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ALJ/BWM/tcg Date of Issuance 4/11/2008
Decision 08-04-009 April 10, 2008
BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
Order Instituting Rulemaking to Continue
Implementation and Administration of
California Renewables Portfolio Standard
(Filed May 25, 2006)
INTERIM OPINION COMPILING
STANDARD TERMS AND CONDITIONS
The Commission has been informed that it would be useful to compile in one document the current Commission-adopted language for the 14 standard terms and conditions (STCs) used in contracts pursuant to the Renewables Portfolio Standard (RPS) Program.1 We do that here with one exception.
The exception is that we now exclude STC 3 (Supplemental Energy Payment (SEP) Awards, Contingencies). Pacific Gas and Electric Company (PG&E) recommended we do so in 2007. We declined at that time, however, given that STC 3 was modifiable, it did not need to be included in a final contract when it was not applicable, and implementation of Senate Bill (SB) 1036 was pending.2 (Decision (D.) 07-11-025, p. 21.) In early 2008, we affirmed the interpretation of STC 3, as requested by Southern California Edison Company, but did so noting that the relevance of STC 3 would decline over time as SB 1036 was implemented. (D.08-02-008, p. 25.)
The California Energy Commission is now transferring (or has transferred) to utilities all relevant remaining unencumbered funds that were available to fund SEPs, as required by SB 1036. Draft Resolution E-4160 is under consideration regarding our implementation of SB 1036. As a result, STC 3 has no continuing relevance for future model contracts, and we will delete it today from the STCs.
That leaves 13 STCs. Of these, 4 are not modifiable, and 9 are modifiable. The most recent Commission-adopted language for these 13 STCs is shown in Appendix A. The 4 non-modifiable STCs are listed first, followed by the 9 modifiable STCs. The STCs are treated as follows:
Non-Modifiable: Each contract used for RPS compliance by an investor-owned utility (IOU), including a small or multi-jurisdictional utility (SMJU), must contain the 4 non-modifiable STCs. (See Decision (D.) 04-06-014, Appendix A, D.07-02-011; D.07-05-057; D.07-11-025, Attachment A.) Each contract used for RPS compliance by a load-serving entity (LSE) other than an IOU must also contain the non-modifiable STCs, with the exception of STC 1 (CPUC Approval.) (See D.06-10-019.)
Modifiable: The model contract initially used by each buyer3 in soliciting bids from project developers/sellers for purposes of RPS compliance must include the Commission's most recently adopted language for the 9 modifiable STCs. Model contracts of electrical corporations may, in the alternative, employ language subsequently accepted by the Commission as part of the periodic review and acceptance, rejection or modification of an electrical corporation's procurement plan. Such language, however, must continue to apply the principles behind each modifiable STC, and remain consistent with all applicable laws and regulations. Electrical corporations must use reasonable efforts to propose uniform and consistent language in their model contracts over time and among electrical corporations. For the final contract, seller and buyer (inclusive of all LSEs under the RPS program) may negotiate different language for each modifiable STC (or agree to delete the term if it is not applicable), as long as the result remains consistent with all applicable laws and regulations. (See D.04-06-014, Appendix A; D.07-11-025, in particular pp. 22-23, 26 and Ordering Paragraph 1.)
Finally, we note that work is underway in Rulemaking 06-02-012 on the issue of tradable renewable energy credits (RECs), and implementation of tradable RECs may necessitate further changes to STC 2. We also note that some parties are discussing possible further modifications to STCs, including STC 2, and additional changes to STC 2 are possible depending upon the outcome of these discussions and subsequent petitions for modification. We will continue to make changes to STC 2 and other STCs, as necessary and appropriate. Parties are encouraged to employ the most efficient methods available for consideration of changes. (See, for example, the discussion in D.07-11-025, pp. 23-27.)
