6. Assignment of Proceeding
Michael R. Peevey is the assigned Commissioner and Anne E. Simon and Burton W. Mattson are the assigned ALJs for this proceeding.
1. Allowing the use of TRECs for RPS compliance will give RPS-obligated LSEs increased options for RPS compliance, and may reduce complexity and costs of RPS procurement contracting.
2. The use of TRECs for RPS compliance will be substantially compatible with existing RPS flexible compliance rules.
3. As the California TREC market develops, it is likely to provide support for the development of new RPS-eligible generation.
4. In view of the benefits of the use of TRECs for RPS compliance and the development of a viable TREC market, it is reasonable to allow the use of TRECs for RPS compliance, subject to reasonable conditions.
5. This Commission adopted the report on the tracking system required by § 399.16(a)(1) by Res. E-4178 (November 21, 2008).
6. The CEC adopted the report on the tracking system required by § 399.16(a)(1) at its business meeting on December 3, 2008.
7. In order to maximize benefits to ratepayers, it is reasonable to classify RPS procurement transactions that convey energy and RECs as bundled transactions when these transactions serve California customer load without the substitution of energy from firming and/or shaping arrangements prior to the energy being scheduled in a California balancing authority.
8. Because the RPS-eligible energy is delivered directly to California's system, California customers receive the maximum benefit of RPS procurement transactions when the generator of the energy associated with a REC has its first point of interconnection with the WECC transmission system with a California balancing authority area, or when the energy procured is dynamically transferred to a California balancing authority.
9. In the early years of a California TREC market, prior to LSEs' attaining the goal of 20% of retail sales from RPS-eligible generation resources, demand for TRECs is likely to exceed supply.
10. REC-only contracts are likely to provide fewer potential benefits to ratepayers than contracts for RPS procurement that include both RECs and RPS-eligible energy. In light of this differential in potential benefits, it is reasonable to impose on the three large IOUs a temporary limit of 25% of APT annually on their use of TRECs for RPS compliance.
11. In order to provide protections for ratepayers from the potential for volatility and spikes in TREC prices without damaging the basic structure of the TREC market or undermining the financial incentives for new renewable construction that are among the longer-term benefits of a TREC market, it is reasonable to impose a temporary price cap of $50/REC for TREC purchases by IOUs.
12. Solely for purposes of determining whether the contract price is reasonable and the price of TRECs is at or below the reviewable price cap, it is reasonable to develop a method to infer the price for a TREC based on a forecast of the market price for the associated energy if the contract does not specifically identify the REC price.
13. In order to promote liquidity in the TREC market, it is reasonable to impose a limit on the period of time that TRECs and RECs associated with energy in bundled contracts may be held in an active WREGIS sub-account before being retired for RPS compliance.
14. Allowing LSEs to unbundle and sell RECs from bundled contracts for RPS-eligible energy, on both a spot and forward basis, will promote liquidity in the TREC market and provide RPS compliance flexibility.
15. Because it is not always possible for the viability of REC-only contracts to be assessed in the same way as bundled contracts, it is reasonable to limit the earmarking of REC-only contracts to those contracts between an RPS-obligated LSE and one RPS-eligible generator providing the TRECs.
16. It is reasonable to allow REC-only transactions as well as bundled transactions to be used to make up shortfalls in RPS procurement in prior years in accordance with the flexible compliance rules and the limits on TREC usage set forth in this decision.
17. In order to preserve the Commission's ability to determine compliance with RPS obligations and to eliminate the potential for double-counting of some RECs, it is reasonable to prohibit the unbundling and trading of RECs from the first three years of deliveries of any RPS procurement contract, whether bundled or REC-only, that has been earmarked.
18. In view of the uncertainties involved in the early years of a new TREC market, it is reasonable to provide for regular reports by RPS-obligated LSEs of their purchases and sales of TRECs including prices of the transactions. This information may be used in assessments of market performance by Energy Division staff and, as needed, review by the Commission of the market rules set forth in this order.
1. The use of TRECs for RPS compliance should be authorized.
2. All statutory preconditions to this authorization have been met.
3. Procurement and trading of RECs that meet the requirements of D.08-08-028 and any subsequent Commission decision or any applicable legislation characterizing RECs should begin not earlier than the effective date of this decision.
4. Only RECs tracked in WREGIS should be allowed to be used for RPS compliance.
5. LSEs should be allowed to unbundle and sell RECs from bundled contracts for RPS-eligible energy, on both a spot and forward basis, subject to conditions that promote RPS compliance and prevent double-counting.
6. Existing RPS flexible compliance rules should be applied to the use of TRECs for RPS compliance, with the following adjustments:
a. REC-only contracts between an LSE and one RPS-eligible generator supplying the TRECs may be earmarked.
b. RECs may not be unbundled or traded in the first three years of contracts (whether bundled or REC-only) that have been earmarked.
c. REC-only contracts that are used for earmarking will count against any TREC usage limitation in the year the TRECs are used for RPS compliance.
7. RECs associated with RPS-eligible generation under contracts with California RPS-obligated LSEs or POUs signed prior to 2005 that do not allocate ownership or disposition of RECs as well as RECs associated with RPS-eligible generation under contracts pursuant to PURPA between QFs and California LSEs or POUs signed after January 1, 2005 may not be unbundled or used for RPS compliance separate from the associated energy.
8. A reasonable limit on the period of time that TRECs and RECs associated with energy delivered in bundled contracts used for RPS compliance may be held in an active WREGIS sub-account before being retired for RPS compliance should be imposed.
9. In order to allow flexibility in RPS procurement and compliance, IOUs should be able to enter into voluntary TREC transactions even if their cost limitation, as set out in § 399.15(d), has been reached, so long as the usage limit, price cap, and other requirements in this decision are met.
