15. Assignment of Proceeding
President Michael R. Peevey is the assigned Commissioner and Maryam Ebke is the assigned Administrative Law Judge in this proceeding.
1. Although on a contractual basis PG&E has procured adequate renewable power to meet its 2010 RPS compliance obligations, using flexible compliance, it is unknown at this time the extent of any potential delay or contract failure that may impact these contracts.
2. New renewable projects and transmission additions face a variety of risk factors, including permitting and financing challenges that may result in contract failure or delays.
3. Smaller projects may avoid many of the risk factors that impede the timely development of larger scale renewable projects to the extent these smaller projects do not have the same land impacts, do not require the same level of project financing and permitting, and do not depend on large capacity transmission additions.
4. The output profile of solar PV largely coincides with periods of peak demand.
5. DRA's SWOT technique does not take into account some of the benefits of the small and mid-sized PV projects proposed by PG&E.
6. The PV Program will not conflict with the RPS program as it focuses on a subset of projects and technologies that cannot effectively compete in the RPS program as it is currently designed and implemented.
7. The final RETI Phase 1B Report identifies PV technology specifically as having significant potential for capital cost reductions in the future.
8. Allocating more capacity to earlier years of the program would not necessarily be beneficial given the dynamic nature of the solar industry and the possibility of future solar PV cost reductions.
9. The Commission has expressed its interest in utility proposals for
utility-owned renewable projects.
10. Few renewable UOG proposals have come forward to date.
11. The PV Program as modified can help facilitate the expeditious deployment of renewable facilities including UOG projects that would not otherwise be selected through the existing RPS procurement process.
12. PG&E's engineering cost estimates are imperfect.
13. The CSI does not provide a good price comparison to the PV Program given the different deployment model and scale of projects pursued under that program.
14. SCE's SPVP, while generally reflecting projects of a smaller scale and deployment approach than the PV Program was approved by the Commission to pursue similar policy objectives as the PV program and so does provide a useful point of comparison.
15. Comparison to other UOG in other states does not provide useful information because it is unclear how analogous these programs are to PG&E's proposed program.
16. Projects of a comparable size and technology that have bid into the RPS program would provide the most reasonable comparison to the proposed PV Program.
17. Under the RPS program as currently implemented, smaller scale projects, while likely to offer greater viability and speed of deployment relative to large scale projects, are unlikely to be selected owing to their higher price, which may limit the extent to which smaller scale projects participate in the RPS program.
18. Bid prices in the RPS program are not necessarily reflective of the actual prices of projects that ultimately come online.
19. The utilities have submitted contract amendment requests to adjust the price of energy for a number of approved RPS projects upward.
20. PG&E's pilot project provides a reasonable upper bound for the cost of projects PG&E intends to pursue under this program as it involves the same technology and deployment approach albeit at the smaller end of the range of projects that would be eligible under the PV Program.
21. Though imperfect, PG&E's estimated price per kWh, derived from its estimates of UOG project costs, provides a reasonable price cap for PPA projects.
22. Because RPS compliance is measured based on renewable energy generation, PG&E is motivated to maximize the energy production from any renewable facilities it chooses to install.
23. A fixed PPA price may result in overpayment by ratepayers.
24. AB 920 does not overlap with the PV Program.
25. SB 32 could overlap with the proposed PV Program for projects between
1 and 3 MW.
26. The Commission has not yet implemented SB 32 and it is not known at this time how the price the Commission develops will impact the deployment of projects between 1 and 3 MW.
27. The price of solar PV is anticipated to decline in the years ahead.
28. A price cost cap for PPA projects is a reasonable way to ensure that the costs of the solar PV Program are not excessive to ratepayers.
29. A capital cost savings incentive mechanism under which PG&E retains a portion of the difference between the cost cap and the actual average capital cost of UOG projects can serve to motivate PG&E to take steps to contain the capital costs of the UOG portion of its solar program.
30. The capital cost savings mechanism may motivate PG&E to postpone deployment of UOG capacity to later years of the program when solar panel prices are anticipated to be lower.
31. The revised Large Project PPA is reasonable.
32. Land deposits prior to purchase of the land do not qualify as acquired or owned property for recovery in PHFU account.
33. A pilot project is a useful undertaking given the scale of the approved program and the experience PG&E can gain from pursuing this project, as well as the cost information it provides.
