ALJ/PVA/tcg DRAFT Agenda ID #3586

Ratesetting

6/9/04 Item 28

Decision DRAFT DECISION OF ALJ ALLEN (Mailed 5/17/2004)

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Order Instituting Rulemaking to Implement the California Renewables Portfolio Standard Program.

Rulemaking 04-04-026 (Filed April 22, 2004)

OPINION ADOPTING
MARKET PRICE REFERENT METHODOLOGY

I. Summary

California Senate Bill (SB) 1078¹ established the California Renewables Portfolio Standard (RPS) Program, as generally set forth in Pub. Util. Code §§ 399.11-399.16.² The RPS Program requires each electrical corporation to procure at least 20% of its total retail electricity sales from eligible renewable energy resources by 2017. This target date was subsequently revised by the Energy Action Plan to 2010, in order to realize the benefits of renewable power more quickly.³ Pub. Util. Code § 399.15(c) requires the Commission to adopt a Market Price Referent (MPR) methodology to estimate the long-term market price of electricity for use in evaluating bid products received during RPS power solicitations. In addition, we must adopt an associated MPR disclosure process, as required by Pub. Util. Code § 399.14(a)(2)(A), regarding how and when actual MPRs will be made public.

MPRs will establish a benchmark at or below which approved contracts will be considered per se reasonable, and above which contracts are eligible to receive Supplemental Energy Payments (SEPs), to be subsequently determined by the California Energy Commission (CEC). In today's order we (1) adopt a cash-flow simulation methodology to calculate MPRs, and (2) determine that MPRs will be publicly disclosed to all parties simultaneously, after utilities' power solicitations have closed and negotiations are complete, but before advice letters requesting contract approval are filed.