Ii. Solicitation Schedule and Approval Process 4

RENEWABLES
PORTFOLIO
STANDARD

2011

SOLICITATION

PROTOCOL

May 11, 2011

(Updated June 7, 2011)

2

TABLE OF CONTENTS

Section Page

I. INTRODUCTION 1

II. SOLICITATION SCHEDULE AND APPROVAL PROCESS 4

III. SOLICITATION GOALS 6

IV. ELIGIBILITY REQUIREMENTS 10

V. TERMS FOR RFO PARTICIPATION 14

VI. OVERVIEW OF ATTACHMENTS 17

VII. CREDIT/COLLATERAL REQUIREMENTS UPON PPA OR PSA EXECUTION 18

VIII. REQUIRED INFORMATION 21

IX. OFFER PRICING 30

X. TRANSMISSION 32

XI. EVALUATION OF OFFERS 40

XII. CONFIDENTIALITY/SARBANES-OXLEY DISCLOSURE 44

XIII. PROCUREMENT REVIEW GROUP REVIEW 46

XIV. SHORTLIST NOTIFICATION TO PARTICIPANTS 46

XV. EXECUTION OF AGREEMENT 47

XVI. REGULATORY APPROVAL 47

XVII. DISPUTE RESOLUTION 47

XVIII. TERMINATION OF THE SOLICITATION – RELATED MATTERS 48

XIX. FERC ORDER No. 717 NOTICE 49

XX. SHORT TERM OFFERS 49

XXI. REC-ONLY OFFERS …………………………………………………………………..52

LIST OF ATTACHMENTS

Attachment A: RPS Solicitation Protocol Terms and Conditions

Attachment B: Form of Letter of Credit

Attachment C: Bidders’ Conference Registration Form

Attachment D: Offer Forms

Attachment E: Participant Credit-Related Information Form

Attachment F: FERC Order No. 717 Waiver

Attachment G: Confidentiality Agreement

Attachment H: Forms of Power Purchase Agreements and Purchase and Sale Agreement

Attachment I: Detailed Term Sheet

Attachment J: Key Commercial Terms of Renewable Power Purchase and Sale Agreement for Renewable Generating Facility

Attachment K: Detailed Least Cost Best Fit Evaluation Criteria

Attachment L: Supplier Diversity Questionnaire

Attachment M: CHP Facility Information

Attachment N: Request for Taxpayer ID Number (W-9)

I.  INTRODUCTION

A.  Implementation of California Renewables Portfolio Standard Program

The California Renewables Portfolio Standard Program (“RPS Program”) was established by California Senate Bill 1078, effective January 1, 2003.[1] The RPS Program requires that a retail seller of electricity such as Pacific Gas and Electric Company (PG&E or Utility) purchase a certain percentage of electricity generated from Eligible Renewable Resources (ERR) by increasing its total procurement of ERR generation by at least 1percent of annual retail sales per year so that in 2010, 20percent of its retail sales were supplied by ERRs. An ERR is a facility that has been certified by the California Energy Commission (CEC)[2] as meeting the applicable criteria set forth in Public Utilities Code Section 399.12 subdivision (c). This RPS Solicitation Protocol describes the process by which PG&E seeks, evaluates, and accepts Participant’s offers to provide electricity from ERRs in order to satisfy PG&E’s RPS requirements.

B.  Solicitation Overview

PG&E requests that interested parties that meet the criteria established in this document (the “Solicitation Protocol”) submit, in accordance with the directions in this Solicitation Protocol, one or more offers (each an “Offer”) to sell to PG&E the Product, as defined below, generated by existing ERRs, planned ERRs, or Sites for ERR development. For purposes of this Solicitation Protocol, (i) the term “Project” refers to the ERR described in an Offer and (ii) the term “Site” refers to new or existing sites controlled by the Participant, with land rights assigned to or purchased by PG&E as part of the acquisition, as further discussed in Section III.D.2(c). The electricity generated by a Project, together with all capacity and any other attributes required by the California Public Utilities Commission (CPUC or Commission) and/or the CEC to count the electricity toward PG&E’s RPS compliance requirements, is called the “Product.” An entity submitting an Offer in response to the Solicitation Protocol is hereby defined as a “Participant.”

As explained more fully below, PG&E is seeking Offers to: (a)procure Products under a power purchase agreement, (b)enter into a power purchase agreement with an option to purchase the Project at a date(s) identified in the offer, (c)purchase a Project pursuant to purchase and sale agreement, (d)purchase of Site for development of a Project, or (e)procure renewable energy credits (RECs).

Because market conditions may be different for existing ERRs selling Product for terms of less than five years, exceptions have been made to accommodate Short Term Offers. Interested Participants should review SectionXX for specific Short Term Offer protocol terms.

