I. Summary

This decision adopts, with modifications, Pacific Gas and Electric Company (PG&E), Southern California Edison Company (SCE) and San Diego Gas & Electric Company's (SDG&E) Long-Term Procurement Plans (LTPP) and provides direction to the utilities on the procurement of the resources identified in the LTPPs. Summaries of the LTPPs are attached as Attachment A.

In our direction to the Invest-Owned Utilities (IOUs) [PG&E, SCE and SDG&E] regarding the procurement of resources to meet identified needs, and in recognition of the substantial amount of procurement to be undertaken as a result of our resource adequacy decisions, we make a number of significant findings. First, following the "loading order" contained in the Joint Agency Energy Action Plan (EAP) is the highest priority, meaning that energy efficiency and demand-side resources should be employed first. When these opportunities are exhausted, renewable generation is to be procured to the fullest extent possible - whenever an IOU issues a Request for Offer/Proposal (RFO/RFP) for generation resources, it must be prepared to defend its selection of fossil generation over renewable generation offers. In other words, selection of renewable generation is the rebuttable presumption guiding IOU generation procurement.

In general, IOUs are directed to procure the maximum feasible amount of renewable energy in the general solicitations authorized by this decision, and will be allowed to credit this procurement towards their Renewables Portfolio Standards (RPS) targets in 2005 and beyond. This is in keeping with the Legislature's clear intent, in creating the RPS program, that renewable procurement be integrated as closely as possible with general IOU procurement practices. To further this effort, we will be working over the course of the next LTPP cycle to fully imbed the RPS into long-term planning, placing renewable energy development where it belongs - central to the IOUs' resource planning efforts.

To further the state's clear goal of promoting environmentally responsible energy generation, we also adopt a policy that reflects and attempts to mitigate the impact of greenhouse gas (GHG) emissions in influencing global climate patterns. As described in this decision, the IOUs are to employ a "carbon adder" when evaluating fossil generation bids. This method, which will be refined in future proceedings, will serve to internalize the significant and under-recognized cost of GHG emissions, and will continue California's leadership in addressing this important problem.