Assignment of Proceeding
Michael R. Peevey is the Assigned Commissioner and Peter V. Allen is the assigned Administrative Law Judge in this proceeding.
1. PG&E and SCE are not presently creditworthy for purposes of the RPS program.
2. A renewable energy credit (REC) consists of the renewable and environmental attributes associated with the production of electricity from a renewable resource.
3. As a general matter, renewable energy credits (RECs) can be traded or used as the basis for a renewable energy accounting system.
4. Renewable energy credit (REC) trading is beyond the scope of this phase of this proceeding.
5. In addition to being based on RECs, accounting systems can be based on contracts or units of energy, such as megawatt-hours.
6. For the purposes of this phase of this proceeding, accounting systems based on RECs or units of energy would generally be equivalent.
7. A REC-based accounting system would ease any future adoption of REC trading.
8. The actual design and implementation of an accounting system is the responsibility of the CEC.
9. The market price referent could theoretically best be established by comparison with truly comparable utility procurement contracts.
10. There is no evidence in this proceeding that truly comparable utility procurement contracts presently exist.
11. Broker quotes and unaccepted bids are not equivalent to executed contracts for purposes of establishing the market price referent.
12. The use of proxy generating plants provides an allowable and usable basis for establishing the market price referent.
13. A combined cycle plant is a reasonable proxy for a baseload plant.
14. A combustion turbine is a reasonable proxy for a peaking plant.
15. Plant-based proxies should include appropriate costs, including the cost of transmission facilities and natural gas.
16. There is no evidence in this proceeding that truly comparable long-term fixed price gas supply contracts presently exist.
17. Gas hedge costs are a reasonable proxy for long-term natural gas supply contracts.
18. Completion and use of the plant-based proxies requires further development.
19. The CEC draft staff report "Comparative Cost of California Central Station Electricity Generation Technologies" provides a reasonable starting point for development of the plant-based proxies.
20. Separation of the market price referent into energy and capacity allows bids to be based on an energy-only basis.
21. SCE argues that a too-high market price referent could be inconsistent with federal law.
22. The "best fit" renewable resource does not have to be a perfect fit.
23. "Best fit" criteria should not skew procurement toward high-priced resources.
24. Bids should be assessed on consistent assumptions.
25. Lowest total ratepayer costs should be achieved by balancing bid prices and integration costs.
26. Bids can best be ranked via an iterative process that considers the product-specific market price referent, adjusted for PGC fund awards, and then re-ordered based on integration and transmission costs.
27. The Commission has experience establishing capacity values.
28. Capacity payments should be based on performance.
29. Projects differ in the accuracy of the transmission cost estimates that are available.
30. The ISO's Amendment 42 provides a method for valuing the system costs of intermittent resources.
31. The results of the CEC's Integration Study can serve as a proxy for the addition of new renewable generation in a given resource area.
32. Transmission costs attributable to a new renewable generator should be incorporated into the bid price or assessed independently.
33. The ISO System Integration Study and Facility Study provide the best assessments of network facility costs for new projects.
34. Network benefits should be identified by bidders and evaluated by the utility and the procurement review group.
35. Utility consideration of dispatchability and curtailment in evaluating bids should be transparent and reported to the Commission and the Procurement Review Group.
36. Benefits to low-income and minority communities should be identified by bidders and considered in the bid evaluation process.
37. The annual procurement targets are steps to reaching the goal of 20% renewable resource procurement.
38. Excess procurement in one year may be carried over to future years.
39. Inadequate procurement in one year may be carried over for not more than the following three years.
40. In the case of inadequate procurement in a previous year, the current year's procurement could be applied first to make up the deficit or applied first to the current year's procurement.
41. The newness of the RPS program, the creditworthiness issues faced by PG&E and SCE, and the state of the electricity markets in California, all contribute to uncertainty.
42. The Commission may impose penalties upon utilities for inadequate procurement.
43. The Edison Electric Institute contract provides a reasonable starting point for development of standard contract terms and conditions.
44. The Edison Electric Institute contract requires modification in order to be appropriate for the RPS program.
45. The parties are in a better position than the Commission to evaluate specific terms and conditions.
46. Bilateral contracts would be entered between a utility and a generator outside of the regular bidding process.
47. Confidentiality issues should be addressed by the assigned Administrative Law Judge or the Law-and-Motion Administrative Law Judge.
1. PG&E and SCE are not required to procure renewable energy under the RPS program until they meet the statutory definition of creditworthiness.
2. PG&E and SCE may voluntarily procure renewable energy under the RPS program prior to meeting the statutory definition of creditworthiness.
