4. Other Customers
We adopt a limited expansion of this basic tariff/standard contract program from water/wastewater customers to other customers. We do this today for only two utilities: SCE and PG&E. We also limit the expanded availability to the same basic terms adopted above for water and wastewater customers (e.g., 1.5 MW or less per project; allocation of 123,884 kW for SCE and 104,603 kW for PG&E, for a combined total of 228,487 kW).
The expanded availability is separate and distinct from the program to implement § 399.20. Therefore, the tariffs/standard contracts should also be separate and distinct.
This will permit clear implementation and administration of the § 399.20 provisions in today's order. These tariffs/standard contracts will establish that certain availabilities are for the § 399.20 program, are up to a 250 MW limit (prorated per utility), are for water and wastewater customers, and are subject to the terms and conditions therein.
Separate tariffs/standard contracts will keep the further availability distinct. It will make clear that the separate tariffs/standard contracts are for other customers who seek to sell electricity generated by renewable resources from projects of 1.5 MW or less, are available up to a combined total of 228.4 MW, along with any other terms and conditions that apply.
4.1. Background
Section 399.20 applies to public water and wastewater agencies. It adopts a definition of "electric generation facility" specific to those agencies. It does not exclude application of the concept to a broader group of customers. Nor does it prohibit employing the same or similar definition of generation facility to this expanded group.
The model for standardization, efficiency, simplicity and transparency framed in § 399.20 appears to be a useful model for other customers. Other customer groups have expressed interest in a standardized tariff or contract.38 We have said that it may make sense to look at standard contracts for relatively small generators using renewable fuels, including bio-energy.39
The CEC recommends further analysis of using feed-in tariffs to spur additional renewable resource development.40 The water and wastewater tariff here is a form of feed-in tariff. It is worthy of further assessment to promote reasonable additional renewable resource development.
It might also be reasonable to employ tariffs/standard contracts in some situations as part of the Commission's application of standard terms and conditions under the RPS Program. For example, the administrative savings, simplicity and transparency from tariffs/standard contracts may be particularly appropriate for some resources while reasonably satisfying RPS Program goals and objectives.
Finally, under the Public Utilities Regulatory Policies Act (PURPA), California currently has a "must purchase" obligation for qualifying facilities up to 20 MW.41 It may be appropriate to fulfill that duty for RPS generators using a tariff/standard contract.
We seek resource programs that are relatively simple, transparent, efficient and cost-effective, while pursuing growth in a LCBF order. A program of tariffs/standard contracts may be particularly appropriate, and satisfy the considerations summarized above.
To explore this opportunity and related issues, the Amended Scoping Memo asked parties to address whether or not the availability of the § 399.20 tariffs and/or standard contracts should be expanded to other customers. In responses, SCE says it does not oppose voluntary expansion conditioned on application of the same provisions outlined in § 399.20 (e.g., eligible renewable energy resource within the meaning of § 399.12; a retail customer of SCE; interconnected and operated in parallel with the utility system; full buy/sell; 1.5 MW or less; proportionate allocation of 250 MW obligation).
PG&E reports that it developed a version of the § 399.20 power purchase agreement prior to enactment of § 399.20. PG&E says its § 399.20 proposal may be adapted to be available to entities other than public water and wastewater facilities, and that it is prepared to offer what it would call a "Small Renewables Generator PPA [Purchase Power Agreement]" to certain sellers of renewable energy.
Other respondents generally oppose expansion. PacifiCorp says, for example:
"PacifiCorp engages in several contracts with qualified facilities pursuant to PURPA mandates. These contracts have standard terms and conditions and provide an efficient and effective means for promoting and procuring renewable resources. As a result, the expansion of this standard tariff to other customers may be unnecessary, since it duplicates PURPA's long-standing mission to promote the development of alternative resources." (April 11, 2007 Proposal, p. 7.)42
CEERT supports additional study. DRA, Sustainable Conservation and RCM support expansion without additional delay.
4.2. Expansion for SCE and PG&E
We adopt the proposals of SCE and PG&E identified above to initiate limited expansion to other customers of the tariffs/standard contracts here, pending further consideration as discussed below. The expanded availability is adopted subject to the same basic terms used for the water/wastewater program.
