III. Overview of RPS Program and 2006 Plans
Pursuant to the RPS legislation, each electrical corporation is required each calendar year to procure, with some exceptions, a minimum quantity of electricity from eligible renewable energy resources as a percentage of total retail sales. (§ 399.15(a).) This is generally known as the annual procurement target, or APT. Each electrical corporation is also required, with some exceptions, to increase its total procurement from eligible renewable energy resources by at least 1% of retail sales per year until it reaches 20%. (§ 399.15(b)(1).) This is generally known as the incremental procurement target, or IPT.
To fulfill these requirements, each electrical corporation must prepare a renewable energy procurement plan. (§ 399.14(a).) The Plan must include, but is not limited to, (a) an assessment of demand and supply to determine the optimal mix of renewable resources, (b) use of compliance flexibility mechanisms established by the Commission, and (c) a bid solicitation. (§ 399.14(a)((3).) The Commission must review and accept, modify or reject each electrical corporation's Plan prior to the commencement of renewable resource procurement. (§ 399.14(b).)
Pursuant to ruling dated November 19, 2005, each IOU submitted its most current (2006) Plan on December 22, 2005. Each Plan describes the actions the IOU will undertake in order to meet its 2006 APT and IPT as it proceeds to ultimately procure 20% of its retail sales from eligible renewable resources by 2010. Each Plan includes resource planning information and a master purchase and sale agreement or RFO. The Plans are briefly described below.
A. PG&E
PG&E estimates its 2006 APT is about 10,942 gigawatt-hours (gWh), and its IPT is approximately 700 gWh.2 In its 2006 Solicitation, PG&E seeks to procure approximately 1% to 2% of its retail sales volume, or between approximately 700 and 1,400 gWhs per year.
PG&E states that, starting in 2007, it will require more capacity to meet its reserve margin requirements, as well as additional peaking energy resources to meet its net energy requirements. After 2007, PG&E says it will require additional dispatchable peaking and shaping resources to meet energy and capacity requirements for all subperiods. PG&E reports that, based on the Commission's flexible compliance rules, projects that offer deliveries with an on-line date no later than the start of 2008 are of particular interest to PG&E.
PG&E's proposed 2006 Plan and draft master purchase and sale agreements are similar to those in 2005. PG&E seeks Power Purchase Agreements (PPAs) with delivery terms of 10, 15 or 20 years beginning in 2006 or beyond. Participants may also propose delivery terms between 10 and 20 years. Participants may submit offers for four specific products: (a) as-available, (b) baseload, (c) peaking, or (d) dispatchable. PG&E states that it will also consider two types of combination products: (a) peaking and as-available, or (b) peaking plus other firm deliveries in any combination of other TOD periods.
In addition to purchases, PG&E will also consider two ownership alternatives: (a) power purchase agreement with PG&E buyout option (in which the developer gives PG&E the option to purchase the facility at a pre-determined price after it has been in operation for a certain number of years), and (b) turnkey agreement (in which the developer sells the project to PG&E for a pre-determined price at the time the project enters commercial operation). PG&E states that it will evaluate offers using the following considerations: (a) market valuation, (b) portfolio fit, (c) non-price factors, (d) adjustment for transmission adders and integration costs, and (e) other non-price considerations.
PG&E assumes a status quo regulatory environment as the context for its 2006 Plan. PG&E identifies four differences between its 2005 and 2006 proposed solicitations:
1. In 2006, bidders will have more time after PG&E issues its solicitation in which to submit bids.
2. While the evaluation criteria remain the same as in the 2005 solicitation, the quantitative weightings have been eliminated to provide more flexibility and accommodate the wide range of technologies and specific project circumstances.
3. The resource needs section has been updated to reflect updated assessment of portfolio needs.
4. In 2006, PG&E proposes to accept bids from all eligible renewable resources, resulting in the acceptance of bids with delivery points anywhere in California, in addition to the CAISO delivery points authorized in D.05-07-039.
B. SCE
SCE estimates its APT for 2006 is 14,220 gWh, and its IPT for 2006 is 754 gWh.3 SCE states that it has a near-term need for renewable energy during the time period beginning January 1, 2006 and ending on December 31, 2008, and, therefore, its evaluation criteria will favor proposals which include these initial operation dates. SCE states it also has long-term needs for renewable energy and will consider proposals which are based upon initial operation dates after December 31, 2008, but it will not consider any proposals based upon an initial operation date after January 1, 2013.
SCE's 2006 Plan and RFO are similar to those in 2005.4 SCE states that its 2006 RPS Plan is straightforward: after SCE completes its 2005 procurement, SCE intends in 2006 to contract for the balance of renewable power necessary to achieve 20% renewables by 2010. SCE indicates that it does not have an institutional preference for a particular resource mix or technology type. SCE's affiliates are permitted to submit a bid.5
Many variables affect SCE's procurement needs, according to SCE, including a projection of bundled sales, the amount of load in SCE's service territory served by direct access providers, and the anticipated level of output from baseline contracts. As a result, SCE develops high, base and low procurement need scenarios. In order to maximize its compliance prospects, SCE states that it plans to procure for the high procurement needs scenario. If SCE successfully procures to its high procurement needs scenario in 2010, and the high procurement needs scenario actually occurs, SCE estimates it will achieve a 20% level of renewables in 2010. SCE estimates it will be above 20% in 2010 if either the base or low case procurement needs scenario actually occurs.
