Conclusions of Law

1. In implementing the amendments to the § 399.20 FiT Program, we rely on federal law, specifically, avoided cost under PURPA, state laws governing statutory construction, and the policy guidelines adopted herein.

2. The modifications to the § 399.20 FiT Program adopted today comply with federal law by requiring, among other things, that all FERC jurisdictional generators participating in the program register with the FERC as QFs and by adopting a price consistent with PURPA, including the most recent guidance provided by FERC regarding avoided costs pricing for QFs on October 21, 2010 in California Public Utilities Commission (2010) 133 FERC ¶61,059 (FERC Clarification Order).

3. Based on the FERC Clarification Order, the Commission can determine a different avoided cost, differentiated for particular sources of energy as long as state law has imposed an obligation on the utility to purchase energy from those sources of energy.

4. The FERC Clarification Order increases the pricing options the Commission can consider when determining the § 399.20 FiT Program price.

5. In implementing the statutory amendments to § 399.20, we are guided by, among other things, the rules of statutory construction together with the Commission's fundamental responsibility to oversee the utility's provision of an adequate supply of safe and reliable electricity at just and reasonable rates.

6. Our primary source of guidance in implementing SB 380, SB 32 and SB 2 1X is derived from the rules of statutory construction.

7. Most significantly for purposes of the § 399.20 FiT Program, SB 32 and SB 2 1X provide new direction to the Commission on how to determine the market price for the § 399.20 FiT Program as electricity purchased under § 399.20 is no longer tied to the MPR. As a result, the potential range of pricing outcomes for the § 399.20 FiT Program has expanded.

8. We should adopt five core policy guidelines as an important secondary source of guidance in implementing SB 380, SB 32 and SB 2 1X. These policy guidelines underlie our adoption of a revised § 399.20 FiT Program price and other program elements.

9. Because the MPR is based on a natural gas-fired electric plant, and not a renewable generator, using the MPR to set § 399.20 FiT Program price fails to achieve our first policy guideline: to "establish a feed-in tariff price based on quantifiable utility avoided costs that will stimulate market demand."

10. Because the MPR does not reflect ongoing changes within the renewable market and, as a result, could potentially result in a price either too low or too high, using the MPR to set § 399.20 FiT Program price fails to achieve our first policy guideline: to "establish a feed-in tariff price based on quantifiable utility avoided costs that will stimulate market demand."

11. The renewable market is sufficiently robust to serve as a point of reference for establishing a market price for the § 399.20 FiT Program, and, therefore, we decline to adopt a pricing proposal that relies upon the MPR.

12. Other proposals that incorporate the MPR, such as those proposals by CALSEIA, Placer County, Silverado Power, the Solar Alliance, Vote Solar Initiative, Clean Coalition, and other parties should not be adopted because these proposals fail to recognize that the renewable market is sufficiently robust to more accurately reflect generation costs of the FiT Program as compared to the cost reflected in the MPR, that of a natural gas plant.

13. The methodologies presented to determine certain adders, such as those based on technology specific generation, are largely based on general avoided societal costs, and not ratepayer or utility costs, which might be argued to be inconsistent with federal requirements under PURPA.

14. Because technology specific adders are largely based on general avoided societal costs, and not ratepayer costs, these adders are inconsistent with three of the policy guidelines adopted by this decision: (1) Establish a feed-in tariff price based on quantifiable utility avoided costs that will stimulate market demand; (2) Contain costs and ensure maximum value to the ratepayer and utility; and (3) Ensure administrative ease and lower transaction costs for the buyer, seller, and regulator.

15. State law does not specifically direct the Commission to account for the unique cost of each technology. The plain language of § 399.20 neither directs nor suggests that technology-specific costs be included in a FiT Program price methodology.

16. Technology-specific pricing is inconsistent with three of the policy guidelines adopted by in this decision: (1) Establish a feed-in tariff price based on quantifiable utility avoided costs; (2) Contain costs and ensure maximum value to the ratepayer and utility; and (3) Ensure administrative ease and lower transaction costs for the buyer, seller, and regulator.

17. Since renewable generators under the § 399.20 FiT Program are required to sign long-term power purchase agreements (a minimum of 10 years per § 399.20), generators under the § 399.20 FiT Program represent a different value than the net surplus compensation from net-energy metered customers and, accordingly, should not be paid the same rate.

18. The net surplus compensation rate is inconsistent with our first policy guideline, to "establish a feed-in tariff price based on quantifiable utility avoided costs that stimulate market demand," since the rate is based on the hourly day-ahead electricity market price, or DLAP price, and not the market price for renewable electricity.