On March 5, 2008, the proposed decision of Administrative Law Judge (ALJ) Mattson in this matter was mailed to parties in accordance with Section 311 of the Public Utilities Code and Rule 14.3 of the Commission's Rules of Practice and Procedure (Rules). On March 25, 2008 comments were filed by PG&E, the Alliance for Retail Energy Markets (AReM), and jointly by Sustainable Conservation, the Inland Empire Utilities Agency, the California Farm Bureau Federation and the Green Power Institute (Joint Parties). On April 1, 2008, reply comments were jointly filed by Sustainable Conservation, the California Farm Bureau Federation and the Green Power Institute. We have carefully considered comments and make changes in the body of the order where appropriate. We briefly explain here why we reject certain comments.
Modifiable STCs for Non-IOU LSEs
In its comments, AReM asserts that the Commission does not require ESPs to use any of the modifiable STCs in model contracts, and proposes clarifying language. AReM is mistaken. We make appropriate changes above, and take this opportunity to make the requirement clear.
In our most recent order regarding STCs, we make no distinction between STCs required of LSEs that are or are not IOUs. (D.07-11-025.) Rather, we require the model contract initially used by each LSE for the purpose of soliciting bids or seeking projects for RPS compliance to contain all STCs. Buyer and seller may not modify the non-modifiable STCs, but may negotiate and modify the modifiable STC (or delete a modifiable STC when it is not applicable). As we said regarding the 10 modifiable STCs (now 9 with the deletion of STC 3 in today's order), we repeat for clarity here:
"Each of the ten remaining terms [the modifiable STCs] is important, and each contract should contain something on each item, to the extent applicable. Each contract, for example, should address important matters such as contract duration (STC 5: Contract Term), certain expectations (STC 7: Performance Standards), applicable definitions (STC 8: Product Definitions), and consequences of failure (STC 9: Non-Performance or Termination Penalties and Default Provisions). The desire for flexibility does not outweigh the state's interest in each contract containing something on a minimum number of important terms. In fact, STCs must include `performance requirements for renewable generators.' (§ 399.14(a)(2)(D).) Even if we desired to grant this part of petitioners' request, we could not do so." (D.07-11-025, p. 20.)
In deciding to retain five specific modifiable STCs we said:
"Second, we do not eliminate but keep the five remaining terms as modifiable. These are: STC 7 (Performance Standards), STC 8 (Product Definitions), STC 9 (Non-Performance Penalties), STC 12 (Credit Terms), and STC 18 (Prevailing Wages). We do this, as stated above, because we believe every contract should contain something on each of these minimal but important items, and in the case of performance requirements, the contract must contain this term." (Id., pp. 21-22.)
Moreover, regarding modifications to the modifiable terms, the permissible modifications are not limitless. For example:
"We point out regarding parties' modifications to any of the ten modifiable STC that such modifications, if any, must continue to be consistent with law and government regulation. For example, parties may modify the STC regarding confidentiality, but the modified term must still comply with all applicable laws regarding confidentiality, including all Commission orders (e.g., D.06-06-066)." (Id., p. 22.)
This last item is particularly worth mentioning here given that our confidentiality decisions specifically address certain matters with respect to LSEs other than IOUs. Accordingly, ESPs and CCAs must not only have a modifiable confidentiality term in their model contract (used to initially solicit RPS electricity), but when modified, the term must still comply with Commission orders, such as D.06-06-066 or successor decisions as they relate to ESPs or CCAs.
Edits to STC 2
In its comments, PG&E suggests several changes to STC 2 which PG&E characterizes as non-substantive. In reply comments, a subgroup of Joint Parties contend the changes may adversely affect the interest of parties. We decline to make a change to the proposed decision given controversy about its effects absent adequate vetting of the change and its implications.
1 See, for example, the "Comments of San Diego Gas & Electric Company to the Proposed Decision Conditionally Accepting Procurement Plans for 2008 RPS," January 31, 2008, page 7.
2 SB 1036 (Stats. 2007, Ch. 685) removed SEP funding of the above market costs incurred by certain projects.
3 This includes all LSEs under the RPS Program, such as IOUs (including SMJUs), electric service providers (ESPs) and community choice aggregators (CCAs).