0000004209.00000 Advice 4209-E: 2021-2023 AES Alamitos … · 2020. 9. 8. · ADVICE 4209-E (U 338-E) - 3 - May 8, 2020 Specifically, the Commission recommended that the SWRCB extend

ADVICE LETTER (AL) SUSPENSION NOTICE ENERGY DIVISION

Utility Name: Southern California Edison

Utility Number/Type: U 338-E

Advice Letter Number(s): 4209-E

Date AL(s) Filed: May 8, 2020

Utility Contact Person: Darrah Morgan

Utility Phone No.: 626-302-2086

Date Utility Notified: May 26, 2020

[X] E-Mailed to:

[email protected]

ED Staff Contact: Jaime Rose Gannon

ED Staff Email: [email protected]

ED Staff Phone No.: 415-703-2818

[X] INITIAL SUSPENSION (up to 120 DAYS from the expiration of the initial review period) This is to notify that the above-indicated AL is suspended for up to 120 days beginning May 26, 2020 for the following reason(s) below. If the AL requires a Commission resolution and the Commission’s deliberation on the resolution prepared by Energy Division extends beyond the expiration of the initial suspension period, the advice letter will be automatically suspended for up to 180 days beyond the initial suspension period. [X] A Commission Resolution is Required to Dispose of the Advice Letter [ ] Advice Letter Requests a Commission Order [] Advice Letter Requires Staff Review The expected duration of initial suspension period is 120 days

[ ] FURTHER SUSPENSION (up to 180 DAYS beyond initial suspension period) The AL requires a Commission resolution and the Commission’s deliberation on the resolution prepared by Energy Division has extended beyond the expiration of the initial suspension period. The advice letter is suspended for up to 180 days beyond the initial suspension period.

_____________________________________________ If you have any questions regarding this matter, please contact Jaime Rose Gannon at [email protected]. cc: EDTariffUnit [email protected]

ADVICE LETTER (AL) SUSPENSION NOTICE ENERGY DIVISION

[email protected] [email protected]

P.O. Box 800 8631 Rush Street Rosemead, California 91770 (626) 302-9645 Fax (626) 302-6396

Gary A. Stern, Ph.D. Managing Director, State Regulatory Operations

May 8, 2020

ADVICE 4209-E (U 338-E)

PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA ENERGY DIVISION

SUBJECT: 2021-2023 AES Alamitos Resource Adequacy Power Purchase Agreement to Meet Resource Adequacy Requirements

I. PURPOSE

Pursuant to Decision (“D.”) 19-11-016, Southern California Edison Company (“SCE”) submits this Advice Letter seeking approval of a Resource Adequacy (“RA”) power purchase agreement (“AES Alamitos PPA”)1 between SCE and AES Alamitos, LLC (“AES”) for Units 3, 4 and 5 of the AES Alamitos Generating Station (“AES Alamitos”) from 2021 through 2023 to meet SCE’s system, LA Basin (“LAB”) local, and flexible RA requirements. SCE requests that the California Public Utilities Commission (“Commission” or “CPUC”) adopt a resolution approving, without material modification, this Advice Letter on or before August 27, 2020. The following table summarizes the AES Alamitos PPA.

Seller Generation Type

Location RA / Contract Capacity

Product Term of Agreement

AES Alamitos, LLC

Gas-fired generation

AES Alamitos Generating Station, Units 3, 4 & 5 – Long Beach, CA

1165.82 Megawatts (“MW”)

LAB local RA

January 1, 2021 – December 31, 2023

1 SCE is using the commonly understood phrase “PPA” for ease of reference, but the

agreement is a confirmation under an EEI enabling agreement, which differs from a traditional PPA but not in respects material to this Advice Letter.

ADVICE 4209-E (U 338-E) - 2 - May 8, 2020

II. BACKGROUND AND SUBJECT OF THE ADVICE LETTER

There have been six (6) units at the AES Alamitos Generating Station that are once-through cooling (“OTC”). For environmental reasons, the State Water Resources Control Board (“SWRCB”) has worked toward phasing out the use of OTC technology at coastal power plants that use marine water for cooling. To that end, the California Independent System Operator (”CAISO”), California Energy Commission (”CEC”), and Commission worked closely with the SWRCB to develop a policy to achieve water quality goals while ensuring electricity grid reliability.2 On May 4, 2010, the SWRCB approved an OTC policy that included many grid reliability recommendations made by the CAISO, as well as a joint implementation proposal developed by the CEC, Commission, and CAISO.3 The policy came into effect as a regulation on October 1, 2010.4

The final compliance date for the Alamitos facility under the OTC policy is December 31, 2020; however, AES Alamitos retired Units 1, 2 and 6 early on December 31, 2019, to provide emission offsets to build a new 640 MW Combined Cycle Gas Turbine power block in phase one at the facility. Also under construction is a 100-MW energy storage system that is also contracted with SCE through its Local Capacity Requirements (“LCR”) RFO. AES also has planned to add another thermal power block, as well as additional energy storage banks. At this time, AES Alamitos Units 3, 4 and 5 are still in operation and are under an RA contract with SCE that expires December 31, 2020.

On November 7, 2019, the Commission adopted D.19-11-016 in the Integrated Resource Planning proceeding, R.16-02-007. In D.19-11-016, the Commission determined there is a significant possibility of system RA shortfalls beginning in 2021 and extending to 2023.5 The Commission therefore concluded that additional incremental capacity resources are necessary to forestall a potential system reliability emergency.6 In addition to requiring load-serving entities to procure 3,300 MW of incremental system RA capacity to come online between August 1, 2021 and August 1, 20237 as a bridge strategy to allow time for new clean electrical capacity to come online, the Commission recommended that the SWRCB extend the OTC compliance deadlines for certain OTC facilities, including AES Alamitos Units 3, 4 and 5.8

2 California Energy Commission’s Tracking Progress, Once-Through Cooling Phase-Out (last

updated in April 2019) at p. 1, available at: https://www.energy.ca.gov/sites/default/files/2019-12/once_through_cooling_ada.pdf.

3 Id. 4 Id. 5 D.19-11-016 at Finding of Fact (“FF”) 5, 17. 6 Id. at pp. 2-3, FF 5, 10, Conclusion of Law (“CL”) 1. 7 Id. at Ordering Paragraph (“OP”) 3. 8 Id. at p. 2, CL 5, OP 1.

ADVICE 4209-E (U 338-E) - 3 - May 8, 2020

Specifically, the Commission recommended that the SWRCB extend the OTC compliance deadline for AES Alamitos Units 3, 4 and 5 for up to a period of three years until December 31, 2023.9 AES does not plan to retrofit these units with alternate cooling technologies to comply with Track 1 or utilize any operational or technical measures to comply with Track 2 of the OTC policy.

In D.19-11-016, the Commission also waived the prohibition in D.12-04-046 against the investor-owned utilities (“IOUs”) contracting with OTC units beyond their compliance deadlines, even if the deadlines are later extended, for the OTC units for which the Commission recommended OTC compliance deadline extensions.10 The Commission authorized the IOUs to contract with OTC units in anticipation of potential compliance deadline extensions, but those contracts would not go into effect if the SWRCB does not grant the compliance deadline extensions and the durations of the contracts shall be limited to the time periods specified by the SWRCB.11 With specific regard to procurement from OTC units, D.19-11-016 required IOUs to obtain approval by Tier 3 Advice Letter.12

On December 20, 2019, SCE issued its RA Request for Offers for RA Capacity Purchases and Sales (“DEC2019 RA RFO”) seeking to buy RA from, and sell RA to, responding market participants from all supply sources that were eligible to provide RA capacity products for the August 2020 - December 2024 RA compliance months/years. Consistent with D.19-11-016, SCE allowed OTC units for which the Commission recommended OTC compliance deadline extensions to bid into the solicitation. SCE received offers on January 7, 2020 and made its shortlist and selections between January 24, 2020 and February 14, 2020. The DEC2019 RA RFO concluded on April 17, 2020 and SCE ultimately executed four RA purchase agreements and one RA sales agreement. One of those RA purchase agreements is the three-year (2021-2023) RA-only agreement with AES Alamitos Units 3, 4, and 5 to meet SCE’s system, LAB local, and flexible RA requirements, i.e., the AES Alamitos PPA. In compliance with D.19-11-016, SCE seeks approval of the AES Alamitos PPA in this Tier 3 Advice Letter.

III. GENERAL PROJECT DESCRIPTION

AES Alamitos Units 3, 4 and 5 are natural gas fired generating units that are 332, 335, and 498 MW, respectively providing a total of 1165.82 MW capacity in the LAB local reliability area. The approval of this AES Alamitos PPA would substantially help SCE meet its system, LAB local, and flexible RA requirements. With the contract, AES would be responsible for offering the units into the CAISO market consistent with the CAISO

9 Id. at OP 1. 10 Id. at CL 6, OP 2. 11 Id. 12 Id. at p. 48.

ADVICE 4209-E (U 338-E) - 4 - May 8, 2020

Tariff, including a must-offer obligation. The AES Alamitos PPA will ensure that the resource is available to the CAISO market through December 2023.

IV. THE AES ALAMITOS PPA IS REASONABLE AND CONSISTENT WITH D.19-11-016

To forestall a potential system reliability emergency, D.19-11-016 allowed SCE to procure from certain OTC resources to serve as a bridge for new incremental capacity coming online starting in 2021 and extending to 2023.13 D.19-11-016 (1) authorizes SCE to enter into contracts with certain OTC facilities, such as AES Alamitos Units 3, 4, and 5, in anticipation of their potential compliance deadline extensions; and (2) waives the prohibition in D.12-04-046 against contracting with OTC units beyond their compliance deadlines, even if those deadlines are later extended.14 The Commission authorized the IOUs to contract with OTC units in anticipation of potential compliance deadline extensions, but those contracts would not go into effect if the SWRCB does not grant the compliance deadline extensions and the durations of the contracts shall be limited to the time periods specified by the SWRCB.15 The AES Alamitos PPA complies with the requirements in D.19-11-016. In particular, the Commission recommended OTC compliance deadline extensions for AES Alamitos Units 3, 4 and 5,16 and the AES Alamitos PPA will not go into effect if the SWRCB does not extend the OTC compliance deadline to allow the units to continue to operate before the delivery term of the AES Alamitos PPA begins. The term of the AES Alamitos PPA is also limited to the time period that the SWRCB allows AES Alamitos Units 3, 4 and 5 to continue to operate. Additionally, the AES Alamitos PPA provides system, LAB local, and flexible RA that is needed to meet SCE’s RA requirements for 2021 to 2023.

A. Solicitation Process

1. RFO Launch

SCE launched its DEC2019 RA RFO on December 20, 2019, notifying over 2,000 market participants (compiled from previous power supply solicitations, regulatory service lists, etc.) and inviting them to participate.

2. Offer Submittal

On January 7, 2020, SCE received a significant response to its DEC2019 RA RFO, with two hundred twenty-six (226) offers for SCE-purchase and seven (7) offers for SCE-sales of capacity.

13 Id. at CL 5-6, OP 1-2. 14 Id. at CL 6, OP 2. 15 Id. at CL 6, OP 2. 16 Id. at OP 1.

ADVICE 4209-E (U 338-E) - 5 - May 8, 2020

3. Selection or Shortlist Period

Each counterparty who submitted an offer and met the RFO requirements was a candidate for selection or shortlisting. SCE evaluated the offers and made its shortlist and selections between January 24, 2020 and February 14, 2020. SCE made decisions based upon the best-priced offer either submitted on January 7, 2020 or obtained during this period. SCE notified all selected counterparties by February 14, 2020.

B. Least-Cost, Best-Fit Methodology and Final Offer Evaluation and Selection

When conducting an RFO, SCE follows least-cost, best-fit (“LCBF”) principles to value and select contracts. SCE’s LCBF methodology takes into account the quantitative and qualitative attributes associated with offers to obtain the best value and the most cost-effective solutions for its customers. SCE employs a net present value (“NPV”) analysis when it conducts its quantitative assessment of offers.17 This methodology is consistent with valuations performed by SCE in other solicitations. The quantitative component of the valuation entails forecasting: (1) the present value of the contract benefits; (2) the present value of the contract costs; and (3) the net value between (1) and (2). In addition to the benefits and costs quantified during the evaluation, SCE assesses non-quantifiable characteristics of each offer by conducting an analysis of each project’s qualitative attributes.

As a result of its final offer evaluation and selection process, SCE selected the following RA purchases through its DEC2019 RA RFO. The quantitative benefits associated with all these contracts are their RA capacity value.

