RENEWABLES
PORTFOLIO
STANDARD

2010

SOLICITATION

PROTOCOL

(draft version)

June 2, 2010

1

TABLEOFCONTENTS

SectionPage

I.INTRODUCTION...... 1

II.SOLICITATION SCHEDULE AND APPROVAL PROCESS...... 3

III.SOLICITATION GOALS...... 6

IV.ELIGIBILITY REQUIREMENTS...... 14

V.PARTICIPANT’S OFFER, OFFER DEPOSIT UPON SHORTLISTING...... 17

VI.FORM OF POWER PURCHASE AND SALE AGREEMENTS...... 21

VII.CREDIT/COLLATERAL REQUIREMENTS UPON PPA OR PSA EXECUTION...22

VIII.REQUIRED INFORMATION...... 23

IX.OFFER PRICING...... 31

X.TRANSMISSION...... 33

XI.EVALUATION OF OFFERS...... 42

XII.CONFIDENTIALITY/SARBANES-OXLEY DISCLOSURE...... 47

XIII.PROCUREMENT REVIEW GROUP REVIEW...... 48

XIV.SHORTLIST NOTIFICATION TO PARTICIPANTS...... 49

XV.EXECUTION OF AGREEMENT...... 49

XVI.REGULATORY APPROVAL...... 49

XVII.DISPUTE RESOLUTION...... 50

XVIII.TERMINATION OF THE SOLICITATION – RELATED MATTERS...... 51

XIX.FERC ORDER No. 717 NOTICE...... 51

XX.SHORT TERM OFFERS...... 52

XXI.REC-ONLY OFFERS

LIST OF ATTACHMENTS

Attachment A:RPS Solicitation Protocol Agreement

Attachment B:Form of Letter of Credit

Attachment C:Notice of Intent to Bid

Attachment D:Offer Form

Attachment E:Participant Credit-Related Information Form

Attachment F:FERC Order No. 717 Waiver

Attachment G:Confidentiality Agreement

Attachment H:Form of Power Purchase Agreement

Attachment I:Form of Purchase and Sale Agreement for Renewable Energy Credits

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:Joint Development and/or Joint Ownership – Required Detailed Participant Information

Attachment N:Short-Term Offers – Additional and/or Substitute Provisions

Attachment O:Detailed Term Sheet

  1. 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 energy resources (“ERR”) by increasing its total procurement of ERR generation by at least 1% of annual retail sales per year so that in 2010, 20% of its retail sales are supplied by ERRs. An ERR is a facility that has been certified by the California Energy Commission (“CEC”)[3]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.Request for Offers

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&Ethe 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 CPUC 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) procureProducts 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 aProject pursuant to purchase and sale agreement, (d) purchase of Site for development of a Project,(e) jointlydevelop and/or jointly own a Project, or (f) 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 ShortTerm Offers. Interested Participants should review Section XX for specific Short Term Offer protocol terms.

In its decision approving the IOUs’ 2009 RPS Plans,4 the Commission encouraged each IOU to highlight the unique renewable development opportunities in the Imperial Valley created by the Sunrise Powerlink. PG&E’s 2010 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 2010. PG&E will continue to conduct a special Imperial Valley bidder’s conference after its general bidder’s conference as it did in 2009.

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). ShortTerm Offerswill 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 Offerwith the understanding that: (i) each Offer is a binding offer in accordance with Section V.A., “Binding 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 usingAttachment H - Form of Power Purchase Agreement (“PPA”), (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”), (c) an agreement to be developed for PG&E’s purchase of a Site for development of a Project (“Site Agreement”), (d) an agreement to be developed for joint development and/or ownership of a Project, or (e) a purchase agreement with PG&E using Attachment I- Form of Purchase and Sale Agreement for Renewable Energy Credits. 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,Buyout Term Sheet, PSA Term Sheet, Site Agreement,agreement for joint development/ownership of a Project, or Purchase and Sale Agreement for Renewable Energy Credits. 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 will be 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 3674-E, filed by PG&E on May 24, 2010. The PV Program solicitation will be separate from the 2010 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 anyof 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 Q&A’s are posted and available for Participants to download, go to and click on “2010 Renewables RFO.” Alternatively, go directly to:

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 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 e-mail 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.

  1. 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
June 29, 2010 / PG&E issues Solicitation
July 16, 2010 / Deadline for Participant to submit non-binding Notice of Intent to Bid and reservation for Bidders’ Conference
July2010 date TBD / General Bidders’ Conferencefollowed by
Imperial Valley Bidders’ Conference
August 24, 2010
noon. Pacific Prevailing Time / Deadline for Participants to submit Offer(s). Offers will not be accepted after 12:00 noon
September 29, 2010 / PG&E notifies Commission that bidding is closed
October 28, 2010 / PG&E notifies Shortlisted bidders and requests bid deposit
November 5, 2010 / Participant notifies PG&E whether it accepts Shortlist position from PG&E
November 23, 2010 / PG&E submits final Shortlist to Commission and PRG
December 3, 2010 / PG&E submits report on evaluation criteria and selection process; Independent Evaluators submit preliminary reports
4th Quarter, 2010 / CPUC issues Market Price Referent (“MPR”)
By May 31, 2011 / 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.

