VII. Renewables

In general, we find that the utilities did not provide a robust analysis of future renewables supply growth in the renewables sections of their respective 2004 and long-term plans. This can be largely attributed to the fact that at the time the utilities prepared their filings, RPS program development was in progress and the Commission had yet to issue and adopt D.03-06-071. We note that the IOUs will file separate renewable procurement plans pursuant to Pub. Util. Code § 399.14(a)(3), thus the 2004 procurement plans currently under consideration do not constitute a filing of the required renewables plans. Our approval of the 2004 procurement plans today does not "trigger" an RPS solicitation as detailed in D.03-06-071. That solicitation requires further development of RPS criteria, such as the Market Price Referent (MPR), additional least-cost and best-fit evaluation criteria, and standard contract terms and conditions. Interim solicitations will follow guidelines already established by the Commission, and are also addressed below.

We will address long-term renewables issues in a subsequent decision and in the forthcoming RPS rulemaking. This Decision will only address short-term issues necessary to ensure that the 2004 plans are consistent with the RPS.

D.03-06-071 adopts rules for RPS elements as required by Pub. Util. Code § 399.14(a)(2), and addresses other issues such as creditworthiness and renewable energy credits. The Assigned Commissioner's Ruling Specifying Criteria for Interim Renewable Energy Solicitations (ACR) dated August 13, 2003, provides criteria for any interim renewables solicitations conducted by a utility prior to a full RPS solicitation implementing the utility's renewable procurement plan. While we strongly discourage pre-RPS solicitations, any renewables solicitations that do occur prior to a full RPS solicitation will follow the criteria set forth in the ACR.

In its 2004 plan, PG&E proposes that the Commission adopt an interim all-in benchmark of 5.37 cents per kilowatt-per hour (kWh), and subsequently review and update the benchmark. The Commission will develop the MPR to accomplish this goal. Additionally, the ACR provides guidance on use of interim benchmarks. Our attention is now focused on refining the methodology for the MPR, and as such we do not adopt an interim benchmarking process. We therefore decline to adopt PG&E's request for an interim all-in benchmark of 5.37 cents per kWh.

PG&E also proposes to conduct a renewables solicitation within 60 days of approval of its 2004 procurement plan. PG&E proposes to sign only one-year contracts, due to its credit status. In its testimony, ORA states that such short-term contracts will "increase the chances of a utility having greater difficulty in meeting its RPS in the future..."³¹ Although the term lengths addressed in D.03-06-071 should apply to RPS solicitations, one goal of the RPS program is to foster a long-term market for renewable energy by providing contracts of 10 or more years. We do not find that PG&E's proposed short-term solicitation adheres to this principle. We will address PG&E's credit status at a later time, noting here that the Commission may determine that PG&E can undertake renewables procurement prior to creditworthiness subject to specific conditions. We deny PG&E's request for one-year renewables contracts, and focus attention instead on progress towards a full RPS solicitation in early 2004.

In its comments on the proposed decision, SDG&E calls attention to footnote 52 of D.03-06-071, which states:

"The SDG&E/TURN proposal does allow for shorter-term contracts to be bid by developers. Any such shorter-term contracts require express Commission approval."

In an RPS solicitation for products with 10, 15, and 20 year terms, developers may submit non-conforming bids. PG&E's proposed solicitation only offers short-term contracts, so our denial of such a solicitation remains consistent with the terms adopted in D.03-06-071.

The IOUs recommend meeting their QF obligations under PURPA in various ways, including competitive solicitations (SCE proposal) and one-year SO1 contract extensions (PG&E proposal). SDG&E refers to holding an "auction" for QF contracts. While renewable bidders are welcome to participate in all-source solicitations outside the RPS bidding parameters, a unique MPR will not be developed for such solicitations. Therefore, bidders must not anticipate the use of Supplemental Energy Payments (SEP), nor shall bids contain SEP contingencies. This is consistent with the August 13 ACR. Bidders may, however, retain previous CEC awards, as stated above. The utilities may receive and select cost-effective renewables bids under an all-source solicitation, and the bid evaluation process must not treat those bids unfairly when compared with non-renewable product offerings. Additionally, any contracts resulting from these solicitations will count toward an IOU's RPS targets, provided the facilities are deemed eligible renewable resources.

We reaffirm that all renewables contracts must be filed for approval by the Commission by Advice Letter filing as required by D.03-06-071 and the ACR. Approval of the 2004 plans does not constitute a waiver of this requirement.

As we consider the utilities' long-term plans, we will require the utilities to provide more detailed estimates of their renewable resource profiles. This amount of energy is substantial over the long-term planning horizon, and will undoubtedly affect the utilities' need for other procurement products in the future. Meanwhile, the IOUs shall update their 2004 plans as appropriate to include any interim renewable procurement activity from 2003 and subsequent changes to the quantity of renewable energy delivered in 2004.