Counterparty Product Resource Volume (MW) Term

AES Alamitos, LLC LA Basin Alamitos Units 3, 4 & 5 1165.82 MW 2021 – 2023

GenOn Energy Management, LLC

Big Creek-Ventura

Ormond Beach Units 1 & 2 1491 MW 2021 – 2023

Dynegy Moss Landing, LLC

System (Bay Area)

Moss Landing Blocks 1 & 2

2021: 970 MW 2022: 460 MW 2021 – 2022

Calpine Energy Services, L.P.

System (Bay Area) Delta Energy Center 2023: 500 MW

2024: 500 MW

2023 – 2024 System (Bay Area)

Metcalf Energy Center

2023: 570 MW 2024: 570 MW

Big Creek-Ventura

Pastoria Energy Facility

2023: 350 MW 2024: 700 MW

As demonstrated in Confidential Appendix A, compared to the other offers received through the DEC2019 RA RFO for local (LAB) RA, as well as experience from previous solicitations, the AES Alamitos PPA was priced competitively for the delivery period

17 SCE’s BPP, Sheets 19.

ADVICE 4209-E (U 338-E) - 6 - May 8, 2020

2021 through 2023. While there were less expensive offers for shorter term and lower quantities, the AES Alamitos offer was selected for its length (2021-2023) and was the least expensive offer before the cutoff level based on SCE’s desired RA positions or needs. In addition, because SCE would be short for both local and system RA without this contract, it provided a marginal premium to this transaction relative to the other contracts awarded through this solicitation. The confidential pricing for the AES Alamitos PPA is included in Confidential Appendix A.

V. CONSULTATION WITH THE PROCUREMENT REVIEW GROUP

SCE consulted with the Procurement Review Group (“PRG”) four times regarding the DEC2019 RA RFO: on December 12, 2019 (with a written follow-up by email on December 18, 2019); January 24, 2020; February 5, 2020; and February 13, 2020.18 The December 12 (and December 18) consultations were pre-RFO launch so that SCE could present the RFO products and terms. The other meetings occurred throughout the RFO process so that SCE could present the offers and selections along with SCE’s RA positions and updates thereto.

VI. ROLE OF THE INDEPENDENT EVALUATOR

D.08-11-008 requires an Independent Evaluator (“IE”) for all competitive solicitations that involve affiliate transactions, utility-owned or utility-turnkey offers, and for all solicitations that seek products two years or greater in duration, regardless of who participates.19 In compliance with these requirements, SCE used Merrimack Energy Group, Inc. (“Merrimack”) as the IE for the DEC2019 RA RFO. Merrimack is currently in SCE’s pre-qualified IE pool. The IE was involved in all aspects of the DEC2019 RA RFO, ranging from participating in conference calls and negotiation sessions to reviewing email communications and other documents exchanged by the parties. The IE also participated in the PRG meetings pertaining to the DEC2019 RA RFO.

The IE concludes that SCE’s action to execute a RA Confirmation with AES is “a reasonable and effective decision to meet RA compliance requirements.”

The IE Report is included as Confidential/Public Appendix C.

VII. CONSISTENCY WITH OTC PROCUREMENT REQUIREMENTS

D.19-11-016 waived the prohibition under D.12-04-046 on contracting with OTC facilities beyond their compliance deadlines, even if those deadlines are later extended.20 SCE entered into the AES Alamitos PPA to address RA needs, including system RA needs that the Commission recognized in D.19-11-016, not the criteria

18 As required by the Commission, SCE routinely consults with its PRG. D.02-08-071 at pp. 24-

25; D.03-12-062 at p. 47. 19 D.08-11-008 at pp. 39-40 (OP 2). 20 D.19-11-016 at CL 6, OP 2.

ADVICE 4209-E (U 338-E) - 7 - May 8, 2020

established in D.12-04-046. For that reason and others, as discussed below, all but one of the four criteria in D.12-04-046 for approving OTC procurement are not relevant to the approval of this contract. Nevertheless, in an abundance of caution, SCE addresses each criterion below. D.12-04-046’s first criterion asks how the contract facilitates compliance with SWRCB OTC policy or does not delay compliance. Here, although the AES Alamitos PPA will delay compliance, the SWRCB OTC final compliance deadline for AES Alamitos is likely to be extended as recommended by D.19-11-016 and the Statewide Advisory Committee on Cooling Water Intake Structure (“SACCWIS”) on which SWRCB is a committee member. Moreover, in D.19-11-016, the Commission recognized that extension of the OTC compliance deadline for Alamitos Units 3, 4, and 5 was needed as a bridge strategy to maintain system reliability until new clean resources come online. The second criterion asks how the OTC facility is expected to operate under normal and high load conditions, including the number of starts and the run time after each start. Here, consistent with the needs D.19-11-016 seeks to address, the AES Alamitos PPA is an RA-only contract and SCE will only be able to count the resource for RA counting purposes. The resource has a must-offer obligation with the CAISO under all the CAISO tariff rules. As such, SCE will not have any control over the energy and ancillary services bids submitted by the resource and cannot predict, based upon market results, the number of starts and the expected operation of the resource under any conditions, including 1-in-2 and 1-in-10 conditions. The third criterion – the utility’s LCR net position with and without the OTC facility – is applicable to this transaction. These units are currently under contract with SCE to provide system as well as local LAB RA. With its current contract expiring December 31, 2020, SCE would be substantially short in local RA for 2022 and 2023. Consistent with D.19-11-016, SCE awarded the AES Alamitos PPA to provide system RA, as well as to meet its local LAB RA capacity requirement. SCE’s LCR net positon with and without the OTC facility is included in confidential Appendix A. Finally, the fourth criterion asks how other generation resources compared to the selected AES Alamitos PPA using the prior three criteria. As discussed above, the AES Alamitos PPA was selected in a competitive solicitation (the DEC2019 RA RFO) and compared favorably, using LCBF, against other offers submitted in the solicitation that also provided the local (LAB) attribute. VIII. COST RECOVERY

For the AES Alamitos PPA, which exceeds one year in length, SCE proposes to record costs in the 2020 vintaged subaccount of its Portfolio Allocation Balancing Account

ADVICE 4209-E (U 338-E) - 8 - May 8, 2020

(“PABA”)21 and to recover the associated costs from bundled service customers and applicable departing load customers.22

IX. SAFETY CONSIDERATIONS

AES Alamitos is an existing and operational facility that SCE has contracted with in prior years. The relevant terms governing the safety of the facility remain the same as in prior contracts approved by the Commission. Therefore, the AES Alamitos PPA raises no new or incremental safety issues.

X. TIER DESIGNATION

This Advice Letter is submitted with a Tier 3 designation consistent with D.19-11-016.

XI. REQUEST FOR EXPEDITED COMMISSION APPROVAL

SCE hereby requests that the Commission adopt a resolution approving the AES Alamitos PPA no later than August 27, 2020 containing the following:

1. Approval of the AES Alamitos PPA in its entirety;

2. A finding that the AES Alamitos PPA, and SCE’s entry into the AES Alamitos PPA, is reasonable and prudent for all purposes, including, but not limited to, recovery in rates of payments made and to be made pursuant to the AES Alamitos PPA, subject only to further review with respect to the reasonableness of SCE’s administration of the AES Alamitos PPA;

3. A finding that SCE is authorized to allocate the benefits and costs of the AES Alamitos PPA to its bundled service customers and applicable departing load customers; and

4. Any other and further relief as the Commission finds just and reasonable.

SCE’s request for expedited approval is due to the timing considerations to meet the Year-Ahead RA compliance filing, due October 31, 2020.

XII. EFFECTIVE DATE

This Advice Letter will become effective upon Commission approval.

21 See SCE’s Preliminary Statement Part WW, Section 2.a. Each PABA-eligible resource is

assigned a resource vintage based on the calendar year the resource was originally executed (contracts).

22 This includes departing load customers who are responsible for the 2020 subaccount of the PABA. See SCE’s Preliminary Statement Part WW, Section 2.b.

ADVICE 4209-E (U 338-E) - 9 - May 8, 2020

XIII. APPENDICES

This Advice Letter contains both confidential and public appendices as listed below.

Confidential Appendix A: Confidential Advice Letter Information

Confidential Appendix B: AES Alamitos PPA

Confidential/Public Appendix C: Independent Evaluator Report

Public Appendix D: Confidentiality Declaration

Public Appendix E: Proposed Protective Order

XIV. CONFIDENTIALITY

SCE requests confidential treatment of Confidential Appendices A through C to this Advice Letter. The information for which SCE is seeking confidential treatment is identified in the Confidentiality Declaration attached as Appendix D. The confidential appendices to this Advice Letter will be made available to appropriate parties (in accordance with SCE’s Proposed Protective Order, as discussed below) upon execution of the required non-disclosure agreement. Parties wishing to obtain access to the confidential appendices to this Advice Letter may contact Rebecca Meiers-De Pastino in SCE’s Law Department at [email protected] or (626) 302-6016 to obtain a nondisclosure agreement. In accordance with GO 96-B, a copy of SCE’s Proposed Protective Order is attached as Appendix E. It is appropriate to accord confidential treatment to the information for which SCE requests confidential treatment in the first instance in the advice letter process because such information is entitled to confidentiality protection pursuant to D.06-06-066, and is required to be submitted by advice letter as part of the process for obtaining Commission approval of the AES Alamitos PPA. SCE would object if the information were disclosed in an aggregated format.

The information in this Advice Letter for which SCE requests confidential treatment, the pages on which the information appears, and the length of time for which the information should remain confidential, are provided in Appendix D. This information is entitled to confidentiality protection pursuant to the Investor-Owned Utility Matrix adopted by the Commission in D.06-06-066 and modified by D.07-05-032. The specific provisions of the IOU Matrix that apply to the confidential information in this Advice Letter are identified in Appendix D.

XV. NOTICE

Anyone wishing to protest this advice letter may do so by letter via U.S. Mail, facsimile, or electronically, any of which must be received no later than 20 days after the date of this advice letter. Protests should be submitted to:

ADVICE 4209-E (U 338-E) - 10 - May 8, 2020

CPUC, Energy Division Attention: Tariff Unit 505 Van Ness Avenue San Francisco, California 94102 E-mail: [email protected]

Copies should also be mailed to the attention of the Director, Energy Division, Room 4004 (same address above).

In addition, protests and all other correspondence regarding this advice letter should also be sent by letter and transmitted via facsimile or electronically to the attention of:

Gary A. Stern, Ph.D. Managing Director, State Regulatory Operations Southern California Edison Company 8631 Rush Street Rosemead, California 91770 Telephone: (626) 302-9645 Facsimile: (626) 302-6396 E-mail: [email protected] Laura Genao Managing Director, State Regulatory Affairs c/o Karyn Gansecki Southern California Edison Company 601 Van Ness Avenue, Suite 2030 San Francisco, California 94102 Facsimile: (415) 929-5544 E-mail: [email protected]

With a copy to: Rebecca Meiers-De Pastino Senior Attorney Southern California Edison Company 2244 Walnut Grove Avenue, 3rd Floor Rosemead, CA 91770 E-mail: [email protected]

There are no restrictions on who may submit a protest, but the protest shall set forth specifically the grounds upon which it is based and must be received by the deadline shown above.

In accordance with General Rule 4 of GO 96-B, SCE is serving copies of this advice letter to the interested parties shown on the attached R.16-02-007, R.01-10-024, R.13-12-010, and GO 96-B service lists. Address change requests to the GO 96-B

ADVICE 4209-E (U 338-E) - 11 - May 8, 2020

service list should be directed by electronic mail to [email protected] or at (626) 302-4039. For changes to all other service lists, please contact the Commission’s Process Office at (415) 703-2021 or by electronic mail at [email protected].

Further, in accordance with Public Utilities Code Section 491, notice to the public is hereby given by submitting and keeping the advice letter at SCE’s corporate headquarters. To view other SCE advice letters submitted with the Commission, log on to SCE’s web site at http://www.sce.com/AboutSCE/Regulatory/adviceletters.

For questions, please contact Dawn Anaiscourt at (415) 929-5518 or by electronic mail at [email protected].

