3. Preliminary Scoping Memo - Issues
As set forth in Commission's Rules of Practice and Procedure (Rules) Rule 7.1(d), we include a preliminary scoping memo in this Order Instituting Rulemaking. As discussed in the Sections below, this preliminary scoping memo is composed of the proposed issues, preliminary determination of category, preliminary determination of need for hearing, and proposed schedule.
We propose to handle this proceeding in two phases. The first phase will address the appropriate funding levels for the renewables and RD&D purposes, going as far as possible in the short timeframe before January 1, 2012 to specify programmatic objectives and details about how the funds should be used. Phase 1 will also address how those funds, if any, should continue to be collected from IOU ratepayers and for how long. We expect to issue a Phase 1 decision before January 1, 2012 in order to ensure continuity in funding and collections, if warranted, or a smooth transition to a new funding level, to be determined in Phase 1.
Assuming our decision in Phase 1 determines that some level of funding should continue to support the renewables and RD&D goals, in the second phase of the proceeding, we will address more detailed program design, oversight, and administrative questions related to how the funding will be allocated and by whom.
Below we lay out several options and questions to which we ask parties to respond in their initial written comments. Responses will help us further scope and organize this proceeding most effectively.
3.1. General Questions
Currently, the renewables and RD&D portions of the system benefits charges combined are approximately $143 million annually ($73 million for renewables and $70 million for RD&D). The charges are collected from customers on a volumetric (equal cents per kWh) basis from individual classes of customers. We ask parties to respond to the following general questions about these funding levels and purposes, as well as the collection methodology:
1. For respondents only: Please specify the exact annual revenue requirement for system benefits charges embedded in your rates as of December 31, 2011. Also specify the annual breakdown in system benefits charge funding for energy efficiency, renewables, and RD&D programs separately.
For all parties:
2. Is it appropriate for the Commission to continue the funding for renewables and RD&D purposes at approximately current levels beyond December 31, 2011? Why or why not? What funding levels do you recommend for each of the existing programs and any new programs you recommend? Be as specific and detailed in your recommendations as possible.
3. If you recommend funding be continued, what public benefits are at risk if funding is discontinued?
4. If you recommend certain programs to be eliminated or reduced in scope, provide a rationale for your recommendations.
5. If you recommend certain programs be increased in scope or new programs be created, provide a rationale for your recommendations.
6. If funding is continued for renewables and RD&D programs at any level, should collections continue to come from customers on a volumetric, equal cents per kWh, basis? Why or why not?
7. Should any changes be made to the way funding is currently collected by customer class? Why or why not?
8. For how long should your recommended level of funding be continued? Should there be a periodic reevaluation of these public benefits questions and, if so, how often?
9. Is it reasonable to continue to collect funds in rates in January 2012 and beyond, even if programmatic details on priority expenditures are not yet settled, possibly subject to refund if actual expenditure levels are lower? Why or why not?
10. How would your answers to any of the above questions change if funding were to be made available from allowance revenues as part of a cap and trade program? Could or should system benefits funding and programs be augmented, continued, scaled back, or eliminated if additional revenues become available from cap and trade or other sources?
3.2. Renewable Energy
Currently, the renewable energy portion of the system benefits charge amounts to approximately $73 million annually collected from customers of all three electric IOUs. Funding supports the following general program areas, overseen by the Energy Commission using funds remitted on a quarterly basis from IOU ratepayers:3
· Existing Renewable Facilities. The majority of the funding in this program supports payments to existing biomass facilities.
· Emerging Renewables. This program includes payments to small fuel cell, wind, and solar facilities, as well as supporting the New Solar Homes Partnership (NSHP).
· Consumer Education. Provision of information for consumers about the value of renewable energy. This area also includes assistance to local governments and workforce training.
For these general renewable energy program areas, we ask parties to respond to the following questions:
1. Given the vibrant market activities in renewables in California today, what is the unique added value or distinct rationale for state-level administration of renewables programs, as distinguished from utility procurement activities, RD&D investments, or other similar activities (if any)?
2. For existing renewable facilities, particularly biomass, should the existing program be continued as-is? Why or why not?
3. Could the existing facilities be supported in a different way, such as via current competitive RPS procurement by IOUs? If so, how?
4. Could and/or should the Commission or Energy Commission develop a set-aside program for projects that provide certain energy and non-energy (environmental) benefits to the state? What could a different programmatic approach look like? How would it be administered?
5. What is the best approach to supporting new facilities with the same energy and non-energy benefits characteristics as the current facilities supported under the existing renewables program? Is the distinction between "existing" and "new" facilities important to maintain? Why or why not?
6. Should biogas projects or facilities be included in a continued or new program? If so, how, and in what applicable category of renewable energy? Is there a need to treat on-site generation from biogas differently than export of biogas to the gas transmission system?
7. Should the New Solar Homes Partnership (NSHP) continue to be funded by an order of the Commission? Why or why not?
8. Does the Commission have the authority to order continued funding for the NSHP, given the separate statutory limits on funding for that program and the Commission's California Solar Initiative (CSI) program established by Senate Bill 1 (Murray)? Please include specific citations to appropriate code sections in your response to this question.
