California's Utilities Must Lower Barriers to Energy Storage Systems

In a proposed decision issued yesterday from the California Public Utilities Commission, an administrative law judge (ALJ) determined that energy storage devices (i) that are paired with net energy metering- (NEM) eligible generation facilities, and (ii) that meet the Renewables Portfolio Standard Eligibility Guidebook requirements to be considered an "addition or enhancement" to NEM-eligible systems are "exempt from interconnection application fees, supplemental review fees, costs for distribution upgrades, and standby charges when interconnecting under current NEM tariffs.  

The issue of whether solar PV-integrated energy storage could interconnect through NEM tariffs heated up in recent months as utilities in California determined that such systems were not NEM-eligible and therefore imposed additional requirements (and costs) in order for a paired solar PV system itself to be NEM-eligible.  These requirements and costs acted as a barrier to using energy storage technologies with distributed generation.  But in this proposed decision, the ALJ encouraged the state's utilities to take a "more proactive and collaborative approach to avoid creating barriers," and found that energy storage should be exempt from these additional requirements when certain conditions are met.  

Sizing.  The proposed decision states that NEM-paired storage systems with storage devices sized at 10 kW or smaller are not required to be sized to a customer's demand or the NEM generator.  For NEM-paired storage systems with storage larger than 10 kW, (x) the discharge capacity of the storage system may not exceed the NEM generator's maximum capacity, and (y) the maximum energy discharged by the storage device shall not exceed 12.5 hours of storage per kW. 

Metering.  With respect to metering requirements, the proposed decision again draws distinctions between storage systems above 10 kW discharge and those at 10 kW and below discharge capability, although the decision proposes to impose certain requirements on both categories in order to "preserve the integrity of NEM."  For systems at 10 kW and below, the decision proposes using a de-rate factor to measure the AC energy that flows into, and out of, the NEM generator.  NEM-paired systems larger than 10 kW will be required to adhere to metering requirements similar to those under the NEM Multiple Tariff Facilities provision of utilities' NEM tariffs, although the costs of metering will be capped at $500.  In either category, the proposed requirements aim to ensure that only NEM-eligible generation receives NEM credit.  

The full proposed decision may be viewed here:  CPUC Proposed Decision re Energy Storage

1.3 GW California Energy Storage Procurement Mandate Approved

The California Public Utilities Commission has unanimously approved a 1,325 MW energy storage procurement target for the state’s largest utilities in Decision 13-10-040. PG&E, SDG&E, and SCE must collectively procure 1,325 MW of energy storage resources by 2020, for installation no later than 2024. The first of at least four competitive solicitations for energy storage projects will take place on December 1, 2014. While the press has hailed the 1.3 GW procurement target as the first of its kind in the nation, the Commission actually first authorized energy storage procurement in California last February, ordering SCE to procure at least 50 MW of energy storage in Decision 13-02-015. The amount of capacity up for grabs in the biennial RFOs is set by Decision 13-10-040, but storage projects already in the pipeline and contracts for storage approved by the Commission in other proceedings will likely eat into the capacity available. There is also a potential off-ramp, if proposed projects are not reasonable in cost or the utilities do not receive enough bids for operationally viable projects, each can defer up to 80% of its procurement target. As the utilities’ cost and fit evaluation methodologies will be developed over the coming year, what would constitute unreasonable cost has yet to be determined.

For more details about the energy storage procurement framework approved by the Commission, see our previous client alerts, here and here.

California Public Utilities Commission Sets Fourth and Fifth Solicitations for the Renewable Auction Mechanism Program

On May 9, 2013, the California Public Utilities Commission adopted Resolution E-4582, scheduling the fourth Renewable Auction Mechanism (RAM) auction to close on June 28, 2013 and setting a fifth RAM auction for no later than June 27, 2014. The RAM program allows renewable energy developers to bid their 3 MW to 20 MW projects to California’s three largest utilities – PG&E, SCE, and SDG&E – for a standard contract. The final Resolution did not differ substantively from the Commission’s draft Resolution, issued in early April 2013 and detailed in a previous blog post.  Advice letters filed today with the CPUC provide the utilities' procurement targets for the fourth RAM auction.  SCE will solicit projects totaling 181 MW, PG&E is seeking a total of 82 MW, and SDG&E is looking to procure 47 MW in total.  The advice letters also breakdown the utilities' total procurement goals into the capacity sought in each of the three RAM product categories - baseload, peaking as-available, and non-peaking as-available.

Various parties commented on draft Resolution E-4582, attempting to influence the Commission's direction with the RAM program.  Commenting on the draft Resolution, the Division of Ratepayer Advocates requested that the fourth and fifth auctions be delayed so that RAM projects from these auctions would come online during the utilities’ third RPS compliance period (2017-2020). In their comments, Recurrent Energy, the Solar Energy Industries Association, and the Large Scale Solar Association proposed that the Commission hold the fifth RAM auction within six months of the fourth auction, rather than up to a year after the fourth auction, and hold three subsequent auctions on an annual basis thereafter. They did not propose an increase in the total capacity of the RAM program; the three additional auctions would solicit capacity to replace any previously executed contracts that fail or are terminated. The Commission did not amend the draft Resolution to incorporate these recommendations.

Draft California PUC Resolution Would Set Fourth RAM Auction for June 28, 2013, Authorize Fifth RAM Auction in 2014

The California Public Utilities Commission has issued a Draft Resolution to schedule the fourth Renewable Auction Mechanism (RAM) solicitation and authorize a fifth RAM auction to take place in 2014. Draft Resolution E-4582, issued April 9, 2013, would close bidding for the fourth RAM auction on June 28, 2013. The fifth RAM auction authorized by the Resolution would close no later than June 27, 2014. Under the Draft Resolution, Pacific Gas & Electric (PG&E), Southern California Edison (SCE), and San Diego Gas & Electric (SDG&E) are directed to solicit two-thirds of their remaining RAM capacity allocation in the fourth auction. The remaining one-third of capacity, plus any unsubscribed capacity from previous auctions, would be solicited in the fifth auction. The Draft Resolution does not alter the total RAM procurement targets of the three utilities or other components of the program. However, the addition of the fifth auction provides RAM participants with an additional opportunity to bid their renewable energy projects to the utilities.

PG&E, SCE, and SDG&E are required under the current RAM Program to procure a combined 1,299 MW of renewable energy from 3 to 20 MW projects through four auctions taking place from 2011 to 2013. The third RAM solicitation closed December 21, 2012. The utilities will submit advice letters to the Commission in May 2013 with the results of the third auction. In previous submissions to the Commission, SCE stated that it sought to procure 186 MW in the fourth auction and SDG&E stated it planned to procure 44 MW in the fourth auction. Depending upon the success of its third auction, PG&E may have approximately 100 MW of remaining procurement capacity. Under the Draft Resolution, this remaining capacity will be solicited across the fourth and fifth auctions. 

Comments on the Draft Resolution are due to the CPUC April 29, 2013.  The Commission currently plans to vote on the Draft Resolution at its May 9, 2013 meeting.

California Public Utilities Commission Opens New Rulemaking on Biomethane

The California Public Utilities Commission has commenced a new rulemaking to implement Assembly Bill (AB) 1900, on the use of common carrier gas pipelines for biomethane. In the rulemaking, the CPUC will develop standards and requirements for biomethane injected into pipelines, as well as pipeline access rules to ensure non-discriminatory open access to the system. Under current tariffs, most gas utilities specifically decline to accept or transport gas from landfills. Under AB 1900, the CPUC is also directed to adopt policies and programs that promote the in-state production and distribution of biomethane. This aspect of AB 1900 is being handled in the CPUC’s existing proceeding on implementation of the state 33% RPS. The California Energy Commission is charged with implementing other provisions of AB 1900, including identifying impediments that limit procurement of biomethane in California and offering solutions to those impediments. 

