APPENDIX B
Summary of PG&E's 2006 Long-Term Procurement Plan
PG&E developed its 2006 Long-Term Procurement Plan ("LTPP") pursuant to the Assigned Commissioner's Ruling and Scoping Memo on the Long-Term Procurement Phase of R.06-02-013, issued on September 25, 2006 ("Scoping Memo"). Initially, PG&E developed four scenarios to represent events or conditions that are outside of PG&E's control, and which could occur over the ten-year planning horizon. These scenarios were designed to take into account long-term uncertainties which may occur, such as changes in load, prices, market availability of resources, and regulatory changes.
PG&E then calculated 2007-2016 demand forecasts for the California Independent System Operator's ("CAISO") NP-26 region and then for its service area using information from the California Energy Commission ("CEC"), with certain specified modifications. PG&E calculated demand forecasts under each of the four scenarios for both the NP-26 region and the PG&E service area.
In addition to demand forecasts, PG&E also developed three candidate procurement plans. These plans included differing demand-side, supply-side and transmission actions that PG&E could take over the ten-year planning horizon. The plans were designed to highlight the trade-offs between reliability, environmental issues and cost. PG&E then tested each of these three plans under the four scenarios, to see how future events captured in the scenarios would impact the reliability, environmentally-preferred resource and cost elements of each of the three plans. PG&E used nine metrics to analyze the feasibility and performance of each of the candidate plans under the various scenarios.
After completing its analysis, PG&E selected its Recommended Plan. The five key elements to PG&E's Recommended Plan are:
· Energy Efficiency: Meeting current California Public Utilities Commission ("Commission") energy efficiency ("EE") quantity targets in all years in the 10-year planning horizon;
· Demand Response: Meeting the Commission's 5% demand response ("DR") goal in all years in the 10-year planning horizon;
· Renewable Energy: Procuring renewable resources to achieve the 20% Renewable Portfolio Standard ("RPS") and higher than 20% by the end of the planning horizon;
· Distributed Solar Generation: Implementing the California Solar Initiative ("CSI") program and supporting the market transformation necessary to achieve the 3,000 MW statewide goal; and,
· New Generation Resources: Procuring up to 2,300 megawatts ("MW") in new dispatchable and operationally flexible generation resources.
PG&E's 2006 LTPP includes a number of procurement elements in addition to its Recommended Plan. For example, PG&E's 2006 LTPP includes products and processes for procurement, fuel-supply plans, hedging plans and recommendations regarding the Procurement Review Group ("PRG") and other procurement-related regulatory processes. Specifically, for the 2006 LTPP, PG&E has requested that the Commission:
· Approve the Increased Reliability and Preferred Resources Plan (i.e., the "Recommended Plan") described by PG&E in Exhibit 10, Section IV.H;
· Approve PG&E's service area need determination provided in Exhibit 10, Section IV.E;
· Approve PG&E's use of the energy products identified in Exhibit 10, Section III.A.3 and its use of the markets and procurement and contracting methods described in Exhibit 10, Sections III.A.4 and A.5;
· Authorize PG&E to procure up to 2,300 MW of new dispatchable and operationally flexible generation resources to come online starting in 2011, as explained in more detail in Exhibit 10, Sections III.A.6 and V.F.6 and Exhibit 12, Sections I.B.1 and IV.B.