34. PG&E conducted a solicitation process for the Pilot Project that includes criteria commonly used in bid selection.
1. The modified PV Program has many benefits and can help meet the RPS goals and should be adopted.
2. PG&E should own, develop, install, operate and maintain up to 250 MW of solar PV projects up to 20 MW in size, and procure 250 MW of solar PV projects up to 20 MW in size from independent solar energy providers.
3. A competitive solicitation should be used to determine which projects are selected and at what price for the PPA component of PG&E's program.
4. Because PG&E's capital price target is below the actual costs of its pilot project and furthermore is in line with what the Commission approved in SCE's SPVP, we believe it can serve as a reasonable basis for the overall revenue requirement for this program.
5. PG&E should enlist the services of an independent evaluator to review the solicitations it conducts for both the PPA and UOG portions of its PV Program.
6. A price cost cap for PPAs will ensure that the costs of the PV Program are not excessive and should be adopted.
7. The revised Large Project PPA should be adopted with modifications.
8. Consistent with what the Commission approved in the context of Southern California Edison Company's Solar Photovoltaic Program, it is reasonable to require developers pursuing projects through power purchase agreements to make reasonable efforts to pay prevailing wage.
9. PG&E should seek Commission authorization through an advice letter prior to making any payments above the compliance cost cap for PPAs to ensure that such costs are reasonable.
10. Because we anticipate market, technical and regulatory issues to arise over the course of the program that could have implications on its effective implementation, the program should be implemented in a manner that provides the flexibility to make changes in response to these issues as they emerge.
11. It is reasonable to expect the adopted standard PPA to require changes over time, for example to address a change in law or in order to respond to lessons learned as the program progresses.
12. A capital cost savings incentive mechanism should be adopted to encourage PG&E to keep its capital costs in check.
13. To prevent gaming of the capital cost savings incentive mechanism and to ensure reasonable correspondence between the actual deployment schedule and the adopted deployment schedule, PG&E's ability to carryover un-deployed UOG capacity should be limited.
14. The stranded costs resulting from PG&E's PV Program should be recovered pursuant to D.04-12-048 and D.08-09-012.
15. PG&E should not be allowed to include the land deposits for future PV facilities in its PHFU account.
16. PG&E's Pilot Project should be approved.
17. It is reasonable to authorize PG&E to record the capital cost of the Pilot Project into its UGBA as of the effective date of this decision.
18. PG&E's program does not meet the requirements of Pub. Util. Code
§ 454.3 necessary for the Commission to grant a higher rate of return.
19. The PV Program is consistent with Pub. Util. Code § 454.8.
IT IS ORDERED that:
1. The Photovoltaic Program set forth in Appendix A to this decision is approved.
2. Pacific Gas and Electric Company shall implement the Photovoltaic Program as set forth in Appendix A.
3. In pursuing the individual solar projects authorized herein, Pacific Gas and Electric Company must adhere to any and all relevant permitting requirements including any required California Environmental Quality Act review.
4. Pacific Gas and Electric Company is authorized to recover up to
$1.45 billion in capital costs for the Utility-owned generation portion of its Photovoltaic Program via cost-of service ratemaking as follows:
a.) Pacific Gas and Electric Company may book the authorized revenue requirement in its Utility Generation Balancing Account.
b.) Pacific Gas and Electric Company shall file an advice letter within 60 days of this decision to establish Photovoltaic Program Memorandum Account to track the difference between the estimated and actual capital costs of this program. Should actual capital costs exceed the authorized revenue requirement adopted herein, these excess costs shall be subject to a reasonableness review.
c.) At the end of the program, should actual average capital costs per kW installed fall below $3920 per kW (DC), Pacific Gas and Electric Company shareholders are eligible to retain 10 percent of the difference between the actual average capital cost and $3920 for every kW installed under the Utility-owned generation portion of the program. If Pacific Gas and Electric Company elects to recover any shareholder incentives, it shall file a Tier 2 advice letter in which it demonstrates eligibility for these incentives by providing actual project capital cost data and the methodology used to calculate the incentive amounts sought.
5. The authorized revenue requirement is based on a 250 megawatt (MW) program and a specific capacity price target as approved in this order. Should Pacific Gas and Electric Company develop fewer than 250 MW over the five year life of the program, the revenue requirement used to determine if a reasonableness review is necessary shall be pro-rata adjusted to reflect the reduced amount of deployed capacity.