10. In order to maximize the benefit California consumers receive from the procurement of RPS-eligible energy and of TRECs, all procurement that does not meet the Commission's criteria for classification as bundled RPS transactions should be classified as REC-only transactions. Transactions in which RECs and energy are procured from RPS-eligible generators for which the first point of interconnection with the WECC interconnected transmission system is in a California balancing authority area, or transactions using dynamic transfer arrangements with a California balancing authority, should be considered bundled procurement for RPS compliance purposes. All other RPS procurement transactions should be considered REC-only at this time.
11. Transactions in which RECs and RPS-eligible energy are procured from a generator whose first point of interconnection with the WECC interconnected transmission system is not a California balancing authority, and the transaction does not make use of dynamic transfer arrangements with a California balancing authority, that were approved by the Commission prior to the effective date of this decision should be counted as REC-only transactions as of the effective date of this decision. All deliveries from such transactions that occurred prior to the effective date of this decision should count as bundled transactions.
12. A temporary limit on the proportion of annual RPS procurement obligations that can be met by using TRECs should be imposed on the three large IOUs.
13. In order to recognize the legitimate expectations of the parties to RPS contracts now classified as REC-only that were approved by the Commission prior to the effective date of this decision, the temporary limit on the use of TRECs for RPS compliance provided in this decision should not be applied to deliveries to an LSE from contracts classified as REC-only by this decision, but which were previously approved by the Commission, if the deliveries would cause the LSE to exceed the TREC usage limit. In this circumstance, the LSE should not be allowed use any TRECs associated with contracts that were not approved by the Commission prior to the effective date of this decision for compliance in that year that would exceed the 25% annual limit.
14. A temporary cap on the price a utility may pay for a TREC should be imposed.
15. The temporary price cap for IOU purchases of TRECs should not be treated as a per se reasonable price for a TREC.
16. IOUs should include proceeds of the sale of TRECs in their ERRA or ECAC accounts, or equivalents (such as power purchase accounts) for the benefit of ratepayers. Any IOU not currently having an appropriate accounting method should file an advice letter within 90 days of the date of this decision proposing an accounting method.
17. In order to allow multi-jurisdictional utilities to recover the reasonable costs of REC-only contracts procured solely for California RPS compliance, such contracts should be submitted for Commission approval via advice letter.
18. In order to carry out the determinations in this decision, the Director of Energy Division should be authorized to develop methods, in consultation with the parties and CAISO and other California balancing authorities, if relevant, of reviewing and evaluating RPS procurement contracts in which a dynamic transfer is an element of the contract.
19. In order to provide the Commission with information to evaluate the role of firm transmission in RPS procurement, the Director of Energy Division should be authorized to investigate the use of firm transmission in accordance with the guidance provided in this decision.
20. In order to facilitate the integration of TRECs into RPS procurement planning and practices, the assigned Commissioner in R.08-08-009 or its successor should be authorized to include in that proceeding consideration of changes to RPS annual procurement plans, LCBF evaluation methodology, and RPS contract approval processes to include procurement of TRECs.
21. In order to facilitate the integration of REC-only transactions into the RPS flexible compliance rules, the Director of Energy Division should be authorized, consistent with the ALJ's Reporting Ruling, to make revisions to the RPS compliance spreadsheet and other RPS reporting formats to implement the requirements and conditions set forth in this order.
22. In order to facilitate the integration of REC-only transactions into the RPS procurement process, the Director of Energy Division should be authorized to apply current procedures and methods of review of bundled contracts to REC-only contracts, with the exception that the fast-track procedure authorized by D.09-06-050 should not now be applied to REC-only contracts.
23. In order to facilitate the integration of REC-only transactions into the RPS procurement process, utilities that have submitted RPS procurement contracts for Commission approval should, if necessary, amend all pending contracts to include the STCs related to RECs, and should amend their pending advice letters or applications to demonstrate that the contracts conform to the requirements for STCs related to RECs.
24. Utilities that are required to submit their RPS procurement contracts for Commission approval should submit contracts conveying only RECs and not energy for approval not earlier than April 1, 2010.
25. In order to facilitate the integration of REC-only transactions into the RPS procurement process, the Director of Energy Division should be authorized to determine the price of the TRECs in transactions for both RECs and energy in which no separate price for RECs is indicated and where the RECs are associated with energy from generators of RPS-eligible energy for which the generator's first point of interconnection with the WECC interconnected transmission system is not with a California balancing authority, and the transaction does not make use of dynamic transfer arrangements in a California balancing authority.
26. In order to provide the Commission with information about the initial period of the TREC market and the use of TRECs for RPS compliance, the Director of Energy Division should prepare a report for the Commission within 16 months of the effective date of this order, using information provided by all RPS-obligated LSEs. This report should include a recommendation to the Commission regarding whether or not the applicable TREC usage limit and price cap should be retained or allowed to sunset.
27. In order to allow the use of TRECs for RPS compliance as soon as practicable, this order should be effective immediately.
IT IS ORDERED that:
1. Renewable energy credits that are procured and traded separately from the associated energy generated by a facility that is eligible for the California renewables portfolio standard may be used for compliance with the California renewables portfolio standard in accordance with the rules set forth in this decision.
2. Procurement and trading of renewable energy credits for compliance with the California renewables portfolio standard in accordance with the rules set forth in this decision may commence on the effective date of this decision.
3. Only renewable energy credits tracked and retired in the Western Renewable Energy Generation Information System shall be used for compliance with the California renewables portfolio standard.
4. Any renewable energy credits tracked in the Western Renewable Energy Generation Information System that conform to the requirements of Decision 08-08-028 and any subsequent Commission decision or any applicable California legislation characterizing renewable energy credits may be used for compliance with the California renewables portfolio standard, subject to the restrictions in Ordering Paragraphs 8 and 9, below.
5. Any renewable energy credits tracked in the Western Renewable Energy Generation Information System associated with electricity that is eligible for the California renewables portfolio standard that was generated on or after January 1, 2008 may be procured and traded separately from the associated energy, subject to the restrictions set forth in Ordering Paragraphs 8, 9, and 14 below.
