12. Statewide Capacity Program Cap Increased to 750 MW and Allocation of Proportionate Share to Commission Regulated Utilities

This decision implements the statutory amendments by increasing the program cap to 750 MW and allocates the proportionate share of the 750 MW (with a proportionate share designated for publicly owned utilities) to the three largest electric utilities regulated by the Commission. The allocations are made in accordance with the methodology adopted in D.07-07-027, as follows: PG&E 218.8 MW; SCE 226 MW; and SDG&E 48.8 MW, for a total of 493.6 MW.77 We make no determinations regarding the implementation of § 399.20(f) to the extent it refers to publicly owned electric utilities provided for under § 387.6.

As originally enacted by AB 1969, § 399.20(e) required each electric corporation to offer service or tariffs under this code section until it had met its "proportional share" of the total megawatts subject to § 399.20. The total amount subject to § 399.20(e), as originally enacted, was 250 MW. The Commission implemented a program with a 250 MW cap in D.07-07-027 for public water and wastewater customers. In implementing the 250 MW cap, D.07-07-027 allocated these megawatts among the utilities regulated by the Commission for public water and wastewater customers. D.07-07-027 and D.08-09-033 expanded the program to all customers in the service territories of SCE, PG&E, and SDG&E, and allocated an additional 248.4 MW to these customers.

These utilities were, in turn, responsible for entering into contracts with generators for, at a minimum, the amount of megawatts allocated to them under D.07-07-027 and D.08-09-033. SB 380 increased the program cap to 500 MW and SB 32 increased the program cap again from 500 MW to 750 MW. At that time, the Commission did not implement these increases by modifying its existing program. The existing program remained capped at 250 MW for public water and wastewater customers and 248.4 MW for all other customers in the large utilities' service territories. SB 32 renamed the relevant subsection from subsection (e) to subsection (f) and included local publicly owned electric utilities. SB 2 1X makes no further modifications to § 399.20(f).

Below we discuss implementing the 750 MW program cap, the existing allocation methodology adopted in D.07-07-027, our allocation methodology adopted today going forward, and several related issues raised by parties.

12.1. Program Cap of 750 MW

Most parties, including CWCCG, Silverado Power, DRA, PG&E, SCE, and SDG&E, support increasing the program cap to the statutory limit of 750 MW. We agree and, accordingly, consistent with the statutory directive in § 399.20(f), increase the program capacity from the existing amount, as implemented in D.07-07-027, of 250 MW to 750 MW. Many parties, even those that support the increase to 750 MW, raise various questions related to implementing the increased cap. We address these various questions below.

We do not adopt the recommendation by some parties, including Vote Solar Initiative, Solar Alliance, Sierra Club, and Clean Coalition, to increase the cap beyond 750 MW. The Legislature created a specific program under § 399.20 limited to 750 MW and this program is, notably, a must-take obligation by utilities and the renewable generation procured under this program has cost implications for ratepayers. Therefore, today we set as our goal implementing the plain language of the statute and the 750 MW cap noted therein. Our decision today also rests upon our goal of achieving "ratepayer indifference" and cost containment within the program. We are sensitive, however, to the fact that the program's MW may quickly be subscribed. In that situation, we will consider proposals from parties to expand the program.

We clarify, however, that for amounts that exceed a utility's proportionate share of the 750 MW cap, the statute does not prohibit utilities and generators from voluntarily entering into contracts. The Commission would review these contracts under the standard of review used for general renewable procurement.

We also clarify that the 750 MW cap applies on a statewide basis. As described in § 399.20(f), 750 MW is a "statewide" cap, not a service territory cap or a cap that solely applies to Commission regulated utilities. As such, based on the clear statutory language, we reject the argument made by CEERT and others that the entire 750 MW cap only applies to IOUs and that publicly owned electric utilities are subject to a separate cap. Under the provisions of the statute, the 750 MW is to be split on a proportional basis between investor owned and publicly owned electric utilities.