19. When combined with SCE's adjustment mechanism, using RAM contracts to set the FiT Program starting price is consistent with the three policy guidelines that relate to choosing a FiT price: (1) Establish a feed-in tariff price based on quantifiable utility avoided costs that results in market demand; (2) Contain costs and ensure maximum value to the ratepayer and utility; and (3) Ensure administrative ease and lower transaction costs for the buyer, seller, and regulator.

20. The pricing methodology we adopt today, Re-MAT, complies with both state and federal law.

21. Because the § 399.20 FiT Program seeks to implement a directive from the Legislature to procure energy from specific sources, renewable generation of 3 MW and less, and to consider the value of different electricity products including baseload, peaking, and as-available electricity, we find using RAM contracts to set the § 399.20 FiT Program starting price, which includes these product types, is the most reasonable alternative to determining the cost of the resources being avoided.

22. A starting price for the § 399.20 FiT Program based on the weighted average of PG&E's, SCE's, and SDG&E's highest executed contract resulting from the RAM auction held in November 2011 is reasonable.

23. Based on the November 2011 auction prices and related information, PG&E's recommendation articulated in its November 2011 comments to use a weighted average of the highest executed RAM contract from each IOU to establish a single, statewide FiT price for each of the three product types provides a reasonable starting price for the FiT Program because the price will be set by the most recent comparable competitive solicitation for renewable distributed generation.

24. It is reasonable to adjust the starting price by time-of-delivery factors based on the generator's actual energy delivery profile to capture the value of each individual generator to the utility.

25. A two-month price adjustment mechanism for each product type should be adopted. The price may increase or decrease from the prior two month's price by increasing or decreasing amounts, depending on the subscription results in each product type for each utility.

26. Each utility should use this adjustment mechanism for each of the three product types.

27. Utilities should be permitted to file a motion to temporarily suspend the program if evidence of market manipulation or malfunction exists.

28. Utilities should incrementally release a portion of their total program capacity allocation each two months for a 24-month period.

29. Utilities should reassign unsubscribed capacity to the same product types starting with Months 25-26 and beyond to prevent gaming, minimize ratepayer exposure to excessively high contract prices, and efficiently manage allocated unsubscribed capacity.

30. To address concerns related to the need and burden of a deliverability study for small distributed generation but, at the same time, ensure compliance with resource adequacy requirements in § 399.20(i), time-of-delivery factors should be adopted for generators that do not provide resource adequacy.

31. The adopted pricing methodology, Re-MAT, is a market-based pricing methodology that reflects the supply and demand of the renewable electricity market to best ensure ratepayer indifference under § 399.20(d)(3).

32. Re-MAT, which includes consideration of product types but not specific technologies, is consistent with the first-come-first-served provision set forth in § 399.20(f) because the statute permits consideration of product types.

33. Increasing the maximum project size to 3 MW is reasonable based on the Commission's obligation to implement provisions of the statute and as reliability concerns, if any, are identified and mitigated during the interconnection process.

34. To prevent daisy-chaining, the utilities should add a provision to the § 399.20 FiT Program standard form contract that requires the seller to attest that the project represents the only project being developed by the seller on any single or contiguous piece of property. This provision should also give utilities the authority to deny a tariff request pursuant to § 399.20(n) if the project appears to be part of a larger overall installation by the same company or consortium in the same general location.

35. To effectively prevent potential gaming, generators with a nameplate capacity of 3 MW and under that meet other eligibility criteria for the FiT Program should be prohibited from participating in the RAM Program if the capacity for the relevant FiT product type has not yet been reached.

36. The statutory language, "strategically located," is interpreted to optimize the deliverability of electricity generated at the FiT project to load centers, which means that a generator must be interconnected to the distribution system, as opposed to the transmission system, and sited near load, meaning in an area where interconnection of the proposed generation to the distribution system requires $300,000 or less of upgrades to the transmission system.

37. To increase the likelihood that projects participating in the FiT Program are viable projects, it is reasonable to adopt project viability criteria similar to those relied upon in the RAM Program.

38. Electric corporations with less than 100,000 service connections should be removed from the § 399.20 FiT Program.

39. The FiT Program cap should be increased to 750 MW and a proportionate share of the 750 MW (with a proportionate share designated for publicly owned utilities) should be allocated to the three largest electric utilities regulated by the Commission. The allocations, made in accordance with the methodology adopted in D.07-07-027, should be as follows: PG&E 218.8 MW; SCE 226 MW; SDG&E 48.8 MW, for a total of 493 MW.