In January 2013, the CPUC updated the scope of its 33% RPS proceeding to also implement Senate Bill (SB) 1122, requiring investor-owned utilities to procure at least 250 MW of electrical generation from new bioenergy projects. A third bioenergy bill, AB 2196, allowing electrical generating facilities using landfill or digester gas to qualify for the California RPS, will largely be implemented by the Energy Commission. This suite of legislation from the 2011-2012 California Legislative Session offers new opportunities in California for the bioenergy and biogas industries, after the setback suffered in March 2012 when the Energy Commission suspended the RPS-eligibility of biogas.

SB 594 Signed into Law: Intended to Expand Virtual Net Metering in California

California Governor Jerry Brown recently signed a new law that could significantly expand virtual net energy metering in California. Since 1996, California utility customers owning renewable energy systems have been able to offset their electricity bills with credits earned by feeding power generated by their systems back to the utility. SB 594 amends California’s net metering law to allow customers to aggregate energy consumed at multiple meters located on their property (or on their contiguous property) and net that use against the power produced by the customer’s renewable facility on the same site. 

Meters on contiguous properties must be solely owned, leased, or rented by the eligible customer-generator to be included. Parcels divided by a street, highway, or public thoroughfare are considered contiguous provided that they are otherwise contiguous and under the same ownership. The customer-generator will be able to use the sum of the load of the aggregated meters for purposes of establishing the maximum size renewable generation system to be used for net metering purposes. However, the existing maximum size limit (1 MW) for net-metered generation facilities will apply to customer-generators aggregating multiple meters. Overall, expanded virtual net metering would provide a way for many customers with multiple meters to use on-site generation more efficiently and economically.    

Implementation of SB 594 is contingent upon the California Public Utilities Commission (CPUC) making a determination that the expanded virtual net metering program established by the bill will not result in costs being shifted to non-participating ratepayers. The CPUC is required to make this determination by September 30, 2013. 

Meanwhile, virtual net metering is currently available on a limited basis in California. Meters may be aggregated for net metering purposes on multi-tenant and multi-meter properties served by investor owned utilities so long as the meters are served by a single service delivery point. This limitation generally means that virtual net metering is only viable for certain types of multi-meter properties (e.g. apartment buildings). Utility virtual net metering tariffs may be somewhat more flexible for customers participating in the Multifamily Affordable Solar Housing program. More complex multi-meter properties like farms and vineyards likely will have significantly expanded opportunities to take advantage of meter aggregation if/when SB 594 is implemented. 

Governor Brown Signs Three Biogas Bills Into Law

Here's a California law update from my partner Wayne Rosenbaum in San Diego:

The California legislature continues to emphasize the importance of renewable energy for the State’s environment and economy. Of the renewable energy bills passed by the legislature and signed by the Governor this year, three of them focused on biogas. Some of the aspects of these bills actively encourage the increased use of biogas for electricity generation by calling on the California Public Utilities Commission (“CPUC”) to look at access to transmission facilities and setting minimum procurement quotas for public utilities. These new laws will also regulate the quality and sources of the biogas that can be used. Here’s a brief summary of some important provisions in each:

SB 1122 requires the CPUC to direct the electrical corporations (PG&E, SDG&E, and SCE) to collectively procure at least 250 megawatts of cumulative rated generating capacity from developers of bioenergy projects that commence operation on or after June 1, 2013.

AB 1900, chaptered as Health and Safety Code 25420 et seq., seeks to do three things primarily:

  1. Regulate chemicals of concern. AB 1900 requires state agencies to compile a list of, and regulate, compounds and elements of concern that could pose resins? to human health that are found at significantly higher concentrations in biogas than in natural gas. The bill also prohibits the sale or transmission of biogas generated at hazardous waste landfills.

     

  2. Identify barriers to procurement. AB 1900 requires the CPUC to hold public hearings to identify the impediments to procurement of biogas in California, including interconnections. It then requires the CPUC to adopt policies and programs to promote the in-state production and distribution of biogas.

     

  3. Adopt pipeline access rules. AB 1900 requires the CPUC to adopt pipeline access rules that ensure non-discriminatory access to the gas pipeline system for biogas generators.

Among other things, AB 2196 amends the definition of a renewable electrical generation facility under the California Energy Commission’s Renewable Energy Resources Program . The new definition provides that if the RPS program eligibility of a facility is based on the use of landfill gas, digester gas, or another renewable fuel delivered to the facility through a common carrier pipeline, the transaction for the procurement of that fuel, including the source of the fuel and delivery method must meet certain conditions including green biomethane claims and greenhouse gas reduction claims.

CPUC Implements Changes to the California Renewable Auction Mechanism

The California Public Utilities Commission (CPUC) has adopted several changes to the state’s Renewable Auction Mechanism program (RAM), created in 2010. The RAM program operates as a reverse auction, offering a standard contract with the state’s three largest investor-owned utilities for energy from renewable distributed generation facilities of up to 20 megawatts (MW). The utilities will procure up to 1,000 MW of renewable energy under the program over two years. The first RAM auction took place in November 2011 and the second auction is schedule for next month. Resolution E-4489, adopted last Thursday, modifies the CPUC decision creating the RAM program, Decision 10-12-048, and Resolution E-4417, which served to implement details of the program. Resolution E-4489 approves changes to align the RAM with recent updates to Southern California Edison’s Solar Photovoltaic Program and incorporate a change requested by Pacific Gas & Electric Company.

 

First, Resolution E-4489 extends the deadline for RAM project developers to bring a facility online – from 18 months to 24 months from the date of approval of the RAM contract by the CPUC. Second, project developers will have the option to bid their projects as energy-only or with full capacity deliverability status. For full capacity deliverability status bids, the utilities will consider the benefits of a project providing resource adequacy and the costs of deliverability upgrades. The utilities will explain how they value resource adequacy in their forthcoming RAM bidding protocols.

The CPUC also approved PG&E’s request to reallocate its procurement solicitation in the next RAM auction across the three eligible energy product categories:  baseload, peaking as-available, and non-peaking as-available. PG&E requested permission to solicit a total of 85 MW of peaking as-available energy and 10 MW from each of the other two categories, rather than 35 MW from each of the three product categories.

The Commission declined to provide utilities with a unilateral right to terminate a RAM contract in the event that the expected costs of ratepayer-funded transmission system upgrades necessary to accommodate a facility increase significantly beyond estimates provided in the facility’s RAM bid.  The Commission did order the utilities, however, to include a stakeholder discussion in their RAM program forum agendas related to a unilateral termination right to protect ratepayers from excessive network upgrade costs.

The changes to the RAM will go into effect in time for the second RAM solicitation for eligible facilities, closing on May 31, 2012. The Commission noted that it will consider more comprehensive RAM program modifications later this year.

CPUC Adopts Decision Implementing RPS Portfolio Content Categories

A legal update from our colleagues Seth Hilton and Allison Smith:

On December 15, 2011, the California Public Utilities Commission adopted Decision 11-12-052, implementing Portfolio Content Categories for the 33% Renewables Portfolio Standard (RPS) Program in California. The Decision implements portions of Senate Bill (S.B.) x1-2, which created the 33% RPS Program. S.B. x1-2 established three categories of RPS-eligible electricity, applicable to RPS contracts executed after June 1, 2010:

  • Category One includes electricity from RPS-eligible resources that have their first point of interconnection with a California balancing authority, RPS-eligible resources with a dynamic transfer arrangement with a California balancing authority, and RPS-eligible resources scheduling their electricity directly into a California balancing authority without substituting electricity from another source.

     
  • Category Two includes firmed and shaped RPS-eligible electricity.

     
  • Category Three includes transactions that do not meet the criteria of Category One or Two, including unbundled renewable energy credit (REC) transactions.
     

Click here to read the entire update on the Portfolio Content Categories and this decision.
 

CPUC Seeks Comments in AB 2514 Electric Storage System (ESS) Docket R.10-12-007

California’s AB 2514 directs the California Public Utility Commission (CPUC) to determine appropriate targets, if any, for load-serving entities to procure viable and cost-effective energy storage systems. If the CPUC decides that targets are appropriate, it is supposed to set dates for achieving those targets.