6. In developing utility-owned projects pursuant to the Photovoltaic Program, Pacific Gas and Electric Company shall seek to maximize the use of tax benefits available to support solar development, including the Investment Tax Credit and the Modified Accelerated Cost Recovery System. These benefits should accrue to ratepayers to the extent practicable.
7. Pacific Gas and Electric Company is authorized to recover its actual operations and maintenance costs in its General Rate Case subject to a reasonableness review. Should the average performance of Pacific Gas and Electric Company's Utility-owned generation systems fall below 80% of expected output as provided in its compliance filings, it will weigh heavily in favor of disallowing or refunding some of the operations and maintenance costs to ratepayers. In its filing for recovery of these costs, Pacific Gas and Electric Company shall consolidate all operations & maintenance costs incurred pursuant to this program and provide a specific breakdown of costs by activity area.
8. Pacific Gas and Electric Company is authorized to recover the costs of energy procured through power purchase agreeements entered into pursuant to the Photovoltaic Program in its Energy Resource Recovery Account.
9. Within 30 days of the effective date of this decision, Pacific Gas and Electric Company shall file a Tier 3 advice letter with the Energy Division specifying the Photovoltaic Program implementation and administration details needed to implement the Power Purchase Agreement portion of the program as set forth in Appendix A, including:
_ Standard contract for facilities less than 3 MW in size;
_ Competitive solicitation process and protocols, eligibility, and timeline for the power purchase solicitations;
_ Criteria for evaluating conforming bids;
_ Process for identifying preferred locations for project development to optimize the locational value of project sites, including impacts on neighboring lands;
_ Generation system interconnection application process and protocols; and
_ Confidentiality protocols to ensure that information given by developers to Pacific Gas and Electric Company through the interconnection or bidding process is not shared with Pacific Gas and Electric Company's staff working on the utility-owned generation of the Photovoltaic Program.
10. Within 60 days of the effective date of this decision, Pacific Gas and Electric Company shall file a Tier 2 advice letter with the Energy Division specifying the Photovoltaic Program implementation and administration details needed to implement the utility-owned portion of the program as set forth in Appendix A, including:
_ Solicitation process and protocols, eligibility, and timeline for turn-key and engineering, procurement and construction projects bidding into the Utility-owned generation solicitations;
_ Criteria for evaluating conforming bids in the
Utility-owned generation turn-key and engineering, procurement and construction solicitations,_ Process for identifying preferred locations of Utility-owned generation project development to optimize the locational value of project sites, including impacts on neighboring lands;
11. Pacific Gas and Electric Company is authorized to record the actual cost of the Pilot Project into its Utility Generation Balancing Account as of the effective date of this decision.
12. Pacific Gas and Electric Company may not enter land deposits for future utility-owned photovoltaic facilities into the account for Plant Held for Future Use.
13. Pacific Gas and Electric Company may recover stranded costs resulting from this program pursuant to Decision (D.) 04-12-048 and D.08-09-012.
14. Pacific Gas and Electric Company must seek Commission authorization through an advice letter prior to making any payments above the adopted power purchase agreement compliance cost cap.
15. Pacific Gas and Electric Company shall enlist the services of an independent evaluator to oversee the solicitation process and provide an assessment of the fairness and robustness of each of the solicitations it conducts pursuant to this program, for both utility-owned generation projects and power purchase agreement projects, and the degree to which these solicitations conform to the solicitation protocols.
16. Within 60 days of the closing date of each solicitation for power purchase agreements, Pacific Gas and Electric Company shall convene a program forum to identify program solicitation components that may need refinement. Based on the feedback received through these program forums, and in consultation with Energy Division, Pacific Gas and Electric Company may file a Tier 3 advice letter seeking modifications to the solicitation component of the Photovoltaic Program adopted by this decision.
17. Pacific Gas and Electric Company shall file annual compliance reports with the Energy Division as described in Appendix A. The first compliance report is due on March 1, 2011. Pacific Gas and Electric Company shall include the independent evaluator reports regarding all solicitations conducted pursuant to this program over the reporting period with its annual compliance report.
