8. Assignment of Proceeding
Michael R. Peevey is the assigned Commissioner, and Burton W. Mattson and Anne E. Simon are the assigned ALJs for this proceeding.
1. Parties generally do not recommend extensive changes in proposed Plans, and no motion for hearing was filed.
2. PG&E proposes to reduce a portion of its Project Development Security for as-available, baseload and peaking (but not dispatchable) products, and no party opposes PG&E's proposal.
3. PG&E's proposed Delivery Term Security is 5% of the total revenues of the project, and no evidence demonstrates that this results in PG&E being "over-insured" at ratepayers' expense, nor that operating collateral of 5% is excessive.
4. PG&E includes an item in its proposed 2007 RPS Protocol for solicitation of "sites for development," wherein PG&E seeks offers for new or existing sites to be acquired by PG&E for the development, construction, and operation of an ERR.
5. Each IOU's proposed 2007 Plan showing relative to its consideration of whether or not to build its own resources is relatively limited, without many specifics, and, in SCE's case, also expresses concern with Commission policy.
6. To the extent consolidation of financial reports is required pursuant to FIN 46(R), the IOU has no choice, and certain financial information must be provided by the seller, but need not necessarily be required as part of the bid.
7. IOU-proposed Plans require a substantial amount of project-specific financial information with a bid.
8. Advice letters are intended to be used primarily for compliance filings, but a change in capital structure, or other cost recovery due to debt equivalence or FIN 46(R), is beyond the normal scope of a compliance filing.
9. There is no compelling evidence that RPS facilities are having undue burden performing SC services themselves, finding SC services from others, or participating in the PIRP.
10. SCE proposes to offer SC services, with the operator taking risk related to operations outside of an established bandwidth.
11. SCE's proposal to charge for deviations outside an established bandwidth provides an incentive for the RPS facility to forecast and operate reasonably, while allowing SCE to offer a useful SC service without itself incurring unreasonable risk for operational deviations.
12. Each IOU improved its statement of evaluation criteria and selection process for its amended 2006 Plan, but, consistent with direction in D.06-05-039 and discussion herein, each can further improve the statement included in its 2007 Plan.
13. Regarding changes relative to SB 107, each IOU proposes adding a definition of REC; PG&E and SDG&E propose changing "Environmental Attributes" to "Green Attributes"; and PG&E proposes including other changes to incorporate AB 32 concepts and RECs.
14. The term "Environmental Attributes" (defined in D.04-06-014) incorporates RECs, while "environmental attributes" (used in SB 107) are only one aspect of RECs and, as a result, SDG&E and PG&E propose mitigating the potential confusion by the Commission changing its term to "Green Attributes."
15. "Green Attributes" is reasonably parallel to, but unlikely to cause confusion with, a term parties already recognize ("green tags").
16. PG&E and SDG&E each initially proposed a sentence (regarding release of certain project information not fully consistent with the SB 107 time period of "no later than six months"), and PG&E now proposes deleting the sentence, as well as updating the solicitation cover sheets.
17. SDG&E proposes that the terms "online date" and "delivery point" be included in the list of disclosable terms related to project information, for consistency with D.06-06-066, and no party objects.
18. PG&E recommends that the Commission expressly allow consideration of changes to non-modifiable standard terms and conditions through the advice letter process, and this issue is also presented in a petition for modification of D.04-06-014 filed on February 1, 2007.
19. PG&E proposes that contracts resulting from prior solicitations and submitted for consideration on or after January 1, 2007 also contain relevant provisions pursuant to SB 107, while (in comments on the proposed decision) others oppose this requirement.
20. Each IOU's Plan has some actual or potential infirmities (e.g., not reflecting current conditions in some respects; limiting the ways in which a bidder may seek relief from the outcome of the solicitation process; not containing high, base and low case scenarios; poor organization; not including all documents to which it refers; not containing a dispute resolution procedure).
21. A solicitation cycle completed by the end of 2007 is consistent with the existing goal of completing each solicitation within one year.
22. Improvements have been made in the form and format of RPS Plans over the previous cycles, but each remains relatively complex, and additional improvements are feasible and desirable.
1. With some exceptions, electrical corporations are required to prepare a renewable energy procurement plan, and the Commission is required to review and accept, modify, or reject each plan.
