11. Comments on Proposed Decision

The proposed decision of ALJ Mattson in this matter was mailed to the parties in accordance with Pub. Util. Code § 311 and Rule 14.2(a) of the Rules of Practice and Procedure. Comments were filed on October 4, 2006 by PG&E, SCE, SDG&E, TURN, DRA, AReM, GPI and CEERT. Reply comments were filed on October 10, 2006 by PG&E, SCE, AReM, GPI, TURN, UCS and Mountain Utilities.

We change or clarify the proposed decision based on comments and replies relative to several items. This includes (a) changing the formula for the 2003 initial baseline procurement amount; (b) clarifying that reasons for deficit carry-forward are permitted relative to under-procurement for anything over 25% of the IPT (not just the remaining 75% of the IPT); (c) explaining that existing flexible compliance rules apply through 2009, and rules for other conditions (e.g., steady-state, growth to 33%) will be adopted in the near future; and (d) reinforcing that a surplus in any year may be banked forward indefinitely. We also make other changes to further clarify the order based on parties' comments. Where appropriate, we ignore comments not based on the record, and those which merely reargue positions already taken in filed documents. (Rule 14.3.)

Several parties recommend changes to the proposed decision based on passage of SB 107. We generally decline to make changes before we hear from parties. For example, we want to first hear from parties before changing flexible compliance rules relative to non-procurement excuses due to inadequate transmission. This is also true regarding flexible compliance for all years (including before and after a retail seller procures at least 20% of total retail sales from eligible renewable energy resources). As we recently did in another decision, however, we make some limited changes to promote efficiency given the short period of time between the date of this decision and January 1, 2007. (See D.06-10-019, p. 10.)

Findings of Fact

1. The February 2006 initial proposal tracks procurement in three categories (baseline, annual, incremental) and, among its attributes, this approach may result in an LSE being in compliance with the overall AP but not having the right mix of BP and IP.

2. An APT-based reporting methodology measures each of the most important elements of an LSE's renewable procurement: baseline, increasing procurement by at least 1% each year, and achieving 20% by 2010.

3. Compared to the initial proposal, an APT-based system is simpler; easier to understand and administer; reasonably incorporates necessary incentives; is consistent with the letter and spirit of the law; and, based on test data, is reasonable.

4. In 2004, only 10.2% of the state's electricity was produced by renewable resources and, in order to reach 20% by 2010, California will need to approximately double its existing renewable resource base.

5. Existing renewable resources cannot provide enough output to reach state-adopted renewable resource goals; rather, significant amounts of new renewable generation are required, and even more will be required if some existing resources are retired, or there is positive growth in retail sales.

6. An APT-based reporting method is consistent with CEC's recommendation for a more transparent, less complex RPS program.

7. Carrying deficits forward is a function of flexible compliance rules, not the reporting methodology.

8. It does not take a three part reporting system to accomplish the RPS program purpose of stimulating new investment in renewable resources.

9. An APT-based system, with compliance and enforcement based on APT, will provide a powerful incentive for new investment.

10. There is no credible evidence of any incremental benefit of separately enforcing a BPT and an IPT, while it is clearly more complex and costly to do so, and the incremental benefits, if any, will not outweigh the complexity and cost.

11. The ultimate outcome in either reporting system is the same: 20% by 2010.

12. Test data used with the two reporting schemes shows that either system requires an immediate and sustained procurement effort by each LSE and, given that existing renewable resources makeup only about 10% of the existing resource base, the majority of the eligible procurement must come from new renewable resources.

13. Commission flexible compliance rules are currently stated in relationship to APT; the initial proposal corrected this to IPT, and no party initially commented on the clarification relative to IPT.

14. Flexible compliance rules balance flexibility and administrative ease for the LSE with the state's interest in monitoring the progress and success of the program; they do this by recognizing that acquisition of renewable resources may not be smooth, taking into account reasonable flexibility in program administration for each LSE, but also recognizing that the Commission does not want any LSE to get so far behind in its procurement that the LSE simply cannot meet the 20% by 2010 goal, nor that any LSE should be permitted to carry forward deficits indefinitely.

15. Flexible compliance rules which balance these competing goals are fundamentally reasonable only in relationship to IPT, not APT.