6. As of the effective date of this decision, a transaction for purposes of compliance with the California renewables portfolio standard shall be considered a transaction that procures only renewable energy credits if that transaction either:
a. Expressly transfers only renewable energy credits and not energy from the seller to the buyer; or
b. Transfers both renewable energy credits and energy from the seller to the buyer but does not meet the Commission's criteria for considering a procurement transaction a bundled transaction for purposes of compliance with the California renewables portfolio standard.
All deliveries from transactions described in subsection b, above, made prior to the effective date of this decision will be counted as bundled deliveries of both renewable energy credits and energy for purposes of compliance with the California renewables portfolio standard.
7. The following types of transactions shall be treated as bundled transactions for purposes of compliance with the California renewables portfolio standard:
a. Transactions in which energy is acquired from a generator certified as eligible for the California renewables portfolio standard and the generator has its first point of interconnection with the Western Electricity Coordinating Council interconnected transmission system with a California balancing authority; and
b. Transactions in which energy is acquired from a generator certified as eligible for the California renewables portfolio standard and the energy from the transaction is dynamically transferred to a California balancing authority area.
8. Renewable energy credits associated with electricity generation that is eligible for the California renewables portfolio standard delivered under procurement contracts signed prior to 2005 with load-serving entities obligated under the California renewables portfolio standard or with California publicly owned utilities that do not allocate ownership or disposition of the renewable energy credits shall be used for compliance with the California renewables portfolio standard only if they are not transferred to an entity other than the original buyer in the Western Renewable Energy Generation Information System prior to being retired for compliance with the California renewables portfolio standard.
9. Renewable energy credits associated with electricity generation that is eligible for the California renewables portfolio standard delivered under procurement contracts of California utilities for both energy and renewable energy credits pursuant to the federal Public Utility Regulatory Policies Act of 1978 that were signed after January 1, 2005 with qualifying facilities located in California shall be used for compliance with the California renewables portfolio standard only if they are not transferred to an entity other than the original buyer in the Western Renewable Energy Generation Information System prior to being retired for compliance with the California renewables portfolio standard.
10. In order to be used for compliance with the California renewables portfolio standard, renewable energy credits may be retained in active sub-accounts in the Western Renewable Energy Generation Information System for no more than three compliance years (inclusive of the year in which the electricity associated with the renewable energy credits was generated) after the electricity associated with the renewable energy credits was generated before being transferred to the Western Renewable Energy Generation Information System retirement sub-account of a load-serving entity obligated under the California renewables portfolio standard.
11. Once renewable energy credits are retired in the Western Renewable Energy Generation Information System for use for compliance with the California renewables portfolio standard, they may be banked for compliance with the California renewables portfolio standard in future years in accordance with the flexible compliance rules for the California renewables portfolio standard.
12. Subject to the restrictions in Ordering Paragraphs 8, 9, and 14, the renewable energy credits from bundled contracts currently delivering energy eligible under the California renewables portfolio standard may be unbundled and traded separately from the associated energy in accordance with the rules set forth in this decision, so long as, once the renewable energy credits have been sold, the associated energy is not used for compliance with the California renewables portfolio standard.
13. Subject to the restrictions in Ordering Paragraphs 8, 9, and 14, the renewable energy credits from bundled contracts scheduled to deliver energy eligible for the California renewables portfolio standard in the future may be unbundled and traded on a forward basis separately from the associated energy, so long as, once the renewable energy credits are generated, they are tracked in the Western Renewable Energy Generation Information System and, once the renewable energy credits have been sold, the associated energy is not used for compliance with the California renewables portfolio standard.
14. Renewable energy credits may not be unbundled and traded from the first three years of deliveries under any bundled procurement contract for compliance with the California renewables portfolio standard that has been earmarked to apply to a shortfall in meeting the annual procurement target of a load-serving entity obligated under the California renewables portfolio standard in the year the bundled contract was signed, subject to the restrictions in Ordering Paragraphs 8 and 9.
15. Contracts for delivery of renewable energy credits only between a load-serving entity and one generator of energy eligible under the California renewables portfolio standard that supplies all the renewable energy credits in the contract may be earmarked for purposes of compliance with the California renewables portfolio standard, but no other types of contracts for delivery of renewable energy credits only may be earmarked. The tradable renewable energy credits from such contracts shall count against any annual limit on the use of tradable renewable energy credits in the year that the tradable renewable energy credits are used for compliance with the California renewables portfolio standard.
16. Renewable energy credits may not be sold or traded from the first three years of deliveries from a procurement contract for renewable energy credits only that has been earmarked to apply to a shortfall in meeting the annual procurement target of a load-serving entity obligated under the California renewables portfolio standard in the year the contract for the delivery of renewable energy credits was signed.
17. Pacific Gas and Electric Company, San Diego Gas & Electric Company, and Southern California Edison Company may each use renewable energy credits procured from contracts for renewable energy credits only to meet no more than 25 percent of their annual procurement targets for the California renewables portfolio standard, beginning with the 2010 compliance year.
18. The temporary limit on the use of tradable renewable energy credits for compliance with the California renewables portfolio standard shall not be applied to deliveries to a load-serving entity obligated under the California renewables portfolio standard from contracts that are classified by this decision as contracts for renewable energy credits only, but were approved by the Commission prior to the effective date of this decision, if such deliveries would cause that load-serving entity to exceed the annual limit on the use of tradable energy credits for compliance with the California renewables portfolio standard. In this circumstance, the LSE may not use any tradable renewable energy credits associated with contracts that were not approved by the Commission prior to the effective date of this decision for compliance in that year that would exceed the 25% annual limit.
19. The temporary limit on the use of tradable renewable energy credits for compliance with the California renewables portfolio standard shall terminate December 31, 2011, unless the Commission acts to review, extend, or modify it, or to terminate the limit prior to its expiration.
20. No renewable energy credits procured through contracts for renewable energy credits only for which the levelized amount paid is greater than $50.00 per renewable energy credit may be used by any investor-owned utility for compliance with the California renewables portfolio standard. This limit applies only to those renewable energy credits procured by multi-jurisdictional utilities exclusively for use in complying with their California renewables portfolio standard procurement obligations.
