D0406014/R0404026 Adopted Standard Contract and Settlements

IV. Procurement Plan

Under Pub. Util. Code § 399.14(b): "The commission shall review and accept, modify, or reject each electrical corporation's renewable procurement plan 90 days prior to the commencement of renewable procurement pursuant to this article by the electrical corporation."

The parties do not agree as to the meaning of this provision.⁵ Some parties argue that this means the Commission must approve a utility's renewable procurement plan 90 days before the utility issues a solicitation for renewable generation, while others argue that the Commission must approve the procurement plan 90 days before deliveries are made under the contract. (Id.)

The statute itself provides guidance, in the form of a definition, set forth in § 399.14(g):

For purposes of this article, "procure" means that a utility may acquire the renewable output of electric generation facilities that it owns or for which it has contracted. Nothing in this article is intended to imply that the purchase of electricity from third parties in a wholesale transaction is the preferred method of fulfilling a retail seller's obligation to comply with this article.

The output of an electric generation facility is electricity. Accordingly, the plain meaning of "acquire the renewable output of electric generation facilities" is that one actually gets electricity. Since "renewable procurement" means that electricity flows to the acquiring utility, then § 399.14(b) means that the Commission "shall review and accept, modify, or reject each electrical corporation's renewable procurement plan 90 days prior to the commencement" of the flow of electricity to the procuring utility.

The argument that the Commission must complete its review of utility procurement plans 90 days before the utility even solicits bids from renewable generators is inconsistent with the plain meaning of the statute. We accordingly reject this interpretation. At the same time, common sense indicates that the 90-day period is a minimum - i.e., the Commission must approve the renewable procurement plan at least 90 days before electricity flows. It would be impossible, given the range of projects and their stages of development, for the Commission to always approve a procurement plan exactly 90 days before electricity begins to flow. Accordingly, the Commission may approve a renewable procurement plan more than 90 days before electricity begins to flow, but not less.

Commission approval of the utilities' renewable procurement plans (for 2004 only) will occur via the following process. Based on this decision being approved at the Commission meeting currently scheduled for June 9, 2004, the three major utilities will make a compliance filing on June 14, 2004, containing their renewable procurement plan. This compliance filing shall be in the form of a letter to the Director of the Energy Division, and shall be served on the service list in this proceeding.⁶ Should any parties wish to submit comments on those compliance filings, those comments are to be filed and served on June 18, 2004.⁷ Acceptance (or rejection)⁸ of the compliance filings will be by letter from the Director of the Energy Division, to be served no later than June 25, 2004.⁹ The utilities are ordered to issue their renewable RFOs by June 30, 2004, contingent upon Energy Division approval.

In order to provide guidance to the parties and to Energy Division, particularly given the accelerated time frame for submission and review of the procurement plans, we outline below what we expect the procurement plans to contain.

Pub. Util. Code § 399.14(a)(3) contains guidance regarding the contents of an RPS procurement plan. These plans are to contain:

An assessment of annual or multi-year portfolio supplies and demand to determine the optimal mix of renewable generation resources with deliverability characteristics that may include peaking, dispatchable, baseload, firm, and as-available capacity; provisions for employing available compliance flexibility mechanisms established by the commission; (and) a bid solicitation setting forth the need for renewable generation of each deliverability characteristic, required online dates, and locational preferences, if any.

Regarding the first category of the plan, we recognize that a detailed supply and demand assessment will be difficult if not impossible to develop in the short time before RPS plans must be filed. We direct the utilities to provide the most specific guidance possible to RPS bidders regarding the type of products they are seeking to procure this year.

Regarding available compliance flexibility mechanisms, we refer to our determinations in D.03-06-071 initiating implementation of the RPS program, and note that utilities are free to bank forward eligible excess procurement from the interim renewable solicitations of 2002-2003. This excess procurement may be credited towards the IPTs for 2004, as described more fully in the next section.

Finally, we direct the utilities to file a draft RFO as part of their plan, reflecting the standard contract terms and conditions adopted here, along with the deliverability characteristics, online dates and locational preferences as allowed for in the statute.

⁵ See, e.g. May 5, 2004 prehearing conference (PHC) Transcript, pp. 8, 29, 44. ⁶ Electronic service of the compliance filing is required, and must be made no later than 4 pm. ⁷ Electronic service of comments is required, and must be made no later than 4 pm. ⁸ Modification of the procurement plan would most appropriately occur with the agreement of the utility. Should a utility refuse to modify its procurement plan, however, Energy Division may reject that plan. ⁹ We note that it is not conventional practice for the Commission to delegate approval of a utility's compliance plan to the Energy Division. In this case, however, it is an appropriate and justified approach. This Commission has consistently specified the June 30, 2004 target for commencement of the first RPS solicitation. Given the limited scope of the plans, and the fact that the delegation is for this first year only, we are comfortable granting this limited delegation to Energy Division.