V. Comments on Draft Decision

The draft decision of ALJ Simon in this matter was mailed to the parties in accordance with Pub. Util. Code § 311(g)(1) and Rule 77.7 of the Rules of Practice and Procedure. Comments were filed on July 11, 2005 by the California Wind Energy Association (CalWEA), Center for Biological Diversity, Green Power Institute (Green Power), Independent Energy Producers Association (IEP), Office of Ratepayer Advocates (ORA), Pacific Gas and Electric Company (PG&E), San Diego Gas & Electric Company (SDG&E), Southern California Edison Company (SCE), The Utility Reform Network (TURN), and Union of Concerned Scientists (UCS). Reply comments were filed on July 18, 2005 by the Center for Energy Efficiency and Renewable Technologies (CEERT), PG&E, SDG&E, SCE, TURN, and UCS.

CalWEA

CalWEA supports the draft decision's expansion of allowable delivery points for RPS bids to the entire CAISO control area and the requirement that utilities allow bids with curtailability as an attribute. CalWEA, reiterating its concerns in earlier comments, argues that turnkey bids should not be allowed in 2005. It also takes issue with the draft decision's deference to utilities' business judgment on specific bidding and contracting practices for 2005 solicitations to which CalWEA had objected.28

We remain unpersuaded that the potential issues CalWEA identifies should preclude allowing turnkey bids in the 2005 RPS solicitation. The experience with evaluation of turnkey bids, if any are submitted in 2005, could provide valuable guidance for future consideration of the issue. Since the utilities and their Procurement Review Groups will be comparing turnkey bids with PPAs in a full RPS solicitation, the utilities will not be able simply to choose a turnkey bid without adequate justification.

We continue to believe that CalWEA's specific requests for direction to the utilities are one solicitation cycle too early. The 2005 RPS solicitation is the first in which all three utilities are participating. Information from this solicitation may support some or all of CalWEA's requests, or may show some or all of them to be unnecessary. If it is relevant, we will revisit these issues in the context of the 2006 solicitation cycle.

CEERT

In its reply comments, CEERT generally supports the draft decision. It also specifically supports the suggestions of two other commenters: IEP's suggestion that bids with delivery points anywhere in California be allowed, and SDG&E's suggestion that additional options for mitigating deliverability concerns be considered.

Center for Biological Diversity

The Center for Biological Diversity notes an error in the wording of footnote 19 in the draft decision, which we correct. It also urges that we more thoroughly address now, rather than in our planned decision on the long-term components of the RPS plans, issues related to PG&E's procurement of repowered wind resources. Repowering is a long-term planning issue, and we will address it in that context.

Green Power

Green Power generally supports the draft decision, but suggests that the draft decision has not come to grips with its concern about the appropriate treatment of line losses in RPS procurement. Green Power clarifies this concern to be distribution line losses, after the power has been delivered to the acquiring utility by the generator. Green Power believes that an additional procurement obligation should be imposed on the utilities to compensate for the distribution losses. We do not adopt Green Power's position, and expand our discussion of the statutory framework for this decision.

IEP

IEP takes issue with the draft decision's requirement that the utilities allow bids that propose delivery to any point in the CAISO control area. IEP argues that this is too narrow a delivery range, and should be expanded to allow delivery anywhere within the state, as TURN initially suggested, and as TURN reiterates in its reply comments.

The draft decision requires utilities to consider bids with delivery points in the CAISO control area. The draft decision does not, as IEP appears to believe, prevent utilities from considering bids with delivery points in California but outside the CAISO control area. Generators may propose such bids and the utilities may consider them on the same terms as all other bids. We will not require the utilities to consider bids with delivery points in California but outside the CAISO control area at this time, because the record in this proceeding does not provide assurance that such deliveries can be accurately tracked for purposes of RPS compliance.

ORA

ORA generally supports the draft decision, but urges that the decision incorporate an express commitment to revisit the treatment of line losses after more experience with the RPS program yields sufficient information to allow a full assessment. As we noted with respect to Green Power's comments, distribution line losses do not appear to be relevant to the utilities' fulfillment of their RPS obligations. If information later emerges that distribution line losses have an unexpected effect on RPS implementation, parties should bring that to our attention.

PG&E

PG&E takes issue with three aspects of the draft decision: rejection of PG&E's proposed changes to the flexible compliance rules; adherence to the Energy Action Plan target of 20% renewable generation by 2010; and the suggestion that PG&E is not properly prioritizing repowered wind projects. PG&E also seeks authorization to record the costs of an independent evaluator in its 20205 RPS solicitation in the Long Term Procurement Memorandum Account for future recovery in rates.