18. The form power purchase agreement for projects greater than three and up to 20 MW, referred to as the Large Project Power Purchase Agreement, is modified as follows:
· Compliance Cost Cap (Section 3.1(o)) shall state:
o Costs applicable to the Compliance Cost Cap are only those costs applicable under the term's definition (section 1.26) and are new costs associated with a change in law from the contract's execution date.
o In the event compliance costs exceed the cap, Pacific Gas and Electric Company will first obtain Commission authorization to incur additional costs.
· Guaranteed Energy Production - (Section 3.1(e)(ii)(A)) shall be 160 percent as the performance metric, as set forth in Pacific Gas and Electric Company's renewables portfolio standard pro forma.
· Guaranteed Energy Production Cure (Section 3.1(e)(ii)(B)) shall be 90 percent as the performance metric, as set forth in Pacific Gas and Electric Company's renewables portfolio standard pro forma.
19. Pacific Gas and Electric Company shall add the following language to its contracts with developers pursuing projects through power purchase agreements under this program:
"Producer shall use reasonable efforts to ensure that all Electricians hired by Producer, and its contractors and subcontractors are paid wages at rates not less than those prevailing for Electricians performing similar work in the locality as provided by Division 2, Part 7, Chapter 1 of the California Labor Code. Nothing herein shall require Producer, its contractors and subcontractors to comply with, or assume liability created by other inapplicable provisions of the Labor Code."
20. Pacific Gas and Electric Company may propose changes to the adopted power purchase agreement by Tier 3 advice letter and Staff may propose changes by issuing a draft resolution on its own motion. Such changes shall apply on a prospective basis only to new contracts entered into subsequent to approval of any such changes.
21. Application 09-02-019 is closed.
This order is effective today.
Dated April 22, 2010, at Los Angeles, California.
MICHAEL R. PEEVEY
President
JOHN A. BOHN
TIMOTHY ALAN SIMON
NANCY E. RYAN
Commissioners
I will file a concurrence.
JOHN A. BOHN
/s/ Commissioner
I reserve the right to file a concurrence.
TIMOTHY ALAN SIMON
/s/ Commissioner
I will file a concurrence.
NANCY E. RYAN
/s/ Commissioner
I reserve the right to file a dissent.
DIAN M. GRUENEICH
/s/ Commissioner
APPENDIX A
The Photovoltaic Program (PV Program) for
Pacific Gas and Electric Company
The Photovoltaic Program (PV Program) is a five-year program to develop up to 500 megawatts (MWs) of solar photovoltaic (PV) facilities in the range of 1 to
20 MWs in Pacific Gas and Electric Company (PG&E's) service territory.
Utility-owned generation (UOG) Portion of the PV Program:
Size: 250 MW
Project Size: From 1 to 20 MW88
Location: Primarily ground-mounted in PG&E's service territory
Schedule89:
2013 |
2014 | ||||
50 |
50 |
50 |
Power Purchase Agreement (PPA) Portion of the PV Program:
Project development timeline: 18 months
Location: Ground-mounted in PG&E's service territory.
Schedule:90
2013 |
2014 | ||||
50 |
50 |
Price: PG&E shall hold a competitive solicitation annually to select winning projects. The levelized cost of energy from any projects bidding into a PPA solicitation may not exceed $246/MWh.
Reporting:
PG&E shall file annual compliance reports with the Energy Division. The first compliance filing is due on March 1, 2011. PG&E shall consult with Energy Division to develop the format and content of the report. The annual report prepared by PG&E shall include, at a minimum, the following information:
Reporting on PPA portion of the PV Program
· Documentation of all solicitations issued for PPA projects;
· A description of all bids received from the PPA solicitations, including the name of bidder, location of project, bid price, and description of proposed facility (generating capacity, type of technology, annual average expected generation, interconnection point), and identification of winning bids;
· The total electrical output for all systems under PPAs that are currently selling electricity to PG&E, for each month of the previous year;
· A description of the project specific distribution and network upgrades and distribution and network upgrades generally needed to facilitate the PV PPA Program.
Reporting on UOG portion of the PV Program
· Documentation of all solicitations issued for UOG projects, including the criteria PG&E established to evaluate bids; a description of the short list of bids, including name of the bidder and final price in the agreement, a description of offer/facility (generating capacity, type of technology, annual average expected generation, interconnection point), and identification of winning bids;
· A description of all UOG facilities for which work has been initiated or completed in the previous year, including: capital costs, and operations and maintenance expenses, generating capacity, type of technology, annual average expected generation, description of the site (existing
PG&E-owned land or newly acquired/leased, land/lease cost, proximity to substation), and progress toward completion;· Quantification of the UOG capacity that came online in the previous calendar year, and how much un-deployed UOG capacity will be carried forward to the subsequent year subject to the 10 MW carryover limit adopted by the decision.
