6. Applicable Commission Decisions and Statutes
6.1. Parties' Positions
Most parties agree that AB 920 does not impact the PV Program. However, DRA urges the Commission to consider PG&E's need for additional RPS resources through PV Program given that both SB 32 and AB 920 will increase the amount of RPS energy that PG&E will be obligated to purchase.50 In DRA's view, purchases under AB 920 and the "must take" obligation under SB 32 would significantly increase the amount of RPS energy for PG&E, thereby reducing PG&E's RPS obligation to procure additional renewable resources.
DRA also recommends that the PV Program be limited to facilities greater than 3 MW to avoid overlap with SB 32, which also targets facilities up to 3 MW.
PG&E believes neither AB 920 nor SB 32 materially conflict with the PV Program. In PG&E's view, the PV Program is different from AB 920 in that under the PV Program none of the power may be used to offset onsite load, whereas under AB 920 PV facility's outputs must be used to offset the customer's onsite load.51
PG&E also believes SB 32 does not conflict with the PV Program, because facilities targeted by the PV Program would likely not want to participate in the FIT. PG&E suggests the price offered under SB 32 may not be adequate to attract new investments. In addition, PG&E believes implementation of SB 32 will likely be on a different schedule from the PV Program.52
TURN echoes the view that AB 920 does not conflict with the PV Program, but believes gaming could occur between SB 32 and the PV Program to the extent prices offered under the two programs are different. TURN contends price differential could create a situation where a minimum price guarantee and an opportunity to speculate on higher prices through a competitive process exists.53 TURN's primary recommendation is to limit PG&E's PPA program to projects greater than 3 MW to eliminate any potential conflicts between the two programs.54 CUE also supports excluding 1 to 3 MW projects from the PV Program.
CALSEIA disagrees with TURN and cautions the Commission against relying on TURN's argument. CALSEIA maintains that TURN's argument is based on the assumption that the pricing under SB 32 and the PV Program will be significantly different. Such an assumption in CALSEIA's view is speculative because the Commission has not yet determined a price for SB 32.55
The Solar Alliance and CFC also believe SB 32 and AB 920 do not impact PV Program. CFC, however, appears to be suggesting the Commission compare the PV Program to SB 32 and AB 920 by listing some of the elements of SB 32 and AB 920 as guidance.
CFC also argues that PG&E's application is contrary to law because it asks for an order concerning the method of recovery of costs of new construction before the plant is built.56 CFC refers to Pub. Util. Code § 454.857 ("Recovery of costs of new construction") and states that the Commission cannot decide the method for recovery of the costs of new construction until after it finds the plant is used and useful to the public. CFC also asserts that the PV Program will not be in compliance with Pub. Util. Code § 454.4(c)(3), because PG&E will not be buying renewable energy through the renewable energy procurement process. According to CFC, only PPA contracts that are submitted as part of the procurement process would be in compliance with § 454.5(c).
6.2. Discussion
AB 920 allows net energy metering customers with projects of up to 1 MW to sell any excess electricity they produce over the course of a year to their electric utility at a rate to be determined by the Commission.
Most parties believe that AB 920 does not have an impact on the PV Program because the two programs are different. We share this view. A major difference between the two programs is that PV facilities under AB 920 are required to use the power to offset on site load while under the PV Program no such requirement exists. Thus, we can reasonably conclude that the facilities that participate in AB 920 are not likely to participate in the PV Program. As such, the two programs do not conflict with each other.
The impact of SB 32 on the PV Program, however, is more complicated.
SB 32 increases the size of generation facilities eligible for California's feed-in tariff program from 1.5 MW to 3 MW, and raises the program's statewide cap from 500 MW to 750 MW. SB 32 also establishes the payment to eligible projects at a price based on the market price referent adjusted to include all current and anticipated environmental compliance costs subject to a ratepayer indifference test. A major concern expressed by the parties with respect to the impact of SB 32 on the PV Program is the potential for forum shopping. Parties are concerned that if prices under SB 32 and the PV Program are significantly different, projects will gravitate toward whichever program offers the greatest value. This can create a situation where projects that would have moved forward at a lower price may receive a higher price by electing to participate in one forum versus the other. PG&E contends that SB 32 price is unlikely to be significantly higher. Further, PG&E asserts that the SB 32 implementation timeline is uncertain. CALSEIA echoes the concern about the implementation timeline and further contends that parties' concern about price differential is speculative at this point since the Commission has not established a price for SB 32.
CALSEIA is correct that the Commission has not presently implemented
SB 32, thus SB 32 prices are unknown. Given that the Commission has not yet implemented SB 32 and it is unclear at this point if the price the Commission ultimately develops will be sufficient to drive deployment of projects in the 1 to
3 MW size it seems premature to preclude such projects from participating in PG&E's proposed program. We are loathe to exclude projects that may be able to successfully compete in a solicitation because of speculative concerns that such a project might receive a higher price than what it would be offered under SB 32, assuming of course that whatever price is developed in the context of SB 32 is adequate to drive deployment. Therefore, we do not, at this time, find it reasonable to exclude projects and projects sizes that may ultimately be eligible to participate under the SB 32 mandated feed-in tariff from the PG&E program we authorize here.
We recognize that the jointly submitted standard PPA proposed for this program, and discussed in more detail below, was specifically intended for projects greater than 3 MW. To ensure that sellers in the 1 to 3 MW size range can participate in the program, PG&E shall file a standard contract for these smaller projects with its Tier 3 advice letter ordered herein within 30 days of the effective date of this decision.
With respect to CFC's claim that PG&E's application is contrary to law, Pub. Util. Code § 454.8 states that:
In any decision establishing rates for an electrical or gas corporation reflecting the reasonable and prudent costs of the new construction of any addition to or extension of the corporation's plant, when the commission has found and determined that the addition or extension is used and useful, the commission shall consider a method for the recovery of these costs which would be constant in real economic terms over the useful life of the facilities, so that ratepayers in a given year will not pay for the benefits received in other years.
It appears that CFC relies on the language in the statute to support its claim that because PG&E has not built the new facility and the Commission has not found the plant to be used and useful, the Commission cannot establish a cost recovery mechanism for the new plant. Nothing in Pub. Util. Code § 454.8 prohibits the Commission from establishing a cost recovery mechanism for an approved utility investment before the plant is built. The only requirement in Pub. Util. Code § 454.8 is that when the Commission considers a cost recovery mechanism for a new plant that is used and useful, it would consider a mechanism that would allow the cost be distributed over the useful life of the facility so that ratepayers only pay for the benefits received in that year. CFC's interpretation of the Public Utilities Code is therefore inaccurate.
CFC claims that PG&E has failed to demonstrate that its PV Program complies with least-cost and best-fit (LCBF) principles and therefore its application should be rejected. Such an analysis is not required at this time. Section 399.14 requires PG&E to include LCBF analysis in its renewable energy procurement plan (Procurement Plan) filed with the Commission. Accordingly, PG&E shall amend its 2010 Procurement Plan to include its PV Program. The Commission will then review contracts executed under the PV Program for consistency with PG&E's approved Procurement Plan and compliance with all other relevant RPS procurement requirements.
50 DRA's Supplemental Briefs at 3.
51 PG&E's Supplemental Briefs at 4.
52 PG&E's Supplemental Briefs at 2.
53 TURN's Supplemental Briefs at 1.
54 TURN's Supplemental Briefs at 4.
55 CALSEIA's Supplemental Briefs at 2.
56 CFC opening Brief at 26.
57 Unless otherwise stated, statutory references are to the California Public Utilities Code.