Furthermore, other parties, such as Clean Coalition and CEERT, suggest that the 750 MW cap is an amount in addition to the existing 250 MW cap enacted under AB 1969 and implemented by the Commission in D.07-07-027. We disagree. Again, we find that the plain language of the statute establishes a total cap of 750 MW for the entire § 399.20 Program and, accordingly, does not provide for an additional cap of 250 MW.

Some parties, including SunEdison and Joint Solar, recommend that the Commission incrementally release available capacity in the program over a two-year period, with a new release every six months. We agree, in part, with this recommendation. This issue is addressed within the pricing proposal adopted by today's decision.

Various parties, including Vote Solar Initiative and FuelCell Energy, raise issues related to the treatment of projects that are already under contract in the existing AB 1969 program. We find that all capacity already under contract from the existing § 399.20 FiT Program must be subtracted from each utility's total capacity allocation. If a contract is terminated at a future date, then the utility is obligated to re-contract for that capacity.

12.2. Capacity Allocation Methodology in Decision 07-07-027 Adopted

This decision adopts the existing allocation methodology previously adopted by the Commission in D.07-07-027 when implementing AB 1969.

In D.07-07-027, the Commission determined that 250 MW, which represented the statewide capacity requirement under § 399.20 (before SB 32), be allocated according to coincident peak demand, meaning the regulated utilities share of total system-statewide peak.

In general, parties support retaining the existing allocation methodology while updating the coincident peak demand data to at least 2009. Some parties, however, support a different methodology. SCE suggests relying on each utilities' prior three year historical peak load compared to the sum of all utilities' peak load because average historical data will mitigate year-to-year volatility. SCE also suggests reliance on actual peak load, rather than coincident peak to again, provide more reliable comparisons. PG&E suggests relying on a utility's actual retail peak demand divided by the total statewide peak demand.

We find these suggestions have merit but do not offer sufficient benefits to warrant a change in the existing allocation methodology. The current methodology is very similar to the above suggestions and, in the interest of consistency and administrative simplicity, we find that retaining the existing allocation methodology going forward is reasonable.

Several factors must be considered in applying the existing allocation methodology to the current situation. At the time the Commission issued D.07-07-027, § 399.20 did not require participation by publicly owned electric utilities. Now, under the amendments to § 399.20 enacted by SB 32, the program's statewide cap of 750 MW applies to IOUs and publicly owned electric utilities. The addition of publicly owned utilities will impact the amount of capacity allocated to Commission-regulated utilities.

12.3. Allocated Amount - Investor Owned Utilities

Table 1

Share of Investor Owned Utilities § 399. 20(f) Capacity Allocation -

750 MW Statewide Program Cap

Electrical Corporation

Share of 750 MW

Capacity Allocated

Pacific Gas and Electric Company


218.8 MW

Southern California Edison Company


226 MW

San Diego Gas & Electric Company


48.8 MW

Publicly Owned Electric Utility (§ 387.6)

See discussion herein on § 387.6

See discussion herein on § 387.6

To determine the above, the Commission relied upon the following data:

(1) 2010 Coincident Peak-Hour Demand:78

(2) Total Statewide Demand:

(3) Determining Each Utility's Share:

(4) Former § 399.20 FiT Program Allocation (with a 500 MW program cap):

12.4. Set Aside of Allocated Capacity for Specific Technologies

We decline to adopt a set-aside (or carve-out) of capacity for specific technologies. AECA, CWCCG, FuelCell Energy, Sustainable Conservation, GPI, and CEERT support a set-side (or carve-out) of capacity for specific technologies. The recommendations vary.