Southern California Edison Company

/s/ Gary A. Stern, Ph.D. Gary A. Stern, Ph.D. GAS:da/db:jm Enclosures

ADVICE LETTER S U M M A R YENERGY UTILITY

Company name/CPUC Utility No.:

Utility type:Phone #:

EXPLANATION OF UTILITY TYPE

ELC GAS

PLC HEAT

MUST BE COMPLETED BY UTILITY (Attach additional pages as needed)

Advice Letter (AL) #:

WATERE-mail: E-mail Disposition Notice to:

Contact Person:

ELC = ElectricPLC = Pipeline

GAS = GasHEAT = Heat WATER = Water

(Date Submitted / Received Stamp by CPUC)

Subject of AL:

Tier Designation:

Keywords (choose from CPUC listing):AL Type: Monthly Quarterly Annual One-Time Other:If AL submitted in compliance with a Commission order, indicate relevant Decision/Resolution #:

Does AL replace a withdrawn or rejected AL? If so, identify the prior AL:

Summarize differences between the AL and the prior withdrawn or rejected AL:

Confidential treatment requested? Yes NoIf yes, specification of confidential information:Confidential information will be made available to appropriate parties who execute a nondisclosure agreement. Name and contact information to request nondisclosure agreement/access to confidential information:

Resolution required? Yes No

Requested effective date: No. of tariff sheets:

Estimated system annual revenue effect (%):

Estimated system average rate effect (%):

When rates are affected by AL, include attachment in AL showing average rate effects on customer classes (residential, small commercial, large C/I, agricultural, lighting).

Tariff schedules affected:

Service affected and changes proposed1:

Pending advice letters that revise the same tariff sheets:

1Discuss in AL if more space is needed.

CPUC, Energy DivisionAttention: Tariff Unit505 Van Ness AvenueSan Francisco, CA 94102 Email: [email protected]

Protests and all other correspondence regarding this AL are due no later than 20 days after the date of this submittal, unless otherwise authorized by the Commission, and shall be sent to:

Name:Title:Utility Name:Address:City:State:Telephone (xxx) xxx-xxxx:Facsimile (xxx) xxx-xxxx:Email:

Name:Title:Utility Name:Address:City:State:Telephone (xxx) xxx-xxxx: Facsimile (xxx) xxx-xxxx:Email:

Zip:

Zip:

mailto:EDTariffUnit%40cpuc.ca.gov?subject=

ENERGY Advice Letter Keywords

Affiliate Direct Access Preliminary StatementAgreements Disconnect Service ProcurementAgriculture ECAC / Energy Cost Adjustment Qualifying FacilityAvoided Cost EOR / Enhanced Oil Recovery RebatesBalancing Account Energy Charge RefundsBaseline Energy Efficiency ReliabilityBilingual Establish Service Re-MAT/Bio-MATBillings Expand Service Area Revenue AllocationBioenergy Forms Rule 21Brokerage Fees Franchise Fee / User Tax RulesCARE G.O. 131-D Section 851CPUC Reimbursement Fee GRC / General Rate Case Self GenerationCapacity Hazardous Waste Service Area MapCogeneration Increase Rates Service OutageCompliance Interruptible Service SolarConditions of Service Interutility Transportation Standby ServiceConnection LIEE / Low-Income Energy Efficiency StorageConservation LIRA / Low-Income Ratepayer Assistance Street LightsConsolidate Tariffs Late Payment Charge SurchargesContracts Line Extensions TariffsCore Memorandum Account TaxesCredit Metered Energy Efficiency Text ChangesCurtailable Service Metering TransformerCustomer Charge Mobile Home Parks Transition CostCustomer Owned Generation Name Change Transmission LinesDecrease Rates Non-Core Transportation ElectrificationDemand Charge Non-firm Service Contracts Transportation RatesDemand Side Fund Nuclear UndergroundingDemand Side Management Oil Pipelines Voltage DiscountDemand Side Response PBR / Performance Based Ratemaking Wind PowerDeposits Portfolio Withdrawal of ServiceDepreciation Power Lines

CONFIDENTIAL Appendix A Confidential Advice Letter Information

Confidential Protected Materials – Public Disclosure Prohibited

CONFIDENTIAL Appendix B AES Alamitos PPA


CONFIDENTIAL Appendix C Independent Evaluator Report


PUBLIC Appendix C Independent Evaluator Report


Solicitation for

Resource Adequacy Purchases and Sales

For 2020 - 2024 Resource Adequacy Compliance

Independent Evaluator Report

Public Version

Review of Agreement with AES Alamitos, LLC

May 04, 2020

Prepared by Merrimack Energy Group, Inc.

MMMerrimack

Energy

Table of Contents I. Introduction…………………………………….…………………………….……..…1 II. Project Specific Contract Negotiations………………………………………..….……2 III. Does the Contract Merit CPUC Approval……………………..…………………….9

Merrimack Energy Group, Inc. 1

I. Introduction

Southern California Edison Company (“SCE”) is submitting a Tier 3 Advice Letter to the California Public Utilities Commission (“CPUC”) seeking approval of a Confirmation for Resource Adequacy (“RA”) Capacity Product (“Confirmation” or “Confirm”) for CAISO Resources with AES Alamitos, LLC (“AES”) for 1,165.82 MW of Resource Adequacy (“RA”) from Units 3, 4, and 5 at the AES Alamitos Power Station (“Alamitos”) for a term of three years beginning on January 1, 2021 through December 31, 2023. The Confirmation was executed on March 23, 2020 and is intended to meet a portion of SCE’s Month-Ahead and Year-Ahead RA Capacity Requirements. Under the Agreement, SCE shall purchase and receive the Capacity Attributes1 from three units at the Alamitos Power Station, including Local RA Requirement Attributes and Flexible Capacity Attributes. The contract is for Firm RA Product. The details of the Alamitos agreement with regard to the payment and crediting mechanism will be discussed later in this report. As evidenced in the recent RA solicitations, there is a shortage of available RA in the market from 2021 to 2023. On November 13, 2019, the CPUC issued Decision 19-11-016 to address the anticipated RA shortages and grid reliability issues. In addition to the Decision authorizing the procurement of an additional 3,300 MW of power by 2023 to be proportionally divided amongst all load-serving entities serving load within the CAISO balancing area, the Decision also recommends that the State Water Resources Control Board (SWRCB) extend the Once-Through-Cooling compliance deadline for specific units. 2 Currently, the following units are supposed to retire by December 31, 2020; however the Decision 19-11-016 recommends the extension for the following units:

AES Alamitos Generating Station for 1,165 MW for up to three years; AES Huntington Beach Generating Station for 225 MW for up to three years; AES Redondo Beach Generating Stations for 840 MW for up to two years; GenOn Ormond Beach Generating Station for ~1,500 MW for up to one year;

o On March 26, 2020, the CPUC issued Decision 20-03-028 which modified the recommendation for the GenOn Ormond Beach Generation Station to include an extension for up to three years.

Dynegy Moss Landing Power Plant for ~1,000 MW pending certification by the SWRCB to comply with OTC requirements on or before December 31, 2020.

1 According to the Confirm, Capacity Attributes mean, with respect to a Unit, any and all resource adequacy attributes, as may be identified from time to time by the CPUC, CAISO or other Governmental Body having jurisdiction that can be counted toward RAR, inclusive of any Local RA Attributes, Flexible RA Attributes, and any other current or future defined characteristics howsoever entitled and counted toward any Compliance Obligations. 2 On May 4, 2010, the SWRCB adopted its statewide Water Quality Control Policy of the Use of Coastal and Estuarine Water for Power Plant Cooling (Resolution No. 2010-0020), which applies to power plants located along the California coast that rely on Once-Through-Cooling (“OTC”) technology (the “OTC Policy”). The OTC Policy requires OTC facilities to meet certain requirements or retire by a specified compliance date. The policy established technology-based standards to comply with the Clean Water Act that impacted nineteen power plants.


The intention is that these extensions will supply the capacity needed until additional generators are built to ensure system reliability. Through this RFO, SCE is seeking to buy from responding market participants and all supply sources which are eligible to provide RA Capacity, including Combined Heat and Power baseload sources, Dispatchable Toll sources, and Import Capability Transfer products from August 2020 through 2024 delivery periods. Through this RFO, SCE is also seeking to sell RA Capacity from April 2020 through June 2020. SCE issued this RFO to assist in meeting its 2020-2024 Year-Ahead and Month-Ahead RA Capacity obligations. In particular, as a result of D.19-11-016, SCE considered OTC generators as eligible resources in this solicitation. While SWRCB needs to officially vote on and approve the extension of OTC units, SCE is seeking to fulfill its RA compliance obligations in a proactive manner. SCE selected the AES Alamitos units through the DEC2019 RA RFO and worked through the contracting process with the consideration in mind that the OTC compliance date extension is still pending SWRCB approval and subject to CPUC Tier 3 Advice Letter approval. Pursuant to regulatory requirements of the CPUC, SCE retained Merrimack Energy Group, Inc. (“Merrimack Energy”) as the Independent Evaluator (“IE”) for this RFO and contract filing. The IE has prepared a public and confidential report, Attachment A and Attachment B respectively that offer a more detailed description and assessment of the entire RFO process. II. Project Specific Negotiations For reviewing and evaluating the performance of the utility with regard to specific contract negotiations, the IE has addressed the issues raised in the CPUC Independent Evaluator Report Template. These include:

1. Identify the principles the IE used to evaluate negotiations; 2. Using the above principles, evaluate the project specific negotiations. Highlight any

issues of interest/concern including unique terms and conditions; 3. Was similar information/options made available to other bidders when appropriate

(i.e. if a bidder was told to reduce its price, was the same information made available to others)?;

4. Describe and explain any differences of opinion between the IE and utility. If resolved, describe the reasonableness of the outcome;

5. Any other information relevant to negotiations not asked above but important to understanding the IOU’s process.

Principles Used to Evaluate Negotiations The general principles followed by the IE in evaluating contract negotiations include assurance that the risk allocation provisions in the contract are reasonably balanced between the counterparties, and that the utility customers are not placed at undue risk as a


result of the contracting process. The IE generally “monitors” but does not actively participate in the contract negotiation process but will identify issues to the utility transactors if negotiations are moving off track, or if there are potential biases or inconsistencies in the negotiation process, or if the IE wants to ensure that all similar projects being negotiated are treated in a similar manner. It has been the IE’s experience in monitoring a number of contract negotiation processes that contract negotiations can divert off course but eventually revert to a balance after contested provisions are resolved. We also attempt to ensure that similarly situated counterparties are treated the same or similarly and that all counterparties are provided with the same message. The negotiation process was clearly described in the RFO Instructions, which was made available to all bidders. SCE included the pro forma contracts for all four eligible products sought via the DEC2019 RA RFO with the documents made available to Offerors. The RFO instructions stated that aside from the project-specific technical and commercial information that needs to be populated, these pro forma agreements are fundamentally execution-ready contracts. SCE noted that for SCE Purchase confirmations, limited modifications would be considered. As outlined in the RFO Instructions, SCE employed a Shortlist and/or Selection notification period, in which the Shortlist notification served to notify the Respondent of shortlisting including the exact product, and quantity details from a specific resource. From there, SCE provided a contingent Selection notification based on a specific resource with this notification period serving as a time to negotiate exact product, parameters, pricing, and quantity details as SCE reserved the right to negotiate the product initially offered to obtain a higher NPV. It is also noted in the RFO Instructions that the selection or shortlisting of an Offer is subject to final SCE management review and approval, consultation with SCE’s Procurement Review Group, and successful completion and execution of transaction documents. SCE employed a flexible shortlisting and selection process with the intention of negotiating product attributes with counterparties. Using the above principles identified above, please evaluate fairness of project-specific negotiations Negotiations with the bidders began shortly after shortlisting notification on January 24, 2020. AES originally submitted annual strips for each of the three Alamitos units (3, 4 and 5)

AES later presented several alternate offers for the

Alamitos units (as well as for other OTC units at other AES plants) with one inclusive of all three Alamitos units for all three years (2021/2022/2023)

After further negotiations and additional concessions from AES, SCE decided to select the AES Alamitos units 3, 4, and 5

because


the negotiated Alamitos offer had a higher NPV than the other two offers and also provides LA Basin local attributes. As a note, AES’s counteroffer for the Redondo Units included a major price reduction; however, SCE would have to pick up the capacity for 2021 and 2022. SCE opted to not pursue the AES Redondo Beach units because the City of Redondo expressed its eagerness of converting the power plant’s land into parkland sooner rather than later, which may impact AES’ ability to get the OTC extension approved. As a result of continued negotiations with AES and the remaining counterparties and changes to forecasted RA positions, SCE and AES came to agreement on final terms. SCE and AES came to an agreement on the three Alamitos units for the years of 2021 through 2023 at a

.