As a follow up to an AB 2514 workshop held on June 28, 2011, Administrative Law Judge Amy C. Yip-Kikugawa issued a ruling asking for comments on the presentations made at the workshop by the California Energy Commission, the California Independent System Operator, Southern California Edison, the California Energy Storage Alliance, AES Energy Storage, Beacon Power Corporation and KS Engineers, all of which were attached to the ruling. The ruling asks the parties to comment on whether they agree or disagree with the presentations.

In addition, the ruling seeks comments from parties on the following questions:

  1. Which barrier(s), either identified by the presenters or the CPUC, do you believe present the greatest impediment to more widespread usage of energy storage and development of ESS in California?
  2.  

  3. Are there other barriers that were not identified during theworkshop? Please explain how these other barriers impede theusage or development of energy storage and whether they needto be resolved at the Commission or other forums.
  4.  

  5. To whatextent can the Commission assist in removing these barriers?In your opinion, are there certain barriers that need to beresolved first, and therefore have higher priority?

The deadline for comments is August 29, 2011, and reply comments will be due September 16, 2011. Your can find a copy of the ruling and attachments here.

Report on CPUC Workstop on Electric Energy Storage Workshop

On Tuesday, June 28, 2011, the CPUC held an Electric Energy Storage Workshop as part of its R10-12-007 proceeding for AB 2514, which defines the process by which the CPUC will consider electric energy storage standards for California’s investor owned utilities. A large number of interested stakeholders attended including Stoel Rives’ Seth Hilton and myself. There were presentations from the UC Berkeley/CEC team, CAISO, SCE and CAISO, as well as informal presentations from participants. (Click on this link for copies of these presentations and the proposal or go to: http://www.cpuc.ca.gov/PUC/energy/electric/storage.htm.) The discussion that followed each presentation was lively and well-informed.

The theme of the workshop was to identify and address the barriers to the inclusion of Electric Energy Storage (EES) and to brainstorm action that the CPUC could take to ameliorate those barriers, both internally and by its participation in other forums. A ruling seeking additional comments from the workshop participants will be issued in the next week or so – we will keep you posted.

The overarching takeaways from the workshop were:

  • EES encompasses many different technologies and many potential applications for generation, transmission, distribution and customer-side.
  • There needs to be a valuation methodology endorsed by all stakeholders that encapsulates all the benefits that EES can provide.
  • A meaningful cost/ benefit analysis of any EES technology cannot be conducted independent of its application. CPUC could address some of these challenges itself, particularly in the following areas:
    • Contract evaluation
    • Rate design
    • Avoidance of over-generation and subsequent curtailment
    • Load, resource adequacy and capacity
  • CPUC could also participate in other forums:
    • CAISO’s transmission analysis and planning process
    • FERC through a Notice of Intent

A pall was cast over the proceedings by the news that Michael Colvin (whose enthusiasm for EES has been a key component in maintaining the momentum of the R10-12-007 proceeding) is leaving his current post to take up a staff position with Commissioner Mark Ferron and California does not currently have the budgetary wherewithal to backfill Mike’s position.

Coming Very Soon: CPUC Energy Storage Workshop

On Tuesday, June 28, 2011, the CPUC will hold an “Electric Energy Storage Workshop” as part of its R10-12-007 proceeding for AB 2514, which defines the process by which the CPUC will consider electric energy storage standards for California’s investor owned utilities. The workshop will be held at in the Golden Gate Room at CPUC’s headquarters from 9:30 am to 4:00 pm.

According to a draft agenda circulated by the CPUC, the theme of the workshop will be addressing barriers to entry facing Electric Energy Storage (EES). The workshops goals are to identify actions that the CPUC should consider, as well as whether and how it should participate in other forums.

The morning will feature presentations from several different perspectives, with each presentation to be followed by Q&A:

 

  • Presentation from UC Berkeley and California Energy Commission (CEC) team on “2020 Vision Project”
  •  

  • Presentation from CAISO about recent storage-related activities at the Independent System Operator, including findings from recent studies.
  •  

  • Presentation from Southern California Edison (SCE) discussing a white paper entitled Moving Energy Storage from Concept to Reality.
  •  

  • Presentation from California Energy Storage Alliance about developer’s perspectives

The afternoon will feature a facilitated presentation about a staff straw proposal concerning potential CPUC actions. The CPUC will allow parties to provide post-workshop comments on both the presentations and the staff straw proposal.

The CPUC is willing to accommodate short presentations (five minutes or less) or share prepared material pertinent to the workshop. Any party who wishes to do so may contact Michael Colvin at michael.colvin@cpuc.ca.gov. For reference (or inspiration), a series of energy storage presentations made to the CPUC as part of its 2011 IEPR process can be found here.

Stoel Rives attorneys Seth Hilton and Janet Jacobs will be attending the workshop.

CEC Moves Forward on Implementation of 33% RPS

On June 3, the California Energy Commission (“CEC”) issued a Notice of Intent to Implement 33 Percent Renewables Portfolio Standard (“RPS”). The new 33% RPS was signed into law by Governor Brown on April 12, 2011. The legislation for the first time expanded the RPS to publicly-owned utilities (“POU”), and tasked the CEC with, among other things, monitoring POU compliance with, and developing regulations to enforce, the new 33% RPS.

The Notice also encourages all regulated entities, including POUs, to participate in the California Public Utilities Commission (“CPUC”) proceeding addressing the new RPS, Rulemaking 11-05-005, “so that, where appropriate, the [CEC] and CPUC may coordinate program development.” 

The Notice states that the CEC will implement the new RPS through two processes: (1) amending the RPS Eligibility Guidebook through the existing amendment process so that it conforms with the new legislation, and (2) initiating a rulemaking proceeding to address POU compliance. Although the new RPS legislation set a target date of July 1, 2011 for the CEC to adopt regulations for POU compliance, pending legislation (Senate Bill 23) may extend that deadline to July 1, 2012. 

 

On June 6, the CEC also noticed a staff workshop for June 17, 2011 to introduce the scope and a tentative schedule for the rulemaking proceeding concerning POU compliance, and to solicit comments from interested stakeholders. Written comments may also be submitted to the CEC by July 1, 2011.

CPUC Issues Scoping Memo in Energy Storage Proceeding; Workshop Set for June 28

 On May 31, 2011, the California Public Utilities Commission (“CPUC”) issued a scoping memo (“Scoping Memo”) identifying issues to be considered and setting a procedural schedule for its energy storage proceeding. In December, 2010, the CPUC opened Rulemaking 10-12-007 to implement the provisions of Assembly Bill 2514, which directs the CPUC to determine appropriate energy storage procurement targets for load serving entities. To date, the CPUC has issued an Order Issuing Rulemaking, held an initial workshop and a prehearing conference, and received public comments from interested parties. After considering such background and input, the CPUC issued the Scoping Memo.

The Scoping Memo splits the proceeding into two phases: Phase 1 – Policies and Guidelines and Phase 2 – Cost Benefit Analysis and Allocation. The Scoping Memo provides that Phase 1 will consider the following topics:

  1. How are energy storage technologies currently being used? To what extent are these current uses indicative of how energy storage should be utilized on a going forward basis? As the Commission is developing a generalized view towards energy storage, what lessons learned should the Commission consider, both in terms of successes and failures?
  2. What policies are needed to encourage effective energy storage that will: reduce greenhouse gas emissions; reduce peak demand; defer and/or substitute for an investment in generation, transmission or distributions; and improve reliable grid operations?
  3. How can energy storage technologies be best integrated into the utilities’ existing portfolios?
  4. How could energy storage technologies be integrated with the Commission’s loading order, such as energy efficiency, demand response, renewable procurement, distributed generation and other items in the Commission’s loading order? What about other overarching policies like smart grid?
  5. Are there current state or federal policies that impede the ability of energy storage technologies from being utilized more widely or serve as barriers to the development of energy storage systems? What, if anything, can be done to remove these impediments and barriers?
  6. Is it possible to develop a single unifying policy for energy storage when storage has a wide variety of uses?
  7. Regardless of the technology used, are there certain energy storage applications/attributes that should be encouraged? To what extent do the costs and benefits associated with these different applications/attributes differ?
  8. How should ownership model of energy storage be considered? Do the current value streams favor one type of ownership model over another?