· A calculation of the levelized cost of energy (LCOE) for each UOG facility that is completed and interconnected to the grid. This calculation shall include work papers showing actual amounts for all cost and electrical output entries used to calculate the LCOE;
· Electrical output by month for the previous year for each PG&E-owned UOG facility that is completed and interconnected to the grid; and
· A description of the project specific distribution and network upgrades and distribution and network upgrades generally needed to facilitate the PV PPA Program. The known or projected costs of those upgrades, associated with interconnecting each UOG facility, including all distribution and network upgrades, a listing of the UOG projects identified as triggering the need for network upgrades, and identification of the UOG projects implemented notwithstanding the need for network upgrades, and the cost of those network upgrades.
(END OF APPENDIX A)
CONCURRENCE OF COMMISSIONER BOHN
In this decision the Commission confronts the dilemma of the hybrid generation market in California, the disparate cost recovery treatment of utility-owned generation versus third party generation. This decision approves 250 MW of new solar photovoltaic projects to be owned by PG&E and another 250 MW of photovoltaic projects that will be owned by third parties. The administrative law judge recommended that the two sets of projects have similar ratemaking treatment, paying the owners a price based on competitive bids for each kilowatt-hour generated by the facilities. While this payment mechanism is typical for third party projects, it is very different than the traditional method of cost recovery for utility owned projects, whereby utilities recover their actual costs and earn a Commission-specified rate of return on their capital investment.
How does this Commission level the playing field in such a manner as to take maximum advantage of third party capital and expertise for the benefit of ratepayer and the State of California? The Judge's proposal has merit in using market forces to provide some discipline to the utility's investment and construction efforts. However, in this instance I am not convinced that this approach has received the needed study to justify to such a significant change in utility ratemaking. This Commission need take care not to order such a radical departure in ratemaking without adequate thought and without the opportunity for the stakeholders and financial community to contribute to the discussion.
In an effort to provide additional market structures, the decision approved today contains some non-typical features that provide additional discipline on the utility-owned projects, such as requiring that PG&E competitively bid out its construction work, that an independent evaluator oversee PG&E's bidding efforts, and in providing PG&E with a financial incentive to reduce its total capital costs. Overall, I believe the decision we have approved provides a fair balance of providing PG&E with a reasonable assurance of recovery of its costs along with sufficient discipline for PG&E to control those costs.
While I support this decision, I want to make it clear that I believe that the alternative approach proposed by the Judge in this proceeding, while it might not be ready for prime time, can be a step in the right direction. As we move towards achieving the State's renewable power goals, we must keep in mind that the ratepayers bear the burden of paying for these resources, and we must consider means to control the high costs that come with these renewable resources, as well as look for ways to utilize other sources of risk capital.
Dated April 26, 2010, at San Francisco, California.
/s/ JOHN A. BOHN
JOHN A. BOHN
Commissioner
Concurrence of Commissioner Timothy A. Simon
Decision Adopting Photovoltaic Program for PG&E
A.09-02-019/D.10-04-052
On balance, this Decision provides for a combined Utility Owned Generation (UOG) and Power Purchase Agreement (PPA) Photovoltaic (PV) Program that is consistent with California's hybrid market structure. It will also promote workforce development and competitive contracting opportunities in construction, installation, and maintenance. It is for these reasons, inter alia, that I support this Decision. This Decision marks an important step in California's development of renewable distributed generation.
Like the Edison Solar Photovoltaic Program (SPVP),91 the PG&E Program consists of the installation and operation of up to 500 Megawatts (MW), equally split between the UOG and PPA sides of the program.92 The PG&E Solar PV program will provide an opportunity for California to potentially accelerate the development of smaller and midsized solar PV projects. Some of the larger PV projects in our RPS Program, which may be incrementally less expensive and meet our Least Cost Best Fit procurement principles, may face greater financial risks to deployment. Thus, the PG&E PV program should ultimately complement our RPS Program and not hinder it as some parties have asserted.
