4. Development of STCs and Changes to STCs

The RPS legislation requires that the Commission shall adopt STCs to be used by all electrical corporations in contracting for eligible renewable energy resources. (§ 399.14(a)(2)(D).¹) The development of these STCs has been the subject of extensive work. The work began in 2003, and has continued into 2007. A brief description of that process will provide useful background in which to understand the amended petition.

4.1. Initial Work in 2003 and 2004

In July 2003, we declined to adopt an interpretation of the legislation that would have required a complete, comprehensive, standardized contract. Rather, we adopted a more limited interpretation and application of STCs. We granted the request of CEERT and SCE for parties to have further opportunity to negotiate particular STCs and language. (D.03-07-061, pp. 55-59, Ordering Paragraphs (OPs) 27 and 28.)

In September 2003, Energy Division conducted workshops in an effort to facilitate negotiations among parties. Parties did not reach agreement. In October 2003, the Administrative Law Judge (ALJ) ordered that parties file briefs to identify terms and conditions to be standardized.

By joint ruling dated March 8, 2004, the assigned Commissioner and ALJ identified 26 terms and conditions to be standardized, proposed some as "may be modified" and some as "may not be modified," and ordered a further round of briefs to propose specific language for each of the 26 STCs. A settlement conference was held on April 21, 2004, but parties were unable to reach agreement.

A PD was issued in May 2004, on which parties filed comments and reply comments. In June 2004, we adopted 14 STCs in D.04-06-014, some being modifiable by parties and others not, as summarized below:

LIST OF STANDARD TERMS AND CONDITIONS

(D.04-06-014, Appendix A)

LINE No.	STC No.	ITEM	MODIFIABLE
			Yes	No
1	1	CPUC Approval		X
2	2	Definition and Ownership of RECs		X
3	3	SEP Awards, Contingencies		X
4	4	Confidentiality		X [1]
5	5	Contract Term		X
6	6	Eligibility		X
7	7	Performance Standards/Requirements	X
8	8	Product Definitions	X
9	9	Non-Performance or Termination Penalties and Default Provisions	X
10	12	Credit Terms	X
11	15	Contract Modifications		X [2]
12	16	Assignment		X
13	17	Applicable Law		X
14	18	Application of Prevailing Wages	X

[1] Modification is limited to permitting additional disclosure only.

[2] Modification is limited to terms that are modifiable.

Thus, rather than adopt an entire, complete, standardized contract, and rather than adopt potentially hundreds or dozens of individual STCs, we narrowed the number from 26 identified by the assigned Commissioner and ALJ to a more limited set of 14. With minor modifications, we adopted the proposal of CEERT Parties,² which we described as:

"...an integrated one, where the contract terms and conditions are intended to work together. In general, such an approach is preferable to an agglomeration of disparate terms and conditions selected in a mix-and-match fashion from a range of parties, which can sometimes result in confusion and inconsistency." (D.04-06-014, p. 5.)

The May 2004 PD did not identify which STCs could be modified by negotiation of parties, and which could not, even though the March 8, 2004 joint ruling had proposed this differentiation. CEERT Parties (which included PG&E), SCE and CalWEA Parties³ brought this to our attention in comments on the PD. As a result, our adopted decision specifically provided that some terms are non-modifiable. (D.04-06-014, p. 16.) In particular, five terms are modifiable by parties and nine are not modifiable by parties (or modifiable only in part).

Parties did not at the time clearly raise, and the decision did not specifically address, the issue of future changes. Our intention, however, was to adopt "year one" STCs in order to get the process moving. We were open to considering changes over time but, consistent with typical Commission practice, the items were adopted until specifically and knowingly modified. As discussed more below, we affirmed this view in a subsequent decision.

4.2. Extending STCs to All Contracts

We gave further consideration to STCs in 2006, and adopted four non-modifiable STCs for contracts between RPS projects on the one hand and either energy service providers (ESPs) or community choice aggregators (CCAs) on the other. (D.06-10-019, OP 20.) In doing so, we said that it is obvious all contracts for RPS-eligible generation must have some standard terms:

"We think it is obvious, however, that all contracts for RPS-eligible generation (whether with large utilities, small utilities, multi-jurisdictional utilities, ESPs, or CCAs, and no matter what their duration) must ensure that RPS buyers and sellers are buying and selling the same thing, with the same environmental attributes, for approved contractual periods, with the same legal requirements related to basic contractual elements. The non-modifiable terms and conditions were originally adopted to encourage statewide consistency and transparency of contracts that were the result of utilities' solicitations for RPS procurement. These goals remain valid for contracts for RPS procurement that are not the result of utility solicitations or bilateral utility contracts.[54] We therefore will require, until further notice, that all RPS contracts of non-utility LSEs [load serving entities] include the following sections from Appendix A to D.04-06-014 :

a. Definition of ownership of RECs [renewable energy credits];

b. Eligibility;

c. Assignment;

d. Applicable law.

_____

[54] Utilities' RPS contracts remain subject to D.04-06-014, unless and until revisions to the standard terms and conditions are made."

(D.06-10-019, pp. 32-33.)

In reaching this order with respect to LSEs other than utilities, we narrowed the number of required STCs from the six determined necessary by the ALJ to four. Nonetheless, we expressly decided that certain STCs must apply not only to utility contracts but all RPS contracts. And importantly, we specifically said the STCs in D.04-06-014 apply for utility RPS contracts unless and until revisions are made.

4.3. Changes to STCs Due to Senate Bill 107

In September 2006, the three large investor-owned utilities (IOUs) submitted model procurement contracts within their 2007 procurement plans for our review. Also in September 2006, Senate Bill (SB) 107 was signed by the Governor (to become effective January 1, 2007). (Stats. 2006, Ch. 464.) In November 2006, the ALJ directed parties to address what changes, if any, would be required in the model contracts as a result of SB 107.

Based on proposals and comments, in February 2007 we ordered that certain changes be made in the model contracts to conform with provisions of SB 107. These included a specific definition for REC, a modified STC 2 (regarding "Definition and Ownership of RECs," with the term "Environmental Attributes" changed to "Green Attributes"), and modified contract language on release of certain project information. (D.07-02-011, pp. 38-45, OP 2.) In May 2007, based on a petition for modification, we further modified the term Green Attributes. (D.07-05-057.)

4.4. Future Modifications to STCs

The issue of the time and method to change STCs, including changes (if any) to non-modifiable STCs, became more focused in late 2006 with the filing of certain advice letters (ALs) for Commission consideration and approval. These ALs concerned specific RPS contracts for individual projects with developers. The contracts in a few cases contained changes to non-modifiable STCs. Energy Division recommended that some ALs be converted to applications for more formal consideration. (See, for example, Application (A.) 07-01-002 and A.07-01-003.)

As noted above, the issue was also presented by large IOUs in late 2006 during review of the IOUs' 2007 RPS procurement plans. PG&E proposed that changes to non-modifiable STC be permitted through the AL process. SCE proposed adoption of changes to both modifiable and non-modifiable STCs in its 2007 procurement plan model contract. SCE stated that if such changes were not allowed, it would need to publicly state it would be unable to enter into its own model contract. The issue was also brought into focus by SB 107, as well as the February 1, 2007 joint petition for modification of D.04-06-014.

¹ All statutory references are to the Pub. Util. Code unless noted otherwise.

² CEERT Parties were CEERT, PG&E, IEP, SDG&E, and The Utility Reform Network.

³ CalWEA Parties were the California Wind Energy Association (CalWEA), the California Biomass Energy Alliance, and Vulcan Power Company. (D.04-06-014, pp. 1 and 3.)