This summary reviews the principal terms and conditions of the Confirmation (“Confirm”) for Resource Adequacy Capacity Product (the “Transaction”) between SCE and AES, dated March 23, 2020. In addition to the Confirmation, the Transaction is governed by the terms and conditions of the Edison Electric Institute Master Power Purchase and Sale Agreement (“EEI Agreement”). The EEI Agreement and the Confirmation collectively comprise the entire “Agreement” of Buyer and Seller (the “Parties”). To the extent that the Confirmation is inconsistent with any provision of the EEI Agreement, the Confirmation governs the rights and obligations of the Parties. SCE worked with AES on the Confirm and EEI over the course of a month roughly. Some of the key provisions discussed during the execution process revolved around contingencies related to SWRCB approval, CPUC approval, and the mechanism for and amounts of collateral posting. In particular, SCE and AES agreed on a quarterly declining collateral concept. Table 1 provides a summary of the key contract provisions for the AES Alamitos contract negotiated by SCE with AES.

Table 1: Summary of AES Alamitos Contract Provisions

Contract Provision 2020 AES Alamitos Contract Section 1.1: Product Buyer shall receive and purchase the Capacity Attributes

(including all Local RA Attributes and Flexible RA Attributes) of the Units described in Appendix C and identified above (collectively, the “Product”) and Seller shall deliver the Product as described in Appendix A. The Product does not include any right to dispatch or receive the energy or ancillary services from the Unit. The Contract Price will not change if the CAISO, CPUC or other Governmental Body defines new or re-defines the existing Local Capacity Area, which decreases or increases the amount of Local RA Attributes provided.

Section 1.3: Delivery Period The Delivery Period shall be: January 1, 2021 through: December 31, 2023, inclusive, unless terminated earlier in accordance with the terms of this Agreement

Section 1.4 Contract Quantity The Contract Quantity for each applicable Showing Month is as shown in Appendix B of this Confirmation


Contract Provision 2020 AES Alamitos Contract under the heading titled “Contract Quantity, which is a total of 1,165.82 MW of RA Capacity. This includes Flexible Capacity of 1,055.82 MW. The quantities specified in Appendix B will control in the event of a conflict between those values and those in Appendix C. The Parties agree to revise the Appendix C as necessary to ensure that the Contract Quantity and Flexible Capacity are satisfied in full. Seller may modify the Contract Quantity Unit Allocation from time to time by providing email notice to Buyer’s Supply Plan contact, as set forth in Appendix D, no later than the initial Compliance Showing deadline for each Showing Month.

Section 2.2: Adjustments to Contract Quantity

Seller shall deliver to Buyer the Contract Quantity of Product for each Showing Month consistent with the following:

a. Planned Outages: Seller’s obligation to deliver the Contract Quantity for each Showing Month may be reduced at Seller’s option by the amount of any Planned Outages which exist with respect to any portion of the Unit during the applicable Showing Month; provided, (i) Seller notifies Buyer, no later than fifteen (15) Business Days before the initial deadline for the Compliance Showing applicable to that Showing Month and ii) such reduction is able to be reflected on the Supply Plans in accordance with the CAISO Tariff.

b. Reductions in Unit NQC and Unit EFC: Seller’s obligation to deliver the applicable Contract Quantity for each Showing Month may also be reduced in the event the Unit experiences a reduction in Unit NQC or Unit EFC after the Confirmation Effective Date as determined by the CAISO. In the event the Unit experiences such a reduction in Unit NQC or Unit EFC, Seller has the option, but not the obligation, to provide the applicable Contract Quantity for such Showing Month from (i) the same Unit, provided the Unit has sufficient remaining and available Product or (ii) from Alternate Units, provided, that in each case Seller provides and identifies such Alternate Units in accordance with Section 2.3

Section 2.4: Damages for Failure to Provide Capacity

Buyer may, but shall not be required to, replace all or any portion of the Replacement Obligation for the applicable Showing Month with capacity having equivalent Capacity


Contract Provision 2020 AES Alamitos Contract Attributes as the Expected Contract Quantity; provided, if, using commercially reasonable efforts, Buyer is unable to acquire capacity having equivalent Capacity Attributes for any portion of any Showing Month, Buyer may replace such portion of the Replacement Obligation with capacity having Capacity Attributes in excess of the Contract Quantity (the “Replacement Capacity”). Seller shall pay to Buyer an amount equal to the positive difference, if any, between (i) the sum of (A) the actual cost paid by Buyer for any Replacement Capacity, including any transaction costs and expenses incurred in connection with such procurement, plus (B) each applicable Replacement Capacity Price multiplied by the aggregate amount of Replacement Obligation neither provided by Seller as Alternate Capacity nor purchased by Buyer as Replacement Capacity, for all applicable portions of the applicable Showing Month and (ii) the Replacement Obligation minus the Alternate Capacity, not provided for all applicable portions of the applicable Showing Month times the Contract Price for that month.

Section 2.6: Buyer’s Re-Sale of Product

This section describes the terms under which the Buyer may re-sell all or a portion of the Product and any associated rights acquired under this Confirmation

Section 3.1: Monthly Payment Monthly Payment = (A x B x 1,000)

where:

A = applicable Contract Price for that Showing Month

B = The amount of Contract Quantity of Product actually delivered by Seller to Buyer pursuant to and consistent with Section 2.1 and, if applicable, Section 2.3, and that can be counted toward RAR, Local RAR, and Flexible RAR, each as applicable, for the applicable Showing Month.


Contract Provision 2020 AES Alamitos Contract Section 4.3: CPUC Approval No later than twenty (20) business days after the

Confirmation Effective Date, SCE shall file with the CPUC the appropriate request for CPUC Approval. Failure to obtain CPUC Approval in accordance with this provision will not be deemed to be or cause an Event of Default by either Party. Either Party has the right to terminate this Confirmation on Notice, which will be effective five (5) Business Days after such Notice is given, if CPUC Approval has not been obtained or waived by SCE at its sole discretion by October 30, 2020. Failure to obtain CPUC Approval in accordance with this provision will not be deemed to be or cause an Event of Default by either Party. No Settlement Amount or Termination Payment with respect to this Confirmation will be due or owing by either Party upon termination of this Confirmation due solely to failure to obtain CPUC Approval.

Section 4.4: SWRCB Approval

No later than twenty (20) business days after the Confirmation Effective Date, Counterparty shall file with the SWRCB the appropriate request to extend the Unit’s once-though-cooling compliance deadline through the Delivery Period End Date (“SWRCB Extension Request”). The Confirmation shall automatically terminate if SWRCB Approval has not been obtained on or before October 30, 2020. Failure to obtain SWRCB Approval in accordance with this provision will not be deemed to be or cause an Event of Default by either Party. If SWRCB Approval partially approves the SWRCB Extension Request by extending the Unit’s once-though-cooling compliance deadline to a date that is earlier than the Delivery Period End Date, then the Delivery Period End Date shall be automatically adjusted to the SWRCB Extension Date; provided, if such SWRCB Extension Date is on or before June 30 of any year within the Delivery Period, the Delivery Period End Date shall be automatically adjusted to December 31 of the prior year if such prior year is within the original Delivery Period.

Section 4.5: Change in Capacity Attributes Market Design

If a Change in Capacity Attributes renders this Confirmation or any terms herein incapable of being performed or administered, then either Party, on Notice, may request the other Party to enter into negotiations to make the minimum changes to this Confirmation necessary to make this Confirmation capable of being performed and administered, while attempting to preserve


Contract Provision 2020 AES Alamitos Contract to the maximum extent possible the benefits, burdens and obligations set forth in this Confirmation as of the Confirmation Effective Date.

Section 8.1(a): Counterparty Collateral Requirements

Seller shall post one-half of the Performance Assurance Amount within five (5) Business Days following the Confirmation Effective Date, with the remainder to be posted within five (5) Business Days after the later to occur of (A) CPUC Approval is obtained or waived by SCE in its sole discretion, or (B) SWRCB Approval is obtained or waived by SCE in its sole discretion.

Section 9.1: Declaration of an Early Termination Date and Calculation of Settlement Amounts

If Buyer is the Non-Defaulting Party and Buyer reasonably expects to incur penalties, fines or costs from the CPUC, the CAISO, or any Governmental Authority having jurisdiction, because Buyer is not able to include the applicable Contract Quantity in any applicable Compliance Showing due to Seller’s Event of Default, then Buyer may, in good faith, estimate the amount of those penalties or fines and include this estimate in its determination of the Settlement Amount, subject to accounting to Seller when those penalties or fines are finally ascertained. If this accounting establishes that Buyer’s estimate exceeds the actual amount of penalties or fines, Buyer shall promptly remit to Seller the excess amount. The rights and obligations with respect to determining and paying any Settlement Amount or Termination Payment, and any dispute resolution provisions with respect thereto, shall survive the termination of this Transaction and shall continue until after those penalties or fines are finally ascertained.


Was similar information/options made available to other participants, e.g. if a participant was told to reduce its price down to $X, was the same information made available to others? The IE concludes that generally similar information and options were made available to all participants during the contract negotiation process. However, there were cases where project specific provisions may differ or be revised based on input from the counterparty. All counterparties have negotiated some provisions that may have different language or reflect the unique nature of the project. SCE’s processes and procedures, however, have been established with a goal of ensuring that all projects had access to the same information and in a timely manner to ensure fairness to all bidders. The IE is of the opinion that these processes and procedures were followed for these solicitations. Any other relevant information or observations, such as other data or information used to inform the negotiations None III. Does the Contract Merit CPUC Approval Provide narrative for each category and describe the project’s ranking relative to: 1) other offers from the solicitation (or recent bilaterals or market information if used in reasonableness comparison; 2) other procurement opportunities (e.g. distributed generation programs); and 3) from an overall market perspective SCE is seeking approval of a Power Purchase and Sale Agreement for Resource Adequacy Capacity Product for CAISO Resources with AES Alamitos, LLC for 1,165.82 MW of Resource Adequacy from Units 3, 4, and 5 located at the Alamitos Power Station for a three-year term from 2021 to 2023 to meet SCE’s Resource Adequacy compliance obligations. As evidenced by prior SCE RA solicitations, the CPUC Decision, and other market indicators, there is a lack of available RA in the market

The pricing of the RA capacity in the

Confirms with AES for Alamitos of

. As noted, the AES Alamitos generating facility is one of three OTC facilities selected and one of five total agreements executed. Table 2 provides a summary of the offers selected and their relative characteristics.


Table 2: Summary of Offers Selected

Table 2 also shows the

The AES Alamitos offers ranked

Even with these selections made,

Finally, the contracts negotiated between SCE and AES are reasonable and fair and reasonably protect customer interests. As a result of this assessment, the IE views the decision of SCE to execute the RA Confirm with AES for the 1,165.82 MW of AES Alamitos capacity to be a reasonable and effective decision to meet RA compliance requirements. Furthermore, the availability of existing resources to meet the amount of RA system capacity required is limited. The IE therefore recommends approval of this contract.


Solicitation for

Resource Adequacy Purchases and Sales

For 2020 - 2024 Resource Adequacy Compliance

Public Version

Attachment A

Final Report of the Independent Evaluator

On the Offer Evaluation and Selection Process

April 28, 2020

Prepared by Merrimack Energy Group, Inc.

