STATE OF CALIFORNIA ARNOLD SCHWARZENEGGER , Governor

PUBLIC UTILITIES COMMISSION

505 VAN NESS AVENUE

SAN FRANCISCO, CA 94102-3298

June 25, 2004 Agenda ID #3691

TO: PARTIES OF RECORD IN RULEMAKING 04-04-026

Enclosed is the draft decision of Administrative Law Judge (ALJ) Halligan. It will be on the Commission's agenda at the meeting on July 8, 2004. The Commission may act then, or it may postpone action until later.

When the Commission acts on the draft decision, it may adopt all or part of it as written, amend or modify it, or set it aside and prepare its own decision. Only when the Commission acts does the decision become binding on the parties.

Pursuant to Public Utilities Code Section 311(g)(3) and Rule 77.7(f)(9), the public review and comment period is shortened. Comments on the draft decision are due by noon on July 2, 2004, and reply comments are due at noon on July 6, 2004.

Parties to the proceeding may file comments on the draft decision as provided in Article 19 of the Commission's "Rules of Practice and Procedure." These rules are accessible on the Commission's website at http://www.cpuc.ca.gov. In addition to service by mail, parties should send comments in electronic form to those appearances and the state service list that provided an electronic mail address to the Commission, including ALJ Halligan at jmh@cpuc.ca.gov. Finally, comments must be served separately on the Assigned Commissioner, and for that purpose I suggest hand delivery, overnight mail, or other expeditious methods of service.

/s/ ANGELA K. MINKIN

Angela K. Minkin, Chief

Administrative Law Judge

ANG:jva

Attachment

ALJ/JMH/avs DRAFT Agenda ID #3691

Ratesetting

Decision DRAFT DECISION OF ALJ HALLIGAN (Mailed 6/25/2004)

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 CRITERIA FOR THE SELECTION
LEAST-COST AND BEST-FIT RENEWABLE RESOURCES

TABLE OF CONTENTS

Title Page

OPINION ADOPTING CRITERIA FOR THE SELECTION OF LEAST-COST AND BEST-FIT RENEWABLE RESOURCES 2

I. Summary 2

II. Background 2

III. Least-Cost and Best-Fit Evaluation Criteria 4

1. Sequencing of RFOs 4

2. Bidding Requirements 7

3. RPS Solicitation - Contract Approval Schedule 9

4. Integration Costs 12

5. SEP Award Issues 14

6. Capacity Values 20

7. Bid Evaluation Process Issues 23

a) Applying the MPR to RPS Bids 23

b) Qualitative & Quantitative Factors Used in Bid Evaluation 29

c) Proposed Utility Approaches 33

8. PRG Review Issues 38

IV. Assignment of Proceeding 41

V. Shortening the Public Review Period of the Draft Decision 41

Findings of Fact 42

Conclusions of Law 46

ORDER 47

OPINION ADOPTING CRITERIA FOR THE SELECTION
OF LEAST-COST AND BEST-FIT RENEWABLE RESOURCES

I. Summary

This decision addresses the requirement in Pub. Util. Code § 399.14(a)(2)(b), which provides that the Commission must adopt a process that provides criteria for the rank ordering and selection of least-cost and best-fit renewable resources on a total cost basis to comply with the California Renewables Portfolio Standard (RPS) Program.¹ Today's order adopts least-cost, best-fit evaluation criteria for use in the 2004 RPS solicitation and directs the utilities to issue revised Requests for Offers (RFOs) for eligible renewable resources consistent with this decision and their approved renewable procurement plans. Since this is the initial RPS solicitation in a multi-year program of renewable energy development, we will revisit aspects of the adopted criteria as we gain more experience with the program, and as the renewable generation industry continues to evolve.