3. Procurement is the only statutory requirement that is excused by a lack of creditworthiness.
4. Renewable energy credit (REC) trading is not adopted in this phase of this proceeding.
5. We recommend adoption of a REC-based accounting system.
6. Adoption of a REC-based accounting system requires a consistent definition of a REC.
7. The default definition of a REC should include all renewable and environmental attributes associated with production of electricity from a renewable resource.
8. Attributes should only be excluded from inclusion in a REC upon an adequate showing.
9. Parties should have a further opportunity to make a showing why certain attributes should be excluded from inclusion in a REC.
10. TURN's description of the contents of a REC is a reasonable interim approach.
11. The process adopted for use of proxy plants to establish the market price referent is consistent with the statutory requirements.
12. The process adopted for establishing market price referents is not inconsistent with federal law.
13. The process adopted for the ranking of bids is consistent with the statutory requirements.
14. Renewable procurement should be guided by annual Commission-approved renewable procurement plans for each utility, coordinated with the Commission's general procurement rulemaking.
15. The Commission will establish capacity values.
16. Bidders will submit only an energy price, not a capacity price.
17. Network facility costs can be assessed and used to rank bids independently of the determination of cost allocation.
18. Annual procurement targets are required, not optional.
19. The legislature has found that there are statewide unmet long-term resource needs.
20. One percent is the minimum annual procurement increase required by statute.
21. Twenty percent of retail sales are to be procured from eligible renewable resources no later than December 31, 2017.
22. The obligation to procure twenty percent of retail sales from eligible renewable resources extends indefinitely beyond 2017.
23. Inadequate procurement in one year is to be made up in no later than the following three years.
24. Procurement in any year should be applied first to that year's annual procurement target, with any excess procurement then being used to make up a prior year's deficit, or banked for future use.
25. The rules adopted for compliance are flexible and are consistent with the statutory requirements and the Commission's general authority.
26. Parties should have further opportunity to develop standard terms and conditions.
27. Bilateral contracts should only be allowed if they do not require any PGC funds.
28. The process adopted for the development of standard contract terms and conditions is consistent with the statutory requirements.
IT IS ORDERED that:
1. Annual procurement targets shall be set for each utility each year.
2. Compliance with the annual procurement target is not required until a utility is creditworthy.
3. We recommend the adoption of an accounting mechanism based upon renewable energy credits.
4. For purposes of this phase of this proceeding, we adopt TURN's definition of a renewable energy credit, as described above.
5. Parties will have further opportunities to address the definition of a renewable energy credit.
6. We adopt a proxy plant methodology for calculating the market price referent, using a combined cycle proxy plant for the baseload product and a combustion turbine proxy plant for the peaking product, as described above.
7. Parties will have further opportunities to address the components of the proxy plant methodology.
8. The Commission will consider using actual contracts for calculating the market price referent as such contracts are available and appropriate.
9. The Commission may use unaccepted bids and broker quotes only as a check mechanism.
10. The market price referent will be separated into energy and capacity components.
11. The Commission will calculate the capacity component.
12. Bidders will bid only the energy component.
13. Bids will be evaluated on a total cost basis and on a consistent set of economic assumptions.
14. Each utility shall file a renewable procurement plan, as described above.
15. The bidding process shall be iterative, considering first the product-specific market price referent, adjusted for PGC fund awards, and then re-ordered based on integration and transmission costs, as described above.
16. The system costs of intermittent resources shall be valued by use of the ISO's Amendment 42.
17. Transmission costs and benefits of new generation facilities must be considered, as described above.
18. The annual procurement target for each utility is set at one percent per year, as described above.
19. Utilities are allowed unlimited forward banking of excess procurement.
20. Procurement in any year shall be applied first to that year's annual procurement target, with any excess procurement then being used to make up a prior year's deficit, or banked for future use, as described above.
21. Utilities are allowed to carry over a deficit of 25% to the next year without explanation, as described above.
22. Subject to the flexible compliance mechanism, failure to satisfy the annual procurement targets will result in an order to show cause why the utility should not be penalized or specific penalties, as described above.
23. Failure to meet the 20% renewable procurement obligation by the end of 2017 will result in an order to show cause why the utility should not be penalized.
24. The utility obligation to procure 20% of its energy from renewable resources continues beyond 2017.
25. The Edison Electric Institute contract is the starting point for the development of standard contract terms and conditions.
26. Parties will have further opportunities to address standard contract terms and conditions.
27. Bilateral contracts are only allowed if they do not require any PGC funds.
28. Confidentiality issues are referred to the appropriate Administrative Law Judge for resolution via Ruling.
This order is effective today.
Dated , at San Francisco, California.