PG&E will evaluate the Offers and then select those Offers that meet the evaluation criteria established herein for (i) further discussion and negotiation of the Offer terms or (ii) acceptance of the Offer, subject to CPUC approval (the “Shortlist” of Offers or “Shortlisted” Offers). Short Term Offers and Tradeable Renewable Energy Credits (REC) may be compared with bids offering similar Products, and may be ranked on a separate Shortlist.

If an Offer is not included on the Shortlist, it means the Participant or the Offer itself has not met the Solicitation Protocol criteria and the Offer will not be entitled to further consideration by PG&E for this Solicitation.

A Participant should prepare each Offer with the understanding that: (i) each Offer is a binding offer in accordance with Section V.A., “Binding and Exclusive Nature of Offer,” and (ii) the result of a successful discussion and negotiation with PG&E or acceptance of an Offer without modification would mean entering into (a) a power purchase agreement with PG&E using Attachment H1 Form of Power Purchase Agreement (PPA), Attachment H2 REC plus Firm Energy Agreement, or Attachment H3 Form of Purchase and Sale Agreement for Renewable Energy Credits, (b) a term sheet agreement with respect to PG&E’s ownership of a generating facility, as set forth in Attachment J - Key Commercial Terms of Renewable Power Purchase and Sale Agreement for Renewable Generating Facility, (“PSA Term Sheet”), or (c) an agreement to be developed for PG&E’s purchase of a Site for development of a Project (“Site Agreement”). For purposes of this Solicitation Protocol, use of the term “Agreement” refers to the agreement between PG&E and Participant resulting from this Solicitation and based on the PPA, PSA Term Sheet, Site Agreement, or Purchase and Sale Agreement for RECs. Please refer to Section VI for details regarding the PPA and Term Sheets.

Each Participant is solely responsible for all its expenses related to its Offer or any other expenses incurred in connection with this Solicitation. PG&E agrees, and requires that each Participant agree, to act in good faith in its performance of obligations under this Solicitation Protocol and, in each case in which PG&E’s or Participant’s consent or agreement is required or requested hereunder, such consent or agreement shall not be unreasonably withheld or delayed.

PG&E is conducting a separate solicitation for projects proposed as a part of PG&E’s Photovoltaic (PV) Program approved in CPUC Decision 10-04-052. The solicitation process and evaluation criteria for PG&E’s PV Program for PPAs is outlined in Advice Letter 3786-E, which was approved by the CPUC on February 1, 2011. The PV Program solicitation is separate from the 2011 RPS solicitation.

C.  No Guarantee of Offer or Agreement

PG&E welcomes Offers under this Solicitation and anticipates executing Agreements, as it has done in the previous seven (7) solicitations under the RPS Program. However, PG&E’s request for Offers through the publication of this Solicitation Protocol does not constitute an offer to buy and creates no obligation to execute any Agreement as a consequence of this Solicitation. PG&E shall retain the sole discretion to reject any Offer at any time on the ground that it does not conform to the terms and conditions of this Solicitation Protocol. PG&E also retains the discretion, at any time, in its sole judgment, to: (a) reject any Offer on the basis that it does not provide sufficient customer benefit or that it would impose conditions that PG&E determines are impractical or inappropriate; (b) formulate and implement appropriate criteria for the evaluation and selection of Offers; (c) negotiate with Participants to maximize customer benefit; (d) modify this Solicitation Protocol as necessary to improve the implementation of this Solicitation and to comply with applicable law or other direction provided by the CPUC or any other regulatory entity with applicable jurisdiction; (e) reject any selected Offer not supported by the Procurement Review Group (PRG), established pursuant to Decision (D.) 02-08-071 and made applicable to this Solicitation by D.03-06-071, in a timely manner; and (f) condition PG&E's acceptance of any selected Offer on the Participant’s agreement to modify such Offer as recommended by the PRG. Notwithstanding the above, PG&E reserves the right to suspend or terminate this Solicitation at any time for any reason whatsoever. PG&E will not be liable, by reason of any of the above actions, to any Participant submitting an Offer in response to this Solicitation.

In its sole discretion, PG&E may also elect to pursue an Agreement with any Participant that has submitted a selected Offer with which the PRG has not concurred, subject to PG&E obtaining Regulatory Approval of such Agreement as provided and defined in Section XVI of this Solicitation Protocol and the applicable Agreement.

Under no circumstances shall PG&E be contractually bound by the terms of any Participant’s Offer until all the terms of the conditions precedent set forth in the fully-executed Agreement have been satisfied or waived upon mutual agreement of PG&E and the party to the Agreement. Two conditions precedent of note are the requirement that the Agreement (i) receives CPUC approval (as provided in each Agreement), and (ii) that the CPUC authorizes rate recovery to PG&E for any payments made under the Agreement.

D.  RPS Website and Communications Between PG&E and Participants

To access PG&E’s website where all Solicitation Protocol documents, information, announcements and Questions and Answers are posted and available for Participants to download, go to www.pge.com/rfo and click on “2011 Renewables RFO.”