SCE allows sellers to offer contract terms of 10, 15 and 20 years, and requires each proposal to be at least 1 MW. For generating facilities located in SCE's service territory, SCE says the only acceptable delivery point is CAISO Zone SP-15. For generating facilities located outside SCE's service territory, SCE says it will consider proposals with a delivery point outside of CAISO Zone SP-15, but that the delivery point must be within the CAISO control area.
According to SCE, it will evaluate proposals based on criteria intended to achieve the lowest ratepayer cost and the best fit with utility retained generation and California Department of Water Resources generation. SCE says it takes into account the criteria in the Commission's LCBF decision, D.04-07-029. Specifically, SCE states it will employ a production simulation model to calculate total system production costs and benefits associated with the renewable generating facility, incorporating Effective Load Carrying Capacity values, transmission costs, and integration costs and benefits. This will produce a benefit/cost ratio for each proposal. In addition, SCE will consider, among other things, debt equivalence, credit, and seller qualifications. Finally, SCE says it will utilize attributes identified by the Commission as quantitative methods for evaluating tie-breakers.
C. SDG&E
SDG&E states that its 2006 APT is 741 gWh.6 SDG&E does not identify the amount of its 2006 IPT. SDG&E says it expects to exceed both its 2006 APT and IPT, and will bank APT surpluses for future compliance.
While SDG&E says it continues to move aggressively toward the 20% by 2010 goal, it is considering whether or not to issue an RFO in 2006. SDG&E anticipates making this decision after it concludes negotiations with bidders from its 2005 solicitation. SDG&E reports that, to the extent necessary, SDG&E will avail itself of the flexibility permitted in the RPS program including the ability to (a) sign bilateral agreements, (b) bank purchases in excess of the APT, and (c) borrow from the bank to make up shortfalls. SDG&E anticipates that it may seek approval of bilateral contracts.
If SDG&E seeks additional offers, SDG&E says it intends to issue one RFO. According to SDG&E, that RFO will solicit PPAs and/or ownership options from developers of all renewable technologies that can interconnect with the CAISO or are located in the Imperial Valley. SDG&E says products may include unit firm or as-available deliveries starting in 2007, 2008, 2009 or 2010. SDG&E's draft RFO allows sellers to offer renewable products anywhere in the CAISO grid or in the Imperial Valley, but SDG&E says it continues to have a preference for in-basin renewable resources, particularly those that can offer overall reliability, must run reliability, or resource adequacy benefits.
SDG&E says that bids will be initially ranked based on the all-in bid price and transmission costs. SDG&E's draft RFO states that three components of the LCBF that are of primary importance to SDG&E are: (a) delivered energy costs, (b) overall fit with SDG&E's resource portfolio, and (c) transmission system upgrade costs. SDG&E says it will differentiate offers of similar cost by reviewing qualitative factors including location, benefits to minority and low income areas, resource diversity, and environmental stewardship. It will also differentiate offers of similar cost by reviewing other factors (e.g., delivery reliability, ability to advance schedule, technology, likelihood project will be able to develop and achieve commercial operation within established time frames, operational flexibility, development risk, financing plan, corporate capabilities, credit, proven experience, repowering, contract extension).
SDG&E seeks power purchase agreement proposals for 10, 15 or 20 years, but will consider other contract durations subject to Commission approval. Resources located in Imperial Valley must commence no earlier than July 2010, unless the resource has adequate transmission capability to deliver to the CAISO control area. Resources from Imperial Valley without adequate transmission capability shall be contingent upon SDG&E obtaining approval for, and being able to license and construct, a new 500 kilovolt (kV) line from Imperial Valley to the San Diego area, according to SDG&E.
SDG&E also seeks PPA proposals with either a buyout option or a turnkey acquisition. SDG&E also says it intends to append a copy of the Edison Electric Institute (EEI) Agreement to the RFO, and reserves the right to revise both the RFO and EEI Agreement prior to issuance. Finally, SDG&E's draft RFO states that all offers in response to its RFO shall be evaluated together with offers in response to SDG&E's distributed renewable technologies solicitation, and one short list will be created.
2 This is an APT of about 1,561 average megawatts (aMW) at an 80% capacity factor (CF). This is an IPT of about 101 aMW at an 80% CF.
3 This is an APT of about 2,029 aMW at an 80% CF. It is an IPT of about 108 aMW at an 80% CF.
4 In fact, SCE states that it intends to issue an RFO in 2006 that is substantially identical to its 2005 RFO. SCE did not file a new draft RFO with its 2006 Plan.
5 Because SCE affiliates may participate, SCE reports that it has engaged an independent evaluator to monitor the process. SCE will discontinue the engagement of the independent evaluator if SCE does not receive a proposal from an SCE affiliate.
6 This is an APT of about 106 aMW at an 80% CF.
