DRAFT PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA ID #10234 ENERGY DIVISION RESOLUTION E-4393 April 14, 2011 REDACTED RESOLUTION Resolution E-4393. Pacific Gas and Electric Company requests approval of a power purchase agreement with SGS-1, LLC, a wholly owned subsidiary of Sempra Generation. PROPOSED OUTCOME: This Resolution approves cost recovery for Pacific Gas and Electric Company’s renewable power purchase agreement with SGS-1, LLC. The power purchase agreement is approved with conditions. ESTIMATED COST: Actual costs are confidential at this time. By Advice Letter 3741-E filed on October 12, 2010. __________________________________________________________ SUMMARY PG&E’s renewable contract complies with the Renewables Portfolio Standard (RPS) procurement guidelines and is approved with conditions Pacific Gas & Electric (PG&E) filed Advice Letter (AL) 3741-E on October 12, 2010, requesting the California Public Utilities Commission’s (Commission) approval of a renewable purchase power agreement (PPA) with a new solar photovoltaic (PV) facility being developed by SGS-1, LLC (SGS-1), a subsidiary of Sempra Generation. For the purpose of meeting its RPS targets, PG&E executed a 20 year contract with SGS-1, LLC through bilateral negotiations. The 150 megawatt (MW) Mesquite Solar PV facility (Mesquite Solar or Project) will be developed in Maricopa County, Arizona. The PPA requires that the Project’s first point of interconnection will be with the California Independent System Operator Balancing Authority Area (CAISO BAA), or that the energy will be dynamically transferred to the CAISO BAA. The Project will start delivering 446535 1 Resolution E-4393 DRAFT April 14, 2011 PG&E AL 3741-E/JLS energy during a 2012-2014 phase-in period. Under the terms of the PPA, the Mesquite Solar project must energize 75 MW of capacity 18 months after Commission approval of the PPA and 150 MW of capacity 36 months after Commission approval of the PPA. This resolution approves the SGS-1, LLC contract with conditions. PG&E’s execution of this contract is consistent with PG&E’s 2009 RPS Procurement Plan, including its resource need, which the Commission approved in Decision(D.)09- 06-018. Provided that the Project’s first point of interconnection is with the CAISO BAA or the energy from the Project is dynamically transferred into the CAISO BAA, the contract with SGS-1 will be considered “bundled” for RPS compliance purposes pursuant to D.10-03-021, as modified by D.11-01-025. The California Energy Commission (CEC) has determined that the proposed delivery pathways that SGS-1, LLC is seeking with the CAISO would meet the RPS delivery requirements according to the Renewables Portfolio Standard Eligibility Guidebook (CEC-300-2010-007-CMF, January 2011). RPS-eligible deliveries from the PPA are reasonably priced and fully recoverable in rates over the life of the contract, subject to Commission review of PG&E’s administration of the contract. This resolution requires that PG&E amend its contract with SGS-1 so that the PPA conforms with the Commission’s standard terms and conditions for RPS contracts. The following table summarizes the Project-specific features of the agreement: Generating Term MW Annual Online Project Type Facility Years Capacity Deliveries Date Location Solar PV, Maricopa Mesquite fixed tilt, 20 150 MW 305 GWh 2012 County, Solar non- AZ tracking 2 Resolution E-4393 DRAFT April 14, 2011 PG&E AL 3741-E/JLS BACKGROUND Overview of RPS Program The California RPS Program was established by Senate Bill (SB) 1078, and has been subsequently modified by SB 107 and SB 1036.1 The RPS program is codified in Public Utilities Code Sections 399.11-399.20.2 The RPS program administered by the Commission requires each utility to increase its total procurement of eligible renewable energy resources by at least one percent of retail sales per year so that 20 percent of the utility’s retail sales are procured from eligible renewable energy resources no later than December 31, 2010.3 Additional background information about the Commission’s RPS Program, including links to relevant laws and Commission decisions, is available at http://www.cpuc.ca.gov/PUC/energy/Renewables/overview.htm and http://www.cpuc.ca.gov/PUC/energy/Renewables/decisions.htm. NOTICE Notice of Advice Letter 3741-E was made by publication in the Commission’s Daily Calendar. PG&E states that a copy of the Advice Letter was mailed and distributed in accordance with Section 3.14 of General Order 96-B. PROTESTS Advice Letter 3741-E was not protested. 1 SB 1078 (Sher, Chapter 516, Statutes of 2002); SB 107 (Simitian, Chapter 464, Statutes of 2006); SB 1036 (Perata, Chapter 685, Statutes of 2007) 2 All further references to sections refer to Public Utilities Code unless otherwise specified. 3 See § 399.15(b)(1). 