2. PG&E, SCE and SDG&E should continue to have reasonable flexibility in the way each satisfies RPS program requirements, subject to Commission guidance, limited specific requirements, and a specific timeframe for limited dates in the next solicitation cycle.
3. Conditional approval of each 2007 RPS Plan (including Protocol, RFO, and model contracts) does not constitute endorsement or adoption of each element of each Plan; rather, each IOU remains responsible for overall program success, subject to rules for flexible compliance and tests of reasonableness (e.g., how each entity administers the program, including the extent to which each entity takes Commission guidance; demonstrates creativity and vigor in program execution; and successfully reaches program goals, targets and requirements).
4. The proposed 2007 RPS Procurement Plans of PG&E, SCE and SDG&E should each be conditionally accepted, subject to the guidance, necessary modifications, changes and clarifications stated in this order, including, but not necessarily limited to, each item summarized in Appendix A.
5. PG&E, SCE and SDG&E should each submit an amended Plan to the Energy Division Director, with service on the service list, within 15 days of the date this order is mailed and, unless suspended by the Energy Division Director within 22 days of the date this order is mailed, each utility should use its amended Plan for its 2007 RPS program and solicitation.
6. To the extent IOUs have reasonable flexibility in program administration (e.g., setting credit and collateral policies and amounts, disclaimer and waiver language) an IOU later requesting deferral or waiver of a penalty should have the burden to present a showing in support of that request which, among other things, demonstrates reasonable administration within Commission guidelines.
7. Commission enforcement of each APT, and 20% by 2010, should take into account whether or not each electrical corporation undertook all reasonable actions to comply, including but not limited to, whether or not it reasonably considered building its own RPS resources.
8. Disclosure of detailed financial information should not be a condition for a developer to submit a bid but, if required at all, may be reasonably requested as part of the contract negotiation once the project is on the IOU's short list.
9. SDG&E's proposal to seek relief via advice letter for certain financing costs (i.e., FIN 46(R), debt equivalence) should be rejected.
10. IOUs and parties should consider including a "change in law" clause in model RPS contracts.
11. An IOU should bring substantive changes in any RPS contract to the Commission's attention.
12. SCE's proposal to offer SC services (with the facility's operator taking the risk of operations outside an established bandwidth) should be accepted, but the operator's taking of the offer should be optional.
13. Each Plan should continue to be improved, including better description of the evaluation criteria and selection process
14. Each Plan should include a definition of RECs as proposed by PG&E, SCE's additional language for conformance with SB 107 should be included for SCE's Plan, and "Environmental Attribute" should be changed to "Green Attribute" with most of the further changes recommended by PG&E.
15. PG&E and SDG&E should each delete a particular proposed sentence (regarding the period in which certain project information may be released that is inconsistent with the "no more than six months" required by SB 107) and change their cover sheets accordingly; PG&E, SCE and SDG&E should each include "online date," "delivery point," "expected deliveries (energy)," and "length of contract" in the list of disclosable terms consistent with D.06-06-066.
16. Effective January 1, 2007, neither an IOU's Plan nor Commission document should limit an electrical corporation transmitting or sharing the results of any competitive solicitation for eligible renewable energy resources with the Commission.
17. Parties should, as appropriate, use the terms described herein (e.g., for RECs, agreement information, access to bid information) for contracts that result from prior solicitations (e.g., 2004, 2005, 2006) presented for our consideration after January 1, 2007, but parties should not be required to engage in renegotiation of executed contracts.
18. Modification of the 2007 RPS Plans so that they conform with the precise standard terms and conditions in D.04-06-014 should not be required now, but the issue of when and how standard terms and conditions may be changed over time should be addressed in the petition for modification of D.04-06-014 filed on February 1, 2007.
19. IOUs may update their Plans, as appropriate, to reflect reporting components decided in D.06-10-050.
20. Individual IOU Plans should be modified to reflect current conditions and other items as noted in this order (e.g., inclusion of high, base, low scenarios; better organization; EEI and other documents).
21. The same basic components in the RPS Solicitation Timeline used for the 2006 Solicitation should be used for the 2007 Solicitation, with some adjustment in the schedule.
22. The Energy Division Director, in administering the program, may modify the Solicitation Schedule dates on Energy Division's own initiative, as necessary, but any modifications should be consistent, to the extent possible, with our goal of bringing the 2007 solicitation to conclusion by the end of 2007.