MMMerrimack

Energy

Table of Contents I. Introduction …………………………………………………………………………. 1 II. Description of the Role of the IE……………….………………………………….….8 III. Outreach Efforts ………………………..……………………………………………11 IV. Description of SCE’s Bid Evaluation and Selection Process ……..………….…….12 V. Administration of the Solicitation Process…..……………………………………….15 VI. Fairness of the Solicitation Process………………………………………………….19 VII. Contract Negotiation Process…....…………………………………………….……21 VIII. Safeguards and Methodologies Employed ......…….…..…………………………..22 IX. Recommendations for Contract Approval …………………………………………. 22 X. Conclusions and Recommendations….....…………………………………………....23

Final Report


I. Introduction Overview of the Request for Offers for Resource Adequacy Purchases, Sales, and Buy-Sells

On December 20, 2019, Southern California Edison Company (“SCE” or “Company”) issued its Request for Offers for Resource Adequacy (“RA”) Purchases and Sales (“DEC2019 RA RFO” or “RA RFO”) seeking to buy from responding market participants and all supply sources (“Respondents”), which are eligible to provide Resource Adequacy (“RA”) Capacity, Combined Heat and Power (“CHP”) baseload, Dispatchable Toll, and Import Capability Transfer products from August 2020 through 2024 delivery periods. Through this RFO SCE is also seeking to sell RA Capacity from April 2020 through June 2020. SCE issued this RFO to assist in meeting its 2020-2024 Year-Ahead and Month-Ahead RA Capacity obligations. Through this RFO it was anticipated that the above noted products would be bought and sold, so as to meet SCE’s Compliance Obligations while also minimizing the procurement cost impact for SCE’s Bundled Customers. The products solicited within this RFO include (1) RA Only, (2) RA with dispatchable capacity through a tolling agreement, (3) RA with firm (baseload) plus “as-available” capacity from existing or repowered CHP facilities, and (4) Import Capability Transfers. The RA Capacity must be from specifically identified generating units that have a Net Qualifying Capacity (“NQC”) assigned by the CAISO and must be able to count toward SCE’s RA requirement. Import Capability Transfer must be for specified CAISO interties which can deliver RA into the CAISO Balance Authority Area. RA from all supply sources and Import Capability Transfer must be eligible for inclusion in both the Year-Ahead and Month-Ahead compliance filings with the California Public Utilities Commission (“CPUC”). Respondents may submit multiple offers with varying delivery periods, including varying volume options and various delivery terms. Table 1 provides a summary of the RA Capacity only product being solicited in this RFO:

Table 1: RA Capacity Only Product(s) RA Only Delivery Point CAISOType CAISO System or LocalFlexible Attribute With or WithoutMinimum Volume 1 MWPricing Fixed Price ($/kW-month)SCE Purchase – Contract OptionsDelivery Period Monthly / Q3 / AnnualEarliest Start Date August 1, 2020Latest End Date December 31, 2024SCE Sale – Contract Options Delivery Period Monthly / Q2

Final Report


Earliest Start Date April 1, 2020Latest End Date June 30, 2020 As noted in Table 1, SCE solicited offers to both sell to and buy from SCE a specified quantity of qualifying and deliverable RA capacity that is approved for inclusion in the respective Compliance Showings. This is a capacity-only product and associated local and/or flexible attributes but does not include energy or ancillary services associated with any unit. Respondents offering to sell RA Capacity to SCE must either own or have contractual rights to the qualifying and deliverable RA Capacity for the delivery period specified in the applicable confirmation. In addition, Respondents may Offer to purchase from SCE specified quantity of CAISO System RA Capacity with second quarter (Q2) 2020 delivery period starting April 1, 2020 to June 30, 2020. SCE sought offers to buy or to sell the RA Capacity product on the terms described in the RA Capacity (SCE Buys or SCE Sells) confirmations included as part of the RFO documents. SCE was not specifically seeking flexible capacity attributes for this RFO, although SCE encourages offerors to include local or flexible capacity attributes, if available. Respondents may offer to buy local or flexible capacity attributes from SCE and such request for local or flexible capacity attributes will be evaluated in accordance with the evaluation criteria set forth in the RFO Instructions. SCE sought offers to buy or sell the RA Capacity product through the terms described in the RA Capacity confirmation which is included as part of the overall RFO. As shown in Table 2, SCE sought Toll Offers from Respondents with a resource that is existing and dispatchable at the full Contract Capacity within 15 minutes and has demonstrated Full Capacity Deliverability Status (“FCDS”).

Table 2: RA Capacity with Tolling Agreement Product Dispatchable Toll

Dispatchable capacity, energy, ancillary services, and RA capacity attributes

Delivery Point CAISOMinimum Volume 5 MWEligible Sources All resources with a Net Qualifying Capacity (NQC) except

OTC unit(s)Delivery Period August 1, 2020 – December 31, 2020, and/or

Any full calendar year(s) before December 31, 2024 Earliest Start Date August 1, 2020Latest End Date December 31, 2024Agreement(s) Tolling Agreement as a working template Toll Offer Parameters Capacity Pricing Fixed Price ($/kW-month) or ($/kW-year) Contracted Heat Rate (BTU/kWh) @ reference conditionsVariable Charge ($/kWh)GHG Compliance Negotiable

Final Report


Fuel Manager NegotiableScheduling Negotiable This product option specifically excludes participation from once-through cooling (OTC) units, although they may be offered through the above described RA-Only product category subject to both the California Public Utilities Commission (CPUC) and the State Water Resource Control Board (SWRCB) approvals. As shown in Table 3, SCE sought Offers for existing or repowered CHP facilities, which is characterized by a firm (baseload) capacity and an “as-available” capacity component1. SCE will consider these RA offers through a power purchase agreement (PPA) that addresses the firm and as available capacity and energy.

Table 3: Combined Heat & Power (CHP) PPA Products CHP PPA - Firm (baseload) plus As-Available capacity,

energy, ancillary services, and RA capacity attributes Delivery Point CAISOMinimum Volume 5 MW Baseload or As AvailableCapacity Pricing Fixed Price ($/kW-month) or ($/kW-year) Delivery Period August 1, 2020 – December 31, 2020, and/or

Any full calendar year(s) before December 31, 2024 Earliest Start Date August 1, 2020Latest End Date December 31, 2024Agreement(s) CHP PPA or Tolling Agreement as a working templateCHP Offer Parameters Contracted Heat Rate (BTU/kWh) @ reference conditionsVariable O&M Charge ($/kWh)Startup Charge Startup time, fuel requirement, auxiliary load Restrictions Capacity & ancillary servicesGHG Compliance SCE, Respondent, or Joint OptionsFuel Manager NegotiableScheduling SCE Any Respondent submitting a CHP offer must provide a firm plus any as-available capacity price whereby Respondent assumes all GHG Compliance Costs. SCE is open to consider other pricing option whereby Respondent and SCE allocate GHG Compliance Costs between them. Lastly, as illustrated in Table 4, SCE sought offers to purchase import allocation rights into the CAISO Balance Authority Area through specific CAISO interties that do not include any RA capacity, energy, or ancillary services.

1 For reference, CHP facilities are those that meet the definition of cogeneration under California Public Utilities Code §216.6 and the Emissions Performance Standard established by Public Utilities Code §8341.

Final Report


Table 4: Import Capability Transfer Product

Products Import Capability Transfer Delivery Points MALIN500 (COB) / NOB_ITC (NOB)

PALOVRDE_ITC (PV) / MEAD_ITC (MEAD) Minimum Volume 1 MWPricing Fixed Price ($/kW-month)SCE Purchase – Contract Delivery PeriodMonthly August 2020 – October 2020 In order to offer this product, Respondents must either own or have the contractual rights to the product for the delivery period In the RFO Instructions document, SCE also provided guidance to Respondents regarding other considerations and requirements associated with the solicitation process. These considerations include:

Respondents providing Offers for SCE to purchase a product (e.g. through a toll or CHP agreement) must in addition submit a RA Only Offer.

Respondents are allowed and encouraged to submit Offers for more than one product and multiple Offers for the same product.

Respondent must state all volumetric limitations in the applicable Volume Limits tab of the Offer Forms. Except for setting volumetric limitations, Offers containing any contingencies will be considered nonconforming and ineligible for consideration.

Local and Flexible attributes are specified in Offers and will become part of any transaction resulting from this RFO.

All product categories may be proposed in partial MW increments that are equal to or greater than the minimum volumes specified in each table but have no more than two decimal places. For example, an offer of 1.23 MW would be acceptable, whereas an offer of 1.234 MW would not be acceptable.

No contracts awarded in this solicitation shall be greater than 52 months in duration.

Once-Through Cooling (“OTC”) Units, as described in the California State Water Resources Control Board (“SWRCB”) policies, can be submitted as an RA Only offer, at Respondent’s discretion, delivery periods that end prior to such OTC Unit’s OTC compliance date (the “OTC Compliance Date”)2 and/or delivery

2 OTC Unit’s OTC Compliance Dates can be found on the SWRCB website at: http://www.waterboards.ca.gov/publications_forms/publications/factsheets/docs/oncethroughcooling.pdf

Final Report


periods that end past the OTC Unit’s OTC Compliance Date. Any awarded contracts that are past such OTC Unit’s OTC Compliance Date must be submitted to the CPUC for approval via a Tier 3 Advice Letter and contingent upon SWRCB granting an extension to the OTC Compliance Date. Reference the SCE Pro Forma RA Confirmation for specific CPUC and SWRCB approval languages.

The RFO also lists eligibility requirements for all Respondents in order for the Respondent to participate in the process. The eligibility requirements listed in the RFO include:

If the Respondent is deemed eligible to submit an Offer, any Offer submitted by Respondent is considered a final Offer and cannot be modified by Respondent. SCE however reserves the right to clarify and further refine all offers at its sole discretion, including but not limited to product type, parameters, price and quantity;

Respondents may enter into good faith negotiations to execute an agreement with SCE related to any Offer short-listed by SCE as a result of this RFO. Respondents are strongly discouraged to make any substantive changes to the form of Enabling Agreements or Confirmations. Extensive modifications to these agreements will not be accepted;

Mutually inclusive offers across generating units of the same RA Area Attribute are allowed (e.g. Offer A for generating unit 1 (Big Creek – Ventura) and Offer B for generating Unit 2 (Big Creek – Ventura)). In making a mutually inclusive offer across generating units, Respondent must also submit discrete Offers for those generating units. SCE will have the option to either select the mutually inclusive Offer or the discrete Offers separately.

The RA RFO includes several Exhibits that Respondents are required to provide with their proposal. Each Respondent must provide (1) a fully completed Offer Form; (2) an executed Confidentiality Agreement/NDA, unless Respondent already has in place an evergreen NDA with SCE; (3) if the Offeror is a government entity, a drafted, but unexecuted, Certificate of Authority inclusive of all applicable exhibits; (4) for all RA Offers, a completed pro forma RA Confirmation (Exhibit B1)3; and (5) for SCE purchases only, a partially executed or minimally modified Enabling Agreement unless Respondent has an existing executed Enabling Agreement with SCE. There were three different Offer forms available to respondents to include in their submission: one for RA & IAR products, one for Toll offers, and one for CHP offers. The RA Offer Form includes a Respondent Information tab that each Respondent must fill out that includes basic respondent contact information. With regard to the Offer Form or Offer information tabs, Respondents are required to fill out the RA Offers tab. The Respondent is required to select product details which includes the type of offer, i.e., SCE Sells RA, SCE Buys RA, or SCE Buys IARs; the product delivery year, and the type of

3 Modification to SCE Sale confirmations will not be considered. Limited modification to SCE Purchase confirmations may be considered.

Final Report


product (CAISO System, LA Basin Local, or Big Creek Ventura Local). In each Offer section within the Offers tab, the Offeror must include the monthly capacity they are offering to sell (or buy) along with the monthly contract price ($/kW-month), the start and end month for the Offer, the resource offered, and inclusive/exclusive notes about the offer. Respondents can vary the offer volume by month, as well as the offer price for each variation. In the Toll product offer form, there are several tabs: Seller Info, Facility Info, Project Status, Offer Template, Toll Capacity Payment tab, a Variable O&M Pricing Tab, and two other tabs requesting additional facility technical information. There is also an Instructions tab that details the cells that the Respondent is required to fill out and which cells are auto-populated. The CHP offer form contains similar information with several additional tabs: Seller Info, Facility Info, Historical Generation, Project Status, Offer Template, Credit Provisions, Exhibit B – Description, Exhibit N – Notice List, Exhibit Q – Milestones, Sample CHP Capacity Payment, Sample CHP Energy Payment, and Estimated GHG Reduction tabs. Each tab contains various information about the Respondent’s experience and contact information, facility technical specs, and offer pricing. SCE’s evaluation process was described in the RA RFO Instructions document. SCE proposed a competitive process and utilize an expeditious offer selection for clear and definitive offers, as well as a shortlisting process with a short window to clarify or refine certain more competitive product offerings for this solicitation. All Offers will be initially assessed for conformance with the requirements set forth in the RFO Instructions. In addition, there will be both quantitative and qualitative considerations involved with evaluating Offers. Any Offer within this RFO will be a considered a final Offer which cannot be modified by the Respondent and shall be only subject to SCE's acceptance. The RFO Instructions included the original schedule which anticipated an almost two-month timeframe for the solicitation process. Table 5 provides the original schedule as listed in the RFO Instructions.

Table 5: RA RFO Proposed Schedule

Event Date RFO Launch December 20, 2019 Deadline to Submit Offers January 7, 2020 PRG Consultation January 14, 2020 Selection or Shortlisting Notification Period

January 24, 2020 – February 7, 2020

RA Confirm Execution Deadline

February 28, 2020

The RFO close-out date was extended several times. The initial extension was due to changes in the recommended selection set resulting from updates to the forecasted RA

Final Report


positions and negotiated pricing concessions. Also, the Selection or Shortlisting Notification Period was extended by a week, concluding on February 14, 2020. Through this RA RFO process,

Exhibit B

contains a list of all individual offers that were executed. As a result of these transactions,

Pursuant to regulatory requirements of the California Public Utilities Commission, SCE retained Merrimack Energy Group, Inc. (“Merrimack Energy”) as the Independent Evaluator (IE) for this solicitation. This report provides Merrimack Energy’s perspective on the RA RFO solicitation process and includes our overall assessment of the process. Issues Addressed in this Report This report addresses Merrimack Energy’s assessment and conclusions regarding the following issues identified in the Commission’s CPUC Independent Evaluator Report Template:

1. Describe the role of the IE throughout the solicitation process. 2. How did the IOU conduct outreach to bidders, and was the solicitation robust?

