ALJ/BWM/tcg Date of Issuance 12/17/2010
Decision 10-12-048 December 16, 2010
BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
Order Instituting Rulemaking to Continue Implementation and Administration of California Renewables Portfolio Standard Program. |
Rulemaking 08-08-009 (Filed August 21, 2008) |
DECISION ADOPTING THE RENEWABLE AUCTION MECHANISM
DECISION ADOPTING THE RENEWABLE AUCTION MECHANISM 1
1. Summary 2
2. Background 5
2.1. Legislation and Initial Implementation 5
3. The Need for a Simplified Procurement Process for Small Generators 9
4. Pricing Approach - The Renewable Auction Mechanism 11
5. Must-Take Requirement 20
6. Utility Applicability 21
7. Auction Design 25
7.1. Program Capacity Authorization 25
7.2. Number of Auctions Per Year 32
7.3. Project Selection 33
7.4. Use of an Independent Evaluator 36
7.5. Simplified RAM Contract Review 37
8. Eligibility 38
9. RAM Standard Contract 48
9.1. Contract Negotiations 48
9.2. RAM Contract Terms and Conditions 49
10. Project Viability Requirements 64
10.1. Site Control 66
10.2. Development Experience 66
10.3. Commercialized Technology 67
10.4. Interconnection 67
11. Market Elements 68
11.1. Preferred Locations to Facilitate Interconnections 68
11.1.1. Party Positions 69
11.1.2. Discussion 70
11.1.3. Response to Critical Infrastructure Argument 72
11.2. Qualified Facility Certification 73
11.3. Conveyance of RECs 73
12. Regulation and Commission Oversight 74
12.1. Program Modifications and Reports 74
12.1.1. Public Release of Aggregated Bid Data 75
12.2. Cost Recovery 77
13. RAM 78
14. Comments on Proposed Decision 80
15. Assignment of Proceeding 81
Findings of Fact 81
Conclusions of Law 86
ORDER 93
Appendix A - Summary of Adopted Program
Appendix C - Duration of Prices and TOD Periods
DECISION ADOPTING THE RENEWABLE AUCTION MECHANISM
1. Summary
This decision authorizes a new procurement process called the Renewable Auction Mechanism, or RAM, for the procurement of smaller renewable energy projects that are eligible for the California Renewables Portfolio Standard (RPS) Program. The RAM is a simplified and market-based procurement mechanism for large investor-owned utilities (IOU). The Commission adopts RAM as a primary contracting tool for this market segment because doing so will promote competition and elicit the lowest costs for ratepayers, encourage the development of resources that can utilize existing transmission and distribution infrastructure, and contribute to RPS goals in the near term. We expect RAM to complement the RPS Program by reducing transaction costs and providing a procurement opportunity for smaller RPS-eligible projects, which have not been able to effectively participate in the annual RPS solicitations to date.
RAM evolved from the Commission's inquiry into expanding the existing feed-in tariff program for generators 1.5 MW and below, pursuant to Public Utilities Code Section 399.20 and Decision (D.)07-07-027. However, RAM is distinct from a feed-in tariff as that term has traditionally been used. While it is a streamlined contracting mechanism and utilizes a standard contract, RAM relies on market-based pricing, utilizes project viability screens, and selects projects based on least cost rather than on a first-come first-served basis at an administratively determined price.
The rules adopted for RAM in this decision are intended to reduce transaction costs, promote regulatory certainty, and provide value to the market, utility, regulator, and ratepayer. For this initial implementation of the program, we direct Pacific Gas and Electric (PG&E), San Diego Gas & Electric (SDG&E), and Southern California Edison (SCE) to use RAM to procure at least 1,000 MW, allocated proportionally by retail sales to each IOU, over two years. All projects solicited through RAM must be 20 MW or less and located within one of the IOU's service territories. We require each IOU to determine upfront the types of products (e.g. baseload, peaking as-available, non-peaking as-available) they intend to procure under RAM to ensure their procurement is consistent with their portfolio needs. This will also provide developers and investors greater clarity and certainty regarding the market opportunity this program provides.
In each RAM solicitation, bids will be screened for viability and selected based on price, using a streamlined utility bid evaluation process that serves to expedite the procurement and review process and increase market transparency. While IOUs must follow these protocols for bid selection, they have the discretion to reject bids if they determine that there was market manipulation and/or if the bid prices are not cost-competitive. Executed contracts resulting from RAM solicitations that fall under the IOU's allocated capacity cap, as described below, can be submitted through a simplified (Tier 2) advice letter process. This pre-approval process benefits all stakeholders by reducing the ratepayer's exposure to risk and allowing regulators to monitor the market before authorizing more RAM procurement.
Our intent in establishing RAM is to create a standardized procurement process for projects up to 20 MW in size in order to promote robust competition and reduce the administrative burden associated with these projects. Going forward, RAM should be the primary procurement vehicle for projects in this size range, though projects may still participate in other Commission-authorized programs such as the annual RPS solicitations and Commission-approved utility solar photovoltaic programs. It is contrary to the intent of this program to allow projects in this size range to use other procurement options, in particular voluntary programs that target the same market segment or bilateral negotiations. Thus, going forward, SCE shall conform its Renewables Standard Contract (RSC) program to the guidance and framework provided herein. However, SCE may count contracts already executed pursuant to its 2010 RSC towards its capacity cap to the extent they are approved by the Commission. Furthermore, SCE may submit additional contracts resulting from its 2010 RSC solicitation via a Tier 3 advice letter for Commission approval, however, these additional contracts will not further reduce SCE's procurement obligation under the RAM program.
Within 60 days, each IOU will file an implementation advice letter with its allocation of megawatts per product category, procurement protocols, and a standard contract that is consistent with the requirements in this decision.
Further, we authorize the Director of Energy Division to explore methodologies for evaluating the utilities' need for system-side renewable distributed generation up to 20 MW in coordination with Commission procurement planning and how we might integrate this need determination into the RAM program. In addition, we expect Energy Division and parties to continually monitor the RAM program, and recommend modifications based on evidence, if and as necessary. We authorize the Director of Energy Division to act on its own motion to revise any aspect of the RAM program through resolutions proposed for Commission approval. We summarize the adopted program in Appendix A. This proceeding remains open.