I appreciate that many of the amendments to this Decision are intended to balance our need to advance renewable deployment while ensuring reasonably competitive solar PV procurement. For instance, the limitation on the carryover of un-deployed UOG to 10 MW from one year to the next provides assurance that PG&E will move forward with PV development expeditiously and consistently over the course of the 5 year time horizon for this program.93 This will ensure that PG&E will stay on course toward its renewable goals and promote necessary growth in green jobs in the near term through steady project implementation.
In addition, the proposed cost savings incentive mechanism, in which 10 percent of cost savings would begin to accrue to shareholders at $3920 per kilowatt (kW) and below, is intended to keep UOG capital costs in check.94 PG&E might have otherwise been incentivized toward higher capital costs and their attendant earnings benefits. The requirement for an Independent Evaluator (IE) to ensure that UOG projects are the best fit possible is also a prudent ratepayer protection. Ultimately, the Decision should result in a favorable regulatory structure for competitive solicitation by Independent Energy Producers (IEPs).
It is my hope that as the market matures, this program will not only increase economies of scale and bring and the price point down on PV panels - it will also be a significant source of green job opportunities in manufacturing, installation, and operations. Our ability to effectively implement capital intensive programs like these with timelines for steady, expedited buildout is what will once again make California an attractive place for investment and innovation.
I am pleased to note that the Decision requires PG&E to file a Tier 3 Advice Letter describing the implementation process for the UOG part of the PV program, including the competitive solicitation process for associated turn-key engineering, procurement, and construction projects.95 I expect that PG&E will continue making progress in the area of diverse procurement through competitive opportunities for Women, Minority, and Disabled Veteran Business Enterprises (WMDVBE) in these critical areas of UOG deployment.
Dated April 27, 2010, at San Francisco, California.
/s/ TIMOTHY ALAN SIMON
TIMOTHY ALAN SIMON
Commissioner
Concurrence of Commissioner Nancy Ryan
Decision Adopting a Solar Photovoltaic Program for Pacific Gas and Electric Company
A.09-02-019
April 22, 2010
The perils presented by global climate crisis require bold action on many fronts. One of them is developing renewable energy resources as rapidly as possible. PG&E's proposed Solar PV program recognizes this imperative.
Both the Proposed Decision (PD) of Administrative Law Judge (ALJ) Ebke and President Peevey's Alternate Decision would approve PG&E's proposed program with modifications. The primary distinction between the PD and APD has to do with the cost recovery mechanism adopted for utility owned generation.
I appreciate the efforts of ALJ Ebke to craft a thoughtful and creative cost containment mechanism. The idea of benchmarking the cost of Utility Owned Generation (UOG) against independent developers' bids is very appealing. However, I am concerned that the proposed mechanism would create too much uncertainty. Instead of acting to contain costs, it could deter investment.
President Peevey's Alternate Decision adopts a traditional cost of service model. It incorporates multiple measures to ensure that PG&E's financial incentives are aligned with its stated desire to minimize the cost of this program to its ratepayers.
First, President Peevey's Alternate Decision's approach relies upon competitive procurement processes for both UOG and independent power generation. An independent evaluator will oversee these solicitations to ensure that they capture the lowest cost resources available in the marketplace. In addition, a cost-cap provides backstop protection.
President Peevey's Alternate Decision also adopts a shared savings mechanism, which provides an additional incentive for PG&E to procure UOG at the lowest cost. The structure of the shared savings mechanism could create an incentive for PG&E to delay development until later in the program. This outcome would be inconsistent with the objective of hastening the development of distributed solar PV in California.
I am pleased that in order to avoid this unintended and undesirable outcome the decision adopts a use-it-or-lose-it requirement. Both ALJ Ebke's PD and President Peevey's Alternate Decision revised the development schedule in PGE's original proposal. PG&E's original proposal would have ramped up the rate of development in later years, however both ALJ Ebke's PD and President Peevey's Alternate Decision both call for 50 MW to be developed in each year of the five-year program. The use-it-or-lose-it requirement ensures that PG&E sticks to this path.
Taken together, the shared savings mechanism and the use-it-or-lose-it requirement will ensure that PG&E moves forward expeditiously and drives the best possible bargain for its customers.