The Scoping Memo contemplates that Phase 1 will involve a series of workshops, the first of which is set for June 28, 2011 at the CPUC Golden Gate Room, 505 Van Ness Ave., San Francisco, CA.

The Scoping Memo notes that the outcome of Phase 1 will influence the scope of Phase 2. Accordingly, the Scoping Memo declines to set the scope of Phase 2, but states that Phase 2 shall consider at least the following topics:

  1. How should energy storage applications/attributes be valued?
  2. What are the costs for the various types of energy storage applications?
  3. What should be taken into consideration to determine whether energy storage technologies are cost effective? Should they be compared against the other types of resources currently being procured by the utilities? How should the benefits associated with energy storage technologies be taken into consideration when determining cost-effectiveness?
  4. How should the costs and benefits associated with energy storage technologies be allocated among retail end-use customers?

The CPUC will issue a future scoping memo to definitively set the scope of Phase 2.

CEC Holds Workshop on Energy Storage for 2011 IEPR

The 2011 IEPR Committee Workshop on Energy Storage for Renewable Integration was held Thursday, April 28th at the California Energy Commission (CEC) offices in Sacramento.  The Workshop was presented in a three panel format, with each panel addressing specific topics, including (1) the need for energy storage in light of California’s renewable portfolio standard, greenhouse gas goals, smart grid and demand response, (2) the costs, benefits and revenues from energy storage applications, and (3) utility perspectives on energy storage. The full agenda, which describes the topics and the questions addressed at the Workshop, can be found here.

The CEC is not planning any further workshops on energy storage, but it will be making recommendations about the topic in its 2011 Integrated Energy Policy Report (IEPR). We understand that the CEC is seeking input on energy storage from all arenas, including developers and owners of gas-fired peaker plants.  Among other things, the CEC wants to understand the economic and environmental benefits and impacts of peakers (i.e., facilities that have the ability to ramp up in ten minutes, generate for a full hour, then be taken off line) compared to the cost and benefits of various energy storage technologies.  The CEC will use the information it gathers to determine if it makes sense economically to recommend a lower or a higher target for energy storage in its 2011 IEPR. 

 

 

The CEC’s report will be taken into account by the California Public Utility Commission (CPUC), which is conducting a separate proceeding under AB 2514 to determine appropriate energy storage targets for California’s investor-owned utilities. You can find our previous descriptions of the AB 2514 process here , here and here.  A report on last year's CPUC staff whitepaper describing energy storage technologies and their potential use in the California market can be found here

 

Parties who want to weigh in on energy storage in California must submit their comments to the CEC by 5 p.m. on May 16, 2011.   The comments must include the docket number “11-IEP-1N” and indicate “Energy Storage for Renewable Integration” in the subject line or first paragraph of the comments.  All filings in the IEPR proceeding are now accomplished electronically and can be submitted in either Microsoft Word format or as a PDF by e-mail to docket@energy.state.ca.us

 

Thanks to Kimberly Hellwig in our Sacramento office for her help in preparing this Blog!

 

Governor Brown Signs Bill Increasing California's Renewable Portfolio Standard to 33%

A Legal News Alert from Seth Hilton and the Stoel Rives Renewable Energy Law Group:

California’s Governor Jerry Brown signed Senate Bill ("SB") X1-2 on Tuesday requiring California's electric utilities to procure 33% of their energy from renewable resources by 2020.  Upon signing the bill, Governor Brown stated the "bill will bring many important benefits to California, including stimulating investment in green technologies in the state, creating tens of thousands of new jobs, improving air quality, promoting energy independence and reducing greenhouse gas emissions."

Details concerning the implementation of the new legislation will have to be worked out at various California regulatory agencies, including the California Public Utilities Commission and the California Energy Commission. The legislation will likely spawn numerous regulatory proceedings as the various regulatory agencies struggle to come to grips with the new RPS mandate.

For more information about SBX1-2, please see our earlier blog post and detailed Renewable Energy Law Alert, dated March 29, 2011.

Upcoming Electric Energy Storage (EES) Workshops

California’s AB 2514 requires the CPUC and municipal utilities in California to open proceedings by March 1, 2012 to determine appropriate targets, if any, for the procurement of viable and cost-effective energy storage systems by load-serving entities. By October 1, 2013, the CPUC must (1) determine whether a procurement target for energy storage is appropriate and, if so, (2) adopt a procurement target for each load-serving entity under its jurisdiction to be achieved by December 31, 2015 and a second target to be achieved by December 31, 2020. Municipal utilities have an additional year to meet these requirements.

In December of last year, the CPUC opened Rulemaking 10-12-007 both to implement AB 2514 and “on [the CPUC’s] own motion to initiate policy for California utilities to consider the procurement of viable and cost-effective energy storage systems.” Order Instituting Rulemaking (“OIR”) at 1, R.10-12-007. 

On March 9, 2011, a workshop was held to address the scope of the rulemaking proceeding. The workshop included discussions of current and emerging energy storage technologies, the goals and applications of energy storage, existing barriers to storage implementation, and whether a unified storage policy would work or whether the policy should be written to address specific barriers to entry. The workshop also considered how the CPUC could and should work with other agencies addressing energy storage or related issues, including the California Energy Commission, the California Independent System Operator, and the Federal Energy Regulatory Commission. You can find Seth Hilton’s report about the March 9 workshop here.

The CPUC has scheduled a pre-hearing conference in the rulemaking proceeding for April 21, 2011The conference will be held before ALJ Amy C. Yip-Kikugawa, beginning at 10 am, in the Commission Courtroom, State Office Building, 505 Van Ness Avenue, San Francisco, California. Stoel Rives partner Seth Hilton will attend the conference.

In addition, as part of its 2011 Integrated Energy Policy Report (IEPR) Schedule, the California Energy Commission has scheduled a committee workshop on energy storage for renewable integration, which will begin at 9:30 on April 28 in Hearing Room A, CALIFORNIA ENERGY COMMISSION, 1516 Ninth Street, First Floor, Sacramento, California. Stoel Rives attorneys are planning to attend the workshop.

California Public Utility Commission to Reopen Rule 21 Working Group

A report from Stoel Rives attorney Jake Storms (Sacramento):

The California Public Utility Commission (“CPUC”) recently announced that it will reopen the Rule 21 Working Group. Rule 21 governs the interconnection of distributed generation to a utility’s distribution system.

Each of the three largest investor-owned utilities—Pacific Gas and Electric, Southern California Edison, and San Diego Gas and Electric—have a version of Rule 21 in their electric tariffs, which are subject to approval by the CPUC. The last Rule 21 workshop was held in 2008. The CPUC stated that, given the substantial changes in the technical and regulatory landscape in the past several years, Rule 21 is in need of reconsideration and has set forth a list of issues it believes should be addressed by the new Working Group. These include:

• The need for transparency in processing, queue information, and customer application information

• The need for review and potential reconsideration of technical screens within Rule 21 to ensure that the appropriate issues are being studied

• The need for articulation of cost-allocation methodology when network upgrades are required

• The need for review of utility tariffs for consistency with each other and with state law

• The need for additional standard interconnection agreements to accommodate the different types of distributed generation projects anticipated to come online

The first meeting of the Rule 21 Working Group will be Friday, April 29, 2011 from 10:00 a.m. to 3:00 p.m. at the Auditorium of the CPUC located at 500 Van Ness Avenue, San Francisco, CA.