23. The assigned Commissioner or ALJ should set a schedule for the filing and service later this year of 2008 draft RPS Plans; should set a schedule related to TRCRs; and the assigned Commissioner should determine whether draft TRCRs should be modified, or other steps taken, before the TRCRs are used in the ranking of bids.
24. Each IOU should continue to seek ways to improve the organization, completeness, comprehensiveness and ease of use of its RPS Plan, including an improved (and possibly common) form and format.
25. Evidentiary hearing is not necessary.
26. This proceeding should remain open.
27. This order should be effective today so that the 2007 RPS solicitation may proceed without delay.
IT IS ORDERED that:
1. Each utility-proposed renewable energy procurement plan (Plan) as part of the California Renewables Portfolio Standards (RPS) Program is conditionally accepted for the next RPS solicitation cycle. Each Plan includes, but is not limited to, Protocols, Request for Offers (RFOs), model contracts and/or Power Purchase Agreements (PPAs). The Plans are in the following documents:
a. The Pacific Gas and Electric Company (PG&E) "2007 Renewable Energy Procurement Plan and Draft Solicitation Protocol" filed September 26, 2006.
b. The Southern California Edison Company (SCE) "2007 Renewables Portfolio Standard Procurement Plan" filed September 25, 2006.
c. The San Diego Gas & Electric Company (SDG&E) "2007 Renewable Procurement Plan" filed September 25, 2006.
2. Each document referenced above is adopted on the condition that:
a. Within 15 days of the date this order is mailed, PG&E, SCE and SDG&E shall each file with the Director of the Energy Division, and serve on the service list, an amended Plan consistent with all the orders in this decision, plus all guidance in this decision with which the utility agrees. The orders and guidance are summarized in, but not limited to, Appendix A.
b. Unless suspended by the Energy Division Director within 22 days of the date this order is mailed, each utility shall use its amended Plan for its next solicitation.
3. The 2007 RPS procurement cycle shall be as stated in Appendix B. The schedule may be modified by the Energy Division Director as reasonable and necessary for efficient administration of this solicitation, Parties may seek schedule modification by letter to the Executive Director (pursuant to Commission Rules of Practice and Procedure).
4. Consistent with all prior Commission orders and directions, each utility ultimately remains responsible for reasonable RPS program outcomes, within application of flexible compliance criteria. The Commission shall later review the results of renewable resource solicitations submitted for Commission approval, and accept or reject proposed contracts based on consistency with each approved Plan. The Commission shall also judge contract results, program results, and non-compliance pleadings by, but is not limited to, considering the degree to which each utility implements Commission orders; reasonably elects to take or reject the guidance provided herein; reasonably demonstrates creativity, innovation and vigor in program execution; reaches program targets and requirements; and shows it took all reasonable actions to achieve compliance, including but not limited to the factors identified in this and prior orders.
5. The assigned Commissioner or ALJ in this proceeding (or its successor proceeding with regard to ongoing implementation and administration) shall set a schedule for the filing and service later this year of draft RPS Plans for the 2008 solicitation, and subsequent draft RPS Plans, as necessary. The assigned Commissioner or ALJ shall set a schedule for matters related to Transmission Ranking Cost Reports (TRCRs) to be used in the ranking of bids in an RPS solicitation. The assigned Commissioner shall assess the adequacy of each TRCR based on filed comments and reply comments, and shall determine whether each TRCR shall be approved, modified, or other steps taken before a TRCR is used in ranking bids in an RPS solicitation.
6. This proceeding remains open.
This order is effective today.
Dated February 15, 2007, at San Francisco, California.
MICHAEL R. PEEVEY
President
DIAN M. GRUENEICH
JOHN A. BOHN
RACHELLE B. CHONG
Commissioners
APPENDIX A
REVIEW OF AND CHANGES TO 2007 PLANS
Pursuant to the discussion in the attached decision, and using the same order of presentation, we adopt the following for the three investor-owned utilities (IOUs), namely Pacific Gas and Electric Company (PG&E), Southern California Edison Company (SCE) and San Diego Gas & Electric Company (SDG&E). We also include procedural guidelines for Commission review of proposed contracts.
