2. Background
2.1. Program Background
Our fundamental responsibility is to oversee utility provision of an adequate supply of safe and reliable electricity at just and reasonable rates. As part of that responsibility, the Commission in 1976 ordered utilities to present proposals for the generation of electricity by alternative sources.3 In 1979, we initiated our first significant program for alternative resource procurement.4 These efforts resulted in the commercial operation of about 11,000 megawatts (MW) of new cogeneration (combined heat and power) and small power production facilities, with about 5,000 MW powered by renewable fuels.
Senate Bill (SB) 1078 established the California Renewables Portfolio Standard (RPS) program effective January 1, 2003. As adopted, it modified program design and structure for renewable resource procurement.5 It specifically sought to increase the amount of California's electricity generated by renewable resources in order to achieve multiple important, expressly stated benefits.6
To achieve these objectives, statutes require that each California retail seller7 procure a minimum quantity of electricity products from eligible renewable energy resources.8 This quantity is measured as a specified percentage of total kilowatt-hours sold to the retail seller's end-use customers each compliance period. At present, compliance periods are annual. Utilities must reach 20% by 2010 (subject to certain provisions that allow compliance by 2013), and maintain 20% every year thereafter.
SB 2 (1X) institutes three compliance periods, each involving more than one year. The Commission must establish the quantity of electricity products from eligible resources to be procured by each retail seller for each compliance period. The first compliance period requires procurement from eligible renewable resources that averages 20% of retail sales over the period between January 1, 2011 and December 31, 2013. After 2013, quantities must reflect reasonable progress in each of the intervening years sufficient to ensure eligible renewable resource procurement achieves 25% of retail sales by December 31, 2016; 33% of retail sales by December 31, 2020; and not less than 33% thereafter.9
The Commission implements and administers the RPS Program in collaboration and cooperation with the California Energy Commission (CEC) and other agencies. We monitor RPS goals and results, including compliance reviews and enforcement, as necessary.
We also require that electrical corporations prepare a renewable energy procurement plan, and update that plan when necessary.10 We review these RPS procurement plans, and accept, reject or modify the plans.11 We oversee electrical corporation RPS solicitations. We review the results of solicitations submitted for approval by an electrical corporation, and accept or reject proposed contracts based on consistency with the approved procurement plan.12
2.2. Procedural Background
On August 22, 2002, in anticipation of the passage of RPS Program legislation (SB 1078), the Commission ordered the three major electric utilities to revitalize their procurement of renewable resources. We did this by requiring that each utility solicit an increment of electricity generated via renewable resources in an amount not less than one percent of the utility's actual energy and capacity needs. (D.02-08-071.)
Upon SB 1078 becoming effective, we began implementation in Rulemaking (R.) 01-10-024. As required by the Legislature, within six months we adopted the first of several decisions to set initial parameters and requirements.13
(D.03-06-071.)
We have considered numerous policy and other issues over the course of the last decade, including the review of multiple RPS procurement plans and administration of several solicitation cycles. We have done so in a number of proceedings including R.04-04-026, R.06-02-012 and R.06-05-027. In August 2008, we closed R.06-05-027 and opened R.08-08-009 to continue this work. Today we close R.08-08-009, and open this proceeding as its successor. We transfer the record from R.08-08-009 to this new proceeding and bring forward limited remaining issues. R.08-08-009 remains open only as necessary for the limited purpose of considering existing petitions for modification, applications for rehearing, and requests for intervenor compensation.
3 Decision (D.) 85559 (March 16, 1976); 79 CPUC 513, 558-561, 571. Also see Resolution E-1738 (January 10, 1978).
4 D.91109 (December 19, 1979), 3 CPUC2d 1. We also penalized Pacific Gas and Electric Company (PG&E) $7.2 million for lack of progress, combined with an incentive for improvement (i.e., penalty offset upon presentation of signed contracts for certain procurement). (D.91107, 2 CPUC2d 596, 726-730, 743.)
5 The RPS program design is largely based on bids (subject to further negotiation over prices, terms and conditions before final contract execution between buyer and seller; the markets are treated as sufficiently competitive to protect both buyer and seller). The prior procurement design was largely based on a standard contract with prices set at the buyer's avoided cost (to achieve a competitive market outcome without negotiations; the markets were treated as monopsony or otherwise not sufficiently competitive to protect both buyer and seller).
6 The stated RPS program benefits (as updated by SB 2 (1X)) include, but are not limited to: displacing fossil fuel consumption; adding new electrical generating facilities; reducing air pollution; meeting climate change goals by reducing greenhouse gas emissions; promoting stable retail rates; meeting the need for a diversified and balanced energy generation portfolio; meeting resource adequacy requirements; contributing to safe and reliable operation of the electrical grid; and implementing
RPS-related transmission and land use planning activities. (See § 399.11.) The Governor identifies several important benefits including: stimulating investment in green technologies in California; creating new jobs; improving local air quality, promoting energy independence, and reducing greenhouse gas emissions. (See Governor's SB 2 (1X) signing letter dated April 12, 2011.)
7 A retail seller is an entity engaged in the retail sale of electricity to an end-use customer located in California. Retail sellers under the Commission's jurisdiction for RPS purposes include electrical corporations, community choice aggregators (CCAs) and electric service providers (ESPs). (§ 399.12(j).)
8 Eligible renewable resources are determined by the California Energy Commission (CEC), and may include the following: photovoltaic, wind, geothermal, solar thermal, biomass, digester gas, landfill gas, small hydroelectric, in-conduit hydroelectric, hydroelectric incremental generation from efficiency improvements, ocean wave, ocean thermal, tidal current, fuel cells using renewable fuels, and municipal solid waste conversion. (§ 399.12 and Public Resources Code § 25741.)
9 §§ 399.15(a) and (b)(2).
10 § 399.13(a)(1). We also require that ESPs prepare an RPS procurement plan.
(D.11-01-026.)
11 § 399.13(c).
12 § 399.14(d).
13 These included: (a) a process for determining the market price of electricity, (b) criteria for the rank ordering and selection of least cost-best fit (LCBF) renewable resources, (c) flexible compliance rules, and (d) an approach to forming standard contract terms and conditions.