PG&E strongly prefers to conduct all Solicitation-related communications via its RPS e-mail address, . With respect to matters of general interest raised by any Participant, PG&E may post the questions with responses on its website without reference to the Participant who raised the issue. PG&E may, in its sole discretion, decline to respond to any email or other inquiry, and will have no liability or responsibility to any Participant for failing to do so. PG&E will hold a public bidders’ conference to provide a further opportunity for Participants to ask questions.

II.  SOLICITATION SCHEDULE AND APPROVAL PROCESS

A.  Solicitation Schedule

The table below summarizes the estimated Solicitation schedule. Further details of each event in the schedule is provided below.

Table II.1: PG&E Solicitation Schedule

DATE / EVENT /
Ongoing / Participant may register online at PG&E’s website for general information or for the Bidders’ Conference, as applicable
May 11, 2011 / PG&E issues Solicitation
May 16, 2011 / Deadline for Participant to submit in-person registration for Bidders’ Conference
May 19, 2011 / General Bidders’ Conference (1:00 - 4:30 P.M. PPT)
June 22, 2011
Noon. Pacific Prevailing Time / Deadline for PG&E to receive Offer(s). Offers will not be accepted after 12:00 noon.
July 11, 2011 / PG&E notifies Commission that bidding is closed
August 22, 2011 / PG&E notifies Shortlisted bidders and requests bid deposit
September 6, 2011 / Participant notifies PG&E whether it accepts Shortlist position from PG&E and posts offer deposit
September 7, 2011 / PG&E submits final Shortlist to Commission and PRG
October 7, 2011 / PG&E submits report on evaluation criteria and selection process; Independent Evaluators submit preliminary reports
TBD / PG&E and Participants negotiate and execute Agreements subject to Regulatory Approval; PG&E submits Agreements for Regulatory Approval

PG&E may change this schedule at any time, at its discretion, subject to CPUC concurrence if necessary. The Solicitation schedule may be affected by, among other things, the deliberations of the PRG, negotiations with selected Shortlisted Participants, and proceedings before the CPUC, including, but not limited to, proceedings to obtain Regulatory Approval. PG&E will endeavor to notify Participants of any schedule change, but will have no liability or responsibility to any Participant for failing to do so.

In its decision approving the InvestorOwned Utilities’ (IOU) 2009 RPS Plans,[3] the Commission encouraged each IOU to highlight the unique renewable development opportunities in the Imperial Valley created by the Sunrise Powerlink. PG&E’s 2011 RPS Plan describes PG&E’s activities during the 2009 RPS Solicitation with respect to projects in the Imperial Valley, and explains why remedial measures, such as preference in the shortlisting process are not required for 2011. PG&E will address Imperial Valley issues as part of its general bidders’ conference.

B.  Events in Solicitation Schedule

1. Online Registration. Participants may register to receive timely announcements and updates about PG&E’s 2011 Solicitation and general Request for Offer (RFO) communications by providing their names and email addresses at the Solicitation website.

Go to www.pge.com/rfo and click on RFO Bidder Registration.

2.  PG&E issues the Solicitation on the date in Table II.1.

3.  Bidders’ Conference. PG&E will hold a Bidders' Conference, including a presentation of Imperial Valley opportunities facilitated by the Sunrise Power Link, on the date and time shown in Table II.1 in the PG&E Auditorium at PG&E’s headquarters at 77 Beale Street, San Francisco, CA. Call-in information will be provided on the Solicitation website before the Bidders’ Conference. Attendance at, or call-in to, the Bidders’ Conference is encouraged but not required. Participants attending in-person are asked to register in advance for the Bidders’ Conference.

4.  Offer Submittal Deadline. Participant’s Offer(s) must be received by PG&E by 12:00 noon Pacific Time on the date shown in Table II.1. Participant’s Offer(s) must follow the format and include the documents described in Section VIII. Failure to submit the requested documents and failure to follow the noted format may disqualify the Participant’s Offer(s). Given the short time frame between Offer Submittal and PG&E selection of a Shortlist, it is imperative that each Participant’s Offer be complete at the time of submission. Participant’s failure to provide all required information may prevent PG&E from being able to evaluate and rank the Offer and thus, prevent the Offer’s inclusion on PG&E’s Shortlist.

5.  PG&E Selects Shortlist. PG&E intends to select a Shortlist of Offers for negotiations. The Shortlist and results of subsequent negotiations will be shared with PG&E’s Procurement Review Group (See Section XIII). Each Participant selected for the Shortlist will be required to post an Offer Deposit, in accordance with Section V, and to execute a Confidentiality Agreement in the form attached hereto as Attachment G, whereby Participant agrees to keep confidential the terms discussed during the course of negotiating the Agreement.