40. In the interest of consistency and administrative simplicity, it is reasonable to retain the existing allocation methodology, updated in certain respects, adopted by the Commission in D.07-07-027.

41. No set-aside (or carve-out) of capacity for specific technologies should be adopted because § 399.20 applies equally to all electric generation facilities, regardless of technology, and must be made available on a first-come-first-served basis under § 399.20(f).

42. Due to the various statutory changes, it is logical for PG&E, SCE, and SDG&E to combine existing tariffs setting forth their § 399.20 FiT Programs into a single tariff for each utility.

43. This decision implements SB 32 by eliminating the requirement that participating generators be retail customers to participate in the § 399.20 FiT Program.

44. The FiT Program should not exclude excess sales.

45. This decision implements SB 32 by directing utilities to add an annual inspection and maintenance provision to the standard contracts under the § 399.20 FiT Program.

46. This decision implements SB 32 by directing utilities to add a 10-day reporting requirement to the standard contracts for the § 399.20 FiT Program. The information required is set forth in Attachment A.

47. This decision implements SB 32 by directing utilities to incorporate a provision into their standard form contracts for written notice of a denial of a request for service under the § 399.20 FiT Program which, at a minimum, requires a denial of service under § 399.20(n) be provided in writing to the producer.

48. This decision implements SB 32 by directing utilities to incorporate a provision into their standard form contracts for termination of service under the § 399.20 FiT Program.

49. This decision implements SB 32 pertaining to expedited interconnection by clarifying that parties should rely on the existing provisions of Tariff Rule 21 (rather than those under review in R.11-09-011) until the Commission finalizes its ongoing efforts to refine Tariff Rule 21 and expedited interconnection in R.11-09-011. Until the Commission makes a final determination in R.11-09-011, utilities should also allow generators to choose which interconnection processes to use, either the process set forth in Tariff Rule 21 or the FERC interconnection procedures.

50. To implement § 399.2(k) requiring refund of CSI and SGIP incentives, a generator that previously received incentives under CSI or SGIP can participate in the § 399.20 FiT Program and will owe no refund if it has been online and operational for at least ten years from the date it first received the incentive. Net-energy metering customers can participate in the § 399.20 FiT Program but should first terminate participation in net-energy metering.

51. A participating generator should register with FERC as a QF. Generators may utilize FERC's self-certification process by filling out FERC's Form 556.

52. The program Rules in place when a contract is executed apply.

53. The Commission gave full consideration to all pricing options presented in the proceeding, including that of an "administratively determined, avoided-cost based pricing mechanism."

54. The petition for modification of D.07-07-027 filed by Solutions for Utilities on June 18, 2010 should be denied.

55. The petition for modification of D.07-07-027 filed by Sustainable Conservation on June 29, 2011 should be denied.

ORDER

1. Pacific Gas and Electric Company, Southern California Edison Company, and San Diego Gas & Electric Company shall incorporate the starting price for three product types, the adjustment mechanism, and their program capacity allocation, and incremental capacity releases into their tariffs and standard contracts for the § 399.20 Feed-in Tariff (FiT) Program being developed in this proceeding in accordance with the schedule set forth in the January 10, 2012 Administrative Law Judge ruling. The Commission will review these provisions and, in a separate decision accept, reject, or modify the provisions. Related FiT tariff modifications will also be addressed in this separate decision.

2. Pacific Gas and Electric Company, Southern California Edison Company, and San Diego Gas & Electric Company shall make the Feed-in Tariff price and available capacity, including any results from the price adjustment mechanism or the capacity reassignment methodology, continuously available to the public on their websites by the first business day of each two-month period.

3. Pacific Gas and Electric Company (PG&E), Southern California Edison Company (SCE), and San Diego Gas & Electric Company (SDG&E) shall convene stakeholders within the first year of the § 399.20 Feed-in Tariff Program to solicit market experience with the pricing adjustment mechanism. PG&E, SCE, and SDG&E shall also establish an online mechanism for continuous receipt of public input on the program. To the extent that changes to the price adjustment, capacity allocation mechanism, or other aspects of the program are needed to improve the program, PG&E, SCE, and SDG&E are permitted to file a joint Advice Letter seeking specific changes.

4. Pacific Gas and Electric Company (PG&E), Southern California Edison Company (SCE), and San Diego Gas & Electric Company (SDG&E) shall offer two sets of time-of-delivery factors: one for generators that do not provide resource adequacy and another for generators that do provide resource adequacy. PG&E, SCE, and SDG&E shall add a provision reflecting delivery factors to the § 399.20 Feed-in Tariff (FiT) Program standard form contract and/or tariff that is being developed in this proceeding in accordance with the schedule set forth in the January 10, 2012 Administrative Law Judge ruling. The Commission will review this provision and, in a separate decision accept, reject, or modify the provision. Related FiT tariff modifications will also be addressed in this separate decision.

