Procurement Policies
For the most part, SDG&E's LTPP does not recommend major changes to the underlying policies and practices for procurement, but does recommend the following changes to existing resource planning principles:
Debt Equivalence. As part of SDG&E's bid evaluation process, SDG&E's LTPP encourages the Commission to approve SDG&E's proposed modification for calculating debt equivalence impacts associated with PPAs to correspond to the updated S&P methodology. SDG&E urges the Commission to also allow SDG&E to assess possible FIN 46(R) effects during the bid evaluation process as appropriate. The issue of cost recovery for these impacts has been deferred to the current cost of capital proceeding.
Loosen the restrictions on bilateral contracting. SDG&E urges the Commission to loosen certain artificial constraints on the use of bilateral contracting for, in particular, non-standard products and transactions.
Streamlining of Procurement Processes. SDG&E urges the Commission to approve several of SDG&E's proposals to streamline regulatory procurement processes: (1) eliminate "renewables only" procurement plans and incorporate them within the LTPP planning and review process, (2) consolidate "Gas Supply Plan" filings into the LTPP, and (3) consolidate Quarterly Procurement Transaction Reports and the ERRA annual compliance review.
Eliminate the requirement for "Renewables Only" RFOs after goals are met. Once targets for renewables have been met, the Commission should permit the utilities to conduct only "all source" RFOs.
Summary of SCE's Long-Term (2007-2016) Procurement Plan
SCE has filed its first completely unified Long-Term Procurement Plan (Procurement Plan or LTPP), covering the years 2007 to 2016.1 SCE's Procurement Plan incorporates and updates all of the procurement-related authority that has been granted to SCE under prior Commission decisions, and, where deemed necessary by SCE, requests approval of certain changes to prior plans. SCE intends for its Procurement Plan to replace its 2004 Long-Term Procurement Plan, filed in July, 2004, and its 2004 Short-Term Procurement Plan, filed in May, 2003, as it was subsequently updated.2
SCE's Procurement Plan was filed in three volumes. The first volume, which was filed in two parts, Volumes 1A and 1B, contains the details of the Procurement Plan required by the Commission's Scoping Outline.3 Volume 1A4 addresses SCE's implementation of its Procurement Plan and provides a detailed discussion of its procurement processes. In Volume 1B,5 SCE provides two candidate plans-a "Required Plan," which specifically assumes that SCE will achieve a level of 33% renewables by 2020 and will meet all other requirements of Commission decisions; and a "Best Estimate Plan," which uses what SCE believes are the most realistic estimates of the goals SCE can actually achieve during the ten-year time frame covered by its Procurement Plan. In addition to the written testimony contained in Volumes 1A and 1B, SCE included an appendix, Appendix A,6 which contains detailed information regarding its forecast of capacity and energy needs in a format consistent with the CEC's draft IEPR forms, in accordance with the direction of the Scoping Memo.7 Volume 2 of SCE's Procurement Plan contains testimony addressing many of the policy issues raised by the Commission in the Scoping Outline. It contains, among other things, a proposal which would allow investor-owned utilities (IOUs) to be involved in the development of new generation, a discussion of repowered generation and the implementation of AB 1576, and testimony supporting updates to SCE's proposed Procurement Rulebook. SCE's proposed Procurement Rulebook was filed concurrently with its plan as Volume 3.8 The Rulebook represents SCE's effort to provide a compilation of all the procurement-related rules and guidance provided by the Commission in approving SCE's previous short-term procurement plans, and SCE believes it captures the "upfront standards and criteria by which the acceptability and eligibility for rate recovery of a proposed procurement transaction will be known prior to execution of the transaction," as envisioned by the California State Legislature in AB 57.9 Finally, SCE provided additional back-up information in support of its proposed Procurement Plan in Appendices B through G.10
SCE asks the Commission to adopt several key proposals in its Procurement Plan in order to achieve its stated planning objectives. First, SCE asks the Commission to approve the Best Estimate Plan as its Procurement Plan for 2007 through 2016. In Sections IV and V of its plan, SCE provides scenario analyses in support of its Best Estimate Plan . SCE updated its Plan on July 12, 2007 to recognize the rejection of the Devers-Palo Verde 2 line by the Arizona Corporation Commission and reflect the concomitant increase in regional need. Based on SCE's updated regional need analysis, SCE requests authority to procure 1,380 MW of new generation resources, in addition to the 1,500 MW already authorized under D.06-07-029, and allocate the benefits and costs of those resources to all benefiting customers in SCE's distribution service territory in accordance with D.06-07-029.
Second, SCE seeks adoption of its proposed Procurement Rulebook as the "upfront standards and criteria by which the acceptability and eligibility for rate recovery of [its] proposed procurement transaction[s] will be known prior to execution of the transaction[s]."11 SCE believes its Rulebook (Volume 3) accurately captures the present rules and Commission decisions under which SCE transacts for the purchase and sale of power and natural gas, and that implementation of its Rulebook will assist SCE in its efforts to achieve 100% compliance with its Procurement Plan by providing SCE's employees and Commission staff with an organized, comprehensive compilation of the rules that govern SCE's procurement activities. SCE further proposes a few modifications to the standards and criteria set forth in its proposed Rulebook, either to resolve perceived ambiguities or to enable SCE to transact more efficiently.
Third, SCE asks the Commission to adopt SCE's proposal for acquiring IOU-owned new generation. SCE believes the Commission should recognize that under some circumstances "the market" will not support the cost-effective supply of sufficient generation, or there is insufficient competition to provide certain types of power plants, including facilities required for grid reliability. In those cases, SCE requests that the Commission authorize the IOUs to consider owning, rather than exclusively relying on contracting, to obtain the required types of generation. SCE believes the Commission should allow IOUs to apply to add new generation through a Certificate of Public Convenience and Necessity (CPCN) process, and grant the IOU a traditional ratemaking mechanism for cost recovery.
Fourth, SCE requests that the Commission adopt its proposal for repowered projects. SCE has proposed what it believes is a workable plan for allowing projects that comply with AB 1576 either to compete in new generation or all-source RFOs (with market-based bids), or bid into separate, AB 1576-only, solicitations, or negotiate bilaterally with IOUs.
(END OF APPENDIX B)
1 The plan was prepared in accordance with the September 25, 2006, Assigned Commissioner's Ruling and Scoping Memo on the Long-Term Procurement Phase of R.06-02-013 (Scoping Memo) and its attached Outline.
2 The Short-Term Procurement Plan was also known as the "AB 57 Component" of the Long-Term Plan, and was updated by Decision 04-12-048 and through subsequent advice letters.
3 "Attachment A -- 2006 Long-Term Procurement Plan Filing Outline," attached to the September 22, 2006 Scoping Memo.
4 Exhibits 19 and 20-C.
5 Exhibits 21 and 22-C.
6 Exhibits 27, 28-C, 29 and 30-C.
7 Attachment A to the Scoping Memo, at 14-16.
8 Exhibit 25.
9 Public Utilities Code § 454.5(b)(7).
10 Exhibits 31 and 32-C.
11 Pub. Util. Code § 454.5(b)(7).
