5. Issues Specific to an IOU Plan
We comment further below on issues specific to each Plan. As we have said before, however, conditional acceptance of these Plans does not constitute endorsement or adoption of proposed policy measures that have not yet been fully vetted. It also does not reflect endorsement or adoption of each aspect of each plan. Rather, we conditionally accept each Plan, subject to limited required amendments and several suggestions made herein. Each utility remains ultimately responsible for proposing and executing reasonable Plans that achieve RPS targets, including 20% by 2010, subject to flexible compliance rules. We will later judge the extent of each IOU's success, including the degree to which each IOU implements Commission orders, applies the Commission guidance, demonstrates creativity and vigor in program execution, and reaches program targets and requirements.26
5.1. PG&E
PG&E's proposed Plan does not reflect current conditions in some respects, or is perhaps unclear, and should be updated as appropriate. Six examples follow.
a. PG&E's proposed Plan states that each IOU must increase its procurement "so that 20% of its retail sales are supplied by ERRs by 2017. As a matter of policy, the CPUC has accelerated the deadline to 2010." (2007 Solicitation Protocol, Section I.A., p. 1.) This is now a requirement of law. (SB 107, § 399.15(b)(1), effective January 1, 2007.)
b. PG&E requires a bidder to provide a project description that includes several factors recognized by the Legislature and Commission. (2007 Solicitation Protocol, Section VIII.C., Tab 5, Items i, j, k and l.) PG&E should consider also including factors stated as important by the Governor, such as biomass. (See Executive Order S-06-06.)
c. PG&E refers to certain transmission ranking costs as part of a report prepared and filed pursuant to a ruling dated November 9, 2005 in OIR 04-04-026. (2007 Solicitation Protocol, Section X.B.1.ii.) The transmission ranking costs for the 2007 Protocol will be pursuant to a ruling dated August 21, 2006 in R.06-05-027. (The assigned Commissioner has recently issued a ruling adopting certain transmission ranking costs; PG&E may wish to refer to that ruling.)
d. PG&E refers to R.04-04-026 as a proceeding in which certain things may happen. (2007 Solicitation Protocol, Section XVII.) R.04-04-026 is closed for any purpose suggested here by PG&E. (It is open at the moment only for consideration of intervenor compensation requests.)
e. PG&E refers to Section V.C but may mean Section V.D. (2007 Solicitation Protocol, Section XIX.G.)
f. PG&E refers to the 2006 Solicitation, June 30, 2006 and/or July 10, 2006 in several places, where the correct references are to the 2007 Solicitation, a document dated in early 2007 and/or a form returned in mid-2007. (2007 Solicitation Protocol, Attachment A, Solicitation Protocol Agreement, paragraph 1 and Confidentiality Agreement, paragraph 2; Attachment B, Form of Letter of Credit, item 2A; Attachment C, Notice of Intent to Bid, paragraph 2.)
PG&E's proposed Plan limits a bidder seeking relief regarding an alleged harm resulting from the solicitation to seeking that relief from the Commission. Specifically, PG&E says the only forums to challenge the conduct or the results of the solicitation are R.04-04-026 or the Commission's Alternative Dispute Resolution procedures pursuant to Resolution ALJ-185. R.04-04-026 closed for such purpose. Even if open, it is unclear whether either that proceeding or its successor (R.06-05-027) provide such forum. Moreover, the limitation may be understood to preclude a bidder from discussing concerns or potential problems with Energy Division or the Independent Evaluator. Such restriction should not be applied. PG&E should consider editing is limitation and its description accordingly.
5.2. SCE
SCE's proposed Plan, similar to PG&E's, does not reflect current conditions in some respects, or seemingly is incomplete, and should be updated as appropriate. Two examples follow.
a. SCE's proposed Plan contains a blank footnote. (2007 RPS Bid Solicitation Documents, Appendix 2A, p. 15.) The footnote should be entered or deleted with the final Plan.
b. SCE's proposed Plan states that certain attributes identified in D.04-07-029 will be utilized "as qualitative methods for evaluating tie-breakers." (2007 RPS Bid Solicitation Documents, Appendix 2A, p. 17, item 5.02.) SCE should state those attributes and explain how they will be used as tie-breakers.
In conditionally approving the 2006 Plans, we favorably noted some SCE-proposed contract language regarding equal treatment, fair dealing and good faith performance. (D.06-05-039, p. 48.) We encouraged each IOU to include such language in its Plan. SCE's proposed 2007 Procurement Protocol (Appendix 2A) appears not to do so. We again encourage SCE to include such language, not only in its proposed proforma agreement, but also in its Protocol.
SCE appears to apply integration costs as a specific cost adder. (SCE Report on RPS Evaluation Criteria and Selection Process dated September 29, 2006, Section III.D., pp. 5-6.) To the extent SCE applies a positive result, this is inconsistent with Commission direction to apply a zero adder. (D.04-07-029.) SCE should correct treatment of integration costs, as needed.
In its 2006 Plan, SCE projected RPS procurement needs based on an assessment of several variables, and developed three procurement need scenarios: high, base and low. SCE reported that it planned to procure to the high needs scenario in order to maximize its compliance prospects, even if that might result in an overstatement of its required procurement. (December 22, 2005 Plan, pp. 3-4.) The Commission commented favorably about SCE's contingency planning, and, as a result in combination with other factors, declined to order an IPT greater than 1%. (D.06-05-039, p. 21.) The Commission concluded, however, that each IOU must continue to include its own procurement margin of safety. (Id., Conclusion of Law 3(b)(1), p. 81.)
