R.11-05-005 ALJ/RIM/avs PROPOSED DECISION (REV. 1)

ALJ/RIM/avs PROPOSED DECISION Agenda ID #15884 (REV. 1)

Ratesetting

8/24/2017 Item 17

Decision PROPOSED DECISION OF ALJ MASON (Mailed 7/24/2017)

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Order Instituting Rulemaking to Continue Implementation and Administration of California Renewables Portfolio Standard Program. / Rulemaking 11-05-005
(Filed May 5, 2011)

DECISION DENYING PACIFIC GAS AND ELECTRIC COMPANY’S
PETITION FOR MODIFICATION OF DECISION 14-11-042
(2014 RENEWABLE PORTFOLIO STANDARD PLANS DECISION)
REGARDING 2016 AND 2017 SOLICITATIONS

Summary

We deny Pacific Gas and Electric Company’s (PG&E) Petition to Modify Decision (D.) 14-11-042 on the grounds that PG&E has failed to meet its burden set forth in Rule 16.4(b) of the Commission’s Rules of Practice and Procedure to justify the requested relief. D.14-11-042 transferred approximately 200 megawatts from PG&E’s solar photovoltaic resources program to the Renewable Auction Mechanism solicitation and two future solicitations scheduled for 2016 and 2017. PG&E asks the Commission to eliminate the requirement that PG&E conduct Renewable Auction Mechanism solicitations in 2016 and 2017 from its terminated solar photovoltaic program on the grounds that current resources and load forecasts demonstrate that PG&E is positioned to meet its Renewable Portfolio Standard (RPS) requirements for 2016 and 2017 without the necessity of additional Renewable Auction Mechanism solicitations.

While we agree that PG&E currently has sufficient RPS resources under contract, we do not believe it would be prudent to permit PG&E to terminate its Renewable Auction Mechanism solicitation. Its perpetuation will be beneficial in assisting California achieve its mandate to reduce 2030 greenhouse gas emissions by 40% below 1990 levels and increase the RPS to 50%. As there is an ongoing need to decarbonize California’s electricity supply while maximizing the value of California’s existing and potential renewable resources, we see the continuation of the Renewable Auction Mechanism as playing a vital role in achieving California’s long-term greenhouse gas reduction goals.

Accordingly, PG&E’s Petition to Modify D.14-11-042 is denied.

This proceeding remains open.

1. Background

1.1. The Renewable Auction Mechanism Program

The Renewable Auction Mechanism (RAM) program is a means by which Investor-owned Utilities (IOUs) may procure RPS eligible generation. The IOUs may use RAM to satisfy authorized procurement needs, as well as any need arising from Commission or legislative mandates. RAM streamlines the procurement process for developers, utilities, and regulators in that it allows bidders to set their own price, provides a simple standard contract for each utility, and allows all projects to be submitted to the Commission through an expedited regulatory review process.

1.2. Decision 10-12-048

In 2010, the Commission adopted the RAM program through Decision (D.)10-12-048 to create a simplified market based procurement process for smaller RPS generation projects. The RAM program started as amarket-based procurement mechanism for renewable distributed generation (DG) projects greater than 3 megawatts (MW) and up to 20 MW. (See Decision 12-05-035.) The Commission initially authorized the utilities to procure 1,000 MW (expanded to 1,299 MW by D.12-02-035 and D.12-02-002) through RAM by holding fourauctions over two years. Resolution E-4582 authorized a fifth auction to take place no later than a year after the close of the fourth RAM auction.

1.3. Decision 14-11-042

On November 20, 2014, the Commission issued D.14-11-042 and adopted one additional RAM auction, RAM 6, to close by June 30, 2015. D.14-11-042 also addressed PG&E’s February 14, 2014 petition for modification of D.10-12-048 in order to transfer the remaining approximately 200 MW capacity in PG&E’s SolarPhotovoltaic Program into RAM and two other solicitations. In essence, PG&E sought authority to close the Solar Photovoltaic Program for future solicitations, except for purposes of the administration of all existing contracts and facilities and compliance reporting.

This Commission granted PG&E’s request. The Commission found that PG&E’s request to transfer any remaining capacity in the Solar Photovoltaic Program to RAM was reasonable as it provided a means of offering this remaining capacity to the market while also increasing efficiency by consolidating the Commission’s smaller procurement solicitations. Ordering Paragraph 32 memorialized the granting of PG&E’s petition as follows:

The Petition for Modification filed by Pacific Gas and Electric Company (PG&E) on February 26, 2014 seeking authority to transfer capacity from its Solar Photovoltaics (Solar PV) Program to the Renewable Auction Mechanism (RAM) is granted, with certain restrictions. PG&E shall file a Tier 1 Advice Letter to advise the Commission of the amount of capacity remaining in the Solar PV Program. PG&E shall transfer ½ of the remaining capacity, including failed or terminated capacity, to RAM 6. The remaining ½ shall be transferred equally to two solicitations held in 2016 and 2017.