21. The temporary limit on the price paid by an investor-owned utility for tradable renewable energy credits procured through contracts for tradable renewable energy credits only for compliance with the California renewables portfolio standard shall terminate December 31, 2011, unless the Commission acts to review, extend, or modify it, or to terminate the limit prior to its expiration.
22. Investor-owned utilities that have reached the procurement cost limitation for compliance with the California renewables portfolio standard set forth in Public Utilities Code Section 399.15(d) may enter into voluntary transactions for renewable energy credits in accordance with the rules set forth in this decision.
23. Investor-owned utilities shall promptly set up an appropriate accounting method to apply proceeds of the sale of renewable energy credits for the benefit of ratepayers. Any investor-owned utility not currently having an appropriate accounting method shall file an advice letter within 90 days of the effective date of this decision proposing an accounting method.
24. Any contracts for renewable energy credits only that are procured solely for compliance with the California renewables portfolio standard for which a multi-jurisdictional utility seeks recovery of costs must be submitted for Commission approval by means of an advice letter.
25. The Director of Energy Division is authorized to develop methods, in consultation with the parties and California Independent System Operator, and other California balancing authorities, if relevant, of reviewing and evaluating procurement contracts for compliance with the California renewables portfolio standard in which a dynamic transfer is an element of the contract.
26. The Director of Energy Division shall take appropriate steps to obtain information that will enable a definitive determination of how to classify transactions for RPS procurement that include firm transmission arrangements but not dynamic transfers to a California balancing authority and will allow the development of criteria for reviewing and evaluating such contracts that are presented for Commission approval. The Director of Energy Division may also, in the Director's discretion, provide recommendations to the Commission about the classification and evaluation of such transactions. Such recommendations may be in the form of a report, or in the form of a resolution prepared for the Commission's consideration.
27. The Director of Energy Division is authorized to review existing reporting formats and tools for the California renewables portfolio standard and undertake appropriate revisions to allow complete reporting and monitoring of the provisions in this order.
28. The Director of Energy Division is authorized to apply current procedures and methods of review of bundled contracts for procurement under the California renewables portfolio standard by investor-owned utilities to contracts for renewable energy credits only, with the exception that the fast-track procedure authorized by Decision 09-06-050 may not now be applied to procurement of renewable energy credits only.
29. The Director of Energy Division is authorized to develop and apply a method for inferring the price of renewable energy credits in transactions for both renewable energy credits and energy in which no separate price for the renewable energy credits is indicated and where the renewable energy credits are associated with energy from generators of energy eligible under the California renewables portfolio standard for which the first point of interconnection with the Western Electricity Coordinating Council interconnected transmission system is not a California balancing authority and a dynamic transfer with a California balancing authority is not an element of transaction.
30. The Director of Energy Division may require the submission of appropriate documentation to verify compliance with any of the requirements set forth in this Order, including but not limited to purchases, sales, and prices of renewable energy credits.
31. The Director of Energy Division shall review and compile information about the market for tradable renewable energy credits and the use of tradable renewable energy credits for compliance with the California renewables portfolio standard provided by load-serving entities obligated under the California renewables portfolio standard in their advice letters or applications seeking approval of contracts for procurement of renewable energy credits only, in their semiannual compliance reports, and in response to other request for information made by Energy Division staff. The Director of Energy Division shall include analysis of this information in a report to be provided to the Commission not more than 16 months from the effective date of this decision. The report shall also include recommendations about whether the Commission should review, modify, or extend the annual limit on the use of tradable renewable energy credits for compliance with the California renewables portfolio standard program, or whether the Commission should let the limit expire. The report shall also include recommendations about whether the Commission should review, modify, or extend the limit on the price an investor-owned utility may pay for tradable renewable energy credits for compliance with the California renewables portfolio standard program, or whether the Commission should let the limit expire.
32. The Director of Energy Division shall include in the format for advice letters seeking Commission approval of contracts for procurement of tradable renewable energy credits for compliance with the California renewables portfolio standard the following information from the utility submitting the advice letter:
· Whether the generation facility or facilities producing the energy eligible for the California renewables portfolio standard that is associated with the renewable energy credits to be procured entered commercial operation prior to January 1, 2005, or after January 1, 2005, or was not in commercial operation at the time the contract was signed;
· the sum of all delivered and expected tradable renewable energy credits purchased through contracts executed by the utility to date and how this compares to any applicable annual limit on the use of tradable renewable energy credits for compliance with the California renewables portfolio standard;
· the sum of all delivered and expected tradable renewable energy credits purchased by that utility through contracts for the procurement of renewable energy credits only with facilities that are or were already online as of the execution date of their associated contract for procurement of tradable renewable energy credits, and how this compares to the applicable annual limit on the use of tradable renewable energy credits for compliance with the California renewables portfolio standard;
· the sum of all delivered and expected tradable renewable energy credits purchased by that utility through contracts for the procurement of renewable energy credits only with facilities that are not or were not online as of the execution dates of their associated contracts, and how this compares to the applicable annual limit on the use of tradable renewable energy credits for compliance with the California renewables portfolio standard;
· a comparison of the price of the renewable energy credits in the contract that is the subject of the advice letter and the price of renewable energy credits from all contracts for the procurement of renewable energy credits only with facilities that were online as of the execution date of their associated contracts; and
· a comparison of the price of the renewable energy credits in the contract that is the subject of the advice letter and the price of renewable energy credits from all contracts for the procurement of renewable energy credits only with facilities that were not yet online as of the execution date of their associated contracts.