Legislature Passes SBX1-2 to Increase California RPS to 33%

Legal News Alert from Stoel Rives Renewable Energy Law Group

The California Legislature has passed Senate Bill (“SB”) X1-2, which requires California’s electric utilities to increase their renewable generation to 33% by 2020. Passage of the legislation is the culmination of years of effort to increase California’s Renewable Portfolio Standard (“RPS”) from its current 20%. In 2009, the Legislature passed SB 14, which also would have increased California’s RPS to 33%, but the bill was vetoed by Governor Schwarzenegger on the ground that it imposed too many restrictions on the use of out-of-state generation to meet California’s RPS requirement. Governor Schwarzenegger then issued an executive order directing the California Air Resources Board to develop its own 33% Renewable Energy Standard under the Board’s authority pursuant to Assembly Bill 32, the Global Warming Solutions Act of 2006. Last year, the Legislature again tried to pass another 33% RPS bill, SB 722, but the session expired before the legislation could reach a final vote. Two bills were introduced in this session: SB 23 and SBX1-2. SBX1-2 was identical to SB 23, but it was introduced in special session in an attempt to speed passage of the legislation. SBX1-2 now goes to Governor Brown for signature, and he is expected to sign the legislation into law.

For more background and information on the decision and its implications, click here.

All Party Meeting Concerning California's 2011 RPS Procurement

My partner Seth Hilton attended last Friday's all-party meeting on California's 2011 RPS procurement and prepared the following update:

On February 11, 2011, California Public Utilities Commission (CPUC) Administrative Law Judge Burton Mattson issued a Proposed Decision (PD) conditionally accepting the 2011 Renewables Portfolio Standard (RPS) Procurement Plans for Southern California Edison (SCE), Pacific Gas and Electric Company (PG&E), and San Diego Gas and Electric Company (SDG&E). If adopted, the Decision would set a schedule for the utilities’ 2011 RPS solicitation. The PD was on the agenda for the CPUC’s March 24, 2011 business meeting, but was held at Commissioner Florio’s request until the April 14 meeting.

On March 25, Commissioner Florio held a well-attended all-party meeting on the PD. Among the issues raised by Commissioner Florio was where California’s investor-owned utilities stood relative to the current RPS procurement targets and the targets contained in pending legislation (SBX1-2), and whether a 2011 RPS solicitation was necessary.

 

All three investor-owned utilities—PG&E, SCE and SDG&E—stated that holding a 2011 RPS solicitation would be prudent. PG&E stated that it was on track to meet the current 20% RPS this year and through 2013. However, future compliance, especially with the higher procurement targets under SBX1-2, is dependent on several large projects that are scheduled to come online in the next few years. Any delay or failure of those projects would require PG&E to procure additional resources to get to the 2016 target under SBX1-2, and therefore holding a solicitation this year made sense. 

 

According to SCE, a 2011 solicitation would be prudent for a number of reasons, not only to assist SCE to reach the goals in SBX1-2. SCE noted that a solicitation would be beneficial for current contract administration by setting the price for any replacement power and that annual RPS solicitations were important for maintaining a vigorous RPS market. 

 

SDG&E stated that it too was not done with procurement and would need further procurement to comply with the 2016 goal under SBX1-2. 

 

Other parties also advocated in favor of a 2011 solicitation, with TURN noting that there may be some bargains available to the utilities due to the fact that no RPS solicitation was held last year and that competition would be fairly robust for RPS contracts. 

 

The Division of Ratepayer Advocates was one of the few dissenters (along with CARE), arguing that because a new cost containment mechanism would apply under SBX1-2, the CPUC should consider waiting until it had addressed cost containment before commencing a new RPS solicitation. 

 

The parties also discussed various issues to be resolved by the PD, including how economic curtailment should be handled in the pro forma RPS contract, congestion adders and integration cost adders. As currently drafted, the PD would require all three utilities to amend their pro forma agreements to use the economic curtailment provisions proposed by PG&E, which would allow utilities to economically curtail projects up to five percent of the project’s expected annual generation, for which PG&E would pay the project the full contract price but would not reimburse the project for any lost production tax credits. The California Wind Energy Association noted that although it supported PG&E’s proposal, the proposal should be amended to make it clear that the cap applies to any economic curtailment caused by the utility, even if the curtailment was in fact ordered by the California Independent System Operator, and to provide for the payment of any lost production tax credits as well.

 

As for congestion adders, the PD would require the utilities to consider congestion costs when evaluating projects and order the utilities to release congestion cost information in their 2012 and future plans, so that project developers will be fully informed when making siting decisions.

 

Finally, the PD declined to allow the use of integration cost adders when evaluating bids, despite both SCE’s and SDG&E’s requests that they be permitted to do so. 

 

If you have any further questions on this all-party meeting or any other California energy regulatory issue, please contact:

Seth Hilton at (916) 319-4749 or sdhilton@stoel.com

Bill Holmes at (503) 294-9207 or whholmes@stoel.com

Jennifer Martin at (503) 294-9852 or jhmartin@stoel.com

California Public Utilities Commission Holds Workshop on Energy Storage Legislation

On Wednesday, March 9, the California Public Utilities Commission (“CPUC”) held a workshop on its implementation of California’s recent energy storage bill, Assembly Bill (AB) 2514, signed by Governor Schwarzenegger on September 29, 2010.

AB 2514 requires the CPUC and municipal utilities in California to open proceedings by March 1, 2012 to determine appropriate targets, if any, for the procurement of viable and cost-effective energy storage systems by load-serving entities. By October 1, 2013, the CPUC must (1) determine whether a procurement target for energy storage is appropriate and, if so, (2) adopt a procurement target for each load-serving entity under its jurisdiction to be achieved by December 31, 2015 and a second target to be achieved by December 31, 2020. Municipal utilities have an additional year to meet these requirements.

Rather than delay implementation of AB 2514, the CPUC moved rapidly to initiate the required proceeding. In December of last year, the CPUC opened Rulemaking 10-12-007 both to implement AB 2514 and “on [the CPUC’s] own motion to initiate policy for California utilities to consider the procurement of viable and cost-effective energy storage systems.” Order Instituting Rulemaking (“OIR”) at 1, R.10-12-007. The benefits of energy storage noted in both the legislation and the OIR include optimizing the use of intermittent and off-peak renewable generation and providing ancillary services currently provided by gas-fired peakers and other fossil fuel generation.

The OIR did not set out the scope of the proceeding. Rather, the CPUC requested that parties including Pacific Gas and Electric, Southern California Edison, and San Diego Gas and Electric file comments by January 21, 2011 on the factual and legal issues to be addressed in the proceeding and directed CPUC staff to hold a workshop to address the potential scope of the proceeding during the first quarter of 2011. Twenty-one parties filed comments by the January 21 deadline, and the workshop was scheduled for March 9.

The workshop was very well attended, with over 100 people participating in person and another 50 participating by phone. The workshop included discussions of current and emerging energy storage technologies, the goals and applications of energy storage, existing barriers to storage implementation, and whether a unified storage policy would work or whether the policy should be written to address specific barriers to entry. The workshop also considered how the CPUC could and should work with other agencies addressing energy storage or related issues, including the California Energy Commission, the California Independent System Operator, and the Federal Energy Regulatory Commission.

The CPUC will use the information gathered from both comments and the workshop to prepare a scoping memo for the proceeding, setting out the issues to be covered in the proceeding and establishing a procedural schedule. Prior to issuing the final scoping memo, the CPUC will hold a prehearing conference, likely sometime in mid-April, to address scoping and scheduling issues.

Stoel Rives participated in the March 9 workshop, and our attorneys have been closely tracking AB 2514 in California as well as electric energy storage (“EES”) developments in other states around the country. If you have any questions about the CPUC’s implementation of AB 2514 or how other developments in EES may impact your business, please contact:

Seth Hilton at (415) 617-8943 or sdhilton@stoel.com
William Holmes at (503) 294-9207 or whholmes@stoel.com
Brian Nese at (858) 794-4102 or bjnese@stoel.com
David Benson at (206) 386-7584 or dlbenson@stoel.com

ALJ Releases Ruling Setting Briefing Schedule for CPUC Implementation of Amendments to CA Feed In Tariff Program

From our colleage Seth Hilton:

In 2006, Assembly Bill (AB) 1969 ushered in the era of the Feed In Tariff (FIT) in California. AB 1969 added section 399.20 to the Public Utilities Code, which allowed for tariffs and standardized contracts for eligible renewable resources up to 1.5MW owned by, and located on, public water and wastewater treatment facilities. In 2007, the California Public Utilities Commission (CPUC) expanded the program to all utility customers. In 2008, Senate Bill (SB) 380 established a standard tariff for all utility customers and applied that tariff to San Diego Gas & Electric (SDG&E) in addition to Pacific Gas & Electric (PG&E) and Southern California Edison (SCE).

