3. Consistency with Commission Decisions
The Commission has adopted a number of requirements for PPAs to be RPS-eligible as well as for those that are not RPS-eligible. They are addressed below.
3.1. Fit with Identified Renewable Resource Needs
Each year, PG&E, Southern California Edison Company, and San Diego Gas and Electric Company submit renewable resource procurement plans for the Commission's review and approval. PG&E's 2008 renewable resource procurement plan (2008 Plan) was approved by Decision (D.) 08-02-008. The plan's goal was to procure between 800 and 1,600 gigawatt-hours per year of RPS-eligible energy. The PPA does not provide new, incremental RPS-eligible power. However, by replacing the expiring agreement with the PPA, PG&E will continue to receive RPS-eligible power and three dispatchable resources capable of generating peak period energy and providing ancillary services such as spinning and non-spinning reserves. Thus, the PPA helps meet the 2008 Plan's goal for renewables procurement, and ensures that current RPS-eligible power from the powerhouses will contribute to PG&E's 2010 RPS target and RPS goals beyond 2010.2
3.2. Consistency with Long-Term Procurement Plan (LTPP)
PG&E's LTPP is its plan for procuring energy resources for a 10-year period. In D.07-12-052 approving PG&E's 2006 LTPP for 2007 through 2016, the Commission said development of renewable resources is of great importance.3 The Commission also required PG&E to procure dispatchable resources that can be used to adjust for the morning and evening ramps created by the intermittent types of renewable resources. The PPA is consistent with these requirements because the powerhouses are dispatchable renewable resources that can be used for ramping.4
3.3. Consistency with Commission Proceedings and Standards for Non-RPS Procurement
In D.07-12-052, the Commission identified the need by 2015 for new, operationally flexible, dispatchable and viable generation facilities. All of the powerhouses, non-RPS-eligible and RPS-eligible, are existing dispatchable resources that meet these criteria. In addition, the PPA prices are reasonable compared to applicable benchmarks.
3.4. Consistency with Commission Guidelines for Bilateral Contracting
In D.03-06-071 and D.06-10-019, the Commission established the following requirements for approval of bilateral contracts for RPS-eligible resources until evaluation criteria have been developed:
· The contract is longer than one month in duration;
· The contract does not receive above market funds; and
· The contract is deemed reasonable by the Commission.
In D.09-06-050, the Commission determined that bilateral contracts should be evaluated using the same methods and criteria as are used to review contracts that result from a competitive bidding.
The PPA is longer than one month in duration and is not eligible for above market funds as discussed in Section 3.15 of this decision. Overall, the PPA is reasonable as discussed elsewhere in this decision. Therefore, the PPA satisfies the Commission's requirements for bilateral contracts.
3.5. Consistency of Contract Evaluation Process with Least-Cost Best-Fit (LCBF) Decision
The LCBF decision, D.04-07-029, directs the utilities to use specified criteria in ranking solicited bids for the provision of RPS-eligible renewable resources. Since the PPA resulted from bilateral negotiations rather than a bidding process, PG&E did not strictly apply the LCBF decision requirements. However, it did consider market valuation and portfolio fit which are addressed in the LCBF decision requirements. These are addressed below.
Based on a review of the confidential information provided with the application, the PPA is competitive with other available alternatives.
The powerhouses are already integrated into PG&E's energy portfolio and most of the energy deliveries are dispatchable. Therefore, the PPA fits well with PG&E's portfolio.
3.6. Consistency with Transmission Cost Ranking Decisions
Pursuant to D.04-06-013 and D.05-07-040, the potential customer cost to accept energy deliveries (the cost of connecting to PG&E's grid) must be considered in determining the RPS-eligible project's value. Since the powerhouses already exist and are interconnected with PG&E, no transmission upgrades are needed and no additional costs to accept deliveries were included in the evaluation of net benefits.
3.7. Qualitative Factors
D.04-07-029 and D.08-02-008 require that qualitative factors be considered when evaluating a PPA for RPS-eligible resources. PG&E considered qualitative factors in evaluating the PPA, including environmental stewardship, local reliability and resource diversity benefits. As discussed in this decision, the powerhouses provide dispatchable power from an existing renewable resource that does not produce greenhouse gases and contributes to the resource diversity in PG&E's renewables portfolio.
3.8. Procurement Review Group (PRG) Participation and Feedback
In D.02-08-071, the Commission required each utility to establish a PRG whose members would review each utility's procurement strategy and processes. The PRG would also review proposed contracts before they are submitted to the Commission for approval. PG&E informed its PRG of the PPA. PRG feedback, as described in the confidential information provided with the application, did not provide a basis for disapproval of the PPA.
3.9. RPS Goals
The California Legislature established an RPS goal of 20% of electric generation by renewable resources by the end of 2010. The Governor, by an Executive Order issued in November 2008, set a new target of 33% by 2020. Generation from the RPS-eligible powerhouses contributes to meeting these RPS goals. In addition, taking power from the non-RPS-eligible powerhouses is consistent with the state's general goal of limiting incremental greenhouse gas emissions.
3.10. Standard Terms and Conditions
The Commission's standard terms and conditions to be incorporated in contracts for electricity purchases from RPS-eligible resources are set forth in D.04-06-014, D.07-02-011 as modified by D.07-05-057, and D.07-11-025. These terms and conditions were compiled and published in D.08-04-009. The non-modifiable term related to Green Attributes was finalized in D.08-08-028. The PPA conforms to the non-modifiable terms set forth in Attachment A of D.07-11-025, and Appendix A of D.08-04-009, as modified by D.08-08-028. PG&E has modified terms identified as modifiable in D.07-11-025 and D.08-04-009 based upon mutual agreement with South Feather.
3.11. Minimum Quantity
In D.07-05-028, the Commission determined that in order to count deliveries from contracts of less than 10 years duration with RPS-eligible facilities that commenced operation prior to January 1, 2005 towards RPS goals, utilities must contract for at least 0.25% of their prior year's retail sales through long-term contracts or short-term contracts with new facilities. The RPS-eligible portion of the PPA is a long-term contract with an existing facility that counts toward PG&E's 2009 procurement obligation under D.07-05-028.
3.12. Emissions Performance Standard (EPS)
In D.07-01-039, the Commission adopted an EPS that applies to contracts with a term of five years or more for base load generation with an annualized capacity factor of at least 60%. The PPA is not covered by the EPS because it is a hydroelectric facility with an expected capacity factor under 60%.
3.13. Above Market Funds
Public Utilities Code Section 399.15(d) provides for above market funds to be available for RPS-eligible resources meeting specified conditions. Since the PPA is for an existing facility and is the result of bilateral negotiations, power from the RPS-eligible powerhouses is not eligible for above market funds.5
3.14. Market Price Referent (MPR)
The MPR represents the presumptive cost of electricity from a non-renewable energy source. RPS-eligible contracts are considered reasonable per se if the cost is below the MPR, and can be recovered in rates.6 The PPA price for the RPS-eligible powerhouses is below the MPR. In addition, the effective price for power from the non-RPS-eligible powerhouses is not expected to exceed the 2008 MPR. 7
2 RPS goals are addressed in Section 3.9.
3 PG&E's 2006 LTPP is the last adopted LTPP.
4 The term "ramping" refers to the gradual increase or decrease of generation as load increases or decreases.
5 Power from non-RPS-eligible resources is not eligible for above market funds.
6 See D.04-06-015.
7 The 2008 MPR was adopted in Resolution E-4214 on December 18, 2008.
