6. Assignment of Proceeding

Michael R. Peevey is the assigned Commissioner and Anne E. Simon and Burton W. Mattson are the assigned ALJs in this proceeding.

1. It is reasonable to continue the use of the CCGT proxy plant model methodology set out in D.04-06-015 and D.05-12-042 in calculating the MPR.

2. It is reasonable to make adjustments to the details of the proxy plant model MPR methodology on the basis of experience to date with the use of the MPR in long-term procurement in the RPS program.

3. Elements of the MPR methodology for which adjustments may reasonably be made at this time are:

· use of NYMEX forward contract data and fundamental forecasts in the MPR long-term natural gas price forecast;

· determination of the California basis adjustment for natural gas prices;

· determination of the capacity factor of the MPR proxy plant CCGT;

· escalation of historic installed capital costs;

· continued application of a five-year escalation of capital costs;

· elimination of the input for "GMM to load center;" and

· calculation of the MPR for contract lengths greater than 20 years.

4. In view of the impending implementation of GHG regulation in California, it is reasonable to include costs of compliance with regulations governing GHG emissions as a permanent feature of the proxy plant model MPR methodology.

5. In view of the rapid developments in GHG regulation, it is reasonable to set criteria for the modeling of GHG compliance costs to require that the model include at least:

- public availability;

- use of multiple scenarios and sources of information;

- use of realistic and public assessments of policy proposals and scenarios; and

- use of the most current reliable information that conforms to the other three criteria.

6. Because of the public importance of the RPS program, it is reasonable to continue to make the MPR calculation publicly available and to require utilities to disclose whether procurement contracts for RPS-eligible resources submitted for Commission approval are priced at, below, or above the MPR.

1. Staff should be authorized to continue to use the CCGT proxy plant model methodology set out in D.04-06-015 and D.05-12-042 in calculating the MPR.

2. Adjustments to the details of the proxy plant model MPR methodology should be made on the basis of experience to date with the use of the MPR in long-term procurement in the RPS program.

3. Elements of the MPR methodology for which adjustments should reasonably be made at this time are:

· use of NYMEX forward contract data and fundamental forecasts in the MPR long-term natural gas price forecast;

· determination of the California basis adjustment for natural gas prices;

· determination of the capacity factor of the MPR proxy plant CCGT;

· escalation of historic installed capital costs;

· continued application of a five-year escalation of capital costs;

· elimination of the input for GMM to load center; and

· calculation of the MPR for contract lengths greater than 20 years.

4. In view of the impending implementation of GHG regulation in California, costs of compliance with regulations governing GHG emissions should be included as a permanent feature of the proxy plant model MPR methodology.

5. In view of the rapid developments in GHG regulation, criteria for the modeling of GHG compliance costs should be set. These criteria should require that the model include at least:

- public availability;

- use of multiple scenarios and sources of information;

- use of realistic and public assessments of policy proposals and scenarios; and

- use of the most current reliable information that conforms to the other three criteria.

6. Because of the public importance of the RPS program, the MPR calculation should continue to publicly available and utilities should continue to be required to disclose whether procurement contracts for RPS-eligible resources submitted for Commission approval are priced at, below, or above the MPR.

7. In order to allow PPAs resulting from the 2008 RPS solicitations to be concluded expeditiously, this order should be effective immediately.

ORDER

IT IS ORDERED that:

1. The market price referent (MPR) required to be calculated for the renewables portfolio standard program shall be calculated for 2008 and later years in accordance with the methodology set out in Decision (D.) 04-06-015 and D.05-12-042, with the adjustments and improvements set forth in today's decision.

2. Energy Division staff is authorized to choose appropriate inputs for the annual calculation of the MPR and to disclose and explain those inputs in the draft resolution presenting the MPR calculation for Commission approval.

3. The assigned Commissioner or assigned Administrative Law Judge in Rulemaking 08-08-009 or its successor is authorized to issue any rulings that may be necessary to:

a. allow effective participation of the parties in developing the inputs to be used for the MPR model in 2009 and later years; and

b. Initiate a review of the greenhouse gas compliance cost methodology for the MPR when and as appropriate.

4. R.06-02-012 remains open.

This order is effective today.

Dated October 16, 2008, at San Francisco, California.

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