1. Credit Requirements
a. Accept PG&E's proposal to reduce a portion of its Project Development Security for PG&E's Plan.
b. Encourage IOUs to reconsider all deposit and collateral policies and amounts in order to reach a proper balance of competing interests while at the same time being compatible with efficient and equitable allocation of risk.
2. Utility-Owned Projects
a. Accept PG&E's proposal to include a solicitation item regarding "sites for development," and encourage SCE and SDG&E to adopt a similar item.
b. Encourage further consideration by each IOU of building RPS resources as needed to achieve RPS Program goals.
3. Financial Disclosures, Rate Adjustments and Change in Law
a. Adopt PG&E's proposed clarification of financial disclosures being required, if at all, no sooner than after the project is on an IOU's short list (with no requirement for disclosures to either submit a bid or permit initial consideration of a bid), and adopt this for all three IOUs.
b. Encourage IOUs and all parties to give further consideration to the issue of project-specific financial information in light of what is truly needed to assess project viability while also considering reasonable risk sharing, if any, over the term of the agreement.
c. Reject SDG&E's proposal to permit seeking rate relief for costs related to debt equivalency and FIN 46(R) in the advice letter filing for approval of an RPS PPA, but note such relief is available in other proceedings, as needed.
d. Encourage IOUs and parties to consider a "change in law" clause (to address how parties will handle new or revised laws, regulations or rules over the term of the contract), with recognition that contract administration is subject to ongoing Commission oversight.
4. Waivers: Encourage IOUs to rethink the tone and nature of waivers and disclaimers.
5. Scheduling Coordinator (SC)
a. Decline to order each IOU to offer SC services.
b. Accept SCE's proposal for SCE to offer SC services, but require those services to be offered as an option and not be mandatory.
c. Accept SCE's proposal relative to SCE that operators take the risk of operational deviations outside an established bandwidth.
6. Evaluation Criteria and Selection Process
a. Require each IOU's amended Plan to do a better job of stating evaluation criteria and selection process.
b. Encourage the IOUs to draft a common evaluation criteria and selection process description to insert into each Plan, with unique language to reflect differences, as needed.
7. Senate Bill (SB) 107
a. Renewable Energy Credits (RECs):
i. Adopt the definition of REC proposed by PG&E for all three IOUs, and SCE's additional language for SCE regarding conformance with SB 107 (noting SCE and SDG&E may also include PG&E's definition of "Law" as they determine necessary or appropriate).
ii. Adopt for all three IOUs a revised non-modifiable term that changes "Environmental Attributes" to "Green Attributes" and incorporates proposals on RECs and concepts in Assembly Bill (AB) 32.
b. Agreement Information: Adopt PG&E proposal for PG&E to delete sentence that is inconsistent with the SB 107 time period; require SDG&E to do the same; adopt SDG&E proposal to include information on online date and delivery point, also include expected deliveries (energy) and length of contract, and require this of all three IOUs.
c. Access to Bid Information: Lift restrictions on an electrical corporation transmitting or sharing bid results with the Commission before Commission establishment of the market price referent.
d. Timing: Permit parties to include relevant changes related to SB 107 mandates (e.g., include definition of REC and changes to "Green Attributes") in any contract submitted for Commission consideration on or after January 1, 2007, even if from a prior solicitation (e.g., 2004, 2005, 2006), but not require contract renegotiation of executed contracts; contracts executed after the date this order is mailed should include relevant provisions of SB 107.
8. Commission Review Process
a. Existing Commission review process by advice letter is continued.
b. Other cost recovery: cost recovery related to debt-equivalence or FIN 46(R) must be through cost of capital or other formal proceeding.
9. RPS Data: Each IOU may update its RPS data showing in amended Plans to reflect categories identified in D.06-10-050, as each determines best.
10. Issues Specific To An IOU Plan
a. PG&E
i. Updated as needed to reflect current conditions.
ii. Edit its limitations and description regarding relief a bidder may seek regarding the solicitation process, as appropriate.
b. SCE
i. Update as needed to reflect current conditions.
ii. Include equal treatment, fair dealing and good faith performance language in its Procurement Protocol.
iii. Reconsider procurement needs based on a range of scenarios, and commitment to procure to the high needs case.
iv. Correct integration costs to zero, as necessary.
v. Consider better organization and presentation of Plan.
c. SDG&E
i. Update as needed to reflect current conditions.
ii. Complete as needed (e.g., include EEI contract).