B.Events in Solicitation Schedule

1.Online Registration. Participants may register to receive timely announcements and updates about PG&E’s 2010 Solicitation by providing their names and email addresses at the Solicitation website.

Go to and click on RFO Bidder Registration. Alternatively, go directly to:

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

3.Notice of Intent to Bid. Participants are strongly encouraged to submit a “Notice of Intent to Bid,” attached hereto as Attachment C. The Notice of Intent to Bid will provide PG&E with basic Project information and Participant’s reservation for the Bidders Conference. The Notice of Intent to Bid is nonbinding and failure to submit it will not disqualify a Participant.

4.Bidders’ Conference. PG&E will hold a Bidders' Conference,including a presentation of Imperial Valley opportunities facilitated by the SunrisePower 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 the day before the Bidders’ Conference. Attendance at, or call-in to, the Bidders’ Conference is encouraged but not required.

5.Offer Submittal Deadline. Participant’s Offer(s)must be received by PG&E by before 12:00noonPacific 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.

6.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 asAttachment G, whereby Participant agrees to keep confidential the terms discussed during the course of negotiating the Agreement.

7.CPUC Releases the Market Price Referent (“MPR”). The CPUC administered a cap on the above-market cost to procure renewable energy through long-term contracts achieved through the RPS Solicitation. On May 28, 2009, the CPUC notified PG&E that PG&E had reached its cap on above-market costs. PG&E can still voluntarily procure renewables priced above the MPR even though its cost limitation has been exhausted, subject to CPUC approval.

8.PG&E and Shortlisted Participants Finalize Agreements. PG&E and Participants selected to PG&E’s Shortlist will negotiate and finalize their Agreements. PG&E will confer with the PRG at this stage of the process.

9.PG&E and Participants Execute Agreements. After PG&E has conferred with the PRG, PG&E and the Participants will sign their Agreements. The effectiveness of each Agreement is subject to the CPUC’s approval of the Agreementand any other conditions precedent set forth in the particular Agreement.

10.PG&E Submits Agreements for Regulatory Approval. PG&E will seek approval from the CPUC for each Agreement.

  1. SOLICITATION GOALS

A.PG&E’s Renewable Resource Needs

PG&E is seeking energyfrom ERRsand RECs to meet its RPS Program obligations and capacity to meet its resource adequacy requirements. The optimal Offers will be those with the best combination of market value, viability, and contribution to the other criteria specified in this Solicitation.

B.Term

PG&E is seeking Agreements for deliveries commencing in 2011 or beyond. Earlier deliveries are preferred to later deliveries. Participants may offer delivery terms as short as one month and as long as 10, 15, 20 or 25 years, or any term that is mutually agreeable and approved by the CPUC. See Section XX regarding Short Term Offers.

C.Volume

In this Solicitation, PG&E is seeking to procure up to1%2%of its retail sales volume or approximately 800,000 to 1,600,000 megawatt-hours (“MWhs”) per year. For reference, one percent of PG&E’s retail sales volume translates to the following approximate contract capacity at the listed capacity factors:

Table III.1: One Percent of PG&E Retail Sales Volume

Capacity Factor / Contract Capacity Amounts (MW)
100% / 92
80% / 114
60% / 152
40% / 228
20% / 456

D.Products Sought

PG&E is seeking energy and capacity through two procurement mechanisms: (1) power purchase agreements and (2) utility ownership. PG&E is also seeking Offers that may represent a combination of the two mechanisms, such as a joint development/ownership project and a power purchase agreement. PG&E is also seeking Offers for RECs. A Participant may submit Offers for either or both types of resource.

1.Power Purchase Agreements

a.Eligible Products

Participants may submit Unit Contingent Offers for the four specific products listed below:

  • As-Available
  • Peaking
  • Baseload
  • Dispatchable

The term “Unit Contingent” means that generation must be from the specific Project identified in the Offer. Offers for As-Available, Baseload, and Peaking products must be from Projects with the capacity of 1.5 MW or greater. Offers for Dispatchable products must be 25 MW or greater to enable them to be efficiently incorporated into PG&E’s system dispatch protocol.

In addition to the product definitions which may be found in thePPA, the specific products have the following meaning:

“As-Available” means intermittent energy and capacity deliveries that are subject to a fuel source not controlled by the generator. The Projects that may provide an As-Available Offer are: (1) wind; (2) solar; (3) run-of-river hydro; or (4) any other technology that PG&E determines qualifies.

“Baseload” means energy and capacity delivered on a twenty-four (24) hours per day, seven (7) days per week schedule (i.e. “24x7”) with an annual capacity factor of at least 80%. This minimum requirement is meant to take into account maintenance and forced outages.