3. Describe SCE’s bid evaluation methodology. Evaluate the strengths and

weaknesses of the methodology.

4. Evaluate the administration of the solicitation process including the fairness of the IOU’s bidding and selection process (i.e. quantitative and qualitative methodology used to evaluate bids, consistency of evaluation methods with criteria specified in bid documents, etc.).

5. Describe project-specific negotiations. Highlight any areas of concern including

unique terms and conditions.

6. If applicable, describe safeguards and methodologies employed by the IOU to compare affiliate bids or UOG ownership proposals. If a utility selected a bid

4 Respondents awarded contracts included AES, Calpine, Dynegy, GenOn, and Direct Energy. 5 SCE made two revisions to the shortlisted selection before moving forward with the final selection into contract negotiations. 6 SCE’s September position, particularly in 2021 and 2022, is a focus of this solicitation report because the largest short positions are in September each year.

Final Report


from an affiliate or a bid that would result in utility asset ownership, explain and analyze whether the IOU’s selection of such bid(s) was appropriate.

7. Based on the complete bid process, is (are) the IOU contract(s) the best overall

offer(s) received by the IOU?

8. If the contract does not directly reflect a product solicited and bid in an RFP, is the contract superior to the bids received or the products solicited in the RFO?

9. Is the contract a reasonable way of achieving the need identified in the RFP?

10. Based on your analysis of the RFP bids, the bid process, and the overall market, does the contract merit Commission approval?

All these issues are addressed in this report, generally in the order included in the CPUC Independent Evaluator Report Template. II. Description of the Role of the IE throughout the Solicitation In compliance with the above requirements, SCE retained Merrimack Energy to serve as Independent Evaluator for SCE’s 2020-2024 Resource Adequacy Electronic Solicitation in November 2019. Merrimack Energy was retained to provide an independent evaluation of the appropriateness of SCE’s proposal evaluation methodology and selection process for product offers and bids and to provide SCE, SCE’s Procurement Review Group (“PRG”), and the Energy Division with periodic presentations, findings and other reports as requested. The objective of the role of the IE is to ensure that the solicitation process is undertaken in a fair, consistent, unbiased and objective manner and that the best resources are selected and acquired consistent with the solicitation requirements. This role generally involves a detailed review and assessment of the solicitation documents, evaluation process, the results of the quantitative and qualitative (non-price) analysis, selection of the short list or preferred options, and monitoring and assessment of contract negotiations. For this solicitation, Merrimack Energy was retained prior to issuance of the RA RFO. Regulatory Requirements for the Independent Evaluator The requirements for participation by an Independent Evaluator (IE) in utility solicitations are outlined in decisions D.04-12-048 (Findings of Fact 94-95, Ordering Paragraph 28), D.06-05-039 (Finding of Fact 20, Conclusion of Law 3, Ordering Paragraph 8) of the California Public Utilities Commission (Commission or CPUC) and D.09-06-050. The role of IE’s in California IOU procurement processes has evolved over the past thirteen years. In Decision 04-12-048 (December 16, 2004), the CPUC required the use

Final Report


of an IE by investor-owned utilities (IOUs) in resource solicitations where there are affiliate, IOU-built or turnkey bidders. The CPUC generally endorsed the guidelines issued by the Federal Energy Regulatory Commission (FERC) for independent evaluation where an affiliate of the purchaser is a bidder in a competitive solicitation, but stated that the role of the IE would not be to make binding decisions on behalf of the utilities or administer the entire process.7 Instead, the IE would be consulted by the IOU, along with the Procurement Review Group (“PRG”) on the design, administration, and evaluation aspects of the Request for Proposals (“RFP”). The Decision identifies the technical expertise and experience of the IE with regard to industry contracts, quantitative evaluation methodologies, power market derivatives, and other aspects of power project development. From a process standpoint, the IOU could contract directly with the IE, in consultation with its PRG, but the IE would coordinate with the Energy Division. In Decision 06-05-039 (May 25, 2006), the Commission required each IOU to employ an Independent Evaluator regarding all solicitations issued pursuant to the RPS, regardless of whether there are any utility-owned or affiliate-owned projects under consideration. This was extended to any long-term contract for new generation in D.06-07-029 (July 21, 2006). In addition, the Commission directed the IE for each RFO to provide separate reports (a preliminary report with the shortlist and final reports with IOU advice letters to approve contracts) on the entire bid, solicitation, evaluation and selection process, with the reports submitted to the utility, PRG and Commission and made available to the public (subject to confidential treatment of protected information). The IE would also make periodic presentations regarding its findings to the utility and the utility’s PRG consistent with preserving the independence of the IE by ensuring free and unfettered communications between the IE and the CPUC’s Energy Division, and an open, fair and transparent process that the PRG could confirm. In 2007, the use of an IE was required for any competitive solicitation seeking products for a term of more than three months in D.07-12-052 (December 21, 2007). Also, the process for retaining IEs was modified substantially, with IOUs developing a pool of qualified IEs, subject to feedback and any recommendations from the IOU’s PRG and the Energy Division, an internal review process for IE candidates, and final approval of the IEs by the Energy Division. In 2008, in D.08-11-008, the CPUC changed the minimum term requirements from three months to two years, and reiterated that an IE must be utilized whenever an affiliate or utility bidder participates in the RFO, regardless of contract duration. In D. 09-06-050 issued on June 18, 2009 in Rulemaking 08-08-009, Order Instituting Rulemaking to Continue Implementation and Administration of California Renewable Portfolio Standard Program,8 the CPUC required that bilateral contracts should be reviewed according to the same processes and standards as contracts that come through a

7 Decision 04-12-048 at 129-37. The FERC guidelines are set forth in Ameren Energy Generating Company, 108 FERC ¶ 61,081 (June 29, 2004). 8 Decision Establishing Price Benchmarks and Contract Review Processes for Short-Term and Bilateral Procurement Contracts for Compliance with the California Renewable Portfolio Standard.

Final Report


solicitation. This includes review by the utility’s Procurement Review Group and its IE, including a report filed by the IE. In D.10-07-042 issued on July 29, 2010, the Commission reaffirmed the role of the IE and required the Energy Division to revise the IE Template to ensure that the IEs focus on their core responsibility of evaluating whether an IOU conducted a well-designed, fair, and transparent RFO for the purpose of obtaining the lowest market price for ratepayers, taking into account many factors (e.g. project viability, transmission access, etc.). This report is filed consistent with the above requirements and is consistent with the requirements outlined in the CPUC’s Short Form IE Report Template. Description of IE Oversight Activities The IE was involved in a number of activities and completed several specific tasks in performing its oversight role in connection with development of SCE’s RA RFO, SCE’s evaluation methodology, and evaluation and selection process. The activities of the IE during the process are described below:

Reviewed and commented on the Draft RA RFO document, including the RFO Instructions and the RA Confirmation;

Participated in a number of SCE internal RA RFO project team meetings during the process;

Reviewed materials provided to the PRG and participated in PRG meetings prior to and during the solicitation process;

Reviewed and discussed SCE’s bid evaluation methodology prior to receipt of offers;

Reviewed and commented on the Company’s responses to Respondent’s questions when applicable;

Reviewed and summarized the offers received to ensure the Company and IE identified and assessed the same list of offers;

Reviewed and assessed SCE’s evaluation of the offers received for purposes of selecting the offers that would be included in the final selection sets. Participated in weekly or more frequent conference calls with SCE’s project team to discuss the status of the offers and any revisions to the offer selection process and contract execution process;

Monitored the contract execution process between the Respondents and SCE contract managers designated to negotiate and execute the Conformations and other required documents;

Prepare the IE report for inclusion with SCE’s Quarterly Compliance Report (“QCR”) with the Energy Division.

With regard to the role of the IE, our objective is to ensure that the solicitation process is undertaken in a fair and equitable manner, that the RFO documents and associated attachments are reasonably transparent and understandable, and that the results of the

Final Report


offer evaluation and selection process are reasonable and consistent with regard to meeting the Company’s objective while getting the best deal for customers. This report provides an assessment and review of SCE’s RA RFO procurement process from development of the RFO through selection of the final contracts. The role of the IE is also discussed as it pertains to specific activities identified in Section V of this report. III. How did SCE Conduct Outreach to Bidders and Was the Solicitation Robust Describe the IOU Outreach to Potential Respondents

Outreach activities are important to the success of a competitive solicitation process. SCE’s outreach efforts targeted more than 2590 contacts on its distribution list for this RFO and directly reached out to the OTC generators. This includes a list of companies which SCE contacts for other types of solicitations, companies who have participated in previous month-to-month and other RA solicitations as well as those companies with which SCE has executed agreements in the past. SCE’s outreach activities did not result in a larger number of offers or Respondents compared to the most recent solicitations; however, due to the inclusion of OTC generator offers in this solicitation, the volumes offered were significantly higher. The RA quantity offered was sufficient for SCE to keep its Year-Ahead and Month-Ahead compliance target more manageable for all years solicited. There were several participants and generators who participated in previous RA solicitations that did not submit offers into this RA RFO. SCE administered the process in a different manner than in previous solicitations as all solicitation documents were posted and submitted to the online database PowerAdvocate. Identify the Principles Used to Determine Adequate Robustness of the Solicitation

There are several principles generally applied to determine whether the robustness of the solicitation was adequate. These include:

Did the amount of capacity offered for each product allow for a competitive process?

Were offers submitted for all products requested? Were there a competitive number of Respondents for all products? Did the utility adequately market the solicitation?

Was the Solicitation Adequately Robust Although SCE intentionally did not specifically identify the amount of capacity sought for each product, the overall result of this outreach activity resulted in a robust response from Respondents, particularly in terms of volume offered. SCE received offers on January 7, 2020. A detailed summary of the indicative offers received is provided as

Final Report


Exhibit A to the Confidential Attachment. Exhibit B to the Confidential Attachment provides a summary of the offers selected and executed with each of the counterparties. The IE concludes that while SCE’s initial outreach activities were adequate, the response of the market was fairly robust in terms of number of counterparties and offers submitted; however, the response

In order to meet and

optimize SCE’s year-ahead and month-ahead compliance obligations in the coming years, SCE will have to continue to hold additional solicitations throughout the year, employing different strategies to engage more market participants to meet and optimize its positions in the most economic manner possible. During team meetings after receipt of indicative offers, SCE’s project team and the IE held several meetings to discuss options

and to discuss the strategy related to selecting various OTC generators. In addition to the NPV results, some of the factors taken into consideration included:

The length of the contract; Local community support related to relative OTC units; Upcoming adjustments to forecasted RA positions based on CCA/LSE plans.

IV. Description of SCE’s Proposal Evaluation Methodology Framework and Principles for Evaluating SCE’s Bid Evaluation Methodology This section of the report addresses the principles and framework underlying Merrimack Energy’s review of SCE’s methodology for the RA RFO offer evaluation and selection. Key areas of inquiry by the IE and the underlying principles used by the IE to evaluate the methodology and results include the following:

Were the procurement targets, products solicited, principles and objectives clearly defined in the RFO documents?

Is the bid evaluation based on the criteria specified in the bid documents? Do the bid documents clearly define the type and characteristics of products

desired and what information the bidder should provide to ensure that the utility can conduct its evaluation?

Does the methodology identify how qualitative and quantitative measures would be considered to be consistent with an overall metric?

Are there differences in the evaluation method for different technologies that cannot be explained in a technology neutral manner?

Does the price evaluation methodology allow for consistent evaluation of offers of different sizes and in-service dates?

