Standard Contract Terms and Conditions

The fourth task before us is to adopt:

(D) Standard terms and conditions to be used by all electrical corporations in contracting for eligible renewable energy resources, including performance requirements for renewable generators. (§ 399.14(a)(2)(D).)

Many active parties recommend that the Commission, in satisfying this requirement, use the Edison Electric Institute (EEI) Master Agreement. Parties differ on what exactly the Commission should do with the EEI contract.

SDG&E argues that the Commission should adopt the EEI contract, but incorporating a limited set of standard terms, including product definitions, contract term, Commission approval language, supplemental energy payment awards and contingencies, ownership of RECs, confidentiality, performance standards, non-performance or termination penalties, scheduling coordination and responsibility for imbalances. (SDG&E Opening Brief, p.28, citing to TURN/SDG&E Joint Principles.)

PG&E recommends that the Commission adopt the EEI contract, largely as-is, but with the addition of a term defining the renewable attributes that are conveyed. (PG&E Opening Brief, pp. 32-34.)³⁷ PG&E generally supports the contract development process proposed by SDG&E and TURN. (Id. p. 36.)

IEP proposes using the EEI contract, but with specific modifications. (IEP Reply Brief, p. 1.) CalWEA, while using EEI documentation, seeks greater standardization, arguing that the Commission should standardize as much as possible and adopt actual standard contracts. (CalWEA Opening Brief, p. 24-25.) Vulcan proposes a specific (non-EEI) contract, and also recommends that the Commission adopt "a new SO5 standard contract with price set by resource type," and based at least in part on DWR contract prices. (Vulcan Opening Brief, p. 10.)

CEERT does not specifically endorse the use of the EEI contract, but rather calls for the Commission to encourage further negotiation among the parties and provide direction to the parties on specific issues. (CEERT Opening Brief, p. 31.) CEERT recommends that the terms to be standardized include eligibility, contract term, product definitions, performance requirements, definition and treatment of RECs, credit terms, and prevailing wage, minority and low-income requirements. In addition, CEERT suggests there would be a benefit to standardizing additional terms, including power delivery, termination, contract modification, assignment, Commission approval, and applicable law. (CEERT Opening Brief, pp. 32-33.)

CEERT's procedural recommendation is sound. As SCE notes, "The Commission does not have before it an adequate record to decide the actual text of the terms to be standardized." (SCE Reply Brief, p. 22.) SCE makes a similar request, that the parties have 90 days to negotiate on a group of standard terms, with the Commission to approve (or otherwise resolve) the results. (Id.)

We will not adopt a specific contract here. The statute calls for standard terms and conditions, not a full contract. Accordingly, we will adopt standard terms and conditions, including performance requirements for renewable generators, as required by the statute. At the same time, however, the type and level of detail that is required for fully developing standard terms and conditions is something that falls better within the abilities of the parties to determine, rather than the Commission. Accordingly, we will grant the request of CEERT and SCE for the parties to have the opportunity to negotiate further on the standard terms and conditions to be used.

We believe the proposal of SDG&E and TURN provides the most balanced and considered starting point on this issue. Accordingly, we direct the parties to negotiate more detailed standard terms and conditions, with the SDG&E/TURN proposal as the basis for those negotiations. Parties may ultimately agree to results that differ from the TURN/SDG&E proposal, and should also modify the proposal as necessary to conform to other aspects of this decision that may be inconsistent with the proposal.

TURN argues that the Commission should specifically require prompt negotiation to resolve what it characterizes as a stalemate around repowering of existing wind facilities. (TURN Opening Brief, p. 51.) We endorse this goal, as the repowering of existing wind facilities in prime locations is a common-sense approach to increasing procurement of renewable energy, with costs that should be lower than for new greenfield projects.

Consistent with the SDG&E/TURN proposal, the utilities should seek bids for 10, 15, and 20-year products. The proposals of SCE and PG&E to seek shorter-term (five-year and one-year) products do not appear likely to promote development of new renewable resources. In addition, § 399.14(a)(4) states that: "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 a contract to shorter duration." We do not see any good reason to permit the utilities to offer contracts of less than 10 years in duration, so we similarly see no reason to deviate from the basic language of the statute.³⁸

One area where we depart from the SDG&E/TURN proposal is in the area of bilateral contracts. SDG&E/TURN would allow bilateral contracts, subject to Commission approval. (SDG&E Opening Brief, pp. 48-50.) We prefer to take a slightly narrower approach, and we will allow bilateral contracts only when such contracts are below the market price referent, and do not require any PGC funds.