As a result of D.14-11-042, 106 MW was allocated to the 2016 and 2017 solicitations, and there was 31.5 MW of unfulfilled capacity from PG&E’s RAM 6 solicitation.[1]

1.4. The Instant Petition for Modification (Petition)

In its Petition, PG&E claims there are new facts which justify the elimination of the requirement that PG&E conduct solicitations in 2016 and 2017 for the remaining capacity from the Solar Photovoltaic Program resources. PG&E argues that its customers do not need new long-term contracts with RPS-eligible resources since the PG&E Bundled Procurement Plan included forecasts of a “substantial” loss of bundled customer load between 2014 and 2024 as a result of the projected growth of Community Choice Aggregation and DG resources.[2] PG&E also notes that the Commission approved PG&E’s 2015 RPS Plan which demonstrated that PG&E is positioned to meet its RPS requirements for the second and third compliance periods and, as a result, PG&E does not have any need for incremental RPS procurement until at least 2022.[3]

PG&E also argues that failure to grant the instant petition may cause financial harm to its customers. It argues that customers do not at present need incremental Solar Photovoltaic resources since most of the Photovoltaic resources that would be procured in 2016 and 2017 would come on-line in 2019-2020.[4] Procuring unneeded resources now would prevent customers from realizing the benefits of any gains in resource efficiency or lower resource costs that may occur in the future since customers would be locked into long-term contracts for current technologies at existing prices.[5]

1.5. Response to the Petition

Solar Energy Industries Association (SEIA), Sierra Club (Sierra), CleanCoalition (Clean) and the Office of Ratepayer Advocates (ORA) filed their responses to the Petition. We summarize their responses below.

1.5.1. SEIA

SEIA attacks PG&E’s premise, i.e., that given the Commission’s determination that PG&E has sufficient resources to the meet the second (20142016) and third (2017-2020) RPS compliance period goals, there is no need for PG&E to conduct an RPS solicitation in 2016.[6] SEIA argues that the Commission’s evaluation of PG&E’s 2015 RPS Procurement Plan was influenced by PG&E’s stated expectation to continue procurement through Commission mandated programs such as the RAM in 2016: “Additionally, PG&E expects to procure additional volumes of incremental RPS-eligible contracts in 2016 through mandated procurement programs, such as the RAM, ReMAT, and BioMAT Programs.”[7] According to SEIA, the Commission’s determination that PG&E had no immediate need for additional RPS procurement was based on an evaluation that accepted PG&E’s representation that it would continue with its 2016 RAM solicitation. To eliminate the RAM solicitation would, in effect, undercut the Commission’s rationale in concluding that PG&E had sufficient RPS procurement.

SEIA also argues that PG&E’s financial justification for terminating the RAM solicitation is factually erroneous. Undergoing solicitations in 2016 and 2017 will, according to SEIA, allow developers to take advantage of the recently extended 30% Investment Tax Credit to lower their bid price, a benefit that would pass through to PG&E’s customers in the form of lower cost renewable energy.[8]

Furthermore, SEIA disputes PG&E’s assertion that foregoing procurement now will enable it to later take advantage of new technologies that will be more efficient and cost effective. According to SEIA, in order for there to be market innovations and newer cost efficient technology, there has to be procurement now.[9] Such an expectation was an underlying factor behind the Commission’s approval of PG&E’s solar photovoltaic program.[10] Without current procurement, PG&E cannot secure future opportunities to procure RPS resources with better technologies at lower prices.

1.5.2. Sierra

Sierra argues that PG&E’s Petition is based on a flawed interpretation of D.15-12-025, which approved PG&E’s 2015 RPS procurement plan. Like SEIA, Sierra asserts that the Commission assumed that the full 200 MW would be procured through the RAM as planned. [11] In support, Sierra references PGE’s modeling forecast in which PG&E assumed that the RAM would accommodate the remaining 200 MW of PG&E’s solar photovoltaic program.[12]

Sierra argues that denying the Petition will be consistent with the Commission’s interest in promoting consistency and certainty in the renewables procurement processes. Sierra asserts that many potential bidders will have already begun the process of preparing the system impact and interconnections studies PG&E requires for the 2016 ad 2017 RAM solicitations. Canceling those solicitations will undermine market stability as bidders have relied on the conclusion in D.15-12-025 that RAM procurement would continue.