Also in 2008, the CPUC adopted the final tariff structure and standardized contracts. The pricing for the tariffs was set at the market price referent (MPR), as adjusted by time of use (TOU) factors. A more detailed description, and the MPR and TOU tables, is available here. The total cap of the program is currently 500MW divided between SCE, PG&E, and SDG&E.

In 2009, SB 32 was signed into law, which, among other things, increased the eligible project size to 3MW. SB 32 went into effect on January 1, 2010. However, the CPUC has not yet fully implemented these amendments to the FIT program.

On January 27, 2011, Administrative Law Judge (ALJ) Anne E. Simon released a ruling setting the briefing schedule in response to the CPUC’s implementation of SB 32. The ruling states that respondents must, and other parties may, file briefs on such issues as eligibility, program size and requirements, and the setting of the tariff price, or any other issue they believe to be “relevant to the Commission’s implementation of SB 32.”

ALJ Simon’s ruling further stated that parties may also file, as a separate action in their brief, a request for any “further activities” they believe should be conducted (i.e., workshops, hearings, etc.).

Filed briefs must be no more than 50 pages and must be filed and served by respondents, and may be filed and served by other parties, no later than March 4, 2011. Reply briefs, which can be no more than 25 pages, must be filed by served no later than March 22, 2011.

Recommendations for Carbon Capture and Storage in California

The California Carbon Capture and Storage Review Panel released its final recommendations last week after nine months of fact-finding and deliberations. The Panel was sponsored by the California Energy Commission, the California Public Utilities Commission, and the California Air Resources Board (“CARB”), with participation from the California Department of Conservation and the California State Water Board. The Panel was formed to review the statutory and regulatory barriers to the use of carbon capture and storage (“CCS”) as a strategy to combat climate change. CCS is a technology with potential to reduce carbon dioxide emissions from power plants and industrial sources on a large scale by capturing the emissions and sequestering them in geologic formations underground.

The Panel’s recommendations focus on:

  • ensuring that CCS can play a role in meeting California’s greenhouse gas emission (“GHG”) reduction requirements (e.g., the Panel recommends that CARB consider and integrate CCS into its GHG rules);
  • addressing regulatory and permitting barriers for CCS projects (e.g., the Panel recommends establishing a coordinated permitting system with the California Energy Commission as the lead agency);
  • addressing key legal issues and uncertainties (e.g., the Panel recommends that the legislature declare surface owners to be the owners of subsurface pore space that could be used for carbon dioxide storage); and
  • ensuring the safe, equitable, and cost-effective use of CCS in California (e.g., the Panel recommends that the legislature establish that any cost allocation mechanisms for CCS projects be spread as broadly as possible across all Californians).

The Panel was comprised of experts from industry, trade groups, academia, and environmental organizations. Stoel Rives’ Jerry Fish served on the Panel’s Technical Advisory Committee along with representatives from the relevant state agencies and other expert consultants. With assistance from other members of Stoel’s CCS team, he contributed white papers on carbon dioxide pipelines, pore space rights, and enhanced oil recovery issues and advised on the Panel on a variety of property, liability, and regulatory issues for CCS. For more information on CCS or the Panel’s work, please contact:

Read the Panel’s key findings and recommendations after the jump or download the full background report and final recommendations report from the California Climate Change Portal.

Key Findings (see pages 3-4 of Findings and Recommendations by the California Carbon Capture and Storage Review Panel, December 2010):

1.     There is a public benefit from long-term geologic storage of CO2 as a strategy for reducing GHG emissions to the atmosphere as required by California laws and policies.

2.     Technology currently exists for the safe and effective capture, transport, and geological storage of CO2 from power plants and other large industrial facilities.

3.     High costs, inadequate economic drivers, remaining uncertainties in the regulatory and legal frameworks for CO2 storage, and uncertainties regarding public acceptance are barriers to the near-term deployment of commercial-scale CCS projects in California.

4.     There is a need for clear rules under AB 32 regarding the treatment of CO2 emission reductions from CCS projects involving capped and uncapped emission sources.

5.     Multiple state and federal agencies are currently responsible for permitting CCS projects in California.

6.     There is a need for clear, efficient, and consistent regulatory requirements and authority for permitting all phases of CCS projects in California, including CO2 capture, transport, and storage.

7.     Standards are needed to ensure the safe and effective operation of geologic storage projects.

8.     Consistent requirements are needed for monitoring, measuring, verifying, and reporting injected CO2, and releases, if any, and for GHG accounting protocols necessary to comply with federal and state laws and policies to reduce CO2 emissions.

9.     There is a need to establish clear financial responsibility for the stewardship of geologic storage sites during the (a) operating phase; (b) post-injection (pre-closure) monitoring phase; and (c) post-closure phase.

10. The right to use subsurface pore space for geologic storage needs to be clarified.

11. There is a need to address any potential environmental justice aspects of CCS projects.

12. There is a need for increased public understanding of CCS benefits and risks.

13. Absent new initiatives, economic barriers to early CCS deployment will delay the technological learning needed to drive down the costs of CCS. 

 Key Recommendations (see pages 4-5 of Findings and Recommendations by the California Carbon Capture and Storage Review Panel, December 2010):

To ensure that CCS can play a role in meeting California’s requirements for GHG emission reductions:

1.   The State should recognize appropriately regulated CCS as a measure that can safely and effectively reduce atmospheric emissions of CO2 from relevant stationary sources, including power plants and other industrial sources. To that end, and conditioned on compliance with all applicable federal and state requirements, ARB should: (a) for capped sources under AB 32, recognize CO2 sequestered by CCS projects as having not been emitted to the atmosphere (with the result that an allowance is not required to be held for each ton of CO2 that is captured and geologically stored) and define accounting protocols for sequestered CO2 and (b) for uncapped sources under AB 32, decide whether offset protocols for CCS projects within the State should be adopted.

To address regulatory and permitting issues related to CCS projects:

2.      The State should evaluate current EPA regulations and determine which, if any, State agency should seek “primacy” for permitting Class VI wells under the UIC program.

3.      The State should designate the California Energy Commission (Energy Commission) as the lead agency under the California Environmental Quality Act (“CEQA”) for preventing significant environmental impacts in CCS projects (both new and retrofit projects).

4.      The State should clarify that the State Fire Marshall is indeed the lead agency for regulating the safety and operation of intrastate CO2 pipelines.

5.      The Energy Commission should consult with the responsible permitting agencies in carrying out its responsibilities as the CEQA lead agency for CCS projects. Specifically, the Energy Commission should:

a.       Designate the Division of Oil, Gas and Geothermal Resources (DOGGR) to be the responsible agency for activities related to the subsurface.

b.      Coordinate the development of performance standards for CCS sites that would include design requirements and other operational measurements consistent with the goals of protecting the groundwater and preventing emissions of CO2 to the atmosphere.

c.       Designate the California Air Resources Board as the responsible agency for air-related aspects of CO2 monitoring, reporting, and verification (MRV) requirements.

d.      Designate the State Fire Marshall as the responsible agency for CO2 pipelines.

e.       Designate the State Water Board as the responsible agency for impacts to water quality.

f.       Designate other agencies as appropriate.

To address key legal issues and uncertainties related to CCS projects:

6.   The State should consider legislation establishing an industry-funded trust fund to manage and be responsible for geologic site operations in the post-closure stewardship phase. In addition, California should proactively participate in federal legislative efforts to enact similar post-closure stewardship programs under federal law.

7.   The State legislature should declare that the surface owner is the owner of the subsurface “pore space” needed to store CO2. The legislature should further establish procedures for aggregating and adjudicating the use of, and compensation for, pore space for CCS projects.

8.   The State should consider whether legislation is needed to extend to CO2 transportation infrastructure for CCS projects the current authority for acquiring the rights of way for the siting of transportation infrastructure for natural gas storage projects.