16. In accelerating the renewables goal from 20% by 2017 to 20% by 2010, the absolute deadline in 2017 (as stated in law and Commission decision) was similarly accelerated to be an absolute deadline in 2010, as the Commission unequivocally made clear (D.06-05-039, FOF 8).

17. Existing flexible compliance rules are in the context of reaching the 20% goal (e.g., time to conduct solicitations and build new plant); the existing rules lose considerable relevance once the 20% goal is reached; and whether or not the existing rules have relevance in any other context (e.g., variations in total retail sales, normal variations in resource output) is currently the subject to parties' comment pursuant to the August 21, 2006 Scoping Memo.

18. Banking of procurement surpluses, and rules for carry-forward of deficits, would be largely or completely meaningless, and APTs could actually decrease over time, if actual procurement results were used as the basis of the APT for the next year.

19. Estimation of a penalty related to a reported deficit does not make the penalty due and payable, but knowing the estimated penalty can potentially inform respondents, parties and the Commission of relevant information during consideration of appropriate action, if any.

20. The RPS program is established to achieve certain actual, physical goals (e.g., growth in procured renewable energy each year of at least 1% of retail sales, an overall level of procured renewable energy of 20% of retail sales), and the program is designed to provide incentives for LSEs to reach these goals, not to permit waiving these goals by the payment of penalties.

21. The RPS Program involves maintaining and creating a very large quantity of resources in a very few years, and is a very important task involving many significant technical details.

22. Central California Power was erroneously included as a respondent in the OIR for this proceeding.

Conclusions of Law

1. The intent of the RPS Program is to increase the amount of California's electricity generated from renewable resources to meet several identified purposes.

2. The Commission has flexibility to clarify or adopt modifications to prior decisions, as necessary, where past decisions were ambiguous, led to confusion, or turned out to not be the best method for achieving RPS program goals.

3. The adopted reporting methodology applies equally to all LSEs, with unique elements of implementation for ESPs, CCAs, or small and multi-jurisdictional utilities, if any, addressed in R.06-02-012.

4. The reporting methodology in Attachment A, based on AP and APT, should be adopted as the methodology to guide LSE reporting of RPS program targets and results, thereby promoting a uniform understanding of necessary concepts and terms, and permitting consistent reporting of program progress and results.

5. An APT-based method is consistent with the law since it uses an initial baseline for the purpose of setting APTs, increases the APT by at least 1% of prior year retail sales per year, and provides a powerful incentive for new investment in renewable generation, all as required by the letter or spirit of the law.

6. The law does not specifically direct Commission implementation of the legislative intent to stimulate new investment by separate creation and treatment of baseline, annual and incremental categories; flexible compliance rules for each of three categories; nor enforcement in each of three categories; and does not uniquely identify and exclusively create three separate categories (baseline, annual, incremental) in a reporting, compliance and enforcement scheme.

7. The adopted methodology with respect to flexible compliance under existing rules should clearly permit inadequate procurement in year 1 to be made up within the following three years (i.e., year 2, year 3, and/or year 4).

8. The adopted method should correct the application of existing flexible compliance rules from APT to IPT.

9. The requirement of 20% by 2010 has been clearly stated but should be clearly restated here.

10. An electrical corporation that has reached 20% in a given year is excused from increasing its procurement the next year (or subsequent years) only if it has met its APT in each of the prior years, or is otherwise exercised by the Commission.

11. Deferral of a deficit in 2009 for up to three years after 2009 is permitted under the existing flexible compliance rules; this may require in excess of 20% to be procured in some years after 2009 until all deficits are made up.

12. A procurement deficit should continue to be reported until it is made up with actual energy deliveries, whether or not three years have tolled after the deficit year, and whether or not a penalty has been paid, unless and until the Commission subsequently finds a deficit need not continue to be reported.

13. APT and IPT are targets based on retail sales, not in relationship to the actual procurement of renewable energy in the prior year.

14. Predetermined penalties that apply with any reported deficit should be estimated and reported with each compliance report.

15. Each APT each year is a separate target, and each separate target must be met, subject to flexible compliance rules.

16. A continuing violation of a Commission order can result in separate and distinct offenses such that failure to make up a deficit from year 1 within the following three years, and continuing failure to make up that deficit in years after year 4, may expose an LSE to a penalty for the year 1 deficit each year after year 4 in which the deficit has not been made up.

