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.
Washington UTC Issues Important Policy to Determine Eligibility of Renewable Energy Resources Under State EIA
For those interested in qualifying energy projects as “eligible renewable resources” under the Washington Energy Independence Act (EIA), the Washington Utilities and Transportation Commission (WUTC) issued on June 7, 2011 an important new policy statement that provides processes by which utilities and developers may obtain either a non-binding or binding opinion regarding the eligibility of those resources. Most importantly, these determinations may be obtained while projects are still in development, thereby easing the way for financing, formation of partnerships, and investments in research and development.
First, the Commission Staff has joined with staff of the Department of Commerce to establish an informal technical working group to provide non-binding technical analysis for guidance as to whether their proposed technology or resource is an “eligible renewable resource” under the EIA. Because the opinions of the Commission Staff are not binding on the Commission, and the Auditor, not Commerce, determines compliance for COUs, the technical working group will only provide technical analysis, not a binding legal opinion.
Second, for those entities that seek a more formal, binding opinion on the eligibility of their proposed project, there is an option under the Washington Administrative Procedure Act. Under the Act, any person may petition the Commission for a declaratory order with respect to the applicability to specified circumstances of a statute or rule enforceable by the Commission, such as RCW 19.285 or WAC 480-109-007. Persons with standing to file such petitions may include investor-owned utilities and entities that propose to sell projects, project output, or RECs from projects to investor-owned utilities.
For more information, see the full policy statement from the WUTC website or contact any of the Seattle-based Stoel Rives energy attorneys listed below:
David Hattery at (206) 386-7528 or dphattery@stoel.com
Graham Noyes at (206) 386-7615 or jgnoyes@stoel.com
Hania Younis at (206) 386-7519 or hyounis@stoel.com
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.
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.
San Diego Gas & Electric Issues RFO for Renewable Resources
Today, San Diego Gas & Electric (SDG&E) issued a Request for Offers seeking eligible renewable resources that the utility will use to meet its California Renewable Portfolio Standard requirements. Respondents may submit one or more of three alternative proposals:
- Power Purchase Agreement (PPA). Respondents are asked to propose a 10, 15, or 20-year PPA for capacity and/or energy, but SDG&E will nevertheless consider proposals with shorter or longer durations. Eligible Resources must be delivered to a point within California and must be begin deliveries sometime between 2010 and 2013.
- PPA with Buyout. Respondents offering PPAs may also submit an option price that SDG&E may exercise to purchase the resource as well as associated environmental attributes, land rights, permits, and other licenses upon conclusion of the PPA term. This alternative is limited to resources located in San Diego County, parts of Orange County within SDG&E's service territory, or Imperial Valley areas. Like respondents offering under the PPA alternative, respondents interested in offering resources under the PPA with Buyout alternative must begin delivering energy and/or capacity between 2010 and 2013.
- Turnkey Facilities. Respondents to the RFO may also propose to develop and construct a new renewable energy generation facility that SDG&E will acquire. SDG&E is proposing the same locational requirements that apply to PPA with Buyout projects.
A limitation that applies to all respondents is that resources located in SDG&E's service territory must be no smaller than 1.5 MW, and resources outside of SDG&E's service territory must be no smaller than 5 MW.
This RFO may be a great opportunity to transact with SDG&E as it endeavors to comply with California's ever-increasing RPS standards. SDG&E will hold two pre-bid conferences: one in San Diego on August 5, 2009, and the other in El Centro on August 12, 2009. Those interested in attending a pre-bid conference should register by July 31.
For more information, click here: SDG&E 2009 RFO Info
California PUC Moves to Allow Unbundled RECs
The California Public Utility Commission issued a draft decision on October 29th authorizing the use of unbundled and tradable renewable energy certificates (“RECs” or “TRECs”) for compliance with California’s RPS.
The draft decision also outlines the structure and rules for a tradable REC market and for integrating these RECs into the RPS “flexible compliance system.” Comments are due on Nov. 18, 2008. The draft decision can be found here: http://docs.cpuc.ca.gov/efile/PD/92913.htm.