To ensure the safe, equitable, and cost-effective use of CCS in California:

9.   It should be State policy that the burdens and benefits of CCS be shared equally among all Californians. Toward this end, the permitting authority shall endeavor to reduce, as much as possible, any disparate impacts to residents of any particular geographic area or any particular socioeconomic class.

10.                       The Panel endorses the need for a well-thought-out and well-funded public outreach program to ensure that the risks and benefits of CCS technology are effectively communicated to the public.

11.                       The State legislature should establish that any cost allocation mechanisms for CCS projects should be spread as broadly as possible across all Californians.

12.                       The State should evaluate a variety of different types of incentives for early CCS projects in California and consider implementing those that are most cost-effective.

  

California Public Utilities Commission Approves Renewable Auction Mechanism

On Friday, December 16, 2010, the California Public Utilities Commission unanimously approved a decision ("Final Decision") ordering a new tariff for a procurement protocol called the Renewable Auction Mechanism, or RAM. RAM applies to California's three largest investor-owned utilities ("IOUs"). All renewable energy projects up to 20 MW that are located in the service territory of one of the IOUs are eligible for RAM. The program authorizes the IOUs, on an interim basis, to acquire up to 1,000 MW of renewable generation, with each IOU allocated a portion of the 1,000 MW cap.

RAM will consist of two auctions per year. Twenty-five percent of the total program allocation will be offered in each auction; unsubscribed capacity and drop-out capacity is added to the next auction. Auctions for all three IOUs will be conducted simultaneously, and a project may bid into all three auctions. If a project is selected in more than one auction, however, it must notify all affected IOUs which one shortlist it will accept within 10 days of its notice that it was selected in multiple auctions.

To continue reading, click here.

If you have any questions about the issues of this update, please contact:

Seth Hilton at (916) 319-4749 or sdhilton@stoel.com
Morten Lund at (858) 794-4103 or malund@stoel.com
Brian Nese at (858) 794-4102 or bjnese@stoel.com

California Legislature Fails to Pass 33% Renewable Portfolio Standard

An alert written by Stoel Rives partner Seth Hilton:

Last night, the California legislature failed to pass Senate Bill 722—the 33% Renewable Portfolio Standard (RPS) legislation—by the close of the legislative session. The bill would have increased California’s RPS to 33% for both investor-owned and publicly owned utilities. It would also have placed limits on the use of renewable resources located out-of-state to meet California’s RPS—utilities would have been required to meet a certain percentage of their RPS obligations through resources whose first point of interconnection was a California balancing authority, or whose power is transmitted to California through a dynamic transfer arrangement or scheduled hourly or inter-hourly into California. The proposed legislation also would have authorized the use of renewable energy credits (RECs)—the environmental attributes of renewable power separated from the power itself—for RPS compliance, but would have imposed limits on the amount of RECs that could be used to meet the utilities’ RPS obligation.

 Last year, California also failed to enact a 33% RPS bill, similar to SB 722, although the process proceeded farther than this year. Last year, the legislature passed the bill, but it was vetoed by Governor Schwarzenegger due to concerns about the limits placed on the use of out-of-state generation. Like SB 722, last year’s bill would have limited the extent to which California could rely on out-of-state renewable resources to meet California’s RPS. Part of the failure of SB 722 to pass this year can be attributed to disagreements between the legislature and the Governor regarding what limits would be appropriate for out-of-state generation.

Despite his concern about limits on out-of-state generation, Governor Schwarzenegger supports increasing California’s RPS to 33%. Following his veto of the legislation last year, he issued an executive order directing the California Air Resources Board (ARB) to develop regulations to implement a 33% RPS under authority the ARB had under AB 32, California’s Global Warming Solutions Act. Pursuant to the executive order, the ARB was to enact those regulations by July 2010. Shortly before the ARB considered those regulations, the Governor requested via letter to the ARB that it postpone consideration of those regulations while the legislature attempted to pass a 33% RPS bill. ARB therefore moved the hearing on those regulations to September 22, 2010. With the failure of SB 722, ARB may now move forward with those regulations, although there are questions regarding the extent to which those regulations would be implemented by the new Governor.

In March, the California Public Utilities Commission (CPUC), which is responsible for administering portions of California’s current 20% RPS for investor-owned utilities, adopted a decision that would have authorized the use of RECs to meet the 20% RPS, subject to certain caps. In May, the CPUC stayed that decision. If SB 722 were enacted, it would have preempted the CPUC’s efforts to set standards for the use of RECs. Just last week, the CPUC issued a proposed decision that, if adopted, will lift the stay. The proposed decision was seen by many as an effort to encourage the legislature to act on SB 722 and adopt standards for the use of RECs. Now that the legislation has failed, the CPUC is free to move forward with its proposed decision allowing the use of RECs, and to lift the stay of the March decision.

If you have any questions about the issues of this update, please contact:

Steven Hall at (503) 294-9434 or schall@stoel.com
Seth Hilton at (916) 319-4749 or sdhilton@stoel.com
Jennifer Martin at (503) 294-9852 or jhmartin@stoel.com
Marcus Wood at (503) 294-9434 or mwood@stoel.com

Energy Law Alert: CPUC Proposes to End Moratorium on TREC Transactions; Increase Cap to 40%

On August 25, the California Public Utilities Commission (“CPUC”) issued a proposed decision (“PD”) that would end the CPUC’s moratorium on approval of tradable renewable energy credit (“TREC”) transactions and increase the cap on such transactions for large investor-owned utilities to 40%.

Previously at its March 11, 2010 meeting, the CPUC authorized the use of TRECs for compliance with California’s Renewable Portfolio Standard (RPS), subject to certain limitations. CPUC Dec. 10-03-021 (Mar. 15, 2010)(“March Decision”). Among the limitations that the March Decision imposed was a cap limiting the use of TRECs for RPS compliance for the largest investor-owned utilities (Pacific Gas and Electric, Southern California Edison, and San Diego Gas and Electric) to 25% of their annual RPS compliance obligations. That cap was to remain in place until December 31, 2011, when the CPUC would consider modifying or removing that limitation. The March Decision also imposed a price cap of $50 per TREC. The price cap also expires on December 31, 2011.

After issuance of the March Decision, Southern California Edison, Pacific Gas and Electric and San Diego Gas and Electric filed a joint petition for modification of the decision, seeking, among other things, modification of the usage and price caps, and modification of the criteria used to determine whether a contract was a TREC transaction subject to the 25% cap. The Independent Energy Producers Association also filed a petition for modification seeking modification of the criteria used to determine whether a contract was a TREC transaction.

On May 6, 2010, the CPUC issued a decision staying implementation of the March Decision pending resolution of the petitions for modification. CPUC Dec. 10-05-018 (May 12, 2010)(“May Decision”). The May Decision also imposed a moratorium on approval of any contracts that would be defined as TREC transactions under the March Decision.

The PD issued yesterday would lift the stay imposed by the May Decision, and end the moratorium on approval of contracts defined as TREC transactions. The PD would also modify the cap on TREC transactions, allowing the largest investor-owned utilities to meet up to 40% of their annual compliance obligations through TREC transactions. The PD would further modify the cap by exempting future deliveries under contracts approved prior to the effective date of the March Decision from counting toward the cap. The March Decision would have included any future deliveries under existing contracts categorized as TREC transactions towards the 25% cap. The PD, however, would not alter the criteria used to determine whether a transaction was a TREC transaction.

The definition of TRECs established in the March Decision (and unchanged by the PD) could have a significant effect on the use of generation from renewable resources located outside of California. TRECS are generally defined as renewable energy credits that can be traded separate and apart from the energy associated with their creation, in contrast to bundled transactions in which both the renewable energy credits and the associated power are sold together. The March Decision defined as bundled transactions any transactions with a generator that had its first point of interconnection with a California balancing authority, or in which the power associated with the renewable energy credits was dynamically transferred to a California balancing authority. The March Decision also recognized that some transactions with firm transmission arrangements might qualify as bundled transactions, but left that for future consideration.

