2. Background

Beginning in 2007, California law required, as part of the RPS program, that every electrical corporation have a feed-in tariff (FIT) to purchase electricity at the market price referent (MPR) from renewable facilities up to 1.5 MW owned by public water and wastewater agency customers.1 The tariffs were available until the combined statewide cumulative capacity of those facilities equaled 250 MW.

We implemented this law in July 2007 in D.07-07-027 and expanded the program at that time from water/wastewater agency retail customers to other customers in the Pacific Gas and Electric Company (PG&E) and Southern California Edison Company (SCE) service territories on the same basic terms and conditions. This added an additional 228 MW to the program, bringing the required FIT program total to 478 MW. We resolved applications for rehearing of D.07-07-027 in February 2008 in D.08-02-010. The resulting IOU tariffs - which we refer to as the "Existing FITs" and the entire program as the "Existing FIT"- became effective over the course of the next few months.

An Amended Scoping Memo and Ruling was filed on June 5, 2008 (June 2008 Amended Scoping Memo and Ruling). The assigned Commissioner identified five issues for consideration, and set a schedule for comments and motions. The five issues were:

1. Program Extension for San Diego Gas & Electric Company (SDG&E): Whether or not to extend the tariffs for water/wastewater customers to other customers in the service territory of SDG&E (as we had already done for other customers in the service territories of PG&E and SCE);

2. Eligible Project Size: Whether or not to increase the eligible project size from 1.5 MW to 20 MW;

3. Excess Sales: How to count electricity purchased pursuant to an excess sales arrangement toward program limits;

4. Third Party Ownership: What changes, if any, are necessary to permit third party ownership; and

5. Other: Anything else a party recommends be considered by the Commission to complete implementation.

On July 3, 2008, comments were filed by 16 parties.2 On July 14, 2008, reply comments were filed by 13 parties.3

The first of five issues was whether or not the existing program for public water and wastewater agency customers should be extended to other customers in the SDG&E service area. No party filed comments in opposition to the extension and, on September 18, 2008, the extension was adopted. (See D.08-09-033.) This added an additional 20 MW to the Existing FIT program, bringing the statewide combined total from 478 MW to 498 MW.

The second issue - whether or not the eligible project size should be increased from 1.5 MW to 20 MW - involved considerable additional work. Among the comments, for example, some parties stated that additional terms and conditions would need to be added to the Existing FITs to accommodate increased project size.

On October 10, 2008, the Commission's Energy Division (ED) sought further data from parties on this issue. The information and comments were received on October 24, 2008. A second ED data request was issued on January 28, 2009, focusing specifically on contract terms and conditions. Parties submitted data responses and comments on February 4, 2009. On February 10, 2009, ED held a workshop regarding standard terms and conditions for a FIT.

ED staff used this material to develop a proposal to expand the size of the Existing FIT. By ruling dated March 27, 2009, the ED staff proposal titled "Feed-in Tariff for Renewable Generators Greater than 1.5 MW" was filed and served to parties for comment. Among other things, ED stated that price level and rate structure are essential to FIT program success, and would be addressed in a future phase of the proceeding. Dates were set for comments and motions.

On April 10, 2009, comments were filed by 21 parties.4 On April 17, 2009, reply comments were filed by 10 parties.5 Some parties stated that price cannot be separated from FIT terms and conditions. Some stated that price is a critical element and its consideration should not be deferred. Others questioned the Commission's jurisdiction to set a FIT price.

By ruling dated May 28, 2009, parties were directed to file briefs on the jurisdiction issue, along with recommended pricing mechanisms consistent with their views on jurisdiction. Opening briefs were filed by 14 parties.6 Reply briefs were filed by 10 parties.7

ED staff then prepared a pricing proposal, which forms the basis of the Renewable Auction Mechanism, or RAM, that we adopt today. RAM was developed by Paul Douglas, Jaclyn Marks and Sara Kamins of ED. Among the important features, the proposal abandoned the Existing FIT fixed price approach, instead proposing to use a market-based competitive auction mechanism to set the price paid to each energy seller.

