resolution regarding SDG&E's 2011 RPS procurement obligations and the procurement considered herein is not appropriate.

12. DRA's protest is denied.

13. Procurement pursuant to the PSAs is procurement of Renewable Energy Credits that conform to the definition and attributes required for compliance with the California Renewables Portfolio Standard, as set forth in California Public Utilities Commission Decision 08-08-028, and as may be modified by subsequent decision of the California Public Utilities Commission or by subsequent legislation, for purposes of determining SDG&E's compliance with any obligation it may have to procure eligible renewable energy resources pursuant to the California Renewables Portfolio Standard (Public Utilities Code Section 399.11 et seq.), Decision 03-06-071, or other applicable law.

14. The immediately preceding finding shall not be read to absolve SDG&E of its obligation to enforce compliance with Standard Term and Condition 6, set forth in Appendix A of D.08-04-009, and included in these PSAs.

15. The confidential appendices, marked "[REDACTED]" in the public copy of this resolution, as well as the confidential portions of the advice letter, should remain confidential at this time.

16. AL 2118-E, AL 2118-E-A, and AL 2118-E-B should be approved with modification.

THEREFORE IT IS ORDERED THAT:

1. The request of San Diego Gas & Electric Company for Commission review and approval of green attribute purchase and sale agreements, as amended, with Cabazon Wind Partners, LLC. and Whitewater Hill Wind Partners, LLC, as requested in Advice Letter 2118-E, Advice Letter 2118-E-A, Advice Letter 2118-E-B, is approved with modification.

This Resolution is effective today.

I certify that the foregoing resolution was duly introduced, passed and adopted at a conference of the Public Utilities Commission of the State of California held on August 18, 2011; the following Commissioners voting favorably thereon:

Confidential Appendix A

Contract Summary

[Redacted]

Confidential Appendix B

Excerpt from the Independent Evaluator Project-Specific Report24

[Redacted]

1 SB 1078 (Sher, Chapter 516, Statutes of 2002); SB 107 (Simitian, Chapter 464, Statutes of 2006); SB 1036 (Perata, Chapter 685, Statutes of 2007).

2 All further references to sections refer to Public Utilities Code unless otherwise specified.

3 See § 399.15(b)(1).

4 Stats. 2011, Ch. 1 (Simitian)

5 SB 2 (1x) was signed by Governor Brown on April 12, 2011. The law becomes effective 90 days from the conclusion of the extraordinary session.

6 The PSA amendments include the following three modifications to the original PSAs: (1) modifies the delivery term (and related changes) to provide for the purchase of RECs associated with underlying generation received beginning on January 1, 2009 instead of at the CPUC approval date; (2) updates the non-modifiable terms included in the PSAs, as required by the Decision 10-03-021, as modified by D.11-01-025; and (3) adds conditions precedent related to Commission approval of the amendment and for approval by the California Energy Commission of SDG&E's ability to retire RECs generated in 2009 and 2010 in WREGIS for 2011 RPS compliance with terms and conditions reasonably acceptable to SDG&E. All other terms of the PSAs remain in full force and effect. (AL 2118-E-A, p.2)

7 Null power is electricity generated from a renewable resource for which the renewable and environmental attributes have been sold to another party (D.07-09-017)

8 In D.02-09-053 and D.02-09-053, the Commission assigned the CDWR PPAs with Cabazon Wind Partners, LLC and Whitewater Hill LLC to SDG&E and ordered SDG&E to administer the PPAs on CDWRs behalf.

9 Cabazon power purchase agreement: http://wwwcers.water.ca.gov/pdf_files/power_contracts/shellwind/041202_cabazon_exctn_vrsn.pdf and Whitewater Hill power purchase agreement: http://wwwcers.water.ca.gov/pdf_files/power_contracts/shellwind/011003whtwtrHllAmendedPPA.pdf

10 The current process set forth for seeking Commission approval for an RPS contract is that RPS contracts, of any length greater than one month in duration, must be submitted for approval by advice letter, unless special conditions warrant filing an application (for example, if the PPA does not include the required standard terms and conditions).

11 Pub. Util. Code, Section §399.14(a)(3).

12 Pub. Util. Code, Section §399.14.

13 See §399.14(a)(2)(B)

14 The TREC price cap and usage limit will sunset December 31, 2013 (See, Ordering Paragraphs 19 and 21 of D.10-03-021, as modified by D.11-01-025.) Advice letter requirements include information on the facilities providing the TRECs, information on an IOU's TREC portfolio, and price comparisons of the TRECs. (See, Ordering Paragraph 32 of D.10-03-021, as modified by D.11-01-025.)

15 SB 2 (x1) establishes product categories and limits on the products from the various categories that can contribute towards its RPS portfolio (See §399.16(b))

16 2011 RPS solicitation data was not available for the Commission's analysis of these contracts. Thus, the most recent solicitation was the 2009 RPS solicitation.

17 See Pub. Util. Code § 399.15(c)

18 SB 1036 codified in § 399.15(d)(2) the following criteria: the contract was selected through a competitive solicitation, the contract covers a duration of no less than 10 years, the contracted project is a new facility that will commence commercial operations after January 1, 2005, the contract is not for renewable energy credits, and the above-market costs of a contract do not include any indirect expenses including imbalance energy charges, sale of excess energy, decreased generation from existing resources, or transmission upgrades.

19 On May 28, 2009, the Director of the Energy Division notified SDG&E that it had exhausted its AMFs account.

20 See Pub. Util. Code § 399.15(d)

21 SDG&E's PRG includes representatives of the Union of Concerned Scientists, the Coalition of California Utility Employees, The Utility Reform Network, the California Public Utility Commission's Energy Division and Division of Ratepayer Advocates, and the California Department of Water Resources.

22 See, e.g. D. 08-04-009 at Appendix A, STC 6, Eligibility.

23 See, e.g. D. 08-04-009 at Appendix A, STC 1, CPUC Approval.

24 Report of the Independent Evaluator on the Whitewater Cabazon and Whitewater Hill contracts, October 26, 2009, Jonathan M. Jacobs - PA Consulting, submitted in SDG&E AL 2118-E, pps. 2-1 and 2-2.

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