Evaluation Criteria and Methodology

Final Report


This section of the report provides a description of SCE’s Least Cost Best Fit evaluation methodology for evaluating offers for 2020 - 2024 pursuant to the RA RFO. It also describes the manner in which SCE applied the evaluation methodology in its evaluation of the offers and selection of winning offers. First, SCE defined the products that it sought to purchase and those that it sought to sell. The RFO Instructions provide that all products associated with the RFO would be for RA Capacity, Import Capability Transfer, tolling, and CHP products for the 2020 through 2024 Resource Adequacy Compliance Year. The RA Capacity was required to come from generating units that have a Net Qualifying Capacity (“NQC”) assigned by the CAISO and must be able to count toward SCE’s RA requirement. The products that are eligible for the RFO were specifically described in tables in the RA RFO.9 Table 1, 2, 3, and 4 of this report provides a listing of the products sought as defined by SCE in the RFO Instructions. This RA RFO proposed to utilize a one-step pricing process where all initial offers would be evaluated but would not become binding until SCE’s contingent selection notification. During the shortlist period, SCE would negotiate with Respondents and reevaluate the Offers based on pricing concessions or volume changes. This differed slightly from several of the previous processes where all initial offer submissions were considered binding. The intention of the initial shortlist process is to provide additional time for clarification and review of all aspects of the offers that could potentially lead to a better NPV. Once the offers are clarified or negotiated, a contingent selection notification may be provided. Only offers that meet the eligibility requirements outlined in the RA RFO instructions would be considered. All offers would be initially assessed for conformance with the requirements set forth in these RFO instructions. There would be both quantitative and qualitative considerations involved with evaluating offers. The RFO Instructions described both the quantitative evaluation and qualitative evaluation approach in general terms, which are then netted and discounted to find a Net Present Value (“NPV”) of each offer. The valuation of each offer would take into account cash flow components for both cost and revenue. For this solicitation, this included capacity payments for RA purchases by SCE, natural gas toll, forecasted market implied heat rate, debt equivalence, potential credit and collateral adders, and SCE’s ascribed RA and Energy Benefits.10 RA cost was based on the offer submitted including the offer price times volume. RA benefits are based on SCE’s forecast of local or system capacity value times the volume offered. SCE indicated that for the quantitative evaluation, the valuation of each Offer would be based on a $/kW-month metric (either positive or negative). Offers would be ranked based on this metric. SCE would then select a set of offers with

9 RFO Instructions page 4-9. 10 SCE does not ascribe any benefits to Offers for any months in cases where it does not have an RA requirement.

Final Report


the goal of minimizing the cost to SCE’s customers while meeting SCE’s defined needs, counterparty volume limits, and pricing.11 SCE also indicated that in addition to the quantitative factors described above, there were qualitative factors that could impact offer selection. These may include among other factors:

Project viability; Location within a Disadvantaged Community (“DAC”); Adherence to the parameters for the solicitation; Offers of flexible capacity; Offers of local capacity; Changes to the RFO Documents; Counterparty concentration; Creditworthiness; OTC compliance considerations.

As noted, the solicitation process was designed as a one-step pricing process which included submittal of offers, contingent shortlisting and negotiations, contingent selection, and final award execution. Following the applicable confirmations and commercial lock-down of Offers, final execution would take place no later than February 28, 2020. As described earlier, due to the extended contract execution process, the RFO was fully closed out on April 17, 2020. SCE developed the DEC19 RA RFO which adequately defined at a high level the products required, the basis for the solicitation, key contract provisions, the evaluation criteria, quantitative and qualitative evaluation factors, and the information required from the respondents. As is typical in procurement processes, the RFO did not provide the detailed model, assumptions or methodology that SCE would use in the evaluation. However, the proposed methodology was discussed with the IE in advance of receipt of offers and reviewed in detail. The proposed methodology was consistent given the type of products sought. Unlike in the previous solicitations, the Toll and CHP products were included which required a slightly different evaluation approach. In this case, a separate model was utilized to evaluate tolling and CHP offers to calculate the NPV which could be used to compare to RA product offers. Although the RFO identified specific qualitative factors, SCE informed the IE that qualitative factors for the most part would be considered if there was a question about a proposal. SCE did not specify any specific weights associated with qualitative factors and did specify that offers would be ranked on the basis of price. Strengths and Weaknesses of SCE’s Evaluation Methodology for RA

11 With regard to pricing limits, SCE stated that it would not select any offers with a price that exceeds the Capacity Procurement Mechanism (“CPM”) cost designation.

Final Report


This section of the report provides an assessment of the strengths and weaknesses of SCE’s evaluation and selection methodology. First, the evaluation methodology utilized by SCE to evaluate the cost of offers submitted into the RA RFO to meet the required RA capacity subject to the constraints applied is reasonable and appropriate for the products sought in this RA RFO. The methodology starts with the CPUC’s requirements to establish a Year-Ahead and Month-Ahead System Resource Adequacy Requirement for Load Serving entities. In addition, CAISO’s most recent study of Local Capacity Requirements (“LCR”) forms the basis for the Commission’s annual Local RA program requirements. SCE’s proposed methodology begins with these parameters and seeks to evaluate and select the combination of resources which provide the best overall value to SCE’s customers based on the relationship between the costs and benefits associated with each offer based on the entirety of offers received and evaluated at the same time. In our view, the proposed evaluation methodology, input assumptions, and application of the methodology was reasonable and consistent for this type of solicitation and met industry standards for this type of product. The methodology was capable of effectively and consistently evaluating the range of products solicited in the RA RFO, including different project structures and bid sizes. Although the methodology was not a true optimization process, the proposed methodology does allow for the opportunity to assess different combinations of offers to select a least cost portfolio of RA resources by calculating the total cost of each portfolio under the initial premise that all offers would be evaluated and considered at the same time under a consistent set of assumptions and market conditions. V. Administration of the Solicitation Process In performing its oversight role, the IE participated in and undertook a number of activities in connection with the solicitation including providing comments on the RFO documents, discussing the bid evaluation and selection process and rationale for any constraints underlying the evaluation and selection, organizing and summarizing the offers received, monitoring the status of contract negotiations with counterparties, reviewing and commenting on the evaluation and selection process and results at each step of the evaluation and selection process, and participating in meetings with SCE’s Finance and Risk Management Committee (“FRM”) and the PRG. As will be discussed later, SCE was very inclusive with regard to the role of the IE and involved the IE in all primary decisions and discussions, including the weekly project team meetings and other required meetings and discussions. Merrimack Energy was retained by SCE prior to the final development and completion of the RFO documents and therefore had the opportunity to participate in and assess all steps in the process. The key project activities are listed in this section of the report in conjunction with the activities of the IE. Project Kick-off Meeting– December 11, 2019

Final Report


SCE’s project team lead initiated a meeting with the IE to discuss the proposed schedule required to implement the DEC19 RA RFO process and the new products being solicited. The purpose of the RFO would be to procure eligible RA capacity to meet, reduce, or optimize SCE’s RA position for 2020-2024. The meeting focused on several topics including the proposed RA products to be solicited12, the proposed schedule for the solicitation process, SCE’s expected RA need for 2020-2024, the proposed shortlisting methodology, and the next steps. PRG Meeting – December 12, 2020 The first PRG meeting associated with the RA RFO was held on December 12, 2020. The objective of the meeting was to notify the PRG of the plans to launch the RFO. At this meeting, SCE’s project lead identified that the purpose of the RA RFO was to procure eligible RA capacity to meet, reduce, or optimize SCE’s RA position for certain months in 2020 through 2024. SCE provided tables in its slide deck presentation which provided details regarding each product sought. The products that would be solicited include:

SCE purchases from August 1, 2020 to December 31, 2024 for: o RA Capacity only (including OTC units with compliance extension) o Combined Heat & Power baseload and as-available o Dispatchable Toll (not eligible for OTC units) o Import Capability Transfer Rights with interties at COB, NOB, PV &

MEAD for August 2020 through October 2020. SCE Sales from April 1, 2020 through June 30, 2020 for RA Capacity only.

SCE provided a description of SCE’s 2020 to 2024 Year-Ahead and Month-Ahead System and Local Capacity Position. SCE also provided a high-level description of its shortlisting methodology and its proposed schedule for the solicitation. With regard to the shortlisting methodology, SCE explained the following primary steps associated with the shortlisting methodology:

1. Ensure offers meet eligibility requirements; 2. Rank purchase offers according to cost13 ($/kW-month) and benefit for each

delivery period; 3. Rank SCE sales bids according to revenue for each delivery period; 4. For CHP or Toll offers, calculate the NPV of the offer to be compared to other

products by considering: Costs Benefits

Contract Payments Energy ValueTransmission Costs Capacity ValueDebt Equivalence Ancillary Services/Real-Time GHG Costs

13 Both NPV ($/kW-month) and cost will be used throughout the selection process.

Final Report


Congestion & Losses

5. Identify natural breakpoints/materiality thresholds and consider additional qualitative criteria (based upon best offer by counterparty).

SCE discussed its willingness to consider OTC facilities beyond the State Water Resource Control Board’s (“SWRCB”) current compliance date of December 31, 2020 with the contingencies of receiving CPUC Approval via a Tier III AL and the SWRCB compliance date extension. SCE noted that the CPUC Decision 19-11-016 recommended that the SWRCB extend the OTC compliance deadlines for specific OTC facilities:

AES Alamitos Generating Station for ~1,200 MW for up to three years; AES Huntington Beach Generating Station for ~200 MW for up to three years; AES Redondo Beach Generating Stations for ~1,500 MW for up to two years14; GenOn Ormond Beach Generating Station for ~,1500 MW for up to one year15; Dynegy Moss Landing Power Plant for ~1,000 Mw pending upgrades to comply

with OTC requirements that would need to be certified by the SWRCB on or before December 31, 2020.

SCE also discussed the option of pursuing OTC Tolls. The option to pursue OTC Tolls along with RA-only OTC offers would allow for the ability to hedge hourly energy positions; however, this would make the standard trading product less effective. SCE recommended to limit OTC units to RA-only offers as this would allow for a more streamline solicitation and there would be no debt equivalence impacts on the balance sheet. SCE presented this draft plan to the PRG in the December 12, 2019 meeting. SCE did not receive any opposition to launch with offers due on January 7, 2020. Comments on the RFO Instructions Document The IE reviewed the RA RFO Instructions and Offer Workbook prior to launch. Since very similar documents were to be used for this iteration of the RA RFO from the previous RA RFO, with the changes being to the products being solicited and the inclusion of tolling and CHP offers, there weren’t any concerns or questions about the RFO documents. The IE concluded that the RFO Instructions addressed all the necessary components that the IE generally looks for in a transparent RFO and one which provides adequate information to facilitate Bidder response. These include:

o Description of the products solicited; o Identification of eligibility requirements; o Description of the evaluation process and criteria; o Schedule for undertaking the solicitation process; o Reference to linkage with the Confirmation Template (“Contracts”);

14 The Redondo Beach OTC extension was reduced to one (1) year in the 01/30/2020 Statewide Advisory Committee on Cooling Water Intake Structures (SACCWIS) updated report to the CPUC and SWRCB. 15 The Ormond Beach OTC extension was updated to three (3) years in the 01/30/2020 SACCWIS report and D.20-03-028.

Final Report


o References to linkage with the Offer Forms; o Information required of Respondents when they submit their proposals; o Description of the communication process with Respondents;

RFO Instructions and Documents Issued – December 20, 2019 SCE uploaded RFO Instructions and related documents to market participants via the PowerAdvocate solicitation platform on December 20, 2019. The RA RFO included the following documents:

DEC19 SCE RA RFO Instructions Exhibit A – Non-Disclosure Agreement Exhibit B1 - RA Capacity (SCE Buy or SCE Sell) Confirmation Exhibit B2 – IAR Transfer Agreement Exhibit C - CHP Agreement Exhibit D – Gas Toll Agreement Exhibit E1 –EEI Master Power Purchase Sale Agreement Cover Sheet Exhibit E2 – EEI Paragraph 10 to the Collateral Annex Exhibit E3 – EEI FTAA Special Provisions Exhibit F – Certificate of Authority (Government Entity) Exhibit G1 – RA & IAR Offer Workbook Exhibit G2 – Gas Fired Generation Offer Workbook (Toll Offers) Exhibit G3 – CHP Offer Workbook

Receipt of Offers – January 7, 2020 Offers were received as required on January 7, 2020. In the past, SCE had required Respondents to submit offers via email to the SCE RFO inbox with a copy to the IE. This was the first RA solicitation that SCE opted to utilize PowerAdvocate for offer submission. A total of sixteen (16) counterparties submitted offers. A majority of the offers submitted were SCE Buys RA offers. There was a total of the 226 unique offers submitted (considering all multi-year strips, annual strips, and monthly offers) with 208 SCE Buy offers, 9 SCE Sell offers, 7 CHP offers, and 2 Toll Offers. There were very few SCE Sells offers submitted relative to the most recent solicitations; however, the inclusion of OTC units offers resulted in greater SCE Buy volumes offered. Fifteen (15) counterparties submitted SCE Buys offers, two (2) submitted SCE Sells offers, three (3) submitted CHP offers, and two (2) submitted Toll offers. For 2021, ten (10) counterparties submitted SCE Buys offers. A total of 17 offers for the 2020 calendar year strip, 60 Offers in 2021 (all of which were SCE Buys offers), 28 offers for 2022, 48 offers for 2023, and 43 offers for 2024.16 Several counterparties submitted offers

16 These counts are for annual strip offers. Additionally there were offers spanning multiple years: one for 2020-2021, 1 for 2020-2022, 3 for 2020-2024, 12 for 2021-2022, 9 for 2021-2023, 2 for 2021-2024, and 3 for 2022-2024.

