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:
- 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?
- 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.
- 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.
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:
- 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?
- 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?
- How can energy storage technologies be best integrated into the utilities’ existing portfolios?
- 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?
- 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?
- Is it possible to develop a single unifying policy for energy storage when storage has a wide variety of uses?
- 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?
- 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:
- How should energy storage applications/attributes be valued?
- What are the costs for the various types of energy storage applications?
- 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?
- 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.
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, 2011. The 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.
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
COMMISSIONER FLORIO NOTICES ALL-PARTY MEETING CONCERNING 2011 RENEWABLE PORTFOLIO STANDARD PROCUREMENT
On February 11, 2011, California Public Utilities Commission (CPUC) Administrative Law Judge Burton Mattson issued a Proposed Decision conditionally accepting the 2011 Renewables Portfolio Standard (RPS) Procurement Plans for Southern California Edison, Pacific Gas and Electric Company, and San Diego Gas and Electric Company. If adopted, the Decision would set a schedule for the utilities’ 2011 RPS solicitation. The Decision 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 17, 2011, Commissioner Florio noticed an all-party meeting on the Proposed Decision for March 25, 2011. Yesterday, Commission Florio circulated an agenda for the meeting. Among the issues raised by the agenda is whether an RPS solicitation in 2011 is necessary and prudent.
Stoel Rives’ Partner Seth Hilton will be present at the all-party meeting, and will provide an update afterwards.
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.
The California Public Utilities Commission Lifts Moratorium on Approval of Tradable Renewable Energy Credit Transactions; Limits Use of Out-of-State Generation for California RPS Compliance
A legal update from our colleague Seth Hilton:
Ten months after initially authorizing the use of tradable renewable energy credits (TRECs), the California Public Utilities Commission (CPUC) today lifted its moratorium on approval of TREC transactions. CPUC Dec. 11-01-025. Today’s decision, however, retains restrictions on TREC transactions that could limit the amount of out-of-state generation that the three major investor-owned utilities can use to meet their California Renewable Portfolio Standard (RPS) obligations.
At its March 11, 2010 meeting, the CPUC authorized the use of TRECs for compliance with the RPS, subject to certain limitations. CPUC Dec. 10-03-021 (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 was also set to expire on December 31, 2011.
California Public Utilities Commission Approves Renewable Auction Mechanism
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 Staff Issues White Paper on Electric Energy Storage (EES)
Energy Electricty Storage (EES) is likely to become more and more important as intermittent solar and wind energy resources penetrate the grid. EES may be a very useful and perhaps essential way to manage the variability of intermittent renewable energy resources to allow developers to continue building wind and solar projects at an accelerating pace.
On July 9, 2010, the Policy and Planning Division of the California Public Utility Commission (CPUC) issued an interesting Staff White Paper entitled "Electric Energy Storage: An Assessment of Potential Barriers and Opportunities." The report is worth reading for those who are interested in the future of renewable energy and the roll that EES can play in enhancing the deployment of intermittent renewables.
The report describes "a promising new set of Electric Energy Storage ("EES") technologies [that] appear to provide an effective means for addressing the growing problems of reliance on an increasing percentage of intermittent renewable generation resources." The report observes that EES can provide several basice services, such as (1) supplying peak electricity demand by using electricity generated during periods of lower demand (e.g., storage of wind energy generated at night for use during daily peak periods), (2) balancing electricity supply and demand fluctuations over a period of minutes, and (3) deferring expansion of electric grid capacity (including generation, transmission and distribution).
Potential storage technologies include pumped hydro, compressed air energy storage ("CAES"), batteries, thermal storage (e.g., solar thermal plants), flywheels, unltracapacitors and superconducting magnetic storage--the report provides short but helpful description of each technology. Storage presents interesting legal and policy issues, because "[r]egulators are uncertain how EES technologies should fit into the electric system, in part because EES services provide multiple services such as generation, transmission and distribution." In addition, "regulators do not yet know how EES costs and benefits should be allocated among these three main elements of the electric system."
The report makes a number of recommendations, including that the CPUC should conduct a rulemaking to develop policies to remove barriers to the deployment of EES technology in California. The report also proposes that the CPUC consider placing EES within California's energy resources loading order, require utilities to incoporate EES into their integrated resource planning processes, encourage CAISO to change ancillary service market rules to allow EES systems to more easily bid into regulation markets, and integrate EES into utility transmission planning.
The report concludes that "the major barrier for deployment of new storage facilities is not necessarily the technology, but the absence of appropriate regulations and market mechanisms that properly recognize the value of the storage resource and financially comepnsate the owners/operators for the services and benefits they provide."
You can find the report here.
CPUC Staff Issues White Paper on Electric Energy Storage (EES)
Energy Electricty Storage (EES) is likely to become more and more important as intermittent solar and wind energy resources penetrate the grid. EES may be a very useful and perhaps essential way to manage the variability of intermittent renewable energy resources to allow developers to continue building wind and solar projects at an accelerating pace.
On July 9, 2010, the Policy and Planning Division of the California Public Utility Commission (CPUC) issued an interesting Staff White Paper entitled "Electric Energy Storage: An Assessment of Potential Barriers and Opportunities." The report is worth reading for those who are interested in the future of renewable energy and the roll that EES can play in enhancing the deployment of intermittent renewables.