AECA recommends that the Commission reserve 150 MW of the total 750 MW program cap for biogas generation projects at California dairy, food processing, and wastewater treatment facilities. Sustainable Conversation and GPI offer a similar recommendation. FuelCell Energy recommends that 20% of each utility's share of the 750 MW total be set aside for biogas. AECA's recommendation to reserve 150 MW is tied to a pricing proposal for biogas that is intended to make this initial 150 MW of biogas project more competitively priced. This proposal is also tied to AECA's broader recommendation that the Commission adopt processes to encourage the growth of the biogas industry. CWCCG also supports a set-aside of the program cap for biogas as a means to spur industry growth.

Other parties, such as, PG&E, SCE, SDG&E, TURN, DRA, and Constellation NewEnergy, Inc. oppose the technology-specific set-aside recommendations. These parties assert that nothing in the statute allows for technology specific set-asides. They further point out that the Legislature had the opportunity to create a set aside but did not and, instead, created a program for all eligible resources under 3 MW. These parties urge the Commission to create a level playing field for equal participation in the program by all eligible technologies.

Today, we decline to adopt a set aside for any specific technology. As created by the Legislature, the § 399.20 Program applies equally to all electric generation facilities and must be made available on a first-come-first-served basis. Subsection (f) of § 399.20 provides, in relevant part, that "An electrical corporation shall make the tariff available to the owner or operator of an electric generation facility within the service territory of the electrical corporation, upon request, on a first-come-first-served basis, ..." In the absence of any statutory provision directing us to consider a set-aside, we find that a set-aside program for a particular technology is inconsistent with the technology-neutral language of the statute and requirement that the program be made available on a first-come-first-served basis.

However, as discussed previously, we seek to support the development of different renewable technologies, and, therefore, we adopt three product types within today's expanded FiT Program. This provides benefits to the IOUs because they can procure FiT resources consistent with their need and the value that each product provides. In addition, it dedicates a certain portion of the capacity allocation to each product type, which could be viewed as a set-aside that is, nevertheless, consistent with § 399.20(d)(2)(C).80 The Re-MAT pricing mechanism could benefit bioenergy, biogas, forest biomass, and the other technologies because it allows renewable resources to compete against other similarly-valued renewable resources, rather than the entire renewable market. As the Re-MAT pricing mechanism adjusts to market conditions, it is probable that the prices for each product type will differ. The result is that bioenergy projects, for example, could receive prices that are different than those available to solar projects that may seek a contract from a different product type.

Accordingly, based on the current statutory language, we do not adopt a technology specific set aside for the portion of the 750 MW allocated to the IOUs under this program. We do, however, seek to promote these technologies within the guidelines of the statute.

12.5. Future Adjustments in Allocation of 750 MW Cap

We decline to adopt a mechanism for future adjustments in the capacity allocation of the 750 MW adopted in today's decision. Some parties recommend that the Commission adopt a methodology for periodic updates to the allocation methodology to account for, among other things, changes in a regulated utility's share of statewide peak demand. These parties state that more accurate allocation will be achieved in this manner. In D.07-07-027, the Commission did not elect to adopt a methodology for periodic updates of the allocation methodology on the basis that the costs devoted to regular updates would likely exceed benefits. We continue to find merit in the cost-benefit assessment set forth in D.07-07-027. For these reasons, we do not adopt a mechanism for future adjustments in capacity allocation.

77 Based on subscriptions to date, the remaining MWs in the FiT Program are as follows: PG&E - 111 MW; SCE - 149.7 MW; SDG&E - 30 MW.

78 Information for most recently available year of 2010 from: Utility Capacity Supply Plans (2011) http://energyalmanac.ca.gov/electricity/s-1_supply_forms_2011/ (scroll through excel spreadsheets for each utility's data).

79 Information for most recently available year of 2010 from: Summer 2010 Electricity Supply and Demand Outlook, CEC-200-2010-003, at 3 (May 2010) http://www.energy.ca.gov/2010publications/CEC-200-2010-003/CEC-200-2010-003.PDF

80 § 399.20(d)(2)(C) provides that the Commission shall establish a methodology to determine the market price of electricity in consideration of, among other things, the value of different electricity products, including baseload, peaking, and as-available electricity.

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