For example, we adopt a tariff along with a standard contract. We employ the same capacity allocations and limits (e.g., 123.9 MW for SCE, 104.6 MW for PG&E). The capacity allocation may be updated on an as needed basis. The purchase rate is the utility's MPR, without reduction for administrative or other fees. We limit projects to 1.5 MW or less. Participants in this expanded availability are not eligible for SGIP or net metering programs. The standard terms and conditions described above also apply here. The tariff must provide for full buy/sell, with an option for the seller to select sales of excess only. The buyer may elect to terminate the agreement if commercial operation has not commenced within 18 months of the date of the agreement, or if the project makes no sales for a period of 12 consecutive months (subject to a reasonable opportunity for the seller to cure delays or non-operation). SCE and PG&E will keep the Commission informed about the program, including information on projects in the queue, as requested by Energy Division. We direct SCE and PG&E to submit advice letters to accomplish this parallel availability at the same time they file advice letters for water and wastewater public agency customers.
PG&E recommends that it be permitted to terminate the expanded availability five years after it is first authorized by the Commission and implemented by the utility. Alternatively, PG&E says this may be accomplished concurrently with a monitoring program, wherein the utilities may suggest program alterations, including termination in the event of unforeseen problems.
We decline to adopt an automatic sunset for the expanded availability. The 228.4 MW limit is an adequate limit and constraint. As explained with the water and wastewater program above, the tariff is closed to new customers when the allocation is met. Respondents are not required to sign new agreements for capacity beyond their allocation (but will keep a "queue" for other interested developers and projects).
The capacity allocation will mitigate problems should there be an excessive response. It will contain the magnitude of the consequences, if any. It will permit a reasonable opportunity to gain experience without exposing projects, ratepayers, utilities, or the state to unreasonable risks, or unreasonably jeopardizing public health and safety.
We expect respondents to keep the Commission informed about the progress of this program, and respond timely to all requests for information made by the Commission through Energy Division or other staff. At any time, and certainly if unexpected and significant problems arise, respondents and parties may move for program alterations and/or termination. While we think the capacity limit of 228.4 MW provides reasonable protection against uncertainties, parties may move for other protection at any time as needed.
We note that SCE has its own Biomass Program with its own standard contracts. SCE's website states that its program offers three biomass standard contracts based on size: projects less than 1 MW, 1 MW to 5 MW and 5 MW to 20 MW. Contract terms are for 10, 15 and 20 years, and SCE seeks to contract up to 250 MW of new biomass capacity through this program. The contracts set the price at SCE's MPR.
We make three observations. First, SCE has not presented its Biomass Program and Biomass Standard Contracts to the Commission. We take no official position on that program or its standard contracts at this time.
Second, our expansion here of 123.8 MW for SCE with regard to other customers is relatively modest compared to SCE's own initiative to secure 250 MW of biomass alone. Third, the adopted expansion here is separate and distinct from SCE's separate biomass expansion. If both are successful, SCE could acquire 123.8 MW from other (non water/wastewater) customers (but which may include biomass), and 250 MW from biomass, for a total of 373.8 MW. This would be in addition to the 123.8 MW from water/wastewater customers, for a total of 497.5 MW.
4.3. No Expansion to Other Utilities
We decline to expand the program to SDG&E and other utilities for now. SDG&E expresses opposition, preferring to focus its limited resources on projects with more "bang for the buck." For example, SDG&E says the administrative cost of negotiating up to 20-30 contracts each for 750 kW or less (for its allocated share of about 20 MW) at MPR prices would divert attention and resources from contracts with greater procurement amounts at or below MPR.
To the contrary, simplicity and cost-savings are important reasons why the § 399.20 program is by tariff and standard contract. The administrative cost to "negotiate" these purchases is small when done by tariff/standard contract. PG&E notes that this is one advantage of the program, thereby providing "access to sources of supply that cannot or would not otherwise market power."43
Nonetheless, we accept the proposition for now that SDG&E and others should focus their attention on larger projects. The entire allocation for these remaining utilities is 21.6 MW. We are satisfied with an initial expansion of 228.4 MW through SCE and PG&E. This will allow respondents and parties to present factual, legal and public policy issues, as necessary or appropriate for our further consideration and decision, as discussed below. It will allow respondent, parties and the Commission to learn from the initial experience.
4.4. Net Greenhouse Gas Emissions from Projects Using Biomass Fuels
Sustainable Conservation and RCM ask that the Commission clarify a Commission finding regarding net greenhouse gas (GHG) emissions from biomass, which they say was made in Attachment 7 to D.07-01-039. In particular, they ask that the Commission clarify that farmers do not need to buy additional offsets when selling biogas derived renewable energy.