I am also pleased that President Peevey's Alternate Decision requires PG&E to disclose detailed cost information from the UOG and independent power producers' solicitations on an annual basis. This way the Commission's staff will be able to evaluate and compare the cost-effectiveness of these two procurement alternatives. Future decisions by the Commission to approve or deny applications for utility ownership of renewable generation will benefit from this side-by-side comparison.
For reasons stated above, I support President Peevey's Alternate Proposed Decision
Dated April 22, 2010, at San Francisco, California.
/s/ NANCY E. RYAN
NANCY E. RYAN
Commissioner
Statement for Commission Business Meeting on items 32 and 32a
PG&E Application for 500 MW of PV
I support Administrative Law Judge Ebke's Proposed Decision (ALJ PD) because it is a balanced approach to facilitating utility-scale photovoltaic (PV) development by appropriately capping Pacific Gas and Electric Company (PG&E) capital recovery at the weighted average of accepted bids for power purchase agreements (PPAs).
California can achieve its 20 percent Renewable Performance Standard (RPS) at a reasonable cost. However, the Alternate Proposed Decision (APD) puts incremental progress toward our RPS above any responsible treatment of cost and disregards the discipline that competition can impose on utility spending. The goal of meeting the 20% RPS by 2010 was intended to not only increase the amount of clean energy within the state's fuel mix. It was also intended to displace fossil generation, reduce emissions, and create clean energy jobs, all under a construct of doing so at reasonable costs. Thus, we have embraced using a competitive solicitation process which is designed over time to also achieve the fundamental goal of bringing down the cost of renewable energy.
Those in favor of the APD claim that that authorizing PG&E to spend well-above the market rate for Utility Owned Generation (UOG) PV assets is justified by the greater project viability offered by UOG generation. The record of this case does not support that logic.
PG&E has stated on the record that capital costs are likely the same for both UOG and independent power production and these capital costs represent the majority of project cost. Yet PG&E has also stated without justification that it could not build any projects under the hybrid structure proposed by the ALJ's PD. If it is true that PG&E-owned generation is not cost competitive with the open market, then we must stop and ask ourselves - what is the logic of picking PG&E to construct the proposed 250 MW of PV? While the APD suggests that Commission review of PG&E's competitive solicitation process and inclusion of a capital cost-savings incentive mechanism will insure the lowest reasonable cost for the UOG PV, it implicitly accepts that PG&E's costs will be well above market prices by stating that PG&E's projects could cost up to $0.45 per kWh! The elegance of the ALJ PD is that it sets a standard for low capital costs by tying it to the market. When asked directly at the Closing Argument what assurance PG&E could give this Commission that it would put ratepayers before shareholders, there was no substantive answer except "trust us".
I am not willing to bet almost $1.5 billion of ratepayer money on a "trust me" approach for ratepayer protection which does nothing to drive down the cost of renewable power. I am also increasingly concerned that Commission decisions such as the APD erode public support for California's aggressive greenhouse gas emission policies by selecting program pathways that are more costly than need be, that ignore the discipline of competitive market forces, and that do not articulate a plan for reducing costs in the long term. California can achieve our 20% RPS and we do not have to resort to approving all projects at any cost in order to do so.
I respectfully dissent from adoption of the APD.
Dated April 27, 2010, at San Francisco, California.
/s/ DIAN M. GRUENEICH |
Dian M. Grueneich Commissioner |
88 Projects below 1 MW and/or roof-mounted may be pursued but must not constitute more than 5% of the total authorized UOG capacity.
89 If PG&E deploys less than the amount of capacity authorized pursuant to this schedule in any year, it may roll forward no more than 10 MW of un-deployed capacity from that year to the subsequent year. It follows from this requirement that the maximum amount of capacity PG&E may deploy in a given year is 60 MW.
90 Un-awarded MWs shall be added to next year's solicitation. PPA drop-outs, defined as projects that were selected via the solicitation process but which do not come online within the 18 month development timeframe, will be added to the next program solicitation.
91 Decision Addressing a Solar Photovoltaic Program for Southern California Edison Company (D.09-06-049), March 27, 2009.
92 Decision Adopting A Solar Photovoltaic Program for Pacific Gas and Electric Company (D.10-04-052), April 20, 2010, at 2.
93 Id. at 51.
94 Id. at 30-31.
95 See Ordering Paragraph 10 in D.10-04-052 at 78.