33. Pacific Gas and Electric Company, San Diego Gas & Electric Company, and Southern California Edison Company shall each file and serve amendments to their 2010 annual procurement plans for compliance with the California renewables portfolio standard that have been submitted in Rulemaking 08-08-009, on a schedule to be set by the assigned administrative law judge. The amendments shall address each utility's anticipated plans for the use of tradable renewable energy credits to meet their procurement obligations under the California renewables portfolio standard. The amendments shall include as much detail as currently possible on whether the utility intends to use long-term or short-term contracts, and whether the utility expects to contract with newly constructed generation, or acquire tradable renewable energy credits from facilities that are currently on line. The amendments shall also explain how these transactions will promote the development of new renewable facilities in California and the area served by the Western Electricity Coordinating Council.
34. The assigned Commissioner in Rulemaking 08-08-009 is authorized to initiate review and revision of the methodology for identifying least cost and best-fit resources for procurement for compliance with the California renewables portfolio standard. The review shall include, among other issues, consideration of revisions to the least cost and best-fit methodology that will encourage greater reliance on procurement transactions that lead to the construction of additional capacity for generation that is eligible for procurement for compliance with the California renewables portfolio standard.
35. The following non-modifiable standard terms and conditions shall be included in all contracts for procurement for compliance with the California renewables portfolio standard, whether bundled contracts or purchases of renewable energy credits only:
a. STC REC-1. Transfer of renewable energy credits
Seller and, if applicable, its successors, represents and warrants that throughout the Delivery Term of this Agreement the renewable energy credits transferred to Buyer conform to the definition and attributes required for compliance with the California Renewables Portfolio Standard, as set forth in California Public Utilities Commission Decision 08-08-028, and as may be modified by subsequent decision of the California Public Utilities Commission or by subsequent legislation. To the extent a change in law occurs after execution of this Agreement that causes this representation and warranty to be materially false or misleading, it shall not be an Event of Default if Seller has used commercially reasonable efforts to comply with such change in law.
b. STC REC-2. Tracking of RECs in WREGIS
Seller warrants that all necessary steps to allow the renewable energy credits transferred to Buyer to be tracked in the Western Renewable Energy Generation Information System will be taken prior to the first delivery under the contract.
36. The following non-modifiable standard terms and conditions shall be included in all contracts for purchase of renewable energy credits only of regulated utilities other than multi-jurisdictional utilities:
STC REC-3. CPUC Approval
"CPUC Approval" means a final and non-appealable order of the CPUC, without conditions or modifications unacceptable to the Parties, or either of them, which contains the following terms:
(a) approves this Agreement in its entirety, including payments to be made by the Buyer, subject to CPUC review of the Buyer's administration of the Agreement; and
(b) finds that any procurement pursuant to this Agreement is procurement of renewable energy credits that conform to the definition and attributes required for compliance with the California Renewables Portfolio Standard, as set forth in California Public Utilities Commission Decision 08-08-028, and as may be modified by subsequent decision of the California Public Utilities Commission or by subsequent legislation, for purposes of determining Buyer's compliance with any obligation that it may have to procure eligible renewable energy resources pursuant to the California Renewables Portfolio Standard (Public Utilities Code Section 399.11 et seq.), Decision 03-06-071, or other applicable law.
CPUC Approval will be deemed to have occurred on the date that a CPUC decision containing such findings becomes final and non-appealable.
STC 17. Applicable Law
Governing Law. This agreement and the rights and duties of the parties hereunder shall be governed by and construed, enforced and performed in accordance with the laws of the state of California, without regard to principles of conflicts of law. To the extent enforceable at such time, each party waives its respective right to any jury trial with respect to any litigation arising under or in connection with this agreement.
37. Utilities that have submitted for Commission approval contracts for procurement for compliance with the California renewables portfolio standard shall, if necessary, amend all pending contracts to include the standard terms and conditions related to renewable energy credits set forth in Ordering Paragraphs 35 and 36 above, and shall amend their pending advice letters or applications to demonstrate that the contracts conform to the requirements for standard terms and conditions related to renewable energy credits.
38. Not earlier than April 1, 2010, utilities may submit for Commission approval contracts conveying only renewable energy credits and not energy that conform to the requirements of this order.
39. The issues in the Second Amended Scoping Memo and Ruling of Assigned Commissioner (February 25, 2008) have either been transferred to Rulemaking (R.) 08-08-009 by the Assigned Commissioner's Ruling Transferring Consideration of Certain Issues from R.06-02-012 to R.08-08-009 (April 3, 2009) or resolved in this proceeding. This proceeding is therefore resolved for the purpose of compliance with Public Utilities Code Section 1701.5. However, the proceeding remains open to address the Petition for Modification of Decision 06-10-019, filed October 29, 2009.
This order is effective today.
Dated March 11, 2010, at San Francisco, California.
MICHAEL R. PEEVEY
President
DIAN M. GRUENEICH
JOHN A. BOHN
TIMOTHY ALAN SIMON
NANCY E. RYAN
Commissioners
I reserve the right to file a concurrence.
/s/ DIAN M. GRUENEICH
Commissioner
I reserve the right to file a concurrence.
/s/ TIMOTHY ALAN SIMON
Commissioner
APPENDIX A
Public Utilities Code Section 399.16
§ 399.16. Use of renewable energy credits to satisfy the requirements of the renewables portfolio standard
(a) The commission, by rule, may authorize the use of renewable energy credits to satisfy the requirements of the renewables portfolio standard established pursuant to this article, subject to the following conditions:
(1) Prior to authorizing any renewable energy credit to be used toward satisfying annual procurement targets, the commission and the Energy Commission shall conclude that the tracking system established pursuant to subdivision (c) of Section 399.13, is operational, is capable of independently verifying the electricity generated by an eligible renewable energy resource and delivered to the retail seller, and can ensure that renewable energy credits shall not be double counted by any seller of electricity within the service territory of the Western Electricity Coordinating Council (WECC).
(2) A renewable energy credit shall be counted only once for compliance with the renewables portfolio standard of this state or any other state, or for verifying retail product claims in this state or any other state.
(3) The electricity is delivered to a retail seller, the Independent System Operator, or a local publicly owned electric utility.
(4) All revenues received by an electrical corporation for the sale of a renewable energy credit shall be credited to the benefit of ratepayers.