9. Should the Commission defer to the Energy Commission to continue to provide guidelines for oversight of the NSHP going forward? If so, how?
10. If NSHP is continued, should the current investor-owned utility administration of the program via contract be transitioned to come under general Commission regulatory oversight, for example as part of or parallel to the Commission's CSI program? If so, how should this arrangement be structured?
11. Besides NSHP, is additional and separate funding needed to support "emerging renewables" that are currently covered by Energy Commission programs? If so, how much and why?
12. Can and should the Commission's Self-Generation Incentive Program cover funding support and administration for the other emerging renewables beyond the NSHP Program, such as for small wind projects and renewable fuel cells? Why or why not?
13. What other aspects of the Energy Commission's current program activities warrant continuation (such as local government assistance, consumer education, workforce training, etc.)? Why? At what funding levels?
14. If such current activities as local government assistance, consumer education, and workforce training continue, what is the proper administrative structure for those activities?
15. Should the Energy Commission continue to administer these ancillary program activities? If so, how would the Energy Commission receive funding to continue those activities and in what amounts?
3.3. Research, Development, and Demonstration
Currently, RD&D investments are funded at approximately $70 million annually out of the system benefits charge and administered as the Public Interest Energy Research (PIER) Program by the Energy Commission. The Energy Commission, by decision of the Commission, also administers a natural gas RD&D program funded by approximately $24 million per year in natural gas public purpose program funds. The rationale for selection of the Energy Commission for administering the natural gas RD&D funds was, at least in part, ease of coordination and synergy with the electric RD&D program. Electric RD&D funds are remitted to the Energy Commission quarterly from IOU ratepayers. Historically, grants and investments for electric RD&D have fallen into the following general categories:
· Energy efficiency and demand response
· Renewables
· Advanced electricity generation
· Transmission and distribution
· Climate/environmental
· Transportation
Legislative discussions about continuing the RD&D/PIER program have focused on such issues as program oversight structure, accountability and transparency, independent evaluation, ratepayer vs. societal benefits, and ensuring a nexus with electricity-related benefits. In addition, some IOUs have expressed a desire for an explicit role, including perhaps funding set aside, to support RD&D as well as deployment investments (e.g. funds used to spur initial or scaled-up commercialization) that will serve to benefit their ratepayers and/or the public interest in general.
In the area of RD&D as well as deployment, we ask parties to respond to the following questions:
1. What makes state-level investment in RD&D appropriate and unique, and how should it be distinguished from federal government, philanthropic, or industry RD&D activities?
2. Should a program such as PIER or similar to PIER continue to be funded? Describe any preferred changes or improvements to the existing program or why you would recommend eliminating the program altogether.
3. What is the appropriate level of funding for RD&D efforts to be continued, if any?
4. Should the Energy Commission continue to administer an RD&D program (PIER or similar)? If yes, how could such an administrative structure be set up under CPUC regulatory and funding oversight (assuming no statutory requirements are extended or recreated)?
5. Alternatively, if you recommend continuing RD&D funding with a different administrative structure, please describe your preferred structure.
6. If a program like PIER or similar is continued, describe your preferred governance structure, process for allocation of funds, and selection methodology for projects.
7. Should a new oversight board be created? What would be its role? How would membership be determined and governed?
8. Would there be a need for any additional structures such as technical advisory committee or other structures that might facilitate participation from the federal or other state RD&D organizations, private investors, industry, environmental or other advocacy organizations, and/or other research institutions?
9. Do any program changes need to be made on the issue of intellectual property rights?
10. If an RD&D program is continued, what are the appropriate metrics for evaluating success or failure of the program?
11. How frequently should any RD&D program be evaluated? By whom?
12. Should RD&D investments be focused on projects with an explicit connection to electricity, or should more general environmental and climate change research be funded? Provide a rationale for your response.
13. If RD&D funding is continued, what are your suggested methods for ensuring and maximizing ratepayer benefits?
14. Should this structure be open to the voluntary participation and contributions of publicly-owned utilities in California? If so, with what roles and financial contributions? Are there other models to ensure that ratepayers served by publicly-owned utilities are able to share in the gains of a state RD&D function?
15. Are there any model approaches in other jurisdictions that could or should inform our consideration of future RD&D funding structures and programs?
16. What suggestions do you have for increasing transparency and accountability in RD&D program spending? How can costs be controlled or reduced, particularly in the administrative area?
17. Should there be an explicit role or set aside for utilities to invest in RD&D, particularly in the areas of demonstration and deployment or commercialization activities? If so, for what explicit purposes, and what is the appropriate level of funding? How would/should such a program be administered and overseen?
18. If utilities have a more explicit role in the future, are there competitiveness considerations that we should be concerned about? If so, please explain.
19. How should we coordinate any utility RD&D program or expenditures in this context with similar requests that may be made in general rate cases?
3 More detail on the Energy Commission's renewable activities and spending was presented at a Senate Hearing in March, 2011 and can be viewed at: http://seuc.senate.ca.gov/sites/seuc.senate.ca.gov/files/03-29-11CEC.pdf.
