In this decision, we adopt a 100 megawatt (MW) solar photovoltaic (PV) program (the adopted Solar Energy Project) for San Diego Gas & Electric Company (SDG&E) as part of a broader effort to promote renewable generation in California. The adopted Solar Energy Project authorizes 26 MW of utility-owned generation and 74 MW of power purchase agreements (PPAs) with independent power producers. The projects will be primarily 1-2 MW, but projects of up to 5 MW are also allowed with some restrictions. SDG&E is authorized to spend up to $100.1 million for capital costs based on $3.50/W, including a contingency, and up to $25/kW-year for the operations and maintenance costs of utility-owned projects. We adopt a cost cap of $235/MWh for the PPAs executed under the Solar Energy Project.

We do so after examining SDG&E's initial proposal (the Proposed Solar Energy Project), and a settlement agreement (SA) that was reached by SDG&E and several parties (the Joint Parties). We reject both the SA and the proposed Solar Energy Project as written because we find that neither proposal adequately protects ratepayers against excessive risk and unknown costs. We find that SDG&E's proposed Solar Energy Project is not in the interest of ratepayers because it is expensive and does not support our goal of competitive procurement of renewable generation. The SA, too, is not in the public interest, reasonable in light of the whole record, or consistent with the law. As such, it does not fulfill the criteria that the Commission requires for approval of a settlement.

Although we reject the SA, the adopted Solar Energy Project contains some of the key elements of the SA that are based on the evidentiary record and which fall within the parties' litigated positions. We recognize the value of generation provided by small-scale PV facilities and conclude that a program that supports development of small-scale PV facilities will be beneficial to SDG&E ratepayers and should be adopted. We find that while the state's existing renewable programs, such as the Renewables Portfolio Standard and the California Solar Initiative programs have resulted in development of renewable energy in California, they have not been effective in attracting investments in small-scale PV facilities in the 1-2 MW range, particularly in SDG&E's service territory.

In our view, small-scale PV facilities have many unique characteristics that can help advance our renewable procurement goals and benefit the state and SDG&E ratepayers. Specifically, small-scale PV facilities can be located close to load centers and when located strategically, can reduce the need for transmission infrastructure development. These facilities will increase renewable energy generation to contribute to the state's renewable goals. In addition, they will replace fossil-fuel generation and help fulfill the state's greenhouse gas emission reduction targets. We believe the adopted Solar Energy Project will provide more options and additional flexibility to invest in renewable generation and will enable further development of small-scale PV in SDG&E's service territory.

Several features of the adopted Solar Energy Project are noteworthy. First, the adopted Solar Energy Project is consistent with state's policy to pursue clean and environmentally sound generation, and will complement the state's existing renewable programs. Projects of all PV technologies and mounting configurations are allowed to participate in the program. Second, consistent with Commission's adopted PV programs for Southern California Edison Company and Pacific Gas and Electric Company, the adopted Solar Energy Project will provide an opportunity for development of both utility-owned and privately-owned PV facilities. Allocating some portion of MWs to each category will provide an opportunity for both forms of renewable generation ownership in SDG&E's service territory. Procurement of the privately-owned PV facilities will be through a competitive solicitation process, which will lead to the selection of the least-cost and highest value projects.