11. Schedules and Plan Organization
a. 2007 Solicitation Schedule
i. Timeline in Appendix B is adopted.
ii. Energy Division Director may modify the dates on own initiative to efficiently administer program, but should seek to bring the 2007 solicitation to conclusion by end of 2007, if possible.
iii. Parties may seek modification in the schedule consistent with Commission Rule 16.6.
b. 2008 Solicitation Schedule
i. Specific schedule set by assigned Commissioner or ALJ, with initial filing later in 2007.
ii. Assigned Commissioner of ALJ shall set the schedule for TRCRs and Assigned Commissioner shall issue an assigned Commissioner's Ruling on the TRCRs.
c. Plan Organization and Ease of Use: Encourage each IOU to consider ways to improve each Plan, including adoption of a common form and format, and perhaps an improved model contract, to facilitate its use by all involved parties and entities.
(END OF APPENDIX A)
APPENDIX B
RENEWABLES PORTFOLIO STANDARD
SOLICITATION TIMELINE
(Updated from D.04-07-029, D.05-12-042, D.06-05-039)
· Utilities file applications for consideration of renewables portfolio standard procurement plans (RPS Plans), including requests for offers (RFOs).
· California Public Utilities Commission (CPUC) decision on RPS Plans, including RFOs.
· Utilities file amended RPS Plans, as needed.
· Utilities issue RFOs (unless amended RPS Plans are suspended by the Energy Division Director).
· Respondents file notice of intent to bid.
· Bidders conferences held.
· Deadline for respondents to submit bids.
· Utilities validate and clarify bids.
· Utilities notify CPUC Executive Director by letter when bidding has closed.
· Market price referent (MPR) is calculated by CPUC when
last solicitation is complete.
CPUC staff calculates and discloses draft MPR in a draft resolution. After party comments, MPR is finalized when CPUC adopts MPR resolution.
· Utilities evaluate the bids to develop short lists.29
Procurement Review Group (PRG) meetings are held to review bid results.
· Utilities submit short-listed bids to CPUC and PRGs.
Utilities' initial reports on evaluation criteria and selection process are included with short-list, or shortly thereafter; Independent Evaluator's Preliminary Reports are also included, or shortly thereafter.
Bidders have five days to withdraw all conflicting bids. Otherwise bid is binding.
· CPUC and PRGs review utilities' short lists.
· Utilities and bidders negotiate and execute contracts.
· Utilities file contracts by advice letter or application for CPUC
consideration.
Filing includes updated utility report on evaluation criteria and selection process, and final Independent Evaluator's Report.
Utilities may file contracts in groups, as appropriate. Contracts that do not require Supplemental Energy Payments (SEP) funds may be submitted separately.
· Contracts are considered and addressed by CPUC in a resolution or decision.
· Sellers confirm Public Goods Charge (PGC) funding with utilities within 10 days after receiving notice of SEP determination from Energy Commission.
After SEP determination is made, generators and utilities may re-structure payment streams in their contract or take other actions in accordance with Standard Terms and Conditions, "SEP Awards, Contingencies," based on SEP determination.
If SEP award is not made within 120 days of submission of the contract for CPUC approval, generators may exercise termination rights under the provisions of Standard Terms and Conditions, "SEP Awards, Contingencies."
· If necessary, utilities submit amended advice letters or applications with revised proposed contracts, reflecting results of SEP determinations, to CPUC for review and approval by resolution or decision.
NOTE ON SEPs
Contracts approved by CPUC and having a contract price greater than the MPR may be eligible for SEPs. The Energy Commission's instructions for submitting applications and supporting materials are set forth in the current New Renewable Facilities Program Guidebook, available at http://www.energy.ca.gov/renewables/documents/index.html.
Thirty days after receiving a contract and all relevant data required to conduct the SEP evaluation, the Energy Commission releases PGC Funding Confirmations to CPUC, utility, and individual bidder, and will identify any caps imposed. Final SEP awards are subject to conditions identified in the current New Renewable Facilities Program Guidebook.