In its comments, PG&E has clarified its proposals on the implementation of the flexible compliance rules. PG&E's principal request is that we provide a more detailed explanation of the application of the flexible compliance rules when a utility invokes one of the four reasons for falling below the threshold of 75% compliance with its APT (or advances another good reason for our approval), as set out in D.03-06-071. (Mimeo, pp. 49-54.) This is a reasonable request, and we revise the draft decision to respond to it.

We are not persuaded by PG&E (or SDG&E, which supports this position) that we must now determine the treatment of utility obligations in the year 2010. The draft decision, with changes in response to comments, provides several tools that the utilities can use to improve their progress toward their RPS goals. We decline the invitation to conclude today that these tools will not be effective by 2010.

SDG&E

SDG&E, as noted above, seeks assurance that the existing rules for flexible compliance will apply in 2010. In response to the draft decision's requirement that the utilities allow delivery at points outside their service territory and allow bids having curtailability as an attribute, SDG&E identifies a number of analytic and practical issues that it says could cause delays in RPS procurement. SDG&E does not seek any changes in the draft decision on the basis of these observations. SDG&E's request that we allow utilities to consider mechanisms such as swaps is already addressed in the draft decision. Its request that we consider a trading program for RECs will be taken up in our decision on the RPS long-term plans.

SCE

SCE seeks clarification that the required expansion of delivery points to the CAISO control area does not apply to contracts with generators that are located within the utility's service territory. SCE wishes to preserve its ability to specify in-territory delivery points for such projects. We agree, and make the change.

SCE also objects to the draft decision's treatment of geothermal energy procured from Calpine's Geysers project. SCE insists that prior Commission action has established that its Geysers contracts are not subject to the requirement set forth in § 399.12(a)(2) that the Energy Commission must certify geothermal procurement as incremental. We adhere to the analysis in the draft decision, but expand the discussion to clarify our reasoning.

TURN

TURN generally supports the draft decision. TURN would like to see the draft decision changed to approve PG&E's request that it be allowed to count contracts emerging from the 2005 RPS solicitation but signed up to June 30, 2006 toward its 2005 APT. We adopt this suggestion.

In its reply comments, TURN supports IEP's proposal that sellers should be allowed to propose delivery points anywhere in the state. TURN opposes SCE's analysis of the proper treatment of output from Calpine's Geysers facility.

UCS

UCS generally supports the draft decision, but notes an inconsistency in the draft decision's approach to delivery requirements in the event of a CAISO market redesign. UCS notes that allowing SCE's preference for in-territory delivery in the event of a market redesign appears to be inconsistent with the general requirement that utilities allow delivery to any point within the CAISO control area. We remove the inconsistency by requiring that SCE's market redesign contingency may specify in-territory delivery only for in-territory generators and must allow delivery to the CAISO control area for other generators.

Findings of Fact

1. Transmission constraints can affect delivery of energy output from eligible renewable resources to procuring utilities.

2. Some transmission constraints exist for only a relatively small number of hours in a year.

3. It would be beneficial to the RPS program to mitigate the effects of transmission constraints on the delivery of energy output from eligible renewable resources to procuring utilities.

4. The process of planning, approval, and construction of additional transmission resources extends over several years.

5. It is reasonable to require utilities procuring electricity through RPS solicitations to allow bids having delivery at points outside their service territories, but in the California Independent System Operator (CAISO) control area.

6. It is reasonable to require utilities procuring electricity through RPS solicitations to allow bids having curtailability as an attribute.

7. It is reasonable to modify the Transmission Cost Methodology adopted in D.04-06-013 to provide for consideration in RPS solicitations of bids that have delivery at points outside the procuring utility's service territory but in the CAISO control area, and bids having curtailability as an attribute.

8. In order to reduce the likelihood of noncompetitive RPS solicitations, it is reasonable to require the procuring utilities to undertake the least restrictive solicitation that is feasible.

9. It is reasonable to extend the use of an independent evaluator, as described in D.04-12-048, to RPS solicitations in which the procuring utility seeks bids that would result in utility ownership of the generation facility through a buyout arrangement.

10. It is reasonable to allow PG&E to book the cost of an independent evaluator for the 2005 RPS solicitation in its Long Term Procurement Memorandum Account.

11. It is reasonable to allow procuring utilities and contracting suppliers to negotiate terms of contracts in RPS solicitations, unless any contract terms or contract processes would violate any of our orders governing RPS solicitations or would impair achievement of the goals of the RPS program.

12. Procurement goals and targets for the RPS program are measured in terms of actual delivery of energy.

13. It is reasonable to measure compliance with RPS procurement goals and targets in terms of actual delivery of energy.

14. It is reasonable to allow a utility that, in response to an APT shortfall greater than 25% for a particular year, demonstrates in its APT compliance filing that contracts already executed will provide incremental future deliveries sufficient to satisfy the current year's deficit, to "earmark" the future deliveries to apply first to the portion of the deficit that exceeds 25% in the year of the deficit, rather than to the year of contract delivery, so long as no deficit is carried forward more than three years.