(5) No renewable energy credits shall be created for electricity generated pursuant to any electricity purchase contract with a retail seller or a local publicly owned electric utility executed before January 1, 2005, unless the contract contains explicit terms and conditions specifying the ownership or disposition of those credits. Deliveries under those contracts shall be tracked through the accounting system described in subdivision (b) of Section 399.13 and included in the baseline quantity of eligible renewable energy resources of the purchasing retail seller pursuant to Section 399.15.
(6) No renewable energy credits shall be created for electricity generated under any electricity purchase contract executed after January 1, 2005, pursuant to the federal Public Utility Regulatory Policies Act of 1978 &_butType=4&_butStat=0&_butNum=2&_butInline=1&_butinfo=16 USC 2601&_fmtstr=FULL&docnum=1&_startdoc=1&wchp=dGLbVlb-zSkAB&_md5=237bee2388ba51beb893afcc84995ba2" target="_top">(16 U.S.C. Sec. 2601 et seq.). Deliveries under the electricity purchase contracts shall be tracked through the accounting system described in subdivision (b) of Section 399.12 and count toward the renewables portfolio standard obligations of the purchasing retail seller.
(7) The commission may limit the quantity of renewable energy credits that may be procured unbundled from electricity generation by any retail seller, to meet the requirements of this article.
(8) No electrical corporation shall be obligated to procure renewable energy credits to satisfy the requirements of this article in the event that the total costs expended above the applicable market prices for the procurement of eligible renewable energy resources exceeds the cost limitation established pursuant to subdivision (d) of Section 399.15.
(9) Any additional condition that the commission determines is reasonable.
(b) The commission shall allow an electrical corporation to recover the reasonable costs of purchasing renewable energy credits in rates.
(END OF APPENDIX A)
APPENDIX B
STAFF STRAW PROPOSAL
COMPLIANCE QUESTIONS |
STRAW PROPOSAL |
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Market Participants | ||||
· Who can participate in the California compliance REC market? · Should the REC trading rules differ for third parties (any non RPS-obligated entity)? |
There are no limits on market participation. To the greatest extent possible, rules should be consistent for all participants. | |||
TREC Usage Limits | ||||
· Pursuant to Pub. Util. Code § 399.16(a)(7), the Commission may limit the quantity of tradable RECs (TRECs) procured for RPS compliance. · Should there be a limit on the quantity of tradable RECs that can be used by LSEs for RPS compliance? Should the limit be different for different classes of LSEs? |
To address usage limits, a minimum quota mechanism, similar to the one set forth in D.07-05-028 for short term contracts, will be applied to TRECs. The minimum quota will allow, in any calendar year, LSEs to count short-term REC contracts for RPS compliance only if, in the same calendar year, the LSE signs long-term bundled contracts or bundled contracts with new facilities whose aggregated annual expected deliveries131 total at least 0.25% of its prior year's retail sales. | |||
Flexible Compliance: Banking | ||||
· Should tradable RECs have an "expiration date"? · Should RPS-obligated LSEs be able to "bank" tradable RECs without limitation as to quantity? · Should RPS-obligated LSEs be able to "bank" tradable RECs without temporal limitations? Note: Currently, there are no temporal or quantity restrictions for banking bundled RPS contracts. Flexible compliance is tracked for each LSE in its Reporting and Compliance Spreadsheet submitted in biannual performance reports required by D.06-10-050. |
Banking within WREGIS In order for tradable RECs to be used for RPS compliance, they must be retired132 in WREGIS within three compliance years (including compliance year in which it was generated).133 Banking after WREGIS After RECs are retired in WREGIS, they can be banked indefinitely for RPS compliance purposes. The flexible compliance for RECs and RPS bundled procurement will be tracked by the Compliance Spreadsheets submitted as part of the biannual Compliance Reports (D.06-10-050). |
Flexible Compliance: Earmarking | |
· Should earmarking134 be allowed for TRECs? |
No tradable RECs can be used for earmarking. No forward REC contracts can be used for earmarking. |
Treatment of Bundled135 Contracts | |
· What types of existing and future bundled RPS contracts can be unbundled for REC trading (excluding contracts pursuant to Pub. Util. Code § 399.16(a) for which no RECs will be created)? |
Beginning on January 1, 2009, LSEs can unbundle and sell the RECs (that are tracked in WREGIS) from currently operational RPS projects. (Once the RECs are sold, they cannot be used for RPS compliance by the selling LSE. The null power also cannot be used for RPS compliance by any LSE.) Beginning on January 1, 2009, LSEs can unbundle and sell RECs (that are tracked in WREGIS), on a forward basis, from Commission-approved RPS projects that are not yet online. (Once the RECs are sold, they cannot be used for RPS compliance by the selling LSE. The null power also cannot be used for RPS compliance.) However, LSEs cannot unbundle the first year of a bundled contract if it has been set aside for RPS earmarking. - LSEs can unbundle subsequent years of an earmarked bundled contract |
Cost Recovery | |
· What is the review and approval process for IOU REC contracts? (Currently, all IOU bundled RPS contracts must be filed by advice letter. The contract review process for short-term bundled contracts is being separately developed in R.06-02-012.) · What price evaluation mechanism should the Commission use to evaluate whether a REC contract price is reasonable? · Should the Commission establish standard terms and conditions (modifiable and/or non-modifiable) to be contained in REC contracts? |
Review process: Long-term REC contracts (either from a solicitation or bilateral) must be filed with the Commission by advice letter. All short-term REC contracts should follow the same approval process that is established in R.06-02-012 for short-term bundled contracts. Price evaluation criteria: IOUs should solicit REC contracts in their annual renewable RFOs. As part of this process, the IOUs must modify their least cost, best fit (LCBF) evaluation methodologies to shortlist the most competitive REC contracts. The LCBF methodology should compare the benefits and costs of bundled contracts with REC transactions and evaluate them relative to the LSE's entire RPS portfolio. A price cap will also be used to protect ratepayers from unreasonable costs. The price cap for any REC contract (short term, long term, bid into a solicitation, bilateral) is $35/REC levelized using the IOU's approved discount rate. Bilateral REC contracts are allowed also and are subject to the $35/REC levelized price cap. Standard terms and conditions: Each REC contract must contain a Commission-approved term identifying the RECs and their attributes transferred to the buyer. This term is not modifiable. |
APPENDIX C
NEW AND REVISED STANDARD TERMS AND CONDITIONS
STC REC-1 Transfer of renewable energy credits (Applies to all REC-only and bundled contracts)
Non-modifiable
Seller and, if applicable, its successors, represents and warrants that throughout the Delivery Term of this Agreement the renewable energy credits transferred to Buyer conform to the definition and attributes required for compliance with the California Renewables Portfolio Standard, as set forth in California Public Utilities Commission Decision 08-08-028, and as may be modified by subsequent decision of the California Public Utilities Commission or by subsequent legislation. To the extent a change in law occurs after execution of this Agreement that causes this representation and warranty to be materially false or misleading, it shall not be an Event of Default if Seller has used commercially reasonable efforts to comply with such change in law.
