2. Background
The Bear Valley Electric Service Division of Golden State Water Company (GSWC) provides retail electric service to over 20,000 customers in the communities of Big Bear Lake, Big Bear City, Fawnskin, Erwin Lake, Moonridge, Sugarloaf, Baldwin Lake, and Lake Williams, in San Bernardino County. The majority of customers are residential (17,500),1 with the remaining 2,500 customers being commercial, industrial, and public authority. Two of the commercial customers are ski resorts.
In 2002, California Senate Bill (SB) 1078 (Stats. 2002, ch. 516) established the California Renewables Portfolio Standard (RPS) Program, with a stated intent of attaining a target of 20 percent renewable energy for the State of California. To reach that goal, the legislation required an increase in procurement of renewable energy of at least one percent per year. The Legislature found that increasing California's reliance on renewable energy resources may have significant economic, social, health, and environmental benefits.2 SB 1078 also required the Commission to adopt processes, rules, and standard terms in order to implement and administer the RPS program. Over the next several years, the Commission addressed and adopted such requirements for the three large energy utilities that operate in California, as well as the small and multi-jurisdictional energy utilities.3
In Decision (D.) 05-11-025, the Commission concluded that GSWC4 and other small utilities need to meet the five basic requirements of the RPS program in the same manner as that of the three large energy utilities. These requirements include: 1) procurement of 20% of the utility's retail sales from renewable energy sources by 2010;5 2) increased procurement of renewable energy by at least 1% of the utility's retail sales per year; 3) reporting to the Commission on the utility's compliance with these requirements; 4) use of flexible compliance mechanisms; and 5) the utility being subject to penalties for non-compliance with these rules.
In D.08-05-029, the Commission ordered GSWC to seek approval of any contracts for the procurement of RPS-eligible energy by application, rather than by advice letter, as long as any cap6 on GSWC electricity charge remains in effect.
Pursuant to Pub. Util. Code §454.5, each electric utility under the Commission's jurisdiction is required to file a proposed electricity procurement plan for Commission review and approval that address various issues, including the utility's specific renewable resource goals. Pub. Util. Code §454(i) provides that an electrical corporation serving fewer than 500,000 customers in California may file a request for an exemption from the requirements of filing a procurement plan. GSWC was granted such an exemption in 2009 from this long-term procurement process for its Bear Valley Electric Service Division.7
In 2006, 2007, and 2008, GSWC issued one Requests for Proposal (RFP), each year, and informed multiple bidders of such (50, 80, and 90, respectively) to prospective bidders for renewable resources, and received only 3, 6, and 2 proposals, respectively. All of these proposals resulted in either unsuccessful negotiations, withdrawal of responses, terms that were not considered viable by GSWC, or costs that were considered too high by GSWC. GSWC believes that it received so few responses to its RFPs because renewable energy producers would prefer to sell their entire output to one large energy utility, as opposed to the sale of a portion of its output to GSWC, which, as a small energy utility, has a lower need for RPS power.
GSWC also unsuccessfully proposed partnerships for the development of a renewable energy facility with another investor-owned utility that is a major developer of renewable energy projects, and a wastewater agency.
Given its unsuccessful effort to acquire RPS power via the competitive bidding process and partnerships with other users of RPS power, GSWC decided to use the bilateral-contracting process instead. In 2008, GSWC initiated bilateral negotiations8 with BioEnergy Solutions, L.L.C. (BioEnergy),9 which resulted in a successful agreement for BioEnergy to provide a small amount of biomethane (biogas) that would fit GSWC's lower load requirements.
GSWC also executed a second RPS contract through the use of the bilateral negotiation process, with County Sanitation District No. 2 of Los Angeles. GSWC filed a separate application,10 in order to request approval of this RPS contract and to recover the costs of the contract in rates.
On July 8, 2010, GSWC on behalf of its Bear Valley Electric Service Division, filed the instant application, A.10-07-012, for approval of a bilateral contract with BioEnergy. The contract for which GSWC seeks approval is described below.
On July 29, 2010, Resolution ALJ-176-3258 preliminarily determined that this proceeding was ratesetting and that hearings would be necessary. On August 12, 2010, the DRA filed a protest, to which GSWC responded on August 20, 2010.
On August 30, 2010, a prehearing conference (PHC) took place in San Francisco to establish the service list for the proceeding, discuss the scope of the proceeding, and develop a procedural timetable for the management of the proceeding.
On September 16, 2010, Commissioner Nancy Ryan issued the Scoping Memo and Ruling of Assigned Commissioner (Scoping Memo), which set forth the scope and schedule of the proceeding, and addressed other procedural matters. In particular, the Scoping Memo confirmed the preliminary categorization that this proceeding was ratesetting and the preliminary determination that hearings would be required. Subsequent to issuance of the Scoping Memo, this proceeding was re-assigned to President Michael R. Peevey.
On December 6, 2010, the assigned Administrative Law Judge (ALJ) issued Administrative Law Judge's Ruling on Request to Suspend Schedule, in which she granted DRA and GSWC's request that the procedural schedule be suspended in order for the parties to continue their efforts to finalize a settlement. The assigned ALJ also required that the parties file a joint progress report every four weeks while the settlement discussions were in progress, with which requirement the parties complied.
On March 9, 2011, DRA and GSWC filed their request for approval of the Settlement Agreement.11
On March 28, 2011, the assigned ALJ issued a ruling requesting further information regarding the Joint Motion, to which DRA and GSWC (Joint Parties) responded on April 8, 2011.
1 http://www.aswater.com/CSC/Maps_and_Directions/maps_and_directions.html.
2 See Public Utilities (Pub. Util.) Code §399.11.
3 http://www.cpuc.ca.gov/PUC/energy/Renewables/decisions.htm
4 Since GSWC has filed this decision on behalf of its affiliate, the Bear Valley Electric Service Division, and in order to simplify references to the requesting entity, we use "GSWC" to represent both GSWC and Bear Valley Electric Service Division for the balance of this decision.
5 We note the recent passage of legislation (California SB 2 (2011-2012 First Extraordinary Session, Stats. 2011, ch. 1)), which now requires that utilities' procurement of renewable energy increase to 33% of retail sales by 2020.
6 In D.02-07-041, the Commission approved a settlement agreement between GSWC, Division of Ratepayer Advocates (DRA) and Bear Mountain Inc., that included a cap on the weighted average annual cost of $77 per megawatt hour (MWh) ($77 Cap) in calculating the energy charge component of its Purchased Power Adjustment Clause. The $77 Cap is still in effect.
7 Resolution E-4232 in Advice Letter No. 224-E.
8 A bilateral negotiation is undertaken by two sides equally, and is binding on both parties.
9 BioEnergy designs, builds and maintains waste-to-gas systems on farms or at processing facilities, distributes renewable natural gas to dairy producers, and sells renewable natural gas to power generators.
10 Application (A.) 10-06-003.
11 Joint Motion of the Division of Ratepayer Advocates and Golden State Water Company (Bear Valley Electric Service Division) to Approve Settlement (Settlement Agreement Attached) (Joint Motion). The attached Settlement Agreement is titled Settlement Agreement Between the Division of Ratepayer Advocates and Golden State Water Company, On Behalf of it's Bear Valley Electric Service Division (Settlement Agreement). Both documents can be found at http://docs.cpuc.ca.gov/efile/MOTION/132172.pdf. Throughout the balance of this decision, the Settlement Agreement will be referred to separately from the Joint Motion.
