5. Limited Issues Specific to an IOU Plan
We comment further below on limited issues specific to each Plan. As we have said before, 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 constitute endorsement or adoption of each aspect of each Plan.20 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, most importantly, reaches program targets and requirements.
5.1. PG&E
We limit our comments to three elements of PG&E's Plan: short-term offer schedule, short-term offer pricing, and bidder workshop.
PG&E proposes an April 4, 2008 deadline for most offers, but April 25, 2008 for short-term offers. (Revised Draft 2008 Solicitation Protocol, September 6, 2008, pp. 3 and 45.) In general, we think the same deadline is likely to be clearer and less confusing, but leave this to PG&E's judgment, subject to PG&E meeting RPS Program goals.
PG&E states that sellers of as-available, baseload and peaking products will be paid for energy delivered according to time-of-delivery (TOD) periods. PG&E also requires that sellers of baseload or peaking products meet certain capacity factors by TOD period. PG&E, however, does not require participants making short-term offers from existing eligible renewable energy resources to include TOD factors. Nor does it require short-term baseload products to meet certain capacity factors. (Revised Draft 2008 Solicitation Protocol, September 6, 2008, pp. 25-26 and 46-47.)
Short-term offers are for periods up to 10 years. To the extent it is relevant for products 10 years and over to be paid by TOD (e.g., so they are given an incentive to provide energy during times when it is most needed) and meet certain capacity factors (e.g., so reliance for resource adequacy is more secure) it also appears relevant for multi-year products up to 10 years. PG&E fails to provide adequate justification to support its reasons to eliminate these provisions. Our general approach is to allow PG&E to exercise its judgment on such items. We point out, however, that PG&E is subject to meeting overall program goals, and decisions regarding application of flexible compliance provisions will also take into account the flexibility given PG&E in procurement design and execution (with the flexibility in procurement design and execution expected to increase PG&E's ability to reach program targets).
PG&E notes that, for the first time with its 2007 solicitation, it conducted a bidders' workshop in addition to a bidders' conference. The workshop was used to inform bidders of the details of solicitation forms and contracts, and answer general procurement questions. PG&E reports that the workshop proved effective, with offers in 2007 on the whole more complete than those in 2006. PG&E says it intends to conduct a bidders' workshop again as part of the 2008 solicitation.
PG&E is on the right track. Just as we did in 2006, we re-emphasize that IOUs should undertake all reasonable actions to reach RPS goals, including workshops if and when useful. (See D.06-05-039, p. 47.) We encourage other IOUs to follow PG&E's lead where doing so will advance the RPS Program.
5.2. SCE
We comment only on one item: SCE's Biomass Program.
We expect RPS Procurement Plans to include and explain each significant method an IOU intends to use to acquire RPS resources for purposes of meeting RPS Program targets. The amended Scoping Memo specifically directed IOUs to prepare 2008 Procurement Plans that are inclusive and comprehensive of the methods each will use to meet RPS Program targets.
In response, SCE states it will not only use its 2008 RFP and pro forma agreement, but will also use two other contracting options: (a) Biomass Program and (b) tariff and standard contract to implement § 399.20 pursuant to D.07-07-027. We comment on SCE's Biomass Program, and begin with a brief description.
On May 14, 2007, SCE issued a press release announcing the availability of three standard contracts for biomass projects. The contracts are available to facilities with capacities of less than 1 MW, 1 MW to 5 MW, and greater than 5 MW to 20 MW. SCE offers all three contracts to RPS-eligible biomass resources for terms of 10, 15 and 20 years at an energy price set at the MPR. SCE states it voluntarily initiated this program to support the Governor's goal of promoting energy production from biomass fuel sources. (See Executive Order S-06-06.) The standard contracts, according to SCE, address difficulties smaller biomass projects have had participating in SCE's annual solicitations, and eliminate the complex negotiation process required of other projects. SCE declares that the Biomass Program will remain open until the earlier of December 31, 2007 or until such time as SCE has signed contracts totaling 250 MW in the aggregate. SCE says it also reserves the right to cancel or extend the program at its sole discretion. (SCE Plan, p. 31.) SCE concludes by saying:
"Finally, it should be noted that SCE is not necessarily seeking approval of its biomass program or the standard contracts as part of its 2008 Procurement Plan. Instead, SCE intends to file an application, along with a batch of executed agreements, seeking standing approval of any agreements signed pursuant to the standard contracts and of the agreements included therewith." (Id., p. 32.)