17. Two of CEERT's proposals should be adopted: (a) clarification and placing an "end-date" on existing flexible compliance rules and (b) development of a transparent compliance report with a periodic report of information through 2020 to assist with assessing each LSE's implementation workplan.

18. The requirement for compliance reports each year on March 1 and August 1 (with updates by May 1) should not be modified in this order, but RPS-obligated LSEs should be required to file an updated report within 30 days of CEC adoption of the relevant Verification Report.

19. The reporting format should continue to include all the data previously specified by the Commission, modified to implement the GPI proposed reporting structure, and to include the items specified in this order (e.g., estimated penalties, procured energy amounts and percent, earmarked contract information, reasons in support of deferral or waiver, other; also data through 2020 in the second report each year).

20. PG&E, SCE and SDG&E should develop and propose a final reporting format as provided in this order, subject to comment and adoption by the ALJ, as provided herein.

21. Compliance reports going forward, except as otherwise directed herein or by the ALJ, should be filed with the ED Director, and served on the service list, but not filed in this docket.

22. The Executive Director may change the standardized reporting spreadsheet and format as necessary after this proceeding is closed, subject to reasonable notice.

23. The Executive Director should hire and manage one or more consultants to provide technical support and assist staff with certain tasks, with cost recovery on a proportional basis from the three largest IOUs, as provided herein.

24. PG&E, SCE and SDG&E should be authorized to establish a RPSCMA, or modify existing RPSCMAs, to record these RPS technical contractor costs into the RPSCMA until December 31, 2010; the costs should be recorded when paid; each IOU should be authorized to later apply for authority to recover these costs via rates; the costs should be subject to a limit on the total prorated amount to the three IOUs of $400,000 annually.

25. Central California Power should be removed as a respondent in this proceeding, while remaining a party.

26. This order should be effective immediately so that respondents, parties and the Commission may proceed without delay to finalize the reporting format as ordered herein, updated reports may be filed, and compliance and enforcement may proceed.

ORDER

IT IS ORDERED that:

1. The document in Attachment A ("Renewables Portfolio Standard (RPS) Rules for Reporting and Determining Compliance with RPS Procurement Targets") is adopted to guide each RPS-obligated load serving entity (LSE) on reporting of RPS Program targets and results, as further discussed in, and subject to, the text of this order.

2. Flexible compliance as previously ordered by the Commission is permitted within the following parameters:

a. Flexible compliance shall be with respect to the incremental procurement target (IPT), not the annual procurement target. Up to 25% of the IPT may be deferred for no more than three years without stated reason or Commission approval; an amount over 25% of the IPT may be deferred for no more than three years based on a stated reason consistent with Commission orders.

b. Carrying forward of an energy deficit for up to three years after the year the deficit is incurred shall apply to a deficit first incurred up to or through 2009. It shall not apply to a deficit first incurred in 2010 or thereafter, subject to further Commission order.

c. The reportable target by 2010 is 20% of annual retail sales, and the reportable result is actual eligible renewable energy deliveries. Failure to meet the 20% renewable procurement obligation by the end of 2010 shall result in application of pre-determined penalties, unless the Commission reduces or waives such penalty based on a compelling showing by the LSE.

3. In addition to other compliance reports addressed in prior Commission orders (e.g., March 1, August 1, and May 1 update), each RPS-obligated LSE shall file and serve an updated compliance report within 30 days of the date the California Energy Commission adopts the applicable and relevant Verification Report related to energy procurement for a reportable year.

4. Pacific Gas and Electric Company (PG&E), Southern California Edison Company (SCE) and San Diego Gas & Electric Company (SDG&E) shall develop a draft compliance report as described in this order. This work shall be done in collaboration with the staff of the Commission, the staff of the California Energy Commission, other LSEs, and parties who wish to participate. PG&E, SCE and SDG&E shall each file and serve a draft proposal, or shall jointly file a consensus proposal if one is reached, within 30 days of the date this order is mailed. Parties may file comments. Such comments shall be filed and served within 21 days of the date the proposal(s) is filed, and reply comments within 7 days of the date comments are filed. The Administrative Law Judge (ALJ) may change these dates as necessary. After review of comments, the ALJ shall by ruling file and serve a final, standardized report to be used by each RPS-obligated LSE. The Executive Director may subsequently change the standardized reporting format, as necessary and reasonable, after this proceeding is closed.