SCE correctly responds that this is beyond the scope of this proceeding, including the expansion of the availability of the § 399.20 tariff/standard contract to other customers. Sustainable Conservation and RCM may seek clarification in the GHG proceeding.
4.5. Further Process
CEERT and several parties recommend further study before expanding the availability to other customers. CEERT suggests a Commission staff White Paper on feed-in tariffs followed by comments, a workshop, a workshop report, comments on the workshop report, and a draft decision.
We will not here order a particular administrative structure for further study, but leave that up to the assigned Commissioner and/or ALJ. Respondents and parties should present the relevant factual, legal and public policy questions for consideration. SCE and PG&E should provide relevant data and information on experience with the 228.4 MW expansion (including whether the expansion is of great or little interest to the RPS community; whether projects are "in the queue;" and potential program improvements, if any, should the Commission desire to continue or expand the program).
PG&E cautions that the Commission should avoid potential disadvantages of standard offers by authorizing the utilities to employ certain Commission-approved controls on their availability. For example, PG&E says:
"any standard contact must not be an open-ended obligation like the `standard offer' contracts made available to Qualifying Facilities (QFs) in the 1980s. As originally conceived, standard offer QF contracts were made available to all qualified sellers, without limitation. Changes in the energy markets not anticipated when the standard offers were developed induced the Commission to suspend the availability of standard offers." (April 11, 2007 Proposal, p. 11.)
We agree with PG&E that neither the water and wastewater program, nor the expanded program, should be "open-ended." The unanticipated "changes in the energy markets" that led to Commission suspension of the standard offers in 1984 (only five years after program adoption) were largely driven by too much success. The problem was overwhelming response with too much potential supply. As said by the Director of the Commission's Policy Division in the 1980s, California suffered an "embarrassment of riches."
One lesson learned from that experience is to adopt certain controls. We do that here by implementing the 250 MW limit for the water and wastewater program, and 228.4 MW for expansion to other customers. This places an automatic "stop" on the program should it become too successful at the then available MPR. At each "stop" point, the Commission has the opportunity, with input from respondents and parties, to determine if the MPR should be adjusted upward or downward for the next increment, whether to implement another increment, the size of that increment, and any other relevant issues.
Thus, among the questions for study may be what Commission-adopted controls and limits should be placed on the program. It might also include what other modifications are necessary, if any, to more thoroughly implement "feed-in" tariffs.
CEERT and others recommend coordination with the CEC. In particular, CEERT recommends taking advantage of the information gathered at the CEC's May 21, 2007 workshop on feed in tariffs, along with other related progress on those tariffs. We agree. We continue to work collaboratively with the CEC on this program. We will take advantage of workshop results, research and recommendations from the CEC to help meet our RPS and GHG goals, including data on feed-in tariffs. Again, we will leave the actual schedule and issues for further consideration up to the Assigned Commissioner and ALJ, with input from respondents and parties.
38 Comments of Western United Dairymen and Comments of RCM Digesters in Application 06-10-003.
39 D.07-03-042.
40 2006 Integrated Energy Policy Report (IEPR) Update, January 2007, p. E-7. A feed-in tariff obligates a utility to purchase electricity at a tariff rate set by a regulatory authority. The tariff rate may be set at either a fixed price, or a fixed premium above a benchmark price (e.g., spot market price), and may reflect the duration of the purchase. Price levels and premiums may vary by technology, reflecting variation in technology costs, and may or may not include incentives for some technologies. The incentives, if any, may decrease over time.
41 FERC Order 688 (October 20, 2006), New PURPA Section 210(m) Regulations Applicable to Small Power Production and Cogeneration Facilities; 18 C.F.R. § 292, 71 Red. Reg. 64342 (December 1, 2006); see Proposed Decision of ALJ Halligan filed April 24, 2007 in R.04-04-003, pp. 18-20.
42 PacifiCorp clarifies that the standard tariffs to which it refers "concern existing incentive programs, such as net metering and qualifying facility tariffs. The `standard tariffs' developed in the context of these existing incentive programs demonstrate that additional `feed in' tariffs to spur renewable development may be unnecessary and duplicative of existing programs that provide similar opportunities for renewable investment." (May 9, 2007 Reply Comments, p. 3.)
43 April 1, 2007 Proposal, p. 11.
