ALJ/AES/sid Mailed 12/19/2005

Decision 05-12-042 December 15, 2005

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Order Instituting Rulemaking to Implement the California Renewables Portfolio Standard Program.

Rulemaking 04-04-026 (Filed April 22, 2004)

INTERIM OPINION ADOPTING METHODOLOGY

FOR 2005 MARKET PRICE REFERENT

TABLE OF CONTENTS

Title Page

INTERIM OPINION ADOPTING METHODOLOGY FOR 2005 MARKET PRICE REFERENT 2

I. Summary 2

II. Procedural Background 2

III. Discussion 4

A. Foundations of the MPR 4

B. Purpose of this Decision 7

C. MPR Gas Forecasting Inputs and Methodology 8

1. Guiding Principles for MPR Gas Methodology 11

2. Gas Forecast for Years 1-6 13

3. Gas Forecast for Years 7-20 13

D. Time of Delivery Profiles 17

E. Non-Gas Methodology and Inputs 23

1. Methodology for Selecting Non-Gas Inputs 23

a) Lowest Quartile or Midpoint of Reasonable Range of Inputs 24

b) Use of Market Surveys, Competitive Bids, and
Secondary Market Data 25

c) Applicability of Out-of-State Data 27

2. Operational Characteristics of Proxy Plant 28

a) Adjusting MPR to Reflect Renewable Attributes 29

b) Calculation of a CT Proxy 30

c) CCGT Turbine 31

d) Capacity Factor 32

e) Heat Rate 35

f) Size of Proxy Plant 37

3. Cost of Capital for Proxy Plant 38

F. Modifications to 2004 MPR Model 42

1. Nominal MPRs Reflecting Different Project On-line Dates 42

2. Property Taxes 45

3. Calculation of Line Losses and GMM 45

G. Greenhouse Gas Adder 46

H. Next Steps 48

1. 2005 MPR 48

2. 2006 MPR 49

IV. Assignment of Proceeding 49

V. Comments on Draft Decision 49

Findings of Fact 53

Conclusions of Law 56

INTERIM ORDER 56

APPENDIX A - The Gas Stipulation

APPENDIX B - RPS Solcitation Timeline

INTERIM OPINION ADOPTING METHODOLOGY
FOR 2005 MARKET PRICE REFERENT

I. Summary

We adopt the methodology for calculating the 2005 market price referent (MPR) to be used for solicitations in the Renewables Portfolio Standard (RPS) program. We direct Energy Division staff to calculate the 2005 MPR, to be applied to the 2005 solicitations that we approved in Decision (D.) 05-07-039, based on this methodology.