5. The ALJ may issue a ruling regarding the filing and service by certain LSEs of RPS compliance reports for 2004 and 2005, and the first report, ordered below, containing data through 2020. Thereafter, each such periodic RPS Program compliance report shall be filed with the Energy Division Director, and served on the service list, but not filed in this docket, unless directed otherwise by the ALJ or the Commission.

6. In addition to (or as part of) other compliance reports, each RPS-obligated LSE shall file with the Energy Division Director, and serve on the service, a report that states its targets and procurement for the current year, and projected for each year through 2020. This report shall be filed and served once per year concurrently with (or as part of) the second report (i.e., due August 1). This requirement shall expire with the report filed in 2010.

7. If any LSE seeks confidentiality protection for information contained in the reports discussed in this decision, it shall comply with the substantive and procedural rules set forth in D.06-06-066, the Commission's recent decision in its Confidentiality proceeding, R.05-06-040, and any subsequent decision issued in the same or subsequent proceeding.

8. The Executive Director may hire and manage one or more contractors to perform tasks described in this order for the purpose of advancing RPS Program goals. Such costs, if any, shall not exceed a total annual amount of $400,000, and the total shall be paid by PG&E, SCE and SDG&E on a proportional basis in relationship to retail sales reported each year in the March 1 RPS compliance report (or other first report each year as directed by the Executive Director). PG&E and SDG&E are authorized to establish a Renewables Portfolio Standard Costs Memorandum Account (RPSCMA) for the purpose of recording such payments. SCE is authorized to modify its existing RPSCMA to record such payments. PG&E, SCE, SDG&E are authorized to record these RPS technical contractor costs into the RPSCMA until December 31, 2010. These costs shall be recorded when paid, and each company may later apply for recovery in rates.

9. Central California Power shall be removed as a respondent but retained as a party in this proceeding.

10. This proceeding remains open.

This order is effective today.

Dated October 19, 2006, in Fresno, California.

MICHAEL R. PEEVEY

President

GEOFFREY F. BROWN

JOHN A. BOHN

RACHELLE B. CHONG

Commissioners

Commissioner Dian M. Grueneich, being

necessarily absent, did not participate.

ATTACHMENT A

RENEWABLES PORTFOLIO STANDARD (RPS)

RULES FOR REPORTING AND DETERMINING COMPLIANCE

WITH RPS PROCUREMENT TARGETS



Renewables Portfolio Standard (RPS)

Rules for Reporting and Determining Compliance

with RPS Procurement Targets

Prepared by the Energy Division of the California Public Utilities Commission


In collaboration with the Renewable Energy Program

of the California Energy Commission

Table of Contents

Page

I. Introduction 3

II. Overview of CEC and CPUC Responsibilities 4

III. RPS-Eligible Procurement and Procurement Targets: Definitions
and Methodologies 4

A. RPS-Eligible Procurement 5

B. Annual Procurement Target (APT) 5

1. APT Calculation Methodologies 5

i. There is No APT in 2003 5

ii. 2004 APT Calculation 6

iii. 2005-2009 APT Calculation 6

iv. APT Calculation for 2010 and the Years Following 7

2. Incremental Procurement Target (IPT) 7

i. IPT Calculation 7

IV. RPS Flexible Compliance Rules 7

A. Procurement Surpluses and Deficits 8

1. Procurement Surpluses 8

2. Procurement Deficits in Years Prior to 2010 8

i. Earmarking Incremental Procurement 9

3. Procurement Targets Increase Regardless of Past Years' Deficits 10

I. Introduction

California Senate Bill (SB) 1078 established the California Renewables Portfolio Standard (RPS) program with the stated intent of ensuring that 20% of electricity purchases in California come from eligible renewable energy sources by 2017. The legislation requires all load-serving entities (LSEs) to which it applies to increase their renewable energy procurement by at least 1% of retail sales per year.²⁸ The State's Energy Action Plan (EAP) accelerated the achievement of the 20% RPS target by seven years to 2010. The 20% by 2010 target has been adopted as state policy in the 2003 Energy Report, 2004 Energy Report Update, and 2005 Integrated Energy Policy Report, and the California Public Utilities Commission (CPUC) reiterated its commitment to reaching this objective in the Order Instituting Rulemaking (R.)04-04-026 issued on April 28, 2004²⁹ and in Decision (D.) 05-07-039, D.05-11-025 and D.06-05-039.³⁰ The 20% by 2010 target will be added as a requirement of the code in 2007.³¹

