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.
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.
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
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.
