D1104033 Order Granting Ltd Rhrng of D1012055 on the Issue of GHG Compliance Costs

ATTACHMENT B

"Conformed" Version of D.09-12-042

Decision 09-12-042, as modified by D.10-04-055 and D.10-12-055,

as modified by D.11-04-033

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Order Instituting Rulemaking on the Commission's Own Motion into Combined Heat and Power Pursuant to Assembly Bill 1613.

Rulemaking 08-06-024
(Filed June 26, 2008)

DECISION ADOPTING POLICIES AND PROCEDURES FOR PURCHASE OF EXCESS ELECTRICITY PURSUANT TO CALIFORNIA ASSEMBLY BILL 1613 AND THE PUBLIC UTILITY REGULATORY POLICIES ACT OF 1978

Table of Contents

Title Page

DECISION ADOPTING POLICIES AND PROCEDURES FOR PURCHASE OF EXCESS ELECTRICITY PURSUANT TO CALIFORNIA ASSEMBLY BILL 1613 AND THE PUBLIC UTILITY REGULATORY POLICIES ACT OF 1978 1 1

1. Summary 2 2

2. Background 3 3

3. Threshold Issues 6 6

3.1. Commission Authority to Establish AB 1613 Purchase Price 6 6

3.2. AB 1613 Policy Objectives And Requirements 7 7

3.3. Ratepayer Indifference 9 9

3.3.1. Parties' Positions 9 9

3.3.2. Discussion 11 11

3.4. Benefiting Customers 11 11

3.4.1. Parties' Positions 12 12

3.4.2. Discussion 15 15

3.5. Program Cap 19 19

3.5.1. Parties' Positions 19 19

3.5.2. Discussion 21 21

4. Pricing 22 22

4.1. Pricing Option 1 23 23

4.2. Pricing Option 2 24 24

4.3. Objections to Both Proposed Pricing Options 26 26

4.4. Location Bonus 27 27

4.5. Discussion 30 30

4.5.1. Pricing Options 1 and 2 30 30

4.5.2. Firm vs. As-Available Energy 32 32

4.5.3. Location Bonus 35 35

4.5.4. Use Of Most Current MPR Inputs 41 41

4.5.5. Adopted Price Formula 44 44

5. Contract Terms and Conditions 44 44

5.1. Contract Sizing and Overview 45 45

5.2. Maximum Contracting Under Simplified Contract (Simplified Contract Term 7.02(c)) 47 47

5.3. Green Attributes and GHG Compliance Costs (Simplified Contract Terms 3.01, 3.03 and Definitions; Standard Contract Term 3.01(b), 3.03 and Definitions) 48 48

5.3.1. Parties' Positions 49 49

5.3.2. Discussion 50 50

5.4. Delivery Point, (Simplified Contract Term 1.06; Standard Contract Term 1.03) 55 55

5.5. Termination Rights of Buyer (Simplified Contract and Standard Contract Term 2.02(a)) 56 56

5.6. Indemnity (Simplified Contract Term 7.03(d); Standard Contract Term 9.03 (f)) 58 58

5.7. Eligible CHP Facility Status (Simplified Contract Term 3.14; Standard Contract Terms 2.01(a) & 3.16) 59 59

5.8. Qualifying Facility Status And Two Tier Price Structure (Standard Contract Terms 1.02(f), 2.01(b), 3.10(a)(v), 3.16, 6.01(c)(xviii) & 9.02(h) and Exhibit O) 60 60

5.9. Credit and Collateral (Standard Contract Term 1.06 and Exhibit D) 63 63

5.10. Conveyance of the Power Product (Standard Contract Term 3.01) and Resource Adequacy Benefits (Standard Contract Term 3.02) 64 64

5.11. Generating Facility Modifications (Standard Contract Term 3.07(b)) 66 66

5.12. Assignment (Standard Contract Term 9.04) 67 67

6. Non-Contract Issues 68 68

6.1. Applicability to Electrical Corporations with Less Than 100,000 Service Connections 68 68

6.2. Ratepayer Funded Incentives 73 73

6.2.1. Parties Comments 73 73

6.2.2. Discussion 74 74

7. Conclusion 75 75

8. Comments on Proposed Decision 77 77

9. Assignment of Proceeding 78 78

Findings of Fact 78 78

Conclusions of Law 86 86

ORDER 91 91

Attachments:

A. Standard Contract for Eligible CHP Facilities

B. Standard Contract for Eligible CHP Facilities with Net Output not
Greater than 5 MW

DECISION ADOPTING POLICIES AND PROCEDURES FOR PURCHASE OF EXCESS ELECTRICITY PURSUANT TO CALIFORNIA ASSEMBLY BILL 1613 AND THE PUBLIC UTILITY REGULATORY POLICIES ACT OF 1978

1. Summary

This decision adopts the policies and procedures for purchase of excess electricity from eligible combined heat and power (CHP) systems by an electrical corporation pursuant to Assembly Bill (AB) 1613 and the Public Utility Regulatory Policies Act of 1978 (PURPA).¹ The decision adopts two separate contracts for the purchase of excess electricity from eligible CHP systems. A standard contract will be available to all eligible CHP systems up to 20 megawatts (MW) and a simplified contract will be available to CHP systems that export no more than 5 MW. Investor-owned utilities' (IOUs) offers under the AB 1613 contracts will be based on the long run avoided costs of a new combined cycle gas turbine, and a location bonus based on avoided transmission and distribution costs shall be available to eligible CHP systems located in high-value areas identified pursuant to an analysis performed by the California Independent System Operator Corporation (CAISO). Unless otherwise excepted, all California electrical corporations shall be required to offer these contracts. This rulemaking remains open to address implementation of a "pay-as-you-save" program.²

¹ PURPA is codified in scattered sections of 16 U.S.C. including § 796 (definitions), § 824a-3, and §§ 2601 et seq.

² Implementation of a "pay-as-you-save" program was addressed in D.11-01-010 and this proceeding was closed pursuant to that decision.