The definition of bundled transactions adopted by the March Decision would mean that any transactions with renewable resources that do not have their first point of interconnection with a California balancing authority, or do not dynamically transfer power to a California balancing authority, would be deemed a TREC transaction subject to the cap. This would be true even if the renewable resource delivered power to California under a firming and shaping arrangement. The more generous cap proposed by the PD would allow California’s largest investor-owned utilities to enter into more contracts with renewable resources located outside the state.

The PD will not be on the Commission’s voting meeting agenda for at least thirty days from the date the PD was issued. Comments may be submitted on the PD by September 14, and reply comments are due by September 20.

Also looming on the horizon is the California legislature’s consideration of Senate Bill 722. Senate Bill 722, as currently drafted, would adopt statutory limits on the use of TRECs, as well as defining what would qualify as a TREC transaction. The legislature has until August 31, 2010, to approve SB 722. However, Governor Schwarzenegger has stated that he will veto the bill (as he did with similar legislation last year), unless the legislature increases the cap on TREC transactions. If SB 722 passes, however, in a form that Governor Schwarzenegger is willing to sign, it would preempt the standards established in the PD.

If you have any questions about the issues of this update, please contact:

Steven Hall at (503) 294-9434 or schall@stoel.com
Seth Hilton at (916) 319-4749 or sdhilton@stoel.com
Marcus Wood at (503) 294-9434 or mwood@stoel.com

CPUC Lifts Hold On CSI Applications

From our colleague Morten Lund:

On July 29, the California Public Utilities Commission (“CPUC”) issued a ruling lifting a prior temporary hold on certain applications under the California Solar Initiative (“CSI”). The CPUC had on July 9 placed a hold on new CSI applications for PBI projects and government/non-profit projects pending comments on certain proposed program changes. Generally, the CPUC and the State of California are concerned over the costs of the program going forward, despite the fact that the program provides ever decreasing incentives as more capacity is installed. But the condition that California finances are in has state regulators in all agencies looking closely at programs that dispense funds to try and find ways to cut such expenditures.

In the July 29 ruling, Commissioner Peevey declared that the temporary hold created an “unacceptable level of market disruption,” and that the temporary hold was therefore lifted. All applications submitted during the hold will be processed, and new applications accepted.

The July 29 ruling can be found on the CPUC’s website here: http://docs.cpuc.ca.gov/efile/RULINGS/121304.pdf
The July 9 ruling can be found on the CPUC’s website here: http://docs.cpuc.ca.gov/efile/RULINGS/120427.pdf

CPUC Approves 500 MW PG&E Program

The California Public Utilities Commission ("CPUC") has given the green light to a five-year solar photovoltaic program to develop up to 500 MW of solar PV facilities in Pacific Gas and Electric Co.'s ("PG&E") service area.

The program is designed to allow PG&E and third parties to develop PV facilities:

  • Under the utility-owned part of the program, PG&E may install up to 250 MW of PV facilities over 5 years, at a rate of 50 MW per year.  Each facility will have between 1 and 20 MW of capcity and will be located in PG&E's service area. The CPUC has allocated up to $1.454 billion for capital costs which will be adjusted if PG&E develops less than 250 MW over the five-year duration of the PV program.  PG&E will solict competitive bids for the construction  of the facilities, which it will own and operate.
  • Under the third-party-owned part of the program, PG&E can solicit energy from up to  250 MW of PV facilities which  located in PG&E's service area and which are owned by third parties - same size and annual installation restrictions apply.  Pricing for this portion will be based on competitive bids, with the successful bidders entering into a 20-year power purchase agreement with PG&E.

In an effort to secure good rates, CPUC is requiring PG&E  to use an independent evaluator to review the bids on both parts of the program.

PG&E built a 2 MW pilot project  in Vacaville, CA to demonstrate the viability of this program. The CPUC decision allows PG&E to recover the costs of construction the pilot project.

CPUC Proposed Decision on TRECs--Comments Due January 19

The California Public Utilities Commission ("CPUC") issued a proposed decision on December 23, 2009 that would, if adopted, allow California investor-owned utilities, energy service providers, and community choice aggregators to purchase renewable energy credits alone, without the associated energy (sometimes referred to as "unbundled renewable energy credits ("RECs)" or "tradable RECs"), to satisfy their obligations under California's RPS. California's largest investor-owned utilities—Pacific Gas and Electric, Southern California Edison, and San Diego Gas and Electric—would be limited to meeting no more than 40% of their annual procurement targets under the RPS with tradable RECs, and a price cap of $50 would be imposed. The CPUC will revisit both the percentage cap and the cost cap and whether those caps should be revised within 24 months of the decision.

Out-of-state renewable energy projects could be adversely impacted if the proposed order were adopted. The proposed decision would define all renewable generation purchased from out-of-state facilities1 as the purchase of unbundled or tradable RECs, making any out-of-state renewable energy sale subject to the cap that bars the large investor-owned utilities from using such sales to meet more than 40% of their overall RPS obligation. Although the proposed decision states that this classification would apply only to contracts signed on or after the effective date of the decision, contracts signed prior to the effective date would be considered REC-only contracts from the effective date forward, and would be "subject to the limits and rules applying to REC-only contracts" according to the proposed decision. Furthermore, although the purchase of tradable RECs from out-of-state facilities would be permitted, the delivery requirement in the RPS legislation would still have to be met, so a comparable amount of power would have to be imported into the state, along with the RECs. The jurisdiction to determine whether and how this delivery requirement is met, however, still remains with the California Energy Commission.

Comments on the proposed decision are due on January 19, 2010, and reply comments are due January 25, 2010.

For additional information about the history and effect of the proposed decision, see our Stoel Rives alert on the topic.

SCE Solicits Feedback on Solar PV Program; CPUC to Host Feed-in Tariff Panel

SCE Solar PV Program:

Back in June, the California Public Utilities Commission (“CPUC”) issued a decision authorizing Southern California Edison (“SCE”) to execute contracts for up to 250 MW of generation from solar PV facilities owned and operated by independent power producers through a competitive solicitation process. The CPUC decision required SCE to file an advice letter outlining the criteria for selection of bids and containing a draft standard power purchase agreement (“PPA”).

SCE recently filed the requisite advice letter requesting approval of its proposed competitive solicitation process and criteria and a draft standard PPA. Anyone may file protests or responses to SCE’s advice letter. Protests are due on August 10, 2009. For more information, as well as a link to SCE’s draft standard PPA, go to the CPUC website.

CPUC Panel on Feed-in Tariffs:

The CPUC announced that it will host an interactive panel discussion on feed-in tariffs for renewable energy on August 27, 2009. The panel will feature international experts from Germany, Spain, the United States, and elsewhere with experience in the global solar power market. The panelists will offer their insights on the global solar market, the role of feed-in tariffs and other mechanisms for advancing renewable energy development, and California’s role in facilitating wholesale renewable distributed generation.

The panel will be held from 1-2:30 PM at the CPUC Auditorium, 505 Van Ness Ave., San Francisco, CA.

California PUC Proposes Criteria to Evaluate the Viability of Proposed RPS Projects

Under California’s Renewable Portfolio Standard, investor-owned utilities only have until 2010 to procure 20% of their power from renewable sources (although certain flexible compliance measures do apply). There are concerns that the  rapidly-approaching deadline is leading utilities to sign power purchase agreements with projects that are not viable and may never achieve commercial operation. To help prevent this going forward, the California Public Utilities Commission Energy Division has proposed project viability criteria to evaluate each project bidding into California’s RPS program. Utilities would be required to score potential RPS projects based on developer experience in project financing, RFOs, and facility ownership and operation; technical viability; and project-specific viability criteria such as equipment procurement, project development lead time, transmission lead time and cost of transmission interconnection, site control, permitting, and pricing structure. The project viability score could be taken into account in PPA approval by the CPUC and in gaging whether to excuse utilities that fail to meet RPS goals. Scoring projects based on viability criteria has the potential to affect who successfully participates in the RPS solicitation process and the types of technologies that are selected as RPS projects. Comments on the CPUC proposal are due on February 27, 2009. Read more about the proposal in my colleagues’ recent Renewable Energy Law Alert.