II. Procedural Background

In Decision (D.) 03-06-071 in Rulemaking (R.) 01-10-024, the Commission took the first steps to implement the RPS program adopted in Senate Bill (SB) 1078. We adopted, among other things, a process for the rank ordering and selection of least-cost and best-fit renewable resources to comply with the statutory annual obligations of the RPS program. The adopted ranking process is iterative. In the first step, bids are to be ranked according to a product-specific market price referent. In the second ranking, bids are to be re-ordered based on integration and transmission costs. In D.03-06-071, we determined that a PG&E proposal submitted in that proceeding was a reasonable starting point as a methodology for consideration of transmission costs in the second ranking of RPS bids, and deferred refinement of the approach to this proceeding.

On March 5, 2004, a prehearing conference (PHC) was held in this proceeding regarding establishment of the methodology for consideration of transmission costs for RPS purposes, consistent with D.03-06-071. In preparation for the PHC, PG&E filed and served on all parties its proposal for the treatment of transmission costs, as submitted in R.01-10-024 and referenced in D.03-06-071. PG&E, SCE, SDG&E, the Center for Energy Efficiency and Renewable Technologies (CEERT), and the California Wind Energy Association (CalWEA) filed PHC statements in advance of the PHC. The assigned administrative law judge (ALJ) allowed Vulcan Power Company to late-file its PHC statement.

During the PHC, there was general agreement among the parties that the Commission should adopt an interim methodology for the development and consideration of transmission costs for use during the initial RPS procurement. Various issues of concern related to consideration of transmission costs were discussed. The parties disagreed to some extent regarding which transmission-related issues should be addressed before the initial RPS procurement and which should be deferred until a later time. However, there was general agreement that, in order to allow the initial procurement to proceed on a timely schedule, transmission costs to be used in assessing renewable projects that do not have completed System Integration Studies and Facility Studies should be based on existing conceptual transmission studies.

The utilities have undertaken conceptual transmission studies based on prior solicitations of interest to potential renewable developers. On March 19, 2004, consistent with determinations at the PHC, the assigned ALJ issued a ruling directing that by April 2, 2004 PG&E, SCE, and SDG&E request any further information needed from potential renewable energy bidders so that they could prepare additional conceptual transmission studies, if needed to develop transmission cost estimates for the initial RPS procurement.

As another step established at the PHC, the ALJ issued an additional ruling on April 2, 2004 (hereinafter referred to as the ALJ ruling), which contained proposed guidelines for the development and consideration of transmission costs during the initial RPS procurement. The proposal was based on PG&E's original proposal in R.01-10-024 and on PHC statements and discussions. PG&E, SCE, SDG&E, The Utility Reform Network (TURN), CEERT, and CalWEA filed comments and reply comments on the interim methodology proposed in the ALJ ruling.