PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Item #41

ID #10711

ENERGY DIVISION RESOLUTION E-4433

November 10, 2011

REDACTED

RESOLUTION

Resolution E-4433. Pacific Gas and Electric Company

PROPOSED OUTCOME: This Resolution denies cost recovery for the long-term renewable power purchase agreement between Pacific Gas and Electric Company and Mojave Solar, LLC, an affiliate of Abengoa Solar, Inc.

ESTIMATED COST: None

By Advice Letter 3876-E filed on July 19, 2011 and Supplemental Advice Letter 3876-E-A filed on August 29, 2011

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SUMMARY

Pacific Gas and Electric Company's renewable energy power purchase agreement with Mojave Solar, LLC is denied.

Pacific Gas and Electric Company (PG&E) filed Advice Letter 3876-E on July 19, 2011, requesting the California Public Utilities Commission (Commission) approval of a 25-year renewable energy power purchase agreement (PPA) between PG&E and Mojave Solar, LLC. Mojave Solar, LLC, an affiliate of Abengoa Solar, Inc., is developing a 250 megawatt concentrating solar power parabolic trough renewable energy generation facility in San Bernardino County, California. PG&E states that the project is expected to produce approximately 617 gigawatt-hours of generation annually beginning in July, 2014.

The Mojave Solar, LLC project (Mojave Solar) was selected through PG&E's 2007 Renewables Portfolio Standard (RPS) solicitation. PG&E initially submitted a PPA with Mojave Solar, LLC on October 27, 2009 (in Advice Letter 3547-E). While the PPA was pending Commission approval, Mojave Solar, LLC learned that the transmission network upgrades necessary for the project to provide resource adequacy to PG&E would not be completed until several years after the project was scheduled to achieve commercial operation. Because the PPA required that the facility provide resource adequacy PG&E and Mojave Solar renegotiated the PPA. According to PG&E, its objective during the renegotiation was to accommodate the delay with transmission network upgrades, facilitate the project meeting the requirements for a Department of Energy Federal Loan Guarantee and to maintain the value of the original PPA.

Mojave Solar is the furthest developed new utility-scale solar thermal project that the Commission has encountered in our capacity of reviewing the utilities' RPS power purchase agreements. Mojave Solar has obtained critical project development components (e.g., permit to construct, transmission interconnection agreement and financing commitments), leaving only a Commission approved power purchase agreement as the final milestone in order initiate project construction. Also, solar thermal facilities offer better operational characteristics than other intermittent renewable facilities.

For all the strengths underlying the Mojave Solar project, it has one significant weakness - the cost. Information provided by PG&E shows that this contract is significantly more costly than other procurement opportunities available to PG&E, including projects from the 2009 and 2011 RPS solicitation. The Mojave Solar contract also exceeds the average price of RPS contracts recently approved by this Commission. Lastly, the Mojave Solar contract ranks low on a net market value basis, a comparison of an RPS contract's total costs and benefits, relative to other contracts. The low net market value of the contract is further impacted by the significant transmission network upgrade costs required to make the project fully deliverable, which is necessary for the project to provide PG&E with resource adequacy credit pursuant to the PPA. It is important to note that these transmission network upgrades are not necessary for the project to interconnect and deliver its generation to PG&E.

In considering the strengths and weaknesses of PG&E's PPA with Mojave Solar, the Commission finds that approving the PPA would have PG&E's ratepayers incur significantly higher costs than might otherwise be necessary to meet PG&E's RPS targets. Review of PG&E's least-cost, best-fit evaluation, a qualitative and quantitative assessment of the contract's costs and benefits, clearly shows that the contract is not competitive. PG&E has not demonstrated that it has a unique need for RPS resources that only this project can meet. PG&E's request for Commission approval of its PPA with Mojave Solar is denied.

The following table provides a summary of the Mojave Solar, LLC power purchase agreement and facility:

Generating Facility	Mojave Solar
Technology	Solar thermal (wet cooled, trough, no storage)
Contract Length	25 years
Facility Capacity	250 megawatts
Annual Deliveries	617 gigawatt-hours
Online Date	July, 2014
Project Location	San Bernardino County, California