15. In view of the current schedule for RPS solicitations for 2005, it is reasonable to allow PG&E, SDG&E, and SCE, at their option, to treat contracts resulting from the 2005 RPS solicitation and signed on or before June 30, 2006 as available to demonstrate compliance with their 2005 APT.

16. Geothermal output is certified as incremental geothermal output for RPS purposes by the Energy Commission.

17. SCE has not presented evidence to the Commission that the geothermal output that was the subject of Resolution E-3809 (January 30, 2003) has been certified as incremental geothermal output by the Energy Commission.

18. SDG&E's proposal to allow bidders in its solar PV/small wind solicitation to site their generation on SDG&E facilities is reasonable.

19. It is not necessary for the public interest for SDG&E to file an application pursuant to § 851 for permission to grant an appropriate property interest to any project that bids in the 2005 RPS solicitation and contracts to site generation on SDG&E facilities, if such property interest is granted to a project that meets the conditions set forth in this order.

20. It is reasonable to require uniform reporting by utilities for RPS compliance purposes.

Conclusions of Law

1. Utilities procuring electricity through RPS solicitations should be required to allow bids having delivery at points outside their service territories, but in the CAISO control area.

2. Utilities procuring electricity through RPS solicitations should be required to allow bids having curtailability as an attribute.

3. SCE should be allowed to require in-territory generators to deliver to
in-territory points in its 2005 solicitation.

4. The Transmission Cost Methodology adopted in D.04-06-013 should be modified to provide for consideration in RPS solicitations of bids that have delivery at points outside the procuring utility's service territory but in the CAISO control area, and bids having curtailability as an attribute.

5. Utilities' obligations under the RPS program to procure electricity from eligible renewable resources are satisfied by the actual delivery of generation output.

6. The procedures for flexible compliance in the RPS program set out in
D.03-06-071 should be maintained.

7. A utility that, in response to an APT shortfall greater than 25% for a particular year, demonstrates in its APT compliance filing that contracts already executed will provide incremental future deliveries sufficient to satisfy the current year's deficit, should be allowed to "earmark" the future deliveries to apply first to the portion of the deficit that exceeds 25% in the year of the deficit, rather than to the year of contract delivery, so long as no deficit is carried forward more than three years.

8. In order to be consistent with the schedule for the 2005 RPS solicitation, PG&E, SDG&E, and SCE, should be allowed, at their option, to treat contracts resulting from the 2005 RPS solicitation and signed on or before June 30, 2006 as available to demonstrate compliance with their 2005 APT.

9. Delivery of geothermal output should not be counted toward the procuring utilities' incremental procurement target unless the geothermal output has been certified as incremental geothermal output by the Energy Commission.

10. PG&E should be authorized to book the cost of an independent evaluator for the 2005 RPS solicitation in its Long Term Procurement Memorandum Account.

11. Procuring utilities should undertake the least restrictive RPS solicitation that is feasible.

12. SDG&E's request for a waiver of the requirements of § 851 should be granted, with conditions, pursuant to § 853(b).

13. Negotiation of contracts in RPS solicitations should be left to the business judgment of the procuring utilities and contracting suppliers, unless any contract terms or contract processes would violate any of our orders governing RPS solicitations or would impair achievement of the goals of the RPS program.

14. Utilities should report their RPS compliance using the forms attached as Appendix A.

15. In order to allow 2005 RPS solicitations to go forward expeditiously, this Order should be effective immediately.

ORDER

IT IS ORDERED that:

1. The 2005 Renewables Portfolio Standard (RPS) procurement plan and 2005 Renewables Portfolio Standard Solicitation Protocol of Pacific Gas and Electric Company (PG&E) are approved, provided that, not later than one week from the date of this order, PG&E files and serves its 2005 Renewables Portfolio Standard Solicitation Protocol, revised to:

2. In evaluating bids in the 2005 RPS solicitation, PG&E shall use an independent evaluator as described in D.04-12-048 for all bids proposing utility ownership of the generation facility through turnkey or buyout arrangements.

3. PG&E is authorized to book the cost of an independent evaluator for the 2005 RPS solicitation in its Long Term Procurement Memorandum Account.