By ruling dated August 27, 2009, the ED-recommended pricing proposal titled "Supply-Side Renewable Distributed Generation Pricing Proposal" was filed and served on parties for comment. Parties were also provided an opportunity to file final comments on pricing approaches, structures, designs and issues. Dates were set for comments and motions.

On October 19, 2009, comments were filed and served by 24 parties.8 On October 26, 2009, reply comments were filed and served by 18 parties.9 No hearings were requested on any of the issues, and no hearings were held.

1 Pub. Util. Code § 399.20, added by Assembly Bill (AB) 1969 (Stats. 2006, ch. 731) effective January 1, 2007. Unless noted otherwise, all subsequent statutory references are to the Public Utilities Code.

2 Comments were filed by PG&E; SCE; SDG&E; PacifiCorp; Sierra Pacific Power Company (Sierra); Division of Ratepayer Advocates (DRA); Green Power Institute (GPI); Independent Energy Producers Association (IEP); Alliance for Retail Energy Markets (AReM); California Farm Bureau Federation (Farm Bureau); Sustainable Conservation; The Vote Solar Initiative (Vote Solar); Recurrent Energy, Inc. (Recurrent); Solar Alliance; The California Solar Energy Industries Association (CALSEIA); and GreenVolts. Comments of Sempra Energy Solutions LLC were served but not filed. These comments are referred to herein as Initial FIT comments.

3 Reply Comments were filed by PG&E, SCE, Sierra, GPI, AReM, Vote Solar, Recurrent, Solar Alliance, CALSEIA, GreenVolts, The Utility Reform Network (TURN), Farm Bureau and Sustainable Conservation. These comments are referred to herein as Initial FIT reply comments.

4 Comments were filed by PG&E; SCE; SDG&E; DRA; TURN; Center for Energy Efficiency and Renewable Technologies (CEERT); GPI; Solutions for Utilities, Inc. (SFUI); Sustainable Conservation; Sierra Club (Sierra Club); Community Environmental Council (Environmental Council); IEP; FuelCell Energy, Inc. (FuelCell Energy); Redwood Renewables (RR); Los Angeles Community College District (LA Community College District); City of Santa Monica (Santa Monica); CALSEIA; Solar Alliance and Vote Solar (jointly); First Solar, Inc. (First Solar); and AReM. These comments are referred to herein as the Terms and Conditions Comments.

5 Reply Comments were filed by PG&E, SCE, DRA, GPI, CARE, Environmental Council, RR, CALSEIA, Solar Alliance and Vote Solar (jointly). These reply comments are referred to herein as the Terms and Conditions Reply Comments.

6 Opening Briefs were filed by PG&E, SCE, SDG&E, DRA, California Attorney General (AG), GPI and Sustainable Conservation (jointly), Santa Monica, FuelCell Energy and CALSEIA (jointly), Cogeneration Association of California (CAC), Energy Producers and Users Coalition (EPUC, joining in the brief of CAC), Solar Alliance and Vote Solar (jointly).

7 Reply Briefs were filed by PG&E; SCE; DRA; CAlifornians for Renewable Energy, Inc. (CARE); IEP; CEERT; Vote Solar; SFUI; and FuelCell Energy and CALSEIA (jointly).

8 Comments were filed by PG&E; SCE; SDG&E; DRA; TURN; CARE; GPI; SFUI; CEERT; Santa Monica; FIT Coalition (FIT Coalition); L. Jan Reid (Reid); CALSEIA; Vote Solar; Solar Alliance; First Solar; IEP; Axio Power, Inc. (Axio); Recurrent; GreenVolts; FuelCell Energy; California Energy Storage Alliance (CESA); and Sempra Generation (Sempra). Separate joint comments were filed by PG&E, SCE, SDG&E, Solar Alliance, GreenVolts, Sierra Club and Reid. These comments are referred to herein as Pricing Comments.

9 Reply Comments were filed by PG&E, SCE, DRA, TURN, GPI, SFUI, Reid, Sustainable Conservation, Sierra Club, Santa Monica, AReM, CALSEIA, Vote Solar, Solar Alliance, Recurrent, FuelCell Energy, CESA, and Fortistar Methane Group (Fortistar Methane). These reply comments are referred to herein as Pricing Reply Comments.

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