Preliminary Scoping Memo

In accordance with Rule 6(c)(2) of the Commission's Rules of Practice and Procedure, a preliminary scoping memo is included in this OIR.4 This memo draws on work already undertaken in R.04-04-026 to implement the participation of ESPs, CCAs, small utilities, and multi-jurisdictional utilities in the RPS program, as well as to begin consideration of the use of RECs for RPS compliance.5

The entities involved in this proceeding are heterogeneous. The CCAs are more properly potential CCAs, which will be formally organized at some later time, pursuant to D.05-12-041. The multi-jurisdictional utilities are the subjects of recently-enacted Pub. Util. Code § 399.17, which sets special conditions for their RPS compliance. The ESPs and small utilities are subject to current compliance obligations, but have structures and problems that are different from those of the large utilities (Pacific Gas and Electric Company (PG&E), Southern California Edison Company (SCE), San Diego Gas & Electric Company (SDG&E)). Nevertheless, ESPs, CCAs, small utilities, and multi-jurisdictional utilities "are to be treated identically to the large investor-owned utilities" for certain purposes (D.05-11-025, Ordering Paragraph (OP) 1).6 The continued operation of the RPS program with respect to the large utilities therefore will also affect the manner in which the ESPs, CCAs, small utilities, and multi-jurisdictional utilities participate.

In D.05-11-025, we identified a number of tasks in implementing the principles enunciated in that decision for RPS participation of ESPs, CCAs, small utilities, and multi-jurisdictional utilities. These are:

At the Prehearing Conference (PHC) held on December 14, 2005, there was substantial agreement that determination of baselines, initial year compliance obligations, use of shorter-term contracts, and investigation of unbundled RECs7 were high-priority issues in the near term. Third-party procurement entities were considered by all parties to be a lower-priority topic; it will therefore be addressed later in this proceeding.

The proposals for RPS compliance submitted by ESPs, CCAs, small utilities, and multi-jurisdictional utilities will be the basis for considering the manner of their participation in the RPS program. These proposals should address the areas that are necessary to "fill in the blanks" for implementation as to them of the five fundamental requirements of the RPS program we identified in D.05-11-025: "1) meeting the 20% requirement by 2010; 2) increasing their renewable sales by at least 1% per year; 3) reporting their progress to the Commission; 4) utilizing flexible compliance mechanisms; and 5) being subject to penalties and penalty processes." (D.05-11-0125, mimeo., p.10.) Any other topics that an ESP, CCA, small utility, or multi-jurisdictional utility believes to be relevant to its RPS participation should also be included. To the extent that our decisions have set up processes for the large utilities related to any aspects of these participation proposals, it would be helpful for the proponent to sketch out the major points of contrast, if any, between the proposal and our existing requirements for the large utilities, as well as any similarities that may not be obvious.8

Workshops on some of these issues may be useful. Short-term contracts and RECs were identified at the PHC as possible workshop topics. Energy Division staff, in consultation with the assigned Commissioner and assigned ALJ, may hold workshops on any topic determined to be of value for the process of setting up RPS participation of ESPS, CCAs, small utilities, and multi-jurisdictional utilities.

Although a principal task of this proceeding is integrating ESPs, CCAs, small utilities, and multi-jurisdictional utilities into the RPS program, it is not the only task. There is also unfinished business directly affecting all RPS-obligated retail sellers.

a. Issues to be addressed primarily in this proceeding

The use of unbundled and/or tradable RECs for RPS compliance is on the agenda for this proceeding. Within that large topic are several smaller ones that have been deferred in earlier decisions and rulings. These include:

1. What are the attributes of a REC? In D.03-06-071, we made a preliminary determination that "[t]he default definition of a REC should include all renewable and environmental attributes associated with production of electricity from a renewable resource." (Conclusion of Law (COL) 7, mimeo., p.70.)9 We also expressly noted that "[p]arties should have a further opportunity to make a showing why certain attributes should be excluded from inclusion in a REC." (COL 9, id.) That opportunity will be provided in this rulemaking.

2. What is the status of RECs associated with renewable energy generated by QFs under contract with California utilities?10 We will return to that issue in this rulemaking.

3. What is the appropriate treatment of RECs associated with energy generated by renewable customer-side distributed generation? In D.05-05-011, we concluded that the REC is the property of the generator, but also concluded that we could not fully characterize the treatment of such RECs for purposes of the RPS program without further development of two important issues - measurement of renewable output from customer-side distributed generation, and analysis of the impact of ratepayer subsidies of renewable distributed generation. We indicated that these issues would be addressed in R.04-03-017. We reaffirm that division of labor, and look to R.04-03-017 and its successor as the venue for determining these questions. We will use those determinations in further refining our treatment of renewable distributed generation in the RPS program.

4. How will a system for the use of unbundled and/or tradable RECs for RPS compliance, from all potentially eligible sources, be incorporated into the development of and use the capabilities of WREGIS, when it exists?

5. Although in D.05-11-025 we expressed our intention not to allow the use of supplemental energy payments (SEPs)11 to purchase RECs, if unbundled/tradable RECs are allowed for RPS compliance, we also indicated that it was possible to revisit that issue. Any such exploration of SEPs and RECs will be undertaken in this rulemaking.

We anticipate that the staff white paper being produced by the Division of Strategic Planning will provide the basis for exploration of many of these issues, but will not be the final word. Some or all of workshops, comments, evidentiary hearings, and briefing may be required. The assigned Commissioner and assigned ALJ may determine the appropriate methods for developing the record on issues related to RECs.

