2. Procedural Background

Decision (D.) 04-12-048; Ordering Paragraph 14 states the following:

"We authorize the utilities to enter into short-term, mid-term, and long-term contracts, with contract delivery start date through 2014, provided that the IOUs submit the necessary compliance filings. We adopt The Utility Reform Network's (TURN) proposal that contracts with duration five years or longer be submitted to the Commission for preapproval."

Pursuant to this direction, SDG&E filed this application on September 26, 2007. No protests were received. SDG&E filed a supplement on October 9, 2007.

Pub. Util. Code § 399.11, et seq. sets a target of generating 20% of total retail sales of electricity in California from eligible renewable energy resources by December 31, 2010. The statute sets forth the framework for the Commission to regulate investor-owned energy utilities (IOUs) in pursuit of this target. Pub. Util. Code § 399.14(a)(4) provides: "In soliciting and procuring eligible renewable energy resources, each electrical corporation shall offer contracts of no less than 10 years in duration, unless the commission approves of a contract of shorter duration." Section 399.14(b)(2), requires the Commission to establish "for each retail seller, minimum quantities of eligible renewable energy resources to be procured either through contracts of at least 10 years' duration or from new facilities commencing commercial operations on or after January 1, 2005."

D.04-12-048 adopted Long-Term Procurement Plans (LTPP) and provided direction to the utilities on the procurement of the resources identified in the LTPPs. The decision determined that energy efficiency and demand-side resources should be employed first in the loading order of resources for procurement. Then, when these opportunities are captured, renewable generation were to be procured to the fullest extent possible, so that whenever an IOU issues a Request for Offer/Proposal (RFO/RFP) for generation resources, it must justify its selection of fossil generation over renewable generation offers. The decision found that selection of renewable generation is the rebuttable presumption guiding IOU generation procurement.

In general, D.04-12-048 directed IOUs to procure the maximum feasible amount of renewable energy in the general solicitations and allowed them to credit this procurement towards their RPS targets, assuming that all RPS eligibility and program standards are met. To further this effort, the Commission committed to fully imbed the RPS into long-term planning, placing renewable energy development central to the IOUs' resource planning efforts.

D.07-05-028 addressed RPS eligibility of short-term (less than 10 years) contracts. The decision allowed RPS credit for short-term contracts only when the utility has satisfied specified requirements for minimum quantities of long-term contracts with new or existing facilities, and/or short-term contracts with new facilities. These specified requirements are known as the gate keeping function.