3 Resolution E-4393 DRAFT April 14, 2011 PG&E AL 3741-E/JLS DISCUSSION PG&E requests Commission approval of a new renewable energy contract On October 12, 2010, Pacific Gas & Electric (PG&E) filed Advice Letter 3741-E requesting Commission approval of a renewable procurement contract with SGS- 1, LLC for generation from its proposed Mesquite Solar photovoltaic (PV) facility (Mesquite Solar or [this is what you have in the Summary] Project). Generation from the 150 megawatt (MW) Project is expected to contribute an average of 305 gigawatt-hours (GWh) annually towards PG&E’s annual procurement target, pursuant to the Commission’s renewables portfolio standard (RPS) program. Under the terms of the bilaterally negotiated purchase power agreement (PPA), the Project must energize 75 MW of capacity within 18 months after Commission approval of the PPA and 150 MW of capacity within 36 months after Commission approval of the PPA. There is a project development phase–in period under which initial energy deliveries are expected to begin in 2012 with full commercial operational delivery expected to begin in 2014. The Project will be located in Maricopa County, Arizona. The project will be interconnected within the Western Electricity Coordinating Council (WECC) transmission system, and energy from the Project will be scheduled directly with the California Independent System Operator (CAISO). The Project’s first point of interconnection will be with the California Independent System Operator Balancing Authority Area (CAISO BAA), or the Project’s energy will be dynamically transferred to the CAISO BAA. See Confidential Appendix C for a discussion on the various interconnection options that SGS-1 is pursuing. The Commission’s approval of the contract will authorize PG&E to accept future RPS-eligible generation that will contribute towards PG&E’s 20% RPS mandate, and the 20-year contract will contribute to PG&E’s long-term RPS goals. PG&E requests that the Commission issue a resolution containing the following findings: 1. Approves the PPA in its entirety, including payments to be made by PG&E pursuant to the PPA, subject to the Commission’s review of PG&E’s administration of the PPA. 2. Finds that any procurement pursuant to the PPA is procurement from an eligible renewable energy resource for purposes of determining PG&E’s compliance with any obligation that it may have to procure eligible 4 Resolution E-4393 DRAFT April 14, 2011 PG&E AL 3741-E/JLS renewable energy resources pursuant to the California RPS (Public Utilities Code Section 399.11 et seq.), D.03-06-071 and D.06-10-050, or other applicable law. 3. Finds that all procurement and administrative costs, as provided by Public Utilities Code section 399.14(g), associated with the PPA shall be recovered in rates. 4. Adopts the following finding of fact and conclusion of law in support of CPUC Approval: a. The PPA is consistent with PG&E’s 2009 RPS procurement plan. b. The terms of the PPA, including the price of delivered energy, are reasonable. 5. Adopts the following finding of fact and conclusion of law in support of cost recovery for the PPA: a. The utility’s costs under the PPA shall be recovered through PG&E’s Energy Resource Recovery Account. b. Any stranded costs that may arise from the PPA are subject to the provisions of D.04-12-048 that authorize recovery of stranded renewables procurement costs over the life of the contract. The implementation of the D.04-12-048 stranded cost recovery mechanism is addressed in D.08-09-012. 6. Adopts the following findings with respect to resource compliance with the Emissions Performance Standard (“EPS”) adopted in R.06-04-009: a. The PPA is not covered procurement subject to the EPS because the generating facility has a forecast capacity factor of less than 60 percent and, therefore, is not baseload generation under paragraphs 1(a)(ii) and 3(2)(a) of the Adopted Interim EPS Rules. b. PG&E has provided the notice of procurement required by D.06-01-038 in its Advice Letter filing. 5 Resolution E-4393 DRAFT April 14, 2011 PG&E AL 3741-E/JLS Energy Division Evaluated the SGS-1 Contract on These Grounds: • Consistency with Commission guidelines for bilateral contracting • Consistency with PG&E’s 2009 RPS Procurement Plan • Consistency with PG&E’s Least-Cost, Best-Fit requirements • Independent Evaluator review • Consistency with RPS standard terms and conditions • Consistency with TREC Rules • Cost reasonableness • Cost containment • Project viability assessment and development status • Consistency with RPS Eligibility Delivery Rules • Compliance with the minimum quantity condition • Consistency with the Emissions Performance Standard • Procurement Review Group participation Consistency with Commission Guidelines for Bilateral Contracting According to PG&E, the parties pursued bilateral negotiations because the timeline of the 2009 RPS solicitation would have delayed SGS-1’s project development.