4. The 2005 RPS procurement plan and 2005 Request for Offers: Distributed Renewable Technologies on Selected Facilities of San Diego Gas & Electric Company (SDG&E) are approved, provided that, not later than one week from the date of this order, SDG&E files and serves its 2005 Request for Offers: Distributed Renewable Technologies on Selected Facilities, revised to:

5. SDG&E's 2005 Request for Offers: Eligible Renewable Resources in San Diego County, is approved, provided that, not later than one week from the date of this order, SDG&E files and serves its 2005 Request for Offers: Eligible Renewable Resources in San Diego County, revised to:

6. When evaluating bids from the two Requests for Offers identified in paragraphs 3 and 4, above, SDG&E shall create one short-list of bids that encompasses the bids responding to both Requests for Offers.

7. In evaluating bids in the 2005 RPS solicitation, SDG&E shall use an independent evaluator as described in D.04-12-048 for all bids proposing utility ownership of the generation facility through turnkey or buyout arrangements.

8. SDG&E need not file an application pursuant to Pub. Util. Code § 851 for permission to lease or otherwise grant a property interest in its property to bidders in its 2005 Request for Offers: Distributed Renewable Technologies on Selected Facilities with whom it has contracted so long as:

9. The 2005 RPS procurement plan and 2005 Request for Proposals from Eligible Renewable Resource Suppliers for Electric Energy Protocol of Southern California Edison Company (SCE) are approved, provided that, not later than one week from the date of this order, SCE files and serves its 2005 Request for Proposals from Eligible Renewable Resource Suppliers for Electric Energy Protocol, revised to:

10. In evaluating bids in the 2005 RPS solicitation, SCE shall use an independent evaluator as described in D.04-12-048 for all bids submitted by an affiliate of SCE.

11. Prior to counting any geothermal output from contracts that were the subject of Resolution E-3809 toward any RPS Incremental Procurement Target, SCE must present to Energy Division staff certification by the Energy Resources Conservation and Development Commission that the geothermal output is incremental geothermal output.

12. Paragraph 6 of the section, "Consideration of Network Transmission Costs in Ranking Bids" of the Transmission Cost Methodology, found at page A-10 of Attachment A to D.04-06-013 is modified as follows (additions underlined):


6. In their bids, renewable bidders may describe expected network benefits, the extent to which the project would be able to produce Volt Amperes Reactive (VARs), and other transmission-related factors, and may propose delivery of product output to any point in the CAISO control area; they may also propose less-than-full deliverability of product output. Each subject utility shall evaluate proposed network benefits and also curtailability proposals that have been examined through System Impact Studies or Feasibility Studies. Each subject utility shall evaluate proposals for delivery outside its service area after making appropriate adjustments for the costs associated with such delivery. It shall utilize consistent, logical approaches to assessing these potential benefits and costs, and its evaluation process should be transparent to the utility's Procurement Review Group and to the Commission.

13. Utilities must use actual deliveries of energy from eligible renewable resources as their measure of compliance with their Incremental Procurement Targets (IPT) and Annual Procurement Targets (APT).

14. A utility that, in response to an APT shortfall greater than 25% for a particular year, demonstrates in its APT compliance filing that contracts already executed will provide incremental future deliveries sufficient to satisfy the current year's deficit, may "earmark" the future deliveries to apply first to the portion of the deficit that exceeds 25% in the year of the deficit, rather than to the year of contract delivery, so long as no deficit is carried forward more than three years.

15. PG&E, SDG&E, and SCE may, at their option, treat contracts resulting from the 2005 RPS solicitation and signed on or before June 30, 2006, as available to demonstrate compliance with their 2005 APT.

16. Not later than August 15, 2005, PG&E, SCE, and SDG&E shall make RPS compliance filings for 2004, using the reporting forms attached as Appendix A hereto.

17. Beginning in March 2006, PG&E, SCE, and SDG&E shall make RPS compliance filings March 1st and August 1st of each year, with the opportunity to supplement or amend the March filing by May 1st of that year.

This order is effective today.

Dated July 21, 2005, in San Francisco, California.

Comr. Grueneich recused herself from
this agenda item and was not part of
the quorum in its consideration.

Appendix A

APT Reporting Template for March RPS Compliance Filings

Previous-Year APT ______ IPT ______ Current-Year APT ______

Utility Retail Sales

Renewable Procurement (KWh)

Biomass7

Biogas

Geothermal

Small Hydro

Solar

Wind

Total Renewables

APT

Carry Forward - put deficits in parentheses

APT Reporting Template for August RPS Compliance Filings

Utility Retail Sales

Renewable Procurement (KWh)

Biomass

Biogas

Geothermal

Small Hydro

Solar

Wind

Total Renewables

APT

(Deficit) or Surplus

28 CalWEA supports some of its comments with references to the "Preliminary Stakeholder Evaluation of the California Renewables Portfolio Standard," presented to the Energy Commission in June 2005 ( http://www.energy.ca.gov/2005publications/CEC-300-2005-011/CEC-300-2005-011.PDF). This document is not in the record of this proceeding.

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