The legislation also requires that the CPUC develop flexible rules for compliance including, but not limited to, permitting electrical corporations to apply excess procurement in one year to subsequent years or inadequate procurement in one year to not more than the following three years.³²

RPS-obligated LSEs are currently required to report twice annually to the CPUC regarding their renewable energy procurement and to show whether they meet the requirements of the RPS program. The CPUC has developed flexible compliance rules allowing banking of surplus procurement and limited carrying forward of deficits, and has also laid out some specific conditions under which LSEs may demonstrate allowable reasons for noncompliance (see Section IV below).

A clear set of procurement target equations, definitions of RPS-eligible procurement and flexible compliance rules will help LSEs report on and evaluate progress toward RPS-eligible procurement, and will help CPUC, the California Energy Commission (CEC) and interested parties evaluate progress toward RPS goals. This white paper opens with a review of the CEC and CPUC roles in RPS reporting and compliance and then clarifies the equations, definitions and rules for reporting and compliance that apply to all RPS-obligated LSEs.³³

II. Overview of CEC and CPUC Responsibilities

Pursuant to SB 1078, CPUC and CEC collaboratively implement California's RPS program. The division of labor pursuant to the legislation and collaborative agreement is as follows:

CPUC is responsible for:

_ Approving or rejecting contracts executed to procure RPS-eligible electricity for most LSEs

_ Establishing each LSE's initial baseline procurement amount and adjusting the baseline going forward as needed

_ Determining each LSE's procurement targets

_ Developing and implementing flexible compliance rules

_ Making determinations regarding RPS compliance

_ Administering enforcement for noncompliance

_ Developing rules that CEC may use to identify RPS-eligible procurement

CEC is responsible for:

_ Certifying renewable generating facilities as RPS-eligible

_ Verifying the RPS-eligibility of energy procured to meet RPS targets³⁴

_ Verifying, to the extent possible, that RPS procurement exclusively serves the California RPS and does not support a separate market claim for renewable energy procurement

_ Verifying that RPS procurement from out-of-state facilities meets delivery requirements

_ Applying statutory requirements and CPUC's rules, where applicable, to identify RPS-eligible procurement

III. RPS-Eligible Procurement and Procurement Targets: Definitions and Methodologies

RPS-obligated LSEs are only required to comply with one RPS procurement target each year, the annual procurement target (APT), rather than two separate procurement targets, baseline and incremental. LSEs may use any type of RPS-eligible procurement to meet the APT, subject to the applicable flexible compliance rules.

A. RPS-Eligible Procurement

RPS-eligible procurement (sometimes referred to herein as "eligible procurement") is defined, pursuant to § 399.12, as procurement from a facility that meets the definition of `in-state renewable electricity generation facility' in §25741 of the Public Resources Code, subject to certain restrictions.³⁵ An LSE may use eligible procurement to meet any portion of its APT. Any RPS-eligible procurement may be used to meet the IPT, which is a component of the APT. Specifically, procurement from eligible resources such as small hydro, geothermal, and municipal solid waste combustion facilities may be used to satisfy any portion of an LSE's APT.

The CEC must list procurement as RPS-eligible in a procurement verification report in order for it to be used to meet RPS procurement targets.

B. Annual Procurement Target (APT)

An LSE's APT for a given year is the amount of renewable generation an LSE must procure in order to meet the statutory requirement that it increase its total eligible renewable procurement by at least 1% of retail sales³⁶ per year. All RPS procurement targets, baseline procurement amounts, and actual procurement amounts in years with RPS targets should be listed as both megawatt-hour (MWh) amounts and as percentage levels in RPS compliance reports.

1. APT Calculation Methodologies

i. There is No APT in 2003, Only an Initial Baseline Procurement Amount

There is no APT for 2003 because 2003 was the first year of the RPS program.³⁷ Instead, each large IOU has a 2003 initial baseline procurement amount that is used for determination of APTs in 2004 and beyond.

For purposes of setting annual procurement targets, the initial baseline for each electrical corporation is the actual percentage of retail sales procured from eligible renewable energy resources in 2001, and, to the extent applicable, adjusted going forward.

