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PUBLIC F I L E D 11-29-12 04:59 PM PACIFIC GAS AND ELECTRIC COMPANY RENEWABLES PORTFOLIO STANDARD 2012 RENEWABLE ENERGY PROCUREMENT PLAN (FINAL VERSION) NOVEMBER 29, 2012 PUBLIC TABLE OF CONTENTS 1 Introduction and Overview of 2012 Plan .............................................................. 1 1.1 Overview of 2012 Plan .............................................................................. 1 1.2 Summary of Important Recent Legislative/Regulatory Changes to the RPS Program ...................................................................................... 4 1.2.1 Commission Implementation of SB 2 (1x) ...................................... 5 1.2.1.1 Portfolio Content Requirements ................................ 5 1.2.1.2 Compliance Period Targets ...................................... 6 1.2.1.3 Compliance Rules ..................................................... 7 1.2.2 TRECs ........................................................................................... 8 1.2.3 Cost Containment .......................................................................... 9 1.2.4 QF/CHP Settlement ..................................................................... 10 1.3 Status of Efforts to Bring New RPS-Eligible Facilities Online and Deliver RPS-Eligible Energy to Customers ............................................. 11 1.3.1 Increasing Success in the Development of Renewable Energy Projects ............................................................................ 11 1.3.2 Challenges to Renewable Energy Deployment Remain ............... 12 1.4 Bid Solicitation Needs, On-Line Dates, and Locational Preferences ...... 12 1.4.1 2012 Procurement Will Address Long-Range RPS Goals ........... 13 1.4.2 Changes to RPS Form PPA and Bid Solicitation Protocol ........... 14 1.5 Utility-Ownership of RPS Resources and Renewable Investments ........ 16 1.5.1 Utility-Owned Renewable Projects ............................................... 16 1.6 Sales of RPS Procurement ..................................................................... 16 1.7 Summary of RPS Cost and Rate Impact Data ........................................ 17 2 Assessment of RPS Portfolio Supplies and Demand ........................................ 19 2.1 Supply and Demand to Determine the Optimal Mix of RPS Resources ............................................................................................... 19 2.1.1 Supply – PG&E’s Need for and Plan for Procuring Resources That Satisfy the Three Portfolio Content Categories .................................................................................... 21 2.1.1.1 Category 1 Products ............................................... 22 2.1.1.2 Category 2 Products ............................................... 22 2.1.1.3 Category 3 Products ............................................... 23 i TABLE OF CONTENTS (CONTINUED) 2.1.1.4 TRECS ................................................................... 24 2.1.2 Supply – Existing Portfolio and Market Trends ............................ 24 2.1.3 Demand ....................................................................................... 25 2.2 PG&E’s 2012 RPS Procurement Goal .................................................... 26 2.3 2012 Procurement Will Address Long-Term RPS Goals ........................ 28 2.3.1 Anticipated Renewable Energy Technologies and Alignment of Portfolio with Expected Load Curves and Durations ................ 28 3 Potential Compliance Delays ............................................................................. 29 3.1.1 Project Financing ......................................................................... 30 3.1.2 Siting and Permitting of Renewable Generation Facilities ............ 31 3.1.3 Transmission and Interconnection Reform ................................... 33 3.1.4 Procurement Expenditure Limitations for the RPS Program ........ 34 3.2 The 2012 Solicitation Protocol and Form PPA Seek to Minimize Potential Compliance Delays .................................................................. 35 3.2.1 Project Financing ......................................................................... 35 3.2.2 Siting and Permitting .................................................................... 36 3.2.3 Transmission and Interconnection ............................................... 37 3.2.4 Cost Containment ........................................................................ 37 3.3 PG&E’s Risk-Adjusted Analysis Accounts for Estimated Compliance Delays ................................................................................. 37 3.4 Assessment of How Potential Compliance Delays Will Impact PG&E’s Procurement Decisions ............................................................. 38 4 Project Development Status Update .................................................................. 38 4.1 Project Status Monitoring Process .......................................................... 38 4.1.1 Monthly Reporting Process .......................................................... 39 4.1.2 Site Visits ..................................................................................... 40 4.1.3 Additional Monitoring Activities..................................................... 40 4.2 Development Schedules ......................................................................... 41 4.3 Project Development Status Update....................................................... 42 4.3.1 Portfolio-Wide Development Summary ........................................ 42 5 Risk Assessment ............................................................................................... 43 5.1 Risk Categorization ................................................................................. 43 ii TABLE OF CONTENTS (CONTINUED) 5.2 Use of Risk Categorization in the Quantitative Assessment Incorporates Assumed Margin of Over-Procurement, and Informs PG&E’s Determination of Procurement Need ......................................... 45 6 Quantitative Information .................................................................................... 46 6.1 Quantitative Methodology Used to Assess PG&E’s Twenty Year RPS Compliance Outlook and Procurement Need ................................. 46 6.2 Deterministic Criteria ............................................................................... 47 6.3 Range of Anticipated Need ..................................................................... 48 6.4 Quantitative Results ................................................................................ 49 6.5 Use of Surplus Bank ............................................................................... 50 7 Minimum Margin of Over-Procurement .............................................................. 51 7.1 Statutory Minimum Margin of Over-Procurement .................................... 51 7.2 Voluntary Compliance Margin of Over-Procurement .............................. 53 8 Bid Selection Protocol, Including Least-Cost, Best-Fit Methodologies .............. 55 8.1 Overview of 2012 RPS Solicitation Protocol and RPS Form PPA .......... 55 8.1.1 2012 RPS Procurement Goals ..................................................... 55 8.1.2 Relationship between Identified RPS Procurement Need and 2012 Procurement Goals ............................................................. 56 8.1.3 Key Issues and Changes in the 2012 RPS Solicitation Process ........................................................................................ 57 8.2 Modifications to Commercial Terms in the 2012 RPS Form PPA ........... 60 8.3 Description of the Least-Cost, Best-Fit Criteria and Evaluation Process ................................................................................................... 64 8.4 New Proposals in ACR Regarding the RPS Solicitation Process ........... 67 8.4.1 Standardized Variables in LCBF Market Valuation ...................... 67 8.4.2 Preliminary Independent Evaluator Report .................................. 69 8.4.3 Shortlists Expire After 12 Months ................................................. 70 8.4.4 Two-Year Procurement Authorization .......................................... 71 8.5 Lessons Learned .................................................................................... 72 9 Estimating Transmission Costs for the Purpose of RPS Procurement and Bid Evaluation .................................................................................................... 72 9.1 Proposed Approach to Estimating and Incorporating Transmission Costs in RPS Bid Evaluations ................................................................. 72 iii TABLE OF CONTENTS (CONTINUED) 9.2 New Proposal to Use CAISO Transmission Cost Study Estimates in LCBF Evaluations ................................................................................... 73 9.3 New Proposal to Create Two Shortlists Based on Status of Transmission Study ................................................................................ 76 9.4 New Proposal to Utilize the Commission’s RPS Procurement Process to Minimize Transmission Costs ............................................... 76 9.4.1 Constraining Procurement at the Shortlisting Stage Is Premature .................................................................................... 77 9.4.2 Energy-only Projects Should Not Be Constrained Based on Deliverability Capacity .................................................................. 79 10 Consideration of Price Adjustment