1.5.3. Clean

Clean raises similar concerns regarding the need for certainty and predictability in the RPS market for smaller RPS developers.[13] Like Sierra, Clean argues that developers have already expended costs on project development in anticipation of the 2016 and 2017 solicitations.[14]

1.5.4. ORA

ORA supports PG&E’s Petition, finding its explanation reasonable.[15]

1.6. PG&E’s Reply

PG&E first addresses SEIA’s and Sierra’s argument that the remaining solar photovoltaic program capacity would be procured through the 2016 and 2017 solicitations, a factor that the Commission took into account in approving PG&E 2015 RPS Plan in D.15-12-025. While PG&E acknowledges that the parties are correct that the 137.5 MW remaining from the solar photovoltaic program was assumed in PG&E’s 2015 RPS Plan analysis, even if the 137.5 MW were removed from future procurement in the models used for its 2015 RPS Plan, PG&E still would not need to procure any new RPS until at least 2022.[16] In other words, neither the inclusion nor the exclusion of the remaining solar photovoltaic program amounts alters the fact that PG&E has no need for incremental RPS resources until at least 2022.[17]

PG&E next questions SEIA’s assertion that PG&E may be able to obtain favorable solar photovoltaic prices now because of the Investment Tax Credit. PG&E argues that the Investment Tax Credit will not end in 2017, but, instead, will extend at the 30% rate through 2019, fall to 26% in 2020, 22% in 2021, and 10% in 2022.[18] As such, PG&E reasons that there is no need to sign long-term contracts now for “unneeded resources” due to fears regarding the impact of the investment Tax Credit expiration on future resource prices.

Third, PG&E attacks SEIA’s assertion that additional procurement now may promote market innovation and new technology as factually unsupported.[19]

Fourth, PG&E claims that SEIA and Sierra ignore the potential cost to customers associated with contracting for unneeded resources. Using a 20-year contract term and the contract prices from the most recent RPS Calculator, PG&E states that customers would pay approximately $445 million for 137.5 MW from the 2016 and 2017 solicitations.[20] PG&E questions the need for such customer payments for incremental RPS procurement that PG&E argues is not currently needed.

With respect to Clean’s claim that certainty and predictability is important for smaller RPS developers, PG&E argues that it was clear that it did not need new incremental resources prior to 2022. Thus the smaller RPS developers received a “clear message” that additional RPS resources were not needed.

As for Clean’s claim that developers expended costs years ago in anticipation of the 2016 and 2017 solicitations, PG&E challenges this assertion as unsupported.[21]

2. Discussion

2.1. Substantive and Timing Requirementsfor Granting Petitions for Modification

Petitions for Modification are governed by Rule 16.4 of the Commission’s Rules of Practice and Procedure. Rule 16.4(b) states the showing required to justify the requested relief:

A petition for modification of a Commission decision must concisely state the justification for the requested relief and must propose specific wording to carry out all requested modifications to the decision. Any factual allegations must be supported with specific citations to the record in the proceeding or to matters that may be officially noticed. Allegations of new or changed facts must be supported by an appropriate declaration or affidavit.

We interpret this rule to mean that petitions for modification are fact-specific requests, the success of which will depend on the particular circumstances of the proceeding at issue.

Rule 16.4(d) requires that a petition for modification be filed within a year of the issuance of the decision or, if more than a year has elapsed, the petition must “explain why the petition could not have been presented within one year of the effective date of the decision.” Here, D.14-11-042 was effective on November20, 2014 so, on its face, PG&E’s Petition may be untimely as it was filed on January 22, 2016. However, as PG&E points out, the Commission did not approve its 2015 RPS Plan (and thus agreeing with PG&E that sufficient RPS procurement had been obtained) until December17, 2015, which was thirteen months after D.14-11-042’s effective date. PG&E could not have filed its Petition sooner because it did not know if its 2015 RPS Plan would be approved. Given these circumstances, we deem the Petition timely.

2.2. PG&E’s Petition to Fails to Satisfy theSubstantive Requirement of Rule 16.4(b)

While PG&E’s claim that it has sufficient RPS resources currently under contract to meet immediate RPS requirements, we find that this is an insufficient reason to grant PG&E’s Petition to end its RAM participation. In reaching this conclusion, we have reviewed and weighed the responses summarized above, PG&E’s reply, and we have weighed those comments in the context of California’s greenhouse gas reduction goals and renewable energy needs. When all of these factors are considered, we find that PG&E’s RAM is still needed.

California’s overarching mandate to reduce 2030 greenhouse gas emissions by 40% below 1990 levels is set forth in Senate Bill (SB) 350, also known as the Clean Energy and Pollution Reduction Act of 2015.[22] SB 350 requires the Commission to meet these higher pollution reduction goals through a combination of increased renewable energy procurement,[23] energy efficiency,[24] integrated resource planning,[25] and the promotion of transportation electrification.[26] This may very well require procurement of renewables in excess of a 50 percent RPS.