In contrast, SCE's 2007 proposed Plan fails to address a range of scenarios, and does not state a commitment to procure to a high needs level. For example, unlike Figure 1 in its 2006 proposed Plan, SCE's Attachment 1 to its 2007 proposed Plan does not include high, base and low cases. At the same time, SCE states that "SCE's bundled customer sales growth rate continues to exceed projections." (Proposed Plan, p. 14.) SCE is encouraged to reconsider the use of a range of scenarios when it prepares and submits its final Plan. Further, SCE should consider again committing, as it did in its 2006 Plan, to procure to the high needs case. To the extent SCE (and/or another IOU) fails to reasonably consider a procurement margin of safety in its amended 2007 Plan or proposed 2008 Plan, we will reconsider, to the extent necessary, an IPT of 1.2% or other margin of safety. (D.06-05-039, pp. 21-24.)
At the same time, we commend SCE when SCE says in its 2007 proposed Plan that its "overall goal is to achieve 20% renewables as soon as possible..." (SCE Proposed Plan, p. 2.) We think contingency planning facilitates achieving that goal. We do not seek to revisit the subject of contingency planning with the 2008 Plans. As we have said many times, however, we will hold each IOU, including SCE, to reaching RPS targets, including 20% by 2010 (subject to flexible compliance rules). We encourage each IOU, including SCE, to continue to include contingencies in its RPS Plans, and to plan accordingly.27
Finally, SCE should consider better ways to organize the many documents in its 2007 RPS Bid Solicitation Documents, Appendix 2. Separation by colored paper (as does PG&E) or separation by tabs (as does SDG&E) would improve the user's ability to understand the organization of the documents.
5.3. SDG&E
SDG&E's proposed Plan does not reflect current conditions in some respects, or seemingly is unclear or incomplete. It should be completed or updated when submitted as the final Plan, as appropriate. Four examples follow.
a. SDG&E's final Plan should employ careful explanation and use of acronyms (e.g., Procurement Plan, p. 21, "EPC").
b. If specific proceedings are identified, SDG&E should ensure the list is complete and up-to-date (e.g., SDG&E should consider referencing R.06-05-027 at Procurement Plan, Appendix A, Proposed RFO, p. 14).
c. If specific laws and decisions are referenced, with web links, the list should be complete and up-to-date (e.g., SDG&E should consider adding SB 107, plus all other relevant Commission decisions at Procurement Plan, Appendix A, Proposed RFO, p. 14.)
d. Many documents are contained in one Appendix. (Procurement Plan, Appendix B, Form PPA.) Further organization (e.g., index) and/or tabbing would be helpful. Moreover, it appears to reference changes to the Edison Electric Institute (EEI) contract, but the EEI contract is not included (e.g., Cover Sheet, p. 13 references Section 10.6, but that Section is not elsewhere apparent).
In its comments on the proposed decision, TURN raises an issue regarding the congestion cost calculation used by SDG&E in its least cost-best fit evaluation process. TURN says it learned of certain specifics regarding this issue only in January 2007, but that the effect on bidders may be great. TURN asks that the Commission either direct SDG&E to eliminate its congestion cost methodology in this cycle, or provide additional documentation as to the reasonableness of its approach.
In response, SDG&E asserts the Preliminary Report of the Independent Evaluator shows that the congestion cost methodology does not alter the short-list ranking of projects or otherwise skew the results. SDG&E claims TURN's concern does not provide adequate basis for elimination of the congestion cost methodology for the 2007 RPS cycle, but that SDG&E will engage TURN in further discussion on this issue.
We decline to direct SDG&E to eliminate its congestion cost methodology based on limited and late information. We support SDG&E discussing this further with TURN. We also expect SDG&E to explain this matter to Energy Division staff and the PRG, as appropriate. We expect parties to bring the matter back to our attention if, and as, necessary.
26 The judgment may include whether or not to apply certain penalties. It may also include whether or not modify implementation of the program. One such modification may be to apply more non-modifiable standard terms and conditions. (§ 399.14.) This modification and other changes will be considered later, as needed, with the benefit of CEC recommendations from its 2006 Integrated Energy Policy Report Update (adopted January 3, 2007; Publication # CEC-100-2006-001-CTF). The CEC Report recommends further study of several potential structural changes in the RPS Program. One such change might be to employ a renewables "feed-in" tariff. (Id., p. 60.) One type of feed-in tariff is payment of a fixed price set at the market price referent for all electricity sold to the buyer. This may be somewhat like the structure previously used for qualifying facilities (QFs). The QF structure involved standard offers at fixed prices with limited room for negotiation. In contrast, the RPS structure now involves limited standard terms and conditions with much greater room for negotiation and vigorous price competition. We welcome creative and vigorous efforts by IOUs to make the current structure succeed in order to obviate the need to consider further structural changes. Moreover, we repeat from our prior orders that it is our "our clear desire never to visit these penalties." (D.03-06-071, p. 52; D.06-05-039, p. 29.) Nonetheless, we will consider penalties and changes if and as needed.
27 For example, PG&E's Protocol states that PG&E seeks to procure between 1-2% of its retail sales volume, or between 700 and 1,400 gWhs per year. (Protocol, p. 5.)