STC REC-2 Tracking of RECs in WREGIS (Applies to all REC-only and bundled contracts) Non-modifiable
Seller warrants that all necessary steps to allow the renewable energy credits transferred to Buyer to be tracked in the Western Renewable Energy Generation Information System will be taken prior to the first delivery under the contract.
STC REC-3 CPUC Approval (Applies to REC-only contracts of regulated utilities other than multi-jurisdictional utilities)
Non-Modifiable
"CPUC Approval" means a final and non-appealable order of the CPUC, without conditions or modifications unacceptable to the Parties, or either of them, which contains the following terms:
(a) approves this Agreement in its entirety, including payments to be made by the Buyer, subject to CPUC review of the Buyer's administration of the Agreement; and
(b) finds that any procurement pursuant to this Agreement is procurement of renewable energy credits that conform to the definition and attributes required for compliance with the California Renewables Portfolio Standard, as set forth in California Public Utilities Commission Decision 08-08-028, and as may be modified by subsequent decision of the California Public Utilities Commission or by subsequent legislation, for purposes of determining Buyer's compliance with any obligation that it may have to procure eligible renewable
energy resources pursuant to the California Renewables Portfolio Standard (Public Utilities Code Section 399.11 et seq.), Decision 03-06-071, or other applicable law.
CPUC Approval will be deemed to have occurred on the date that a CPUC decision containing such findings becomes final and non-appealable.
APPENDIX D
Summary of TREC Rules Announced in This Decision
This decision sets rules for the use of TRECs for RPS compliance and for the TREC market. The orders and guidance (while not limited by this summary) are
summarized below. Other sources relevant to TRECs include D.08-08-028, the CEC's RPS Eligibility Guidebook, and the WREGIS Operating Rules.
What is a tradable renewable energy credit (TREC) transaction?
1) A transaction in which an entity procures only a REC (and not the underlying energy) from another entity, or
2) A transaction conveying both RECs and energy that does not meet the Commission's criteria for bundled RPS procurement transactions. These REC-only transactions currently include all procurement from generators of RPS-eligible energy for which the first point of interconnection with the WECC interconnected transmission system is not a California balancing authority, and the transaction does not make use of dynamic transfer arrangements in a California balancing authority area.
Effective date of REC trading
· RPS-obligated load-serving entities136 may begin procuring and trading RECs on the effective date of this decision.
Eligibility of TRECs
· All TRECs must be associated with RPS-eligible energy generated on or after January 1, 2008.
· All TRECs must be tracked in WREGIS to be used for RPS compliance.
· The RECs from bundled contracts currently delivering RPS-eligible energy may be unbundled and traded separately from the associated energy, subject to the exceptions below.
· The RECs from bundled contracts scheduled to deliver RPS-eligible energy in the future may be unbundled and traded on a forward basis separately from the associated energy, subject to the exceptions below.
· Exceptions:
1. RECs associated with RPS-eligible energy delivered under procurement contracts signed prior to 2005 with California RPS-obligated LSEs or publicly owned utilities cannot be traded unless the contract explicitly assigns ownership or disposition of the RECs.
2. RECs associated with RPS-eligible energy delivered to California utilities under procurement contracts pursuant to the Federal Public Utility Regulatory Policies Act of 1978 with qualifying facilities signed after January 1, 2005 cannot be traded.
Flexible compliance rules for TRECs
Commitment and Banking
· In order to be used for RPS compliance, TRECs may be retained in active sub-accounts in WREGIS for no more than three calendar years (inclusive of the year in which the electricity associated with the RECs was generated) after the electricity associated with the RECs was generated.
· Once RECs are retired in WREGIS for RPS compliance, they may be banked for RPS compliance in future years in accordance with the RPS flexible compliance rules.
Earmarking
· TREC contracts between an LSE and one RPS-eligible generator may be earmarked for RPS compliance purposes, but no other types of TREC contracts may be earmarked.
· An LSE may not unbundle and trade RECs associated with energy generated in the first three years of an RPS contract (whether bundled or REC-only) that is being used for earmarking.
Filling compliance shortfalls
REC-only contracts may be used to make up shortfalls in APT, so long as the total use of TRECs for the year of the shortfall does not exceed the applicable limit on TRECs usage.
Temporary limit on use of TRECs for RPS compliance
· PG&E, SCE, and SDG&E may meet no more than 25% of their APT with TRECs. This limitation will sunset December 31, 2011 unless the Commission acts to extend it.
Contract review and approval of TREC transactions
· IOUs may submit TREC contracts for CPUC review and approval by advice letter starting April 1, 2010.
· Energy Division staff may use present methods of analyzing advice letters for bundled contracts, and make any adaptations necessary, for reviewing REC-only contracts, except that the fast-track process set out in D.09-06-050 does not apply to TRECs. These methods may be reviewed in R.08-08-009.