ADOPTED SCHEDULE
FOR 2007 SOLICITATION
LINE NO |
ITEM |
NO. OF DAYS |
DATES |
1 |
Commission's Conditional Approval of RPS Plans |
0 |
2/15/07 |
2 |
IOUs file amended RPS Plans |
15 |
3/2 |
3 |
IOUs issue RFOs (unless amended Plans are suspended by Energy Division Director by Day 22) |
25 (a) |
3/12 (a) |
4 |
IOUs notify Commission when bidding is closed |
113 |
6/8 |
5 |
IOUs submit short lists to Commission and PRG |
151 |
7/16 |
6 |
IOUs submit report on evaluation criteria and section process; Independent Evaluators submit Preliminary Reports |
165 |
7/30 |
7 |
IOUs submit ALs with PPAs for Commission consideration |
by 319 |
by 12/31 |
Note: The Energy Division Director may change these dates. Party requests for changes must be directed to the Executive Director (Rule 16.6).
(a) An IOU may adjust this date to a day after day 25, as necessary, without Commission approval.
(END OF APPENDIX B)
APPENDIX C
CHANGE IN LAW
Electric Corporations subject to the Renewables Portfolio Standards (RPS) Program may, for the purpose of future procurement plans, consider the following example of a change in law provision. This example is from an interconnection agreement between two telecommunications carriers.
"This Agreement is entered into as a result of both private negotiation between the Parties and the incorporation of some of the results of arbitration by the California Public Utilities Commission. If the actions of the State of California or federal legislative bodies, courts, or regulatory agencies of competent jurisdiction invalidate, modify, or stay the enforcement of laws or regulations that were the basis or rationale for a provision of the contract, the affected provision shall be invalidated, modified, or stayed, consistent with the action of the legislative body, court, or regulatory agency upon the written request of either party. In the event of any such actions, the Parties shall expend diligent efforts to arrive at an agreement respecting the appropriate modifications to the Agreement. If negotiations fail, disputes between the Parties concerning the interpretation of the actions required or provisions affected by such governmental actions shall be resolved pursuant to the dispute resolution process provided for in this Agreement. The Parties acknowledge the following: Verizon v. FCC, et. al, 535 U.S. 467 (2002); USTA, et. al v. FCC, 290 F.3d 415 (D.C. Cir. 2002) and following remand and appeal, USTA v. FCC, 359 F.3d 554 (D.C. Cir. 2004); the FCC's Triennial Review Order, CC Docket Nos. 01-338, 96-98 and 98-147 (FCC 03-36) including, without limitation, the FCC's MDU Reconsideration Order (FCC 04-191) (rel. Aug. 9, 2004) and the FCC's Order on Reconsideration (FCC 04-248) (rel. Oct. 18, 2004), and the FCC's Biennial Review Proceeding; the FCC's Order on Remand (FCC 04-290), WC Docket No. 04-313 and CC Docket No. 01-338 (rel. Feb. 4, 2005) ("TRO Remand Order"); the FCC's Report and Order and Notice of Proposed Rulemaking (FCC 05-150), CC Docket Nos. 02-33, 01-337, 95-20, 98-10 and WorldCom Docket Nos. 04-242 and 05-271 (rel. Sept. 23, 2005) ("Title I Order"); the FCC's Supplemental Order Clarification (FCC 00-183) (rel. June 2, 2000), in CC Docket 96-98; and the FCC's Order on Remand and Report and Order in CC Dockets No. 96-98 and 99-68, 16 FCC Rcd 9151 (2001), (rel. April 27, 2001), which was remanded in WorldCom, Inc. v. FCC, 288 F.3d 429 (D.C. Cir. 2002), and as to the FCC's Notice of Proposed Rulemaking as to Intercarrier Compensation, CC Docket 01-92 (Order No. 01-132) (rel. April 27, 2001) (collectively, "Government Actions"). The Parties further acknowledge and agree that by executing this Agreement, neither Party waives any of its rights, remedies or arguments with respect to such Government Actions and any remand thereof, including its rights under this Intervening Law paragraph."
(Source: Interconnection Agreement between AT&T-California and Verizon Business, General Terms and Conditions Appendix, Section 23, Intervening Law; Approved by the Commission in Decision 06-08-029, August 23, 2006.)
(END OF APPENDIX C)
29 Utility evaluation process should begin prior to MPR release and adoption.