· Approve PG&E's electric and gas hedging plan described in Exhibit 14-C, Section III.B.1 and B.3 and Attachment III.A;
· Approve PG&E's gas supply plan described in Exhibit 14-C, Section III.C.1 and Attachment III.B;
· Approve PG&E's nuclear fuel supply plan described in Exhibit 14-c, Section III.C.2, Attachment III.C and Exhibit 12, Section IV.D;
· Approve PG&E's credit and collateral requirements described in Exhibit 10, Section III.B.4;
· Modify the current requirement that PG&E consult the PRG for all transactions that either begin deliveries more than three months in the future or have a term greater than three months to a requirement to consult the PRG for transactions that begin deliveries more than six months in the future or have a term greater than six months, for the reasons explained in Exhibit 10, Section II.D.1 and Exhibit 12, Section II.A.1;
· Modify the confidentiality rules to provide that PG&E does not need to disclose a winning bidder or project location when it files an application or advice letter to approve a project, for the reasons explained in Exhibit 10, Section II.D.1 and Exhibit 12, Section II.A.3.b;
· Synchronize the filing of PG&E's California Department of Water Resources ("DWR") gas supply plan with PG&E's annual review of its electric portfolio gas hedging plan by specifying that the gas supply plan should be filed annually in the fall of each year, and encourage DWR to agree to the fall filing date, as described in Exhibit 12, Section III.A.1; and,
· Determine that PG&E's 2006 LTPP is in full compliance with the requirements of Public Utilities Code Section 454.5.
Summary of SDG&E's Long-Term (2007-2016) Procurement Plan
Overview
San Diego Gas & Electric Company's (SDG&E) long-term procurement plan (LTPP) covers the 10-year resource planning horizon of 2007 to 2016 and is intended to establish the upfront guidelines required by AB 57 (California Public Utilities Code Section 454.5) to govern SDG&E's electric procurement activities. This updated and consolidated LTPP replaces SDG&E's prior, Commission-approved short- and long-term plans submitted in past procurement and resource planning dockets beginning in 2002, prior to the utilities resuming their procurement responsibilities in 2003. SDG&E's 2007-2016 LTPP attempts to employ a balanced resource strategy that follows the State's preferred loading order of resources (cost-effective demand response and energy efficiency, renewable energy, conventional generation, and new transmission). SDG&E's LTPP also demonstrates a declining greenhouse gas (GHG) emissions profile.
SDG&E's LTPP consists of a base case "Preferred Plan" that meets SDG&E's expected bundled customer needs, and for illustrative purposes, additional capacity scenarios are presented to demonstrate how SDG&E's procurement will adjust if resource needs turn out to be higher or lower than the base case. SDG&E's Preferred Plan is consistent with previous Commission decisions adopting targets for specific resource areas, such as energy efficiency, demand response, and renewable resources. Regarding renewables, SDG&E's LTPP outlines a plan to meet the 20% renewables requirement by 2010 and also shows that SDG&E is on a trajectory to meet a 33% goal by 2020 -- with the important condition that new transmission infrastructure is necessary to meet those goals. SDG&E's Preferred Plan anticipates a diversified mix of contracting options, contract durations, ownership options, technology and fuel types, and a diversity of markets and products for both procurement and risk management. SDG&E's LTPP identifies a range of bundled need for 900 - 1,900 MW in the 2010 - 2012 timeframe, after accounting for renewables procurement and less any capacity added as a result of the 2008 peaker RFO (two projects totaling approximately 130 MW were approved by the Commission in D.07-09-010).
SDG&E's updated LTPP also contains the procurement implementation plan, the bulk of which was previously designated the "short-term procurement plan." This portion of SDG&E's LTPP generally applies to procurement activities that take place within the year and describes SDG&E's plans to meet its load requirement in a least-cost dispatch manner. Specifically, this portion of the LTPP addresses procurement processes, including the framework for conducting RFOs, as well as the products for electric and gas procurement. Risk management policy and strategy are also addressed, including (1) current risk management practices (SDG&E's hedge plan and hedging targets), (2) portfolio risk assessment (forecast SDG&E risk positions, risk management products, and selection criteria), (3) security requirements (collateral and credit risk management practices), and (4) use of customer risk tolerance (CRT) and Value at Risk (VaR) as hedge metrics. Finally, the LTPP addresses SDG&E's fuel supply procurement strategy for the DWR dispatchable contracts (also known as the "Gas Supply Plan") allocated to SDG&E, SDG&E-owned facilities, and SDG&E contracted tolling agreements.
