II. Background

In the RPS program, as adopted in Senate Bill (SB) 1078 in 2002, transmission costs are considered in the rank ordering and selection of least-cost and best-fit renewable resources. In D.04-06-013, the Commission adopted a methodology for development and consideration of transmission costs in the initial RPS procurement, which can be summarized as follows:

1. Prior to the RPS bid solicitation, the utilities request information from potential bidders regarding their project technology, location, size, and output profile.

2. Each utility groups potential RPS bidders into clusters based on the substation(s) and bus(es) to which the identified renewable resources most likely would interconnect. The utility then uses the Commission-approved methodology to identify network upgrades that may be needed for each cluster. Where available, CAISO System Impact Studies and Facility Studies, which the CAISO requires for each new generator before the project can be interconnected to the grid, are used. The utility performs conceptual studies to estimate other transmission costs using the approved methodology.

3. Each utility files its transmission cost estimates in a Transmission Ranking Cost Report, which is then subject to comment and approval. These reports, provided to each bidder in advance of bidding, provide developers with important information regarding the transmission costs that may be associated with a bid when it is evaluated by the utility. This up-front identification of transmission expenses and constraints may help developers select optimal locations to site generation.

4. Utilities then use the information in the Transmission Ranking Cost Reports and a Commission-approved ranking methodology to evaluate and rank bids according to the statutory least-cost and best-fit criteria.

In D.04-06-013, we required that PG&E, SCE, and SDG&E each file a Transmission Ranking Cost Report consistent with the adopted methodology. Following the receipt of comments, the 2004 Transmission Ranking Cost Reports were approved by an Assigned Commissioner ruling.

A prehearing conference (PHC) was held on October 1, 2004 regarding possible refinements of the transmission cost methodology adopted in
D.04-06-013. Consistent with PHC discussions, Commission staff held a workshop on January 20-21, 2005, to address areas of dispute regarding the use of transmission costs in future RPS procurements. PG&E, SCE, SDG&E, the California Independent System Operator (CAISO), the California Wind Energy Association (CalWEA), the Center for Energy Efficiency and Renewable Technologies (CEERT), and The Utility Reform Network (TURN) filed comments and/or reply comments on the staff's workshop report.

On May 27, 2005, the assigned Administrative Law Judge (ALJ) issued a ruling requiring that PG&E, SCE, and SDG&E each request information from potential bidders in the planned 2005 RPS solicitation regarding their proposed projects' interconnection requirements. The ALJ also required that the utilities undertake conceptual transmission studies based on developers' responses, as needed, in order to allow development of Transmission Ranking Cost Reports for the 2005 RPS procurement.