ALJ/BWM/sid Date of Issuance 2/15/2008

Decision 08-02-008 February 14, 2008

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 06-05-027 (Filed May 25, 2006)

OPINION CONDITIONALLY ACCEPTING

PROCUREMENT PLANS FOR 2008 RPS SOLICITATIONS

TABLE OF CONTENTS

Title Page

OPINION CONDITIONALLY ACCEPTING 2

PROCUREMENT PLANS FOR 2008 RPS SOLICITATIONS 2

1. Summary 2

2. Procedural Background 4

3. Overview of RPS Program, 2008 Plans and Commission Duties 5

4. Issues Common to All Plans 7

4.1. Solicitation for Short-Term Contracts and Delaying or Foregoing 2008 Solicitation 8

4.1.1. Short-Term Solicitations 8

4.1.2. No Delay in 2008 Solicitation 10

4.2. Flexible Compliance 11

4.2.1. 2010 and After 11

4.2.2. Transmission 12

4.2.2.1. Necessary Showing 13

4.2.2.2. Particular Transmission Line Issues 15

4.2.3. Banked Surplus and Pooling 16

4.2.3.1. Banked Surplus 16

4.2.3.2. Pooling 17

4.2.4. Other Mechanisms 18

4.2.4.1. Unbundled RECs 18

4.2.4.2. Unlimited Deficit Carry-Forward 18

4.2.5. 33% by 2020 20

4.2.6. General Application 21

4.3. Transmission Ranking Cost Report 22

4.4. Standard Terms and Conditions 24

4.5. Reporting on Transmission 25

4.6. Margin of Safety 26

4.7. Tariffs for Small RPS Projects 29

4.8. Increase Minimum Size of Project to Participate 30

4.9. Utility Ownership of RPS Facilities 32

4.10. Coordination of Plans 35

4.11. In-State Delivery 38

5. Limited Issues Specific to an IOU Plan 40

5.1. PG&E 40

5.1.1. Short-Term Offer Schedule 40

5.1.2. Short-Term Offer Pricing 41

5.1.3. Bidder Workshop 41

5.2. SCE 42

5.3. SDG&E 44

5.3.1. Integration Cost 44

5.3.2. Election to Conduct 2008 Solicitation 45

6. Schedule and Organization for 2008 Solicitation and 2009 Plans 46

6.1. 2008 Solicitation 46

6.2. 2009 Plan 46

7. Comments on Proposed Decision 47

8. Assignment of Proceeding 47

Findings of Fact 48

Conclusions of Law 50

ORDER....... 54

APPENDIX A - Review of and Changes to 2008 Plans

APPENDIX B - Adopted Schedule for 2008 Solicitation

APPENDIX C - Summary of 2008 RPS Procurement Plans

APPENDIX D - Flexible Compliance Provisions

OPINION CONDITIONALLY ACCEPTING

PROCUREMENT PLANS FOR 2008 RPS SOLICITATIONS

1. Summary

As part of the California Renewables Portfolio Standard (RPS) Program, each California retail seller is required each year to procure, with limited exceptions, a minimum quantity of electricity from eligible renewable energy resources. The amount must increase by at least 1% each year, and reach 20% of total retail sales no later than 2010. As part of fulfilling this requirement, each electrical corporation must prepare a renewable energy procurement plan (Plan). The Commission is required to review and accept, modify or reject each Plan.

In this order, we conditionally accept the Plans filed by Southern California Edison Company (SCE), Pacific Gas and Electric Company (PG&E), and San Diego Gas & Electric Company (SDG&E). In doing so, important steps we take include:

1. Address specific proposals (see Appendix A for more details):

a. Short-Term Contracts: include solicitation of short-term contracts within the 2008 solicitation;

b. 2008 Solicitation: neither postpone nor forgo the 2008 solicitation;

b. Flexible Compliance: modify flexible compliance provisions;

c. Transmission Ranking Cost Reports (TRCRs): decline to modify the TRCR process, particularly in light of the California Renewable Energy Transmission Initiative (RETI);

d. Standard Terms and Conditions (STCs): incorporate four non-modifiable STCs, and employ recommended language for modifiable STCs;

e. Reporting on Transmission: not require specific additional reporting on transmission;

f. In-State Delivery: decline to modify current provisions;

g. SCE Biomass Program: recognize Biomass Program as part of SCE's Plan, but accept SCE's proposal to defer decisions pending submission of an application; and

h. SDG&E Integration Cost: reject SDG&E's proposal to include a non-zero integration cost.

2. Address limited general elements of the RPS Program:

a. Margin of Safety: each Plan must include a reasonable margin of safety;

b. Tariffs for Smaller RPS Projects: encourage utilities to work with customers on this option, where reasonable, and provide additional information to the Commission;

c. Minimum Size: increase the minimum size of projects that may bid, from 1.0 megawatt (MW) to 1.5 MW;

d. Utility Ownership of RPS Facilities: not require utilities to build and own RPS facilities, but restate that utilities must consider this option; and

e. Coordination of Plans: Investor-owned utilities (IOUs) should continue to make incremental improvements in preparing Plans using a more uniform form and format.

3. Schedule: Adopt schedule for completing the 2008 solicitation cycle (see Appendix B) and process for initiating the 2009 solicitation cycle.

Within 14 days of the date this order is mailed, PG&E, SCE and SDG&E shall each file and serve an amended Plan, with a copy filed on the Director of the Commission's Energy Division. Unless suspended by the Energy Division Director within 21 days of the date this order is mailed, each utility shall proceed to use its amended Plan for its 2008 RPS program and solicitation.

We continue to employ the presumption that utilities are able to use their business judgment in running their solicitations, within the parameters we establish and the guidance we provide. Utilities ultimately remain responsible for program implementation, administration and success, within application of flexible compliance criteria. We will later judge the extent of that success, including the degree to which each IOU implements the orders adopted herein, elects to take the guidance provided herein, demonstrates creativity and vigor in program administration and execution, and reaches program targets and requirements. This proceeding remains open.