ALJ/AES/sid Date of Issuance 8/22/2008

Decision 08-08-028 August 21, 2008

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Order Instituting Rulemaking to Develop Additional Methods to Implement the California Renewables Portfolio Standard Program.

Rulemaking 06-02-012 (Filed February 16, 2006)

DECISION ON DEFINITION AND ATTRIBUTES OF RENEWABLE ENERGY CREDITS FOR COMPLIANCE WITH THE CALIFORNIA RENEWABLES PORTFOLIO STANDARD

TABLE OF CONTENTS

Title Page

DECISION ON DEFINITION AND ATTRIBUTES OF RENEWABLE ENERGY CREDITS FOR COMPLIANCE WITH THE CALIFORNIA RENEWABLES PORTFOLIO STANDARD 2

1. Summary 2

2. Introduction 3

3. Procedural Background 4

4. Discussion 10

4.1. History of the REC in the RPS Program 10

4.1.1. Initial Steps 10

4.1.2. SB 107 14

4.1.2.1. STCS 14

4.1.2.2. RECS 15

4.1.2.3. Definition 16

4.1.2.3.1. Certificate of Proof 16

4.1.2.3.2. Renewable and Environmental
Attributes 17

4.1.2.3.3. Exclusions 27

4.1.2.3.1.1. Emissions Reduction
Credits 27

4.1.2.3.1.2. Reduction and Treatment
Benefits 28

4.1.2.3.1.3. Only de minimus Use
of Fossil Fuel 30

4.1.2.3.4. Other Exclusions 30

4.1.3. Additional Requirements and Restrictions 31

4.1.3.1. Delivery of Electricity 31

4.1.3.2. Contracts Prior to January 1, 2005 34

4.1.3.3. QF Contracts After January 1, 2005 34

4.2. Characterization of the REC 35

4.3. Conforming Language of STC 2 38

5. Next Steps 39

6. Comments on Proposed Decision 41

7. Assignment of Proceeding 43

Findings of Fact 43

Conclusions of Law 44

ORDER.. 44

APPENDIX A-1 - Standard Terms and Conditions from Appendix A

(pp. A-2 - A-3) of D.04-06-014

APPENDIX A-2 - Standard Terms and Conditions, D.07-02-011, pp. 41-42,

Modified by D.07-05-057

APPENDIX B - Standard Term and Condition 2

DECISION ON DEFINITION AND ATTRIBUTES OF RENEWABLE ENERGY CREDITS FOR COMPLIANCE WITH THE CALIFORNIA RENEWABLES PORTFOLIO STANDARD

1. Summary

In this decision, we define and specify the attributes of a renewable energy credit (REC) for compliance with the California renewables portfolio standard (RPS) program.¹ RECs are playing an increasing part in several important aspects of energy policy, including participation in net-metering, the California Solar Initiative, the Self-Generation Incentive Program, tariffs or standard contracts for utilities' purchase of RPS-eligible generation from certain facilities sized at or below 1.5 megawatts (MW), and voluntary programs reducing emissions of greenhouse gases (GHG). Clarifying the definition and attributes of the REC is thus increasingly important. It is appropriate to make that clarification even in advance of, and independent of, any decision on the use of unbundled or tradable RECs for RPS compliance. Both the current RPS regime using the "bundled" transfer of energy and RECs together and any prospective regime in which use of unbundled RECs is allowed necessarily involve the sale of RECs. We believe that in order for a market to function correctly, participating entities must have a clear and consistent understanding of what, exactly, they are buying and selling.

We will turn in a later decision to whether to authorize the use of unbundled and/or tradable RECs (TRECs) for RPS compliance. If we authorize the use of TRECs, we will also set out the structure and rules for the TREC market and for the integration of TRECs into the RPS compliance regime.

¹ The complete definition and attributes of a REC are set out in Ordering Paragraph 1.