The 2003 initial baseline procurement amount for the IOUs is calculated using the following equation:

2003 Initial Baseline Procurement Amount = 2001 RPS-eligible procurement + 1% of 2001 total retail sales

Any 2003 RPS-eligible procurement that an LSE procured in excess of 1% of 2001 total retail sales should be excluded from the 2003 initial baseline procurement amount; rather, it should be counted as surplus procurement that can be used to meet future year RPS procurement targets.³⁸

ii. 2004 APT Calculation

2004 is the first year of RPS compliance for obligated LSEs.³⁹ 2004 is the first year for which each LSE that was in operation in 2003 (except ESPs) has an APT.⁴⁰

The 2004 APT is calculated using the following equation:

2004 APT = 2003 initial baseline procurement amount +

2004 IPT (1% of 2003 total retail sales)⁴¹

iii. 2005-2009 APT Calculation

The 2005-2009 APT consists of two separate components:⁴²

a. Prior year APT: the LSE's renewable procurement requirement in the prior year that the utility must retain in its portfolio.

b. Incremental procurement target (IPT): 1% of the previous year's total retail electrical sales (see section III.B.2. for discussion of the incremental procurement target)

The 2005-2009 APT is calculated using the following equation:

Current year APT = prior year APT + current year IPT

Table 1: Sample 2005 - 2009 Procurement Target Calculations (kWh)

#		2005	2006	2007	Calculation
A	Retail Sales	1000	1000	1000	- -
B	Incremental Procurement Target	10	10	10	Prior year A * 1%
C	Annual Procurement Target	510	520	530	Prior year C + B

iv. APT Calculation for 2010 and the Years Following

The APT in the years 2010 and beyond is calculated using the following equation:

APT = 20% of prior year total retail sales⁴³

²⁸ See Public Utilities Code § 399.15(b)(1).

²⁹ See R.04-04-026, p. 6.

³⁰ See D.05-07-039, p. 14, D.05-11-025, p. 24, CoL 1 and D.06-05-039, pp. 2, 5, 21-22.

³¹ See SB 107 §399.15(b)(1).

³² See SB 1078, § 399.14(a)(2)(C).

³³ RPS-obligated LSEs include investor-owned utilities (including large, small and multi-jurisdictional utilities), energy service providers (ESPs) and community choice aggregators (CCAs). Exceptions to the reporting and compliance rules listed here, if any, that apply to ESPs, CCAs, and small and multi-jurisdictional utilities will be determined in R.06-02-12.

³⁴ The California Energy Commission will develop and refine its verification of RPS procurement in its RPS Eligibility Guidebook based on legislation and on the RPS reporting and compliance rules adopted by the CPUC.

³⁵ See §399.12 for restrictions on RPS eligibility of certain hydroelectric facilities and municipal sold waste facilities.

³⁶ Retail sales means total retail electrical sales in California, including power sold to an LSE's customers from DWR contracts. See § 399.15(b), D.03-06-071, p. 7, fn. 9 and R.04-04-026, p. 5.

³⁷ As discussed in D.03-06-076, pp. 35-36, CPUC set a 2002/2003 interim procurement benchmark for renewable procurement, but since the benchmark was set before the enactment of SB 1078 and the creation of the RPS program, it is not an RPS procurement target.

³⁸ See D.04-06-014 Appendix B, p. B-1.

³⁹ One exception is for ESPs that were in operation since at least 2005. For these ESPs, the baseline year is 2005 and the first APT is in 2006. See D.06-10-019, pp. 11-12 for a discussion of how the 2005 baseline procurement amount and the 2006 APT are to be calculated for such ESPs.

⁴⁰ By analogy, any RPS-obligated LSE coming into operation after 2003 will have its first APT in its second year of operation. The APT for such an LSE will be calculated by adding its first year baseline procurement amount to its second year IPT (see section III.B.2. below for a discussion of IPT.)

⁴¹ The CPUC may set the IPT amount above 1% to meet state goals. (D.04-06-014, p. B1).

⁴² See R. 04-04-026, p. 5.

⁴³ Energy Action Plan II orders that implementation paths for achieving 33% renewables by 2020 be evaluated and developed, contingent upon cost-benefit and risk analysis. (Energy Action Plan II, October 2005, Specific Action Area 3, Key Action 5, p. 8.)