10. Combined Heat and Power (CHP)

In D.10-12-035, the Commission approved a broad-ranging settlement between the three major utilities, consumer groups, and associations of Qualifying Facilities (QFs) generating electricity from CHP facilities. That settlement included forward-looking agreements by the utilities to procure certain amounts of electricity from QF/CHP resources. Future procurement was divided into an Initial Program Period, which is currently estimated to end by December 2015,⁸ and a Second Program Period, which runs from expiration of the Initial Program Period until December 31, 2020.

For the Initial Program Period, SCE proposes to use the megawatt (MW) target numbers from the QF/CHP Settlement, as approved in D.10-12-035, rather than the standardized planning assumptions. (SCE Opening Brief at 33-34.) For the Second Program Period, however, SCE proposes a MW target of zero, on the grounds that the amount of CHP that will ultimately need to be procured during that period is subject to change, based on a number of factors. (Id. at 34-35.) PG&E generally concurs with SCE's position. (PG&E Reply Brief, at 11-13.) CAC and EPUC take issue with the assumption of zero CHP procurement in the Second Program Period. (See EPUC Opening Brief at 3-5.)

For the Initial Program Period, we find that it is reasonable to approve SCE's proposal to use the MW targets approved in D.10-12-035, rather than the standardized planning assumptions. Each utility should use its specific MW procurement targets from the QF/CHP Settlement as the basis for their procurement activities through 2015.

SCE's proposal to assume zero MW of CHP for the Second Program Period is less reasonable, however. First, CHP comes before conventional fossil generation in the loading order, so SCE's forecast of zero CHP would be credible only if SCE is also forecasting to procure zero conventional fossil generation. This is not the case, as SCE is forecasting that it will procure fossil generation in the Second Program Period. (See Exhibit 200 at 8, and Exhibit 201C at Appendix J.)

Second, there will continue to be a mandatory Public Utilities Regulatory Policies Act program for CHP facilities less than 20 MW that may execute contracts after 2015. And third, while there is uncertainty about how much CHP SCE or the other utilities may need to procure in order to satisfy the utility-specific GHG reduction targets in the QF/CHP Settlement, it is far from clear that the utilities will have achieved all of their required GHG reductions from CHP in the Initial Program Period.

Accordingly, SCE and PG&E should use the standardized planning assumptions for CHP megawatts for the Second Program Period. SDG&E should use the specific megawatt number for the second program period set forth in D.10-12-035.

⁸ The Initial Program Period runs 48 months from the effective date of the QF/CHP Settlement.