As noted previously, the possible routine use of contracts shorter than 10 years has been raised by the ESPs and CCAs, but contracting is an issue for all obligated retail sellers, including the large utilities.12 Also relevant for all RPS-obligated retail sellers are formats for and contents of reporting on their acquisition of renewable energy, and coordination of reporting to this Commission with supplying information needed by the Energy Commission for its verification of eligible renewable energy acquired.13 We anticipate that the majority of the work on reporting will be carried out in R.04-04-026 and its successor, and all retail sellers should participate in it.

Similarly, flexible compliance mechanisms and penalty processes are relevant to all RPS participants, but will be addressed primarily in R.04-04-026 and its successor. Compliance issues related particularly to ESPs, CCAs, small utilities, and multi-jurisdictional utilities; for example, the initial compliance obligations of CCAs, will be handled in this new proceeding.

This rulemaking will also address coordination of the RPS program with other initiatives and develop methods for integrating aspects of other programs with the RPS requirements, if needed. The recently-announced California Solar Initiative (see D.05-12-044 and D.06-01-024) is one example. Other such programmatic integration issues may arise during the course of this proceeding, but it is not possible to predict exactly what they may be, or when they will occur. Both the assigned Commissioner and assigned ALJ should therefore have the ability to identify and include such other new topics for coordination and integration with the RPS program requirements as necessary and appropriate.

The schedule set forth below draws on the ALJ rulings made after the December 14, 2005 PHC, including rulings extending the time for previously scheduled submissions.

January 26, 2006

Preliminary renewable portfolio reports of ESPs, CCAs, small utilities, multi-jurisdictional utilities (public) filed and served

February 1, 2006

Preliminary renewable portfolio reports (preliminarily confidential) filed, with motions for leave to file under seal

February 17, 2006

Proposals of ESPs, CCAs, small utilities, multi-jurisdictional utilities for RPS participation filed and served

15 days from mailing date of this OIR

Requests to be on service list sent to Process Office

20 days from mailing date of this OIR

Comments on preliminary scoping memo and categorization filed and served

March 7, 2006

Comments on proposals for participation filed and served

March 15, 2006

Reply comments on proposals for participation filed and served

April 24-May 5, 2006

Evidentiary hearings, if needed, on initial issues

It is our intention to complete this rulemaking within 24 months of the date of the assigned Commissioner's scoping memo. In using the authority granted by § 1701.5(b) to set a time longer than 18 months for this proceeding, we are considering both the number and complexity of the tasks and the unique aspects of this proceeding, including the need for coordination not only with other proceedings here, but also with projects and processes of the Energy Commission; the likelihood that CCAs will not begin their operations until 2007; and our desire to be able to complete and close this proceeding without having to transfer any of its tasks to yet another proceeding. The assigned Commissioner or the assigned ALJ may alter the schedule to promote efficient and fair administration of this proceeding.

Comments on the preliminary scoping memo must be filed and served not later than 20 days from the mailing date of this order.

4 All subsequent references to rules are to the Rules of Practice and Procedure, unless otherwise specified.

5 See, e.g., Administrative Law Judge's Ruling Setting Prehearing Conference (PHC) and Requesting Prehearing Conference Statements (November 28, 2005); PHC statements filed December 21, 2005 by Central California Power, Crossborder Energy, Green Power Institute, Union of Concerned Scientists, Kings River Conservation District, Center for Energy Efficiency and Renewable Technology, The Utility Reform Network, Alliance for Retail Energy Markets, Aglet Consumer Alliance, Joint filing from City & County of San Francisco - City of Chula Vista - County of Los Angeles - Community Environmental Council - Energy Choice, PG&E, SCE, and (jointly) the City of Chula Vista, City and County of San Francisco, County of Los Angeles, and Community Environmental Council; Administrative Law Judge's Ruling Setting Schedule for Submission of Proposals for RPS Participation (January 3, 2006); Administrative Law Judge's Ruling Granting in Part AReM's Motion concerning Contents of Electric Service Provider Preliminary Renewable Portfolio Reports and Motion for Adoption of Protective Order (January 19, 2006).

6 These are:

7 The Division of Strategic Planning is developing a staff white paper on a full range of issues related to RECs. In this proceeding, we will defer more active consideration of tradable RECs until more is known about the development of the Western Renewable Energy Generation Information System (WREGIS) being developed by the California Energy Commission (Energy Commission).

8 This task, articulated at the PHC and elaborated in the ALJ's January 3, 2006 Ruling, has been the source of some confusion among the CCAs. We are not soliciting comparisons at a detailed operational level, but at the level of specificity that we have used in our decisions on those topics.

9 This default definition is carried forward in the standard terms and conditions adopted in D.04-06-014.

10 This issue was identified in the Assigned Commissioner's Ruling and Scoping Memo Establishing Schedule for Phase Two of the Renewables Portfolio Standard Proceeding (December 16, 2004). Preliminary briefs on this issue were submitted, but the topic should be revisited in this new rulemaking.

11 Section 399.13(c) gives responsibility to the Energy Commission to "[a]llocate and award supplemental energy payments ... to eligible renewable energy resources to cover above-market costs of renewable energy" in the RPS program.

12 Section 399.14(a)(4) provides: "In soliciting and procuring eligible renewable energy resources, each electrical corporation shall offer contracts of no less than 10 years in duration, unless the commission approves of a contract of shorter duration."

13 Section 399.13(b) assigns to the Energy Commission the responsibility to "[d]esign and implement an accounting system to verify compliance with the renewables portfolio standard by retail sellers ... "

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