2. Background
On February 16, 2006, the Commission opened Rulemaking (R.) 06-02-013 to continue its efforts to ensure a reliable and cost-effective electricity supply in California through the integration of a comprehensive set of procurement policies and review of the long-term procurement plans (LTPP) of the three investor-owned utilities (IOUs). In Phase 1 of the proceeding, the Commission examined the need for additional policies to support new generation and long-term contracts in California. This effort resulted in D.06-07-029, where the Commission adopted a cost-allocation mechanism that allows the advantages and costs of new generation to be shared by all benefiting customers in an IOU's service territory.
Due to an amalgamation of regulatory and economic factors, private investment in California generation was not keeping up with the state's growing resource needs, especially when that growth is coupled with the expected retirements of many aging power plants. The investment community indicated that it needed the certainty of long-term contracts to get financing for new generation projects, but both the IOUs and the other load serving entities (LSE) were reluctant to sign long-term contracts.
In D.06-07-029, the Commission established a cost-sharing mechanism designed to spur development of new electric resources by designating the IOUs as the procurers of new generation for the benefit of their entire service territory. The IOUs were directed to solicit long-term contracts for electricity from new generation facilities and the cost and benefits of the capacity and energy from the contracts would be shared with all benefiting customers in the IOUs' service territories, including bundled service customers, direct access (DA) customers and community choice aggregation (CCA) customers.3
The decision further advised SCE to issue an RFO seeking up to 1,500 MW of new generation resources.4 In response to that order, SCE issued an RFO on August 14, 2006. In the RFO, SCE solicited two types of offers: (1) fast-track projects that could come on-line on or before August 1, 2010; and (2) standard-track projects that could be available on or before August 1, 2013. The Blythe and CPV contracts are the choices SCE made from the fast-track offers.
2.1. Fast-Track RFO
As SCE set forth in its testimony supporting its application, the RFO asked for offers for the sale of electrical capacity, energy, ancillary services and resource adequacy benefits from new resources that could be on-line by August 1, 2010. SCE received offers from 18 projects that could potentially meet the on-line date. Based on the final bid prices received, SCE accepted the Blythe and CPV offers.
Pursuant to D.06-07-029, SCE was required to use an Independent Evaluator (IE) to oversee any solicitation leading to the procurement of resources where the benefits and costs would be shared with all benefiting customers. SCE testified that it engaged Sedway Consulting, Inc. as the IE. SCE provided Sedway Consulting with all the data and materials it needed to perform an independent evaluation of the offers from the RFO.5 In a separate report, the IE concluded that "SCE conducted a fair and effective evaluation of the offers that it received in response to its Fast Track solicitation and made appropriate selection decisions."6
On February 15, 2007, SCE signed a 10-year PPA with Blythe for up to 490 MW of expected baseload capacity and associated energy from the Blythe Energy Center, including a 2x1 combined cycle generating turbine and supporting generation equipment. The Blythe Energy Center has been operating since December 2003 and is currently connected to the Western Area Power Administration (WAPA) grid.
The proposed PPA between Blythe Energy Center and SCE requires the Blythe Energy Center to be disconnected from WAPA and interconnected to the California Independent System Operator (CAISO) grid by a new 67-mile direct radial connection to an existing substation within the south-of-path (SP) 15 control area. The project qualifies as a new resource pursuant to the requirements articulated in SCE's RFO. The project has a 30-year design life, a direct radial transmission line connection into the CAISO grid to provide incremental capacity into SP 15, and satisfies CAISO's requirements to qualify as an SP 15 resource including execution of interconnection studies and agreements.
Consistent with Federal Energy Regulatory Commission policy, the 67-mile radial transmission line or "gen-tie" needed to connect the generation project to the integrated transmission network within SP 15 will be fully funded by the generation developer itself, so that construction of this line will impact neither transmission owner costs nor general transmission rates charged to recover such costs.
3 D.06-07-029 at pp. 7, 25-27. Benefitting customers are defined as all bundled service customers, DA customers, and CCA customers. Benefitting customers are also other customers who are located within a utility distribution service territory, but take service from a local POU subsequent to the date new generation goes into service.
4 Id. at pp. 47, 62-63.
5 The IE prepared an Independent Evaluation Report, Exhibit 7.
6 Exhibit 7, p. 1.