5. Pacific Gas and Electric Company, Southern California Edison Company, and San Diego Gas & Electric Company shall add a provision reflecting the increase in eligible generator projects to three megawatts to the § 399.20 Feed-in Tariff (FiT) Program standard form contract and/or tariff that is being developed in this proceeding in accordance with the schedule set forth in the January 10, 2012 Administrative Law Judge ruling. The Commission will review this provision and, in a separate decision accept, reject, or modify the provision. Related FiT tariff modifications will also be addressed in this separate decision.

6. Pacific Gas and Electric Company (PG&E), Southern California Edison Company (SCE), and San Diego Gas & Electric Company (SDG&E) shall add a provision to the § 399.20 Feed-in Tariff (FiT) Program standard form contract and/or tariff that requires the seller to attest that the project represents the only project being developed by the seller on any single or contiguous piece of property. This provision will give PG&E, SCE and SDG&E the authority to deny a tariff request pursuant to § 399.20(n) if the project appears to be part of a larger overall installation by the same company or consortium in the same general location. This provision shall permit generators to contest a denial under § 399.20(n) through the Commission's standard complaint procedure set forth the Commission's Rules of Practice and Procedure. The Commission will review this provision and, in a separate decision, accept, reject, or modify the provision. Related FiT tariff modifications will also be addressed in this separate decision.

7. Within 90 days of the effective date of this decision, Pacific Gas and Electric Company, Southern California Edison Company, and San Diego Gas & Electric Company shall file a Tier 1 Advice Letter restricting Renewable Auction Mechanism (RAM) to generators with a nameplate capacity of greater than three megawatts and that do not satisfy the Feed-in Tariff eligibility criteria. This change will not affect the upcoming RAM auction scheduled to close in May 2012 but will take effect in time for the third RAM auction scheduled for the end of 2012.

8. Pacific Gas and Electric Company, Southern California Edison Company, and San Diego Gas & Electric Company shall add a provision to the § 399.20 Feed-in Tariff (FiT) Program standard form contract and/or tariff addressing the prerequisite that generators must be "strategically located." This means that the generator be (1) interconnected to the distribution system, as opposed to the transmission system, and (2) sited near load, meaning sited in an area where interconnection of the proposed generation requires $300,000 or less of upgrades to the transmission system. Such a provision shall be presented to the Commission for consideration in accordance with the schedule set forth in January 10, 2012 ALJ ruling. The Commission will review this provision and, in a separate decision accept, reject, or modify the provision. Related FiT tariff modifications will also be addressed in this separate decision.

9. Pacific Gas and Electric Company, Southern California Edison Company, and San Diego Gas & Electric Company shall add a provision reflecting the adopted project viability criteria to the § 399.20 Feed-in Tariff (FiT) Program standard form contract and/or tariff that is being developed in this proceeding in accordance with the schedule set forth in the January 10, 2012 Administrative Law Judge ruling. The Commission will review this provision and, in a separate decision accept, reject, or modify the provision. Related FiT tariff modifications will also be addressed in this separate decision.

10. Within 90 days of the effective date of this decision and pursuant to § 399.20(c), electrical corporations with less than 100,000 service connections within this state shall file Tier 1 Advice Letters withdrawing their tariffs relevant to the § 399.20 Feed-in Tariff Program.

11. Pacific Gas and Electric Company, Southern California Edison Company, and San Diego Gas & Electric Company shall modify tariff and/or contract provisions to reflect the consolidation of tariffs applicable to public water or wastewater agencies and tariffs for other customers in the § 399.20 Feed-in Tariff (FiT) Program. These modifications shall be incorporated into the standard form contract that is being developed in this proceeding in accordance with the schedule set forth in the January 10, 2012 ALJ ruling. The Commission will review these provisions and, in a separate decision accept, reject, or modify the provision. Related FiT tariff modifications will also be addressed in this separate decision.

12. Pacific Gas and Electric Company (PG&E), Southern California Edison Company (SCE), and San Diego Gas & Electric Company (SDG&E) shall remove, as necessary, references to retail customers in the Feed-in Tariff (FiT) Program standard form contract and/or tariff that is being developed in this proceeding in accordance with the schedule set forth in the January 10, 2012 ALJ ruling. PG&E, SCE, and SDG&E are required to offer generators two options: either full sales or excess sales. The nameplate capacity of all generators participating in this program is limited to three megawatts, regardless of the sales option. The Commission will review this provision submitted by the utilities and, in a separate decision accept, reject, or modify the provision. Related FiT tariff modifications will also be addressed in this separate decision.

