5. Comments on Proposed Decision

The proposed decision (PD) of ALJ Simon in this matter was mailed to the parties in accordance with Pub. Util. Code § 311 and Rule 14.3 of the Rules of Practice and Procedure. Comments were filed on May 15, 2008 by BVES, MU, PacifiCorp, and Sierra. Reply comments were filed on May 20, 2008 by SCE.

We briefly address the comments and reply comments by topic. We note generally that some of the SMJUs' comments appear to be based on a view of the administration of the RPS program that does not fully recognize the ways in which the existing flexibility in RPS administration may be applied to the situations of SMJUs without the need to create special rules or exceptions. We have expanded the text of the PD in several respects in order to clarify the application of existing administrative flexibility.

BVES, MU, and PacifiCorp argue that the regular RPS procurement obligations and flexible compliance rules should not apply to them until 2009. We do not adopt this suggestion. We agree with SCE that D.05-11-025 made clear more than two years ago that the substantive RPS requirements of increasing procurement of eligible renewable resources by one per cent per year and reaching the 20% statutory goal applied to SMJUs. Further deferral of these obligations will not serve the purposes of the RPS program. We also reiterate that the regular flexible compliance rules still allow a shortfall of up to 25% of IPT without explanation for up to three years, and that these rules apply in all years, both before and after an LSE attains the 20% goal.

In response to the request of BVES, we clarify the relationship of the deferral of IPT to APT for the 2004-2007 period.

PacifiCorp proposes that we adopt what it characterizes as an "alternative compliance plan" for its RPS obligations. We do not see the need to do so. PacifiCorp describes two procurement modalities for its alternative compliance plan: allocating a percentage of its system's RPS-eligible resources to its California RPS obligations, and allocating a percentage of the output of a specific RPS-eligible generation facility to its California RPS obligations. Both these modalities, however, are entirely consistent with the proportional APT allocation authorized by §399.17(c), so long as no power is double-counted as allocated both to California RPS and the requirements of another state. To the extent that PacifiCorp's proposal arises from uncertainty about how to report these modalities, it can work with ED staff to resolve any uncertainties. We therefore make no change to the PD in this regard.

PacifiCorp and Sierra urge that we revise the requirements for filing supplements to their IRPs. Sierra also suggests that §399.17(d) requires only the filing of IRPs, in effect supplanting §399.14. That is not, however, what §399.17(d) says. We agree with SCE that §399.17(d) explicitly requires that IRP submissions ultimately conform to §399.14 for RPS purposes, and thus do not change the basic requirement for supplements to IRPs.

We agree with PacifiCorp and Sierra that requiring 2007 supplements to the IRPs is not useful, and remove that requirement. We also agree that the PD's explanation of the plan for supplements to the IRPs requires clarification. In doing so, we give slightly less weight to administrative consistency and slightly more weight to ease of compliance than in the PD. We summarize these changes in a specific schedule for PacifiCorp and Sierra to file IRPs and supplements, subject to modification by the assigned Commissioner or assigned ALJ, or by the Director of Energy Division.

We also make minor changes to the discussion of IRPs for clarity and for consistency with these larger revisions.

At Sierra's request, we allow it to seek recovery of any incremental and administrative costs associated with annual California RPS supplements in its GRC.

BVES asks us to declare in this decision that the existing $77/hour cap on weighted average energy cost will not apply to RPS-eligible energy, thus allowing it to file any RPS contracts by advice letter. We decline this invitation. The parties to A.01-08-020, in which the cap was imposed, did not have notice that we might lift the cap it in this decision. We prefer to have an application with proper notice before us.

MU suggests for the first time in its comments on the PD that its diesel generators, even if they were to use biodiesel fuel, would not qualify as RPS-eligible because they are not connected to the transmission grid. We disagree, and thus make no changes to the PD based on this argument. In our view, this argument misreads Pub. Res. Code § 25741(b)(2)(A). We think it clear that this section states that a facility is RPS-eligible if it is "located in the state." MU's generators are located in California. We note, however, that the CEC, not this Commission, is charged with making RPS eligibility determinations. We expand the text on these points.

MU also expresses concern about its authority to use its Diesel Fuel Balancing Account for biodiesel purchases. We clarify this point.

The PD explains that Sierra can implement its request for formal assurances (required by PCUN), which it asserts are required by PUCN, that a particular long-term RPS procurement contract price is at or below the MPR by filing an advice letter. In its comments, Sierra argues that it should not have to follow the limited advice letter procedure in the PD. It argues that §399.17(e) requires that contracts at or below the MPR must be "deemed approved" without examination by ED staff. We do not agree with Sierra's reading of the statute, but it is not necessary to focus on this difference in statutory interpretation. As a practical matter, the determination that an RPS long-term procurement contract is at or below the MPR is not self-executing. The MPR is a levelized price over the term of the contract, with various highly technical requirements for its calculation. Many contracts have prices that vary over the life of the contract, and other terms that affect the calculation of the price metric in relation to the MPR. Without review by ED staff, it is not possible for Sierra or PUCN to have assurance that the contract price is at or below the MPR. We therefore do not alter this requirement.

Reporting

All SMJUs express some degree of discomfort with RPS reporting requirements and methods. In response, we make more explicit the PD's explanation of the existing opportunities for resolving problems in reporting by consultation with ED staff and proposing changes in the reporting spreadsheets.

BVES expresses particular concern about the perceived consequences of reporting "potential penalties" if a procurement shortfall is reported. We have explained the relationship between the potential for a penalty and the assessment of a penalty in several prior decisions, including D.03-12-065, D.06-05-023, and D.06-10-050. The issues raised by BVES were discussed at length in D.06-10-050 (mimeo., pp. 36-38).

MU asks us to create special flexible compliance rules exclusively for it. We decline the invitation. Existing flexible compliance rules, properly applied, are sufficient for MU to manage its RPS compliance. In particular, MU's assertion that the scope of the "insufficient transmission" excuse should be expanded for it appears to be based on its concern that using biodiesel in its existing generators would not be RPS-compliant. Since we think this concern is not well-founded, we see no need to revisit our recent treatment of "insufficient transmission" in D.08-02-008.

Finally, we make minor changes throughout the PD to respond to comments of less significance, correct minor errors, and improve clarity and consistency.

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