The report describes "a promising new set of Electric Energy Storage ("EES") technologies [that] appear to provide an effective means for addressing the growing problems of reliance on an increasing percentage of intermittent renewable generation resources." The report observes that EES can provide several basice services, such as (1) supplying peak electricity demand by using electricity generated during periods of lower demand (e.g., storage of wind energy generated at night for use during daily peak periods), (2) balancing electricity supply and demand fluctuations over a period of minutes, and (3) deferring expansion of electric grid capacity (including generation, transmission and distribution).
Potential storage technologies include pumped hydro, compressed air energy storage ("CAES"), batteries, thermal storage (e.g., solar thermal plants), flywheels, unltracapacitors and superconducting magnetic storage--the report provides short but helpful description of each technology. Storage presents interesting legal and policy issues, because "[r]egulators are uncertain how EES technologies should fit into the electric system, in part because EES services provide multiple services such as generation, transmission and distribution." In addition, "regulators do not yet know how EES costs and benefits should be allocated among these three main elements of the electric system."
The report makes a number of recommendations, including that the CPUC should conduct a rulemaking to develop policies to remove barriers to the deployment of EES technology in California. The report also proposes that the CPUC consider placing EES within California's energy resources loading order, require utilities to incoporate EES into their integrated resource planning processes, encourage CAISO to change ancillary service market rules to allow EES systems to more easily bid into regulation markets, and integrate EES into utility transmission planning.
The report concludes that "the major barrier for deployment of new storage facilities is not necessarily the technology, but the absence of appropriate regulations and market mechanisms that properly recognize the value of the storage resource and financially comepnsate the owners/operators for the services and benefits they provide."
You can find the report here.
Tradable RECs Now Count Toward California's RPS
On Thursday March 11, 2010, the California Public Utility Commission (the "CPUC") created a market for tradable renewable energy credits ("TRECs") in the state. That's big news. In its 149-page decision, the CPUC stated that investor-owned utilities ("IOUs"), energy service providers, and community choice aggregators may now use TRECs to comply with California's ambitious renewable portfolio standard ("RPS"). These entities are now permitted to purchase a portion of their RPS compliance from generation sources other than those they own (e.g., distributed solar generation facilities within the state and certain out-of-state facilities).
Think of a renewable energy credit as the "green" portion of a unit of electricity generated from an RPS-eligible facility (e.g., wind, solar, geothermal). Together, the "green" renewable energy credit and the unit of electricity that it came with are bundled; separate them, and they become unbundled. The CPUC's decision allows an RPS-eligible generator to unbundle the renewable energy credits and sell them separately from the electricity they were generated with. Thus, the renewable energy credits become tradable (i.e., TRECs).
The CPUC made its decision to allow the unbundling of renewable energy credits for two main reasons, both of which seem perfectly reasonable in light of California's push toward distributed solar generation and the conflict that is created when utilities need to meet ever-increasing RPS requirements in an atmosphere of stringent siting regulations for new projects under the California Environmental Quality Act.
- First, the CPUC created a market for TRECs to aid utilities with RPS compliance.
- Second, the TREC market is intended to incentivize development of more RPS-eligible generation, like rooftop solar modules.
A few highlights of the CPUC decision deserve particular attention:
25% Cap on TRECs: IOUs may only meet 25% of their RPS requirement with TRECs under the program. However, that 25% cap will be lifted in 2011 (unless the CPUC changes its mind).
Interim Price Cap: The CPUC set a price cap of $50 per TREC that is used for compliance by an IOU. However, that price cap will also be lifted in 2011 (unless the CPUC changes its mind).
3-Year Tradable Life: To count TRECs toward its RPS requirement, a participating utility must meet CPUC requirements for TREC-trading and Western Renewable Energy Generation Information System ("WREGIS") requirements for TREC-tracking. During the first 2-3 years of the program, the CPUC does not expect much activity in the market; so to ensure liquidity, new TRECs must be retired with WREGIS within 3 years from the date the TREC was created. "Retiring" a TREC means that the ultimate owner has applied the TREC's compliance value to the owner's California RPS requirement with WREGIS and the TREC is taken out of the market. However, once retired, a TREC's compliance value may be banked indefinitely.
TRECs Under Existing Contracts: TRECs generated in future years under existing RPS contracts (i.e., TRECs generated from this day forward) may be unbundled and sold separately under certain conditions set out in the CPUC's ruling.
Out-of-State Suppliers & Bundled Transactions: Bundled transactions must benefit California-customer load. Therefore, only electricity that comes from (1) California-connected generators and (2) out-of-state suppliers that can demonstrate that the bundled product that they deliver to California is not "shaped" using non-RPS-eligible resources, may qualify.
No Bundled Transactions for In-State Generators Selling Out-of-State: When an IOU purchases renewable energy credits (whether bundled or unbundled) from a generator located in California that sells its electricity outside of the state, the CPUC will consider that an unbundled purchase for purposes of reporting and retiring the credits. Therefore, renewable energy credits bought from an RPS-eligible generator serving out-of-state loads will count toward the IOU's 25% cap.
From an economic standpoint, the CPUC hopes that creating a market for TRECs will increase the overall efficiency of the RPS program. By allowing the market to set separate prices for TRECs and for the electricity associated with generating them, the CPUC believes that the public will benefit because the price of each will reflect its actual value.
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.
