5. Comments on Proposed Decision

The revised proposed decision of ALJ Simon in this matter was mailed to the parties in accordance with Section 311 of the Public Utilities Code and comments were allowed under Rule 14.3 of the Commission's Rules of Practice and Procedure. Comments were filed on January 19, 2009 by AReM and WPTF (jointly; collectively, AReM); BVES; Bonneville Power Administration (BPA); California Wastewater Climate Change Group; CalWEA; CEERT; DRA; Evolution Markets; GPI; Iberdrola; IEP; Lakeview Light & Power, LL&P Wind Energy, Inc., and Lakeview Green Energy, Inc. (jointly; collectively, Lakeview); LSA; LS Power Associates (LS Power); NaturEner USA; PacifiCorp; PG&E; SCE; SDG&E; Sempra Generation; Shell Energy North America; SMUD; Solar Alliance; TransAlta Corporation; TURN; and UCS. With the permission of the ALJ, Bloom Energy filed its comments on January 20, 2009.¹²³

Reply comments were filed on January 25, 2010 by Aglet, AReM, CEERT, DRA, Evolution Markets, Iberdrola, IEP, CAISO, LS Power, Mountain Utilities, PG&E, Pilot Power, SMUD, SCE, Solar Alliance, TURN, and UCS.

The majority of the comments focused on the classification of transactions as REC-only or bundled, and the limit on the proportion of APT that can be met with REC-only transactions. DRA, GPI, PacifiCorp, Solar Alliance, and TURN support the criteria for classification of REC-only contracts in the RPD. CEERT, Evolution Markets, PG&E, Pilot Power, SCE, and SMUD oppose them. The helpful comments of BPA and CAISO do not take a position.

Most parties support the use of some criteria for differentiating bundled from REC-only contracts, but propose modifications to the RPD.¹²⁴ We adopt the suggestion that transactions that are "electrically equivalent" to the direct interconnection criterion in the RPD should also be included in the "bundled transaction" classification.¹²⁵ Staff will further investigate the use of firm transmission, which was advanced by several parties as an indication of a bundled transaction.

The temporary limit on the use of TRECs for RPS compliance is supported by GPI and Solar Alliance, and opposed by AReM, Lakeview, NaturEner, PG&E, Pilot Power, SCE, and Shell. Aglet, CEERT, LSA, Sempra, TURN, and UCS propose modified limits. We agree with LSA that, since we now include a greater range of transactions in the bundled transaction category, the TREC usage limit should be reduced. Most parties¹²⁶ proposing a specific amount for a lower limit identify 25% of APT as the appropriate limit; we agree.

We are also persuaded by SDG&E and TURN that the temporary limit on the use of TRECs for RPS compliance should not be applied to TRECs from contracts previously approved by the Commission if applying the limit to those deliveries would cause the LSE to exceed the TREC usage limit.

Several commenters¹²⁷ on the RPD argue that the classification of REC-only contracts, the usage limit, or the combination of the two creates an impact on interstate commerce that runs afoul of the commerce clause of the United States Constitution (Art. I, sec. 8, cl. 3).¹²⁸ These parties assert that the RPD impermissibly favors RPS-eligible generators located in California over generators that are not located in California and are not interconnected to a California balancing authority area.

These arguments against the TRECs regime in the RPD are not persuasive. As an initial matter, the RPD makes no distinctions among RPS procurement contracts that expressly convey only RECs and not energy. Any generator within the WECC can enter into a REC-only contract with a California RPS-obligated LSE, so long as the CEC's criteria for eligibility and delivery are met.

The parties' arguments focus on the classification of REC-only and bundled contracts where both RECs and energy are initially conveyed to the buyer. The classification announced in the RPD is not based on political boundaries, and it does not equate to a state-based classification in practice. The electrical boundaries of California balancing authority areas extend outside the state, and indeed outside the country, into Mexico. As TURN notes in its reply comments on the RPD, about 23% of the pending requests by renewable generators for interconnection to the CAISO are made by generators located outside the state border of California.

The changes made to the RPD in response to comments about the "bright-line" test in the RPD further erode the claim that the treatment of REC-only contracts discriminates against RPS-eligible generators located outside California.¹²⁹ This decision now includes as bundled RPS contracts (i.e., contracts with energy that can directly serve California load) those contracts using dynamic transfers from RPS-eligible generators located outside California to California balancing authorities. This improvement to the technical accuracy of the classification made in the RPD also has the effect of clarifying that generators throughout the WECC may enter into RPS bundled contracts, since dynamic transfer arrangements are not limited to balancing authority areas that are immediately adjacent to one another.¹³⁰

Parties' concerns about the effect of the temporary TREC usage limit on interstate commerce are misplaced. The usage limit applies to all REC-only contracts, whether the generator is located within California or outside its borders. Depending on its RPS procurement decisions, an LSE could fill its entire annual usage limit with REC-only transactions with generators located outside California, or entirely with REC-only transactions with generators located in California, or with some combination of generation resources. The usage limit itself does not create any RPS procurement requirements, nor does it require any particular pattern of RPS procurement.

In response to a number of suggestions, we provide a fixed date for the expiration of the temporary TREC usage limit and price cap on REC-only purchases, as well as topics the Commission should consider if it decides to review the usage limit and price cap prior to their expiration.

Parties' comments on the temporary cap on utility payments for TRECs do not present new policy arguments; the RPD remains substantially unchanged on this point. Several suggestions for clarifications to this section are adopted.

All comments and reply comments have been carefully considered; only those areas with the most interest from commenters are discussed in this section. The RPD has been thoroughly revised in response to the full range of comments, as well as to improve clarity and consistency, and to correct minor errors.

¹²³ Motions for party status were filed on January 15, 2010 by LS Power Associates, L.P. and by Sempra Generation. Motions were filed on January 19, 2010 by TransAlta Corporation; Lakeview; and California Wastewater Climate Change Group. Bloom Energy Corporation filed its motion on January 20, 2010 and BPA filed its motion on January 21, 2010. BPA's motion was granted by the ALJ's Ruling Granting Motion for Party Status (January 27, 2010); the other motions were granted by the ALJ's Ruling Granting Motions for Party Status (January 22, 2010).

¹²⁴ AReM, CalWEA, CEERT, Iberdrola, IEP, LSA, Lakeview, LS Power, NaturEner, Sempra, SDG&E, and UCS are in this group.

¹²⁵ CalWEA, Iberdrola, and IEP advance this view. LSA and UCS support it. Sempra Generation provides useful information to support this clarification.

¹²⁶ Aglet, TURN, and UCS.

¹²⁷ Iberdrola, Lakeview, NaturEner, Pilot Power, SCE, and SDG&E raise this issue. DRA argues that the RPD is not in conflict with the Commerce Clause.

¹²⁸ This clause provides that:

The Congress shall have power. . . to regulate commerce with foreign nations, and among the several states, and with the Indian Tribes. . .

¹²⁹ See § 4.5, above, for a detailed discussion of these adjustments.

¹³⁰ CAISO Dynamic Transfer Issue Paper at 16.