13. Pacific Gas and Electric Company, Southern California Edison Company, and San Diego Gas & Electric Company shall add a provision reflecting the annual inspection and maintenance reporting to the § 399.20 Feed-in Tariff (FiT) Program standard form contract and/or tariff that is being developed in this proceeding in accordance with the schedule set forth in the January 10, 2012 Administrative Law Judge ruling. The Commission will review this provision and, in a separate decision accept, reject, or modify the provision. Related FiT tariff modifications will also be addressed in this separate decision.

14. Pacific Gas and Electric Company, Southern California Edison Company, and San Diego Gas & Electric Company shall add a provision reflecting the 10-day reporting requirement for requests for service in the § 399.20 Feed-in Tariff (FiT) Program standard form contract and/or tariff being developed in this proceeding in accordance with the schedule set forth in the January 10, 2012 Administrative Law Judge ruling. The Commission will review this provision and, in a separate decision accept, reject, or modify the provision. Related FiT Tariff modifications will also be addressed in this separate decision.

15. Pacific Gas and Electric Company, Southern California Edison Company, and San Diego Gas & Electric Company shall add a provision regarding denial of service by the utility to the § 399.20 Feed-in Tariff (FiT) Program standard form contract and/or tariff that is being developed in this proceeding in accordance with the schedule set forth in the January 10, 2012 Administrative Law Judge ruling. The Commission will review this provision and, in a separate decision accept, reject, or modify the provision. Related FiT tariff modifications will also be addressed in this separate decision.

16. Pacific Gas and Electric Company, Southern California Edison Company, and San Diego Gas & Electric Company shall add a provision reflecting contract termination to the § 399.20 Feed-in Tariff (FiT) Program standard form contract and/or tariff that is being developed in this proceeding in accordance with the schedule set forth in the January 10, 2012 Administrative Law Judge ruling. Other termination provisions may be included in the standard form contract. The Commission will review this provision and, in a separate decision accept, reject, or modify the provision. Related FiT tariff modifications will also be addressed in this separate decision.

17. Pacific Gas and Electric Company, Southern California Edison Company, and San Diego Gas & Electric Company shall add a provision reflecting the eligibility to participate in the § 399.20 Feed-in Tariff (Fit) Program based on past participation and receipt of California Solar Initiative and Small Generator Incentive Program incentives in the § 399.20 FiT Program standard form contract and/or tariff that is being developed in this proceeding in accordance with the schedule set forth in the January 10, 2012 Administrative Law Judge ruling. The Commission will review this provision and, in a separate decision accept, reject, or modify the provision. Related FiT tariff modifications will also be addressed in this separate decision.

18. Pacific Gas and Electric Company, Southern California Edison Company, and San Diego Gas & Electric Company shall be authorized to file a motion to temporarily suspend the Section 399.20 Feed-in Tariff Program when evidence of market manipulation or malfunction exists. The motion shall be served on the service list of this proceeding or any successor proceeding. This authorization shall be incorporated into the standard form contract and/or tariff that is being developed in this proceeding in accordance with the schedule set forth in the January 10, 2012 ALJ ruling. The Commission will review this provision and, in a separate decision accept, reject, or modify the provision.

19. The Joint Motion of the Center for Energy Efficiency and Renewable Technologies; AG Power Group, LLC; Sustainable Conservation; Agricultural Energy Consumers Association; Green Power Institute; California Wastewater Climate Change Group; California Farm Bureau Federation; Fuel Cell Energy; and FlexEnergy, Inc., for a Ruling Directing the Consideration of an Administratively determined Avoided Cost Pricing Methodology for the Renewable FIT at a January 2012 Workshop that Would be Part of the Record for the Decision on the Renewable FIT filed on December 19, 2011 is denied.

20. The Petition for Modification of D.07-07-027 filed by Solutions for Utilities on June 18, 2010 is denied.

21. The Petition for Modification of D.07-07-027 filed by Sustainable Conservation on June 29, 2011 is denied.

22. Rulemaking 11-05-005 remains open.

The order is effective today.

Dated May 24, 2012, in San Francisco, California.

MICHAEL R. PEEVEY

President

TIMOTHY ALAN SIMON

MICHEL PETER FLORIO

CATHERINE J.K. SANDOVAL

MARK J. FERRON

Commissioners