We note four things about SCE's Biomass Program. First, if it closes on December 31, 2007, it is not relevant for the 2008 Procurement Plan. Second, no party provides material comments (e.g., recommending specific changes to one or more standard contracts or the applicable price).
Third, our application of the legislative structure for the RPS Program is to allow each electrical corporation considerable flexibility in the way it meets RPS goals. In exchange, each electric corporation must meet its RPS Program targets, within application of flexible compliance criteria, and penalties will apply for unexcused failures to meet targets. We accept, reject or modify each Plan before a particular solicitation, but we do so at a reasonably high level.
In that context, SCE's Biomass Program appears to be a reasonable application of SCE's business judgment, including whether or not SCE elects to cancel or extend the program. SCE is not necessarily seeking Commission acceptance, rejection or modification of its Biomass Program or the related standard contract in the context of its 2008 Plan, and, with one limited exception, we decline to make that judgment.
The exception is, if SCE elects to extend the program into 2008, we accept SCE's Biomass Program as part of SCE's 2008 RPS Plan. In that way, such contracts may be judged based on consistency with this Plan.21
Fourth, SCE does not request acceptance of its three standard contracts, nor use of the MPR price level. Rather, SCE says it "intends to file an application, along with a batch of executed agreements, seeking standing approval of any agreements signed pursuant to the standard contracts and of the agreements included therewith." Because we reach no decision here on the three standard contracts and/or price, we will make those judgments if and as needed when SCE files an application.
5.3. SDG&E
We address two items: (a) integration cost and (b) whether and when to conduct a solicitation.
SDG&E reports that bids for RPS projects are assessed using evaluation criteria consistent with directives contained in various Commission decisions (e.g., D.03-06-071, D.04-06-013, D.04-07-029). The bids are then ranked in an LCBF order. For 2008, SDG&E proposes to include a non-zero integration cost as part of its evaluation criteria and LCBF assessment. The integration cost adder, according to SDG&E, would account for added costs created by resources that require additional ancillary services, load following capability, over-generation mitigation and/or VAR support. SDG&E says it intends to develop an integration cost adder, and will review the adder with its PRG prior to its inclusion in its 2008 evaluation criteria.
We decline to accept this item in SDG&E's Plan. We currently direct IOUs to follow the CEC determination that integration costs are negligible. (D.04-07-029, p. 12.) SDG&E does not point to any different determination made by CEC, and we are not persuaded to vary from the CEC's determination here. We recently declined to permit SCE to include an integration cost adder. (D.07-02-011, p. 56.) SDG&E presents no information why it should be treated differently. Moreover, one very important function of requiring IOUs to periodically file RPS Procurement Plans, as done here, is to provide an opportunity for public review and comment. We are not inclined to permit an IOU to develop an arguably important element of its LCBF assessment subject only to PRG review without the opportunity for public input.
SDG&E proposes that each IOU be permitted to decide on its own whether or not to conduct a solicitation in 2008. We are not entirely persuaded.
We addressed this same concept two years ago, and nothing convinces us to conclude differently now. Just as we said in 2006, and for all the same reasons, we think foregoing a solicitation in 2008 would be poor judgment. No utility is so certain of achieving 20% by 2010 that it should err on the side of postponing or foregoing a solicitation. Moreover, nothing prohibits an IOU from achieving 20% before 2010. Each IOU should vigorously pursue early success.
We do not order SDG&E to conduct a solicitation, but we will evaluate its decision should SDG&E later fail (beyond flexible compliance provisions) to achieve its annual targets or 20% by 2010. Absent a very good reason to the contrary, we expect each IOU to conduct a solicitation at least once each year, and-if IOUs assist us craft it-on a more frequent or continuous basis. (See D.06-05-039, pp. 65-66.)
20 See, for example, D.06-05-039 (pp. 61-62), D.07-02-011 (p. 53) and D.07-012-052 (p. 299, Conclusion of Law 63).
21 Contracts submitted for our consideration that are not part of an accepted Plan may be reviewed by application of other criteria, such as those used for a bilateral contract. SDG&E notes, for example, that RFOs are only one means of procurement. SDG&E says the Western Electricity Coordinating Council has a well-established and liquid bilateral market. Not only is the bilateral market an important tool for procurement, according to SDG&E, but it is available year-around where the RPS RFOs tend to be annual. (Plan, p. 9.)
