10. Project Viability Requirements

ED proposes that RAM projects meet four minimum project viability criteria before being eligible to submit a bid, including site control, equipment standards, developer experience, and use of a commercialized technology. ED intends the project viability criteria to prevent the authorized capacity under RAM to be filled with non-viable projects to the detriment of projects that can come on line quickly. One of the primary goals of RAM is to support the development of small generation that can interconnect quickly to the distribution system, thereby avoiding the significant time and economic investment required for larger projects requiring transmission upgrades before they can be operational.

Parties present a range of views. Those in support argue the criteria will streamline review and facilitate program success. Those in opposition assert the criteria unreasonably increase project costs and risks.

We agree with ED that some level of minimum project viability criteria must be adopted to support success of the RAM program. We adopt the following minimum viability criteria here:

These criteria should be incorporated in the IOUs' standard RAM contracts. As with all other elements of this program, the utilities may request modifications or additions to the viability criteria via the implementation advice letter process.

ED recommends that the bidder must show 100% site control through (a) direct ownership, (b) lease, or (c) an option to lease or purchase that may be exercised upon award of the contract. We agree.

We want the RAM to be available for projects that are not unduly speculative. To do this, it is reasonable to require site control. Further, we recognize that site control on public lands may be manifested in something other than a lease or sale agreement. Consequently, we decline to adopt specific criteria for what constitutes demonstration of site control and rely upon the IOU to develop its own criteria.

ED recommends that the bidder demonstrate that the company and/or development team has (a) completed at least one project of similar technology and capacity or (b) begun construction of at least one other similar project. We agree.

Some parties object, saying this criterion is too subjective and exclusionary. They assert that the pay-for-performance nature of the program ensures that only viable projects will participate.120

We agree that pay-for-performance is a powerful tool that facilitates viable project self-selection. It is not enough for the RAM program, however. We seek a streamlined process that promotes ease of bid review and selection of projects which can become operational or be removed to open the queue for another project. Development experience complements pay-for-performance in promoting that objective. We require that at least one member of the development team has either begun or completed construction of at least one project similar to the one proposed in the RAM program.

ED proposes that RAM be limited to commercialized technologies to facilitate the 18-month on-line requirement for RAM generators. ED recommends commercialized technology be defined as one currently in use at a minimum of two operating facilities of similar capacity worldwide.

We agree with a commercialized technology screen. Research, demonstration and development of new technologies are vital, and we encourage such activities. However, research, demonstration and development should be funded in ways other than through the RAM program.

The RPS program itself is largely intended for commercial technologies. California seeks 20% RPS by 2010 with reasonably proven technologies that will provide safe and reliable electricity at just and reasonable rates. Experimental technologies may seek a place in the RPS resource mix in other ways and apply via other approaches (e.g., bilateral negotiations).

We recognize that the interconnection process is integral to the success of RAM. We note that issues regarding jurisdiction of distribution-level interconnections have been raised in FERC Docket No. ER11-1830-000. Commission staff will consider and address these issues in the future as appropriate and necessary, including, without limitation, ensuring non-discriminatory interconnection procedures based on developments in or resolution of the FERC proceeding.

Furthermore, we strongly encourage the IOUs to proactively modify their interconnection protocols for use in RAM where such modifications are reasonable and would enhance the implementation timelines and probability of success of RAM projects. Among other things, the IOUs should consider adopting or modifying criteria for expedited processing where possible, either at the FERC or at this Commission.

Since the interconnection process is a critical milestone to a project becoming operational, Recurrent recommends that bidders demonstrate they have filed their interconnection application by the time they bid into the RAM.121 We agree.

Given the 18-month deadline for commercial operation, projects must have begun the interconnection application process by the time of bid submission. Thus, such a requirement is a reasonable screening criterion for bids. IOUs should require bidders to show with bid submission that the interconnection application has been filed.

120 Pay-for-performance refers to the payment mechanism wherein projects are paid upon delivery of the product (i.e., electricity), with no payment when there is a failure to perform.

121 Recurrent Pricing Reply Comments at 10.

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