· TRECs for which an IOU pays more than $50/TREC may not be used for RPS compliance. This price cap will sunset December 31, 2011, unless the Commission acts to extend it.
· The temporary $50/TREC price cap does not make a TREC priced at or below $50 reasonable. A utility will still have to provide sufficient information in its advice letter filing to demonstrate that the TREC contract is reasonable.
· All REC-only contracts must contain the following three non-modifiable standard terms and conditions: (1) Transfer of renewable energy credits; (2) Tracking of RECs in WREGIS; (3) Applicable Law.
· REC-only contracts of California IOUs other than MJUs must contain a fourth STC: Commission Approval.
· IOUs may enter into voluntary TREC transactions even if their cost limitation pursuant to § 399.15(d) has been reached, so long as they comply with the requirements of this decision.
Delivery rules for TREC transactions
· The CEC decides whether a TREC contract satisfies RPS delivery rules. For bundled contracts, the Energy Division may request written confirmation from the CEC about whether the contract complies with RPS delivery rules.
(END OF APPENDIX D)
APPENDIX E
SERVICE LIST IN R.06-02-012
************** PARTIES ************** |
Michael Alcantar |
John R. Redding |
Avis Kowalewski |
Frederick M. Ortlieb |
R. Thomas Beach |
Ronald M. Cerniglia, Director- National Advocacy |
Greggory L. Wheatland |
Garson Knapp |
James D. Squeri |
Steven Kelly, Policy Director |
David L. Huard, Attorney At Law |
Noel Obiora |
PILOT POWER GROUP, INC. |
Daniel V. Gulino |
Aimee M. Smith |
William V. Walsh |
Laura Wisland |
Clare Laufenberg |
Paul Douglas |
Cheryl Lee |
Kenneth Swain |
Sean A. Simon |
Donald Brookhyser |
Darin Lowder |
Scott Blaising |
Dan Adler |
Karen Lindh |
Peter Blood |
Graig Cooper |
Balwant S. Purewal |
Cassandra Sweet |
Jeffrey Harris |
Dan Perkins |
Janine L. Scancarelli |
Amber Riesenhuber |
Timothy Castille |
Richard Mccann |
Wes Miller |
Brad Bauer |
Kirby Dusel |
Harold M. Romanowitz |
Matt Gonzales |
Jason Payne |
Andre Devilbiss |
Bud Beebe |
Vikki Wood |
Sandra Rovetti |
Elena Mello |
Seth D. Hilton |
Erin Grizard |
Andrew J. Van Horn |
(END OF APPENDIX E)
Concurrence of Commissioner Grueneich
March 11, 2010 Business Meeting, Agenda ID #8406, Item 32
Tradable Renewable Energy Credits (RECs) are potentially a very important tool to help California reach its 33 percent renewable energy goal in a timely and cost-effective manner. California's load serving entities must have the full range of procurement options open to them to achieve our clean energy and greenhouse gas emission reduction goals at the least cost and greatest benefit for ratepayers.
In developing guidelines for REC transactions, this Commission must keep several objectives in mind: one, ensuring development of a robust and well-functioning REC market; two, providing value to ratepayers by displacing conventional generation with renewable generation; three, obtaining a net reduction in greenhouse gas emissions, and; four, achieving the legislative goals for the state's renewable portfolio standard (RPS) program.
The legislative goals are found in Public Utilities Code Section 399.11. They are fivefold:
1) Promotion of stable electricity prices through resource diversity,
2) Protection of public health and environmental quality through reduction in air pollution from fossil fired generation,
3) Stimulation of sustainable economic development,
4) Creation of new employment opportunities for Californians through the development of new renewable resources, and
5) Reduction in reliance on imported fuels.
Each of these goals is met primarily through development of new renewable resources, not buying RECs from existing plants. Likewise, the additional legislative goals of providing ratepayer benefit and net greenhouse gas emissions reductions can only be achieved through the construction of new renewable generation facilities and delivery of that generation for use by end use customers in California.
If REC transactions fail to achieve these goals, then all we have achieved is paper compliance with the RPS and a huge financial burden on ratepayers. Ratepayers will be required to pay for the RECs, purchase the energy needed to satisfy demand and to achieve resource diversity, and fund additional measures to achieve the AB 32 emissions reductions that the RPS failed to provide. As we have seen with the concerns over the existing de facto REC contracts submitted by our regulated utilities, a robust market for these contracts does not automatically mean that meaningful value was created for ratepayers.
Thus, it is necessary to give clear guidance to the utilities on the nature of the REC transactions that they should pursue. I want to thank President Peevey for working with me to revise the proposed decision to state this Commission's clear preference for REC transactions with new renewable energy facilities and to establish a process in the RPS procurement docket to ensure that this preference is implemented. With these changes, I will support the proposed decision before us today.
Dated March 11, 2010, at San Francisco, California.
/s/ DIAN M. GRUENEICH |
Dian M. Grueneich Commissioner |
131 This is different from the minimum quota framework set forth in D.07-05-028, which requires that the total deliveries expected from the long-term contracts and contracts with new facilities are greater than 0.25% of prior year's retail sales before short-term contracts can be signed.
132 "A Retirement Subaccount is used as a repository for WREGIS Certificates that the Account Holder wants to designate as Retired and remove from circulation (e.g., to demonstrate compliance with a state's RPS). Once a Certificate has been transferred into a WREGIS Retirement Subaccount, it cannot be transferred again to any other Account." (WREGIS Operating Rules, p. 6.)
133 The LSEs should create a banking Active sub-account within WREGIS to `hold' RECs until they are retired for compliance purposes.
134 Earmarking is a flexible compliance tool that LSEs can conditionally use to defer deficits. See D.06-10-050, Attachment A, pages 9-10.
135 A bundled RPS contract is a power purchase agreement that conveys all energy, capacity and environmental attributes to a load-serving entity.
136 Load-serving entities (LSEs) include: investor-owned utilities (IOUs), energy service providers (ESPs), and community choice aggregators (CCAs).