Final Report


spanning multiple years, but no offers spanned all five years being solicited. With regards to contract terms, SCE received annual strips for a majority of the SCE Buys offers. Due to the limitations on the delivery period for the SCE Sells offers, there were very few submitted, which is a large reason for the significant decline in the total number of offers submitted. Another cause of the reduction in offers is due to the elimination of the Swap product being offered. The IE received the proposals at the same time as SCE. The IE downloaded the proposals and reviewed the proposals along with SCE’s project team. The IE prepared its own summary of the proposals received including high level summary information of the proposal quantities and pricing for each product. RFO Document Submittal Checklist SCE and the IE each downloaded all documents submitted to PowerAdvocate by the submittal deadline by the bidders and reviewed those offers to ensure conformance with the requirements as listed in the RFO Instructions. As listed in the RFO Instructions, Respondents were required to provide fully completed Offer Forms Workbook and an executed Confidentiality Agreement/NDA unless Respondent already has one in place with SCE. Activities associated with the offer receipt and the evaluation and selection process are described in detail in Confidential Attachment, which also includes information regarding the offers evaluated and selected. VI. Fairness of SCE’s Offer Evaluation and Selection Process Principles Used to Determine Fairness of Process In evaluating SCE’s performance in implementing its RA RFO evaluation and selection process, Merrimack Energy has applied a number of principles and factors, which incorporate those suggested by the Commission’s Energy Division as well as additional principles that Merrimack Energy has used in its oversight of other competitive bidding processes. These include:

Were bidder questions answered fairly and consistently and the answers made available to all?

Did the bid evaluation team maintain consistent scoring and evaluation among

and across projects, including different products and price structures?

Did the evaluation methodologies result in a fair and equitable evaluation and selection process?

Final Report


Were the requirements listed in the RA RFO applied in the same manner to all proposals?

Was there evidence of any undue bias regarding the evaluation and selection of

different type of technologies, project structures, bid sizes, or contract terms that cannot be reasonably explained?

Were the bids given equal credibility in the economic evaluation? Did SCE ask for “clarifications” that provided the bidder an advantage over

others?

Did all bidders have access to the same information?

Were all cost factors treated in an equitable and consistent manner?

Did SCE consistently apply the requirements, procedures and criteria of the evaluation process as identified in the RFO documents to different bids and types of projects?

Was the evaluation and selection process based on complete information about

each proposal and a thorough investigation by SCE’s project team? Merrimack Energy has the following observations about the process based on our role as IE:

The response by Respondents to the RA RFO was robust compared to the

response in previous solicitations in regards to the volume offered;

SCE implemented a more flexible shortlisting period in order to allow for an optimized portfolio in regard to selection volume and offer pricing;

SCE has aggressively attempted to reduce short positions in Month-Ahead and Year-Ahead obligations in the coming years by holding solicitations on a rolling basis. Based on the responses to the previous solicitations, it had become clear that there is a shortage of available RA in the market in the coming years. The inclusion of new products and participating resources is intended to procure as much available RA as possible and reduce short positions as much as possible in the coming years.

SCE maintained an expanded delivery term for this solicitation in order to

identify RA availability in the future. The expansion of the delivery term has also allowed market participants to seek awards for multiple years, which has been a concern for bidders in the past as some bidders are looking for multi-year contracts;

Final Report


SCE focused on assessing “every MW” for all buy and sell opportunities;

Overall, the IE viewed the evaluation, ranking and selection by SCE as being reasonable, consistent, and fair to all respondents and generally consistent with the pre-specified evaluation protocols;

After the original offer submission and subsequent shortlist selection, SCE

worked actively and closely with counterparties to engage in good faith negotiations and to work through issues raised.

SCE used the same general evaluation process based on the calculated NPV

metric for each offer. SCE implemented this metric in a fair and equitable manner in order to select a portfolio of offers;

Based on our assessment of the evaluation process relative to the above

criteria, it is our opinion that all Respondents were treated fairly and consistently and all had access to the same amount of and quality of information at the same time via contact with contract managers. We also observed no difference in the treatment of Respondents regarding clarification questions or requests for exceptions for Respondents and correspondence and communications with Respondents;

SCE notified all Respondents of revisions to the RA RFO process in a

consistent and timely manner and clearly informed the Respondents of the proposed changes to the solicitation process;

SCE engaged the PRG on numerous occasions during the solicitation process,

including any changes to the proposed selection portfolio.

The implementation of the solicitation process highlights the challenges associated with conducting a solicitation process of this nature in a rapidly changing market. VII. Contract Negotiations Process As noted, SCE’s RFO process involved a single-step pricing process which consisted of the offer stage, a contingent shortlisted process followed by a short window for negotiations, then a contingent selection and negotiations of Confirms and other agreements with counterparties as required. The Confirmation and other agreements were included on the Company website for the RA Capacity RFO and selected Respondents were required to communicate acceptance of SCE’s documents or propose modifications to documents. SCE also had to work with the selected counterparties to accept the Enabling Agreement. Parties were required to complete and finalize SCE’s applicable Confirmation and applicable Credit and Collateral documents shortly thereafter.

Final Report


Since SCE has gone through this process several times in 2019, the evaluation and selection processes were conducted efficiently. However, due to the introduction of new products and resources, particularly OTC units, there were additional considerations taken into account during the selection process. In addition, SCE allowed for pricing updates during the negotiation process which allowed SCE to adjust the final selection set from the shortlisted portfolio. During the execution process, SCE and the counterparties spent time negotiating contract terms that required the solicitation deadline to be extended. Contracts were executed with counterparties when possible. The IE was of the opinion that the negotiation process was undertaken in a fair and impartial manner with all counterparties, with no undue preference afforded to any counterparty, which resulted in substantially similar agreements. VIII. Safeguards and Methodologies Employed The RA RFO requires Respondents to provide a fully executed Confidentiality Agreement with its indicative offer. Also, the RFO contains a clear statement of Confidentiality that is intended to limit or restrict Respondent’s ability to engage in communications with any other actual or potential participants in the RFO concerning this solicitation, price terms in offers, and other related matters. This language is designed to address situations in which respondents may be marketing agents for suppliers or provide credit on behalf of counterparties. The RFO also contains other sections which clearly describe Respondent’s waiver of claims and limitations of remedies and Respondent’s representations, warranties and covenants. The RFO also requires a clear statement that it will be bound by the terms and conditions of the RFO including the requirement that the Respondent is bound by the terms of its offer. Due to the concerns with selecting OTC units that had not been approved for extensions yet, SCE worked diligently to inform the PRG and other stakeholders of the selection set changes and reasons behind the selection set. In addition, SCE worked diligently with counterparties to ensure that all language in the contracts protects SCE and its customers pending any changes to the approval of OTC unit extensions. No affiliates of SCE participated in the solicitation process. IX. Recommendation For Contract Approval The CPUC IE Report Template requires that the IE address the question, “Based on your analysis of the proposals received and available, the bid process, and the overall market does the contract merit Commission approval? Explain.” In the context of the quarterly compliance report Commission approval is taken to mean the finding that the procurement was consistent with the IOU’s approved procurement plan. Through the RA RFO, SCE executed contracts for two (2) SCE Sells offer with one (1) counterparty and

Final Report


eighteen (18) SCE Buys offers with four (4) counterparties. Through these selected offers, SCE was able to

. While there were changes to the forecasted position while the process was ongoing, SCE assessed all offers to select the most high-valued offers available. The OTC units comprise an overwhelming majority of the selection set, so the pending approval will have a significant impact on SCE’s position in those years. SCE’s 2021 position will most certainly change when the CAISO’s final allocations are made. In addition, there will likely be updates made to the positions based on CCA load allocations, results of the reliability solicitations, and other forecast changes; however, even with the large volume selected from OTC units,

In addition, the prices of the RA proposals selected generally represent the lowest cost and highest valued available products given SCE’s RA requirements, based on the delivery point constraints and timeliness of securing RA to meet 2021 Year-ahead and Month-ahead requirements while also looking ahead to secure RA for the years 2022 through 2024. Overall, the IE concludes that the resulting contracts are reasonable and appropriate based on the conditions surrounding this solicitation process. X. Conclusions and Recommendations The results of the RA procurement process for the DEC19 RA RFO met the goals and requirements of SCE within the RA RFO at a reasonable and appropriate cost based of the offers submitted, SCE’s outreach efforts to other potential suppliers, and SCE’s assessment of future market pricing. SCE selected the best offer for the products and delivery period required which led to a reasonable expenditure of costs to meet requirements. Second, the IE is of the view that all Respondents were treated fairly and consistently throughout the process, with no Respondent disadvantaged. For the reasons stated herein, Merrimack Energy concludes that the offer selection decisions by SCE in this RA RFO were reasonable based on the requirements and evaluation criteria set forth in the RFO document. SCE generally followed its identified protocols and methodology in evaluating and selecting resources. We believe the RA Confirmations are reasonable and are in the best interests of customers. Recommendations There were several changes made in this solicitation compared to previous solicitations. These changes included the RFO schedule, the products solicited, and the eligible generators in order to widely canvas the RA market. In addition to the changes to the process timelines, SCE utilized a new offer submission process to more formally track all

Final Report


document transmittals and communications. Shortly after the initial evaluation and selection, it was discovered that one Respondent had an issue submitting their bid through the new platform and it was not included in the original inventory of bids. Once it was discovered that the offer was transmitted timely through SCE’s prior RFO submittal email, it was then included and evaluated along with all other offers. While no Responders were advantaged or disadvantaged by the inclusion of this offer, it would have been more favorable if all offers are submitted through the same process initially. In the future, if a submission process or platform is changed, it should be highlighted to all bidders either through a short webinar or within the RFO Instructions. In addition, SCE utilized a very malleable contingent shortlisting and contingent selection process. This flexible process allowed SCE to update its selection set as contingent shortlisted Responders improved their offer terms during negotiations, and therefore SCE was able to optimize its selection portfolio. One of the issues that can arise in this type of process where there aren’t defined refreshed offer stages is that all offers may not be evaluated in parallel.

PUBLIC Appendix D Confidentiality Declaration

DECLARATION OF RAAFAY AHMED REGARDING THE CONFIDENTIALITY OF CERTAIN DATA

I, Raafay Ahmed, declare and state:

1. I am a Senior Advisor in the Southern California Edison (SCE) Contract Origination

Group. As such, I had responsibility for preparing and reviewing the Advice Letter titled

“ADVICE 4209-E” (advice letter). I make this declaration in accordance with Commission

Decisions (D.) 06-06-066 and D.08-04-023, issued in Rulemaking 05-06-040. I have personal

knowledge of the facts and representations herein and, if called upon to testify, could and would

do so, except for those facts expressly stated to be based upon information and belief, and as to

those matters, I believe them to be true.

2. Listed below are the data in the Document for which SCE is seeking confidential

protection and the categories of the Matrix of Allowed Confidential Treatment Investor-Owned

Utility (IOU) Data (Matrix) appended to D.06-06-066 to which these data correspond.

Data Location Matrix Category Limitations on Confidentiality Specified in Matrix

RA Solicitation Pricing

Confidential Appendix A

VIII) Competitive Solicitation (Bidding) Information – Electric B) Specific quantitative analysis involved in scoring and evaluation of participating bids

Evaluation guidelines should be public. Other information confidential for three years after winning bidders selected.

AES Alamitos PPA

Confidential Appendix B

VIII) Competitive Solicitation (Bidding) Information – Electric A) Bid Information

Total number of projects and megawatts bid by resource type (e.g. fossil, wind, solar, hydroelectric, ect.) – public after final contracts submitted to CPUC for approval

RA Capacity Confidential Appendix C – Independent Evaluator Report

VI) Net Open Position Information – Electric E) Utility Planning Area Net Open (Long or Short) for Capacity (MW)

Annual and Quarterly data: Public. Monthly and Daily data: Front three years of forecast data confidential.

VIII) Competitive Solicitation (Bidding) Information – Electric B) Specific quantitative analysis involved in scoring and evaluation of participating bids

Evaluation guidelines should be public. Other information confidential for three years after winning bidders selected.

3. I am informed and believe and thereon allege that the data in the table in

paragraph 2 above cannot be aggregated, redacted, summarized, masked or otherwise protected

in a manner that would allow partial disclosure of the data while still protecting confidential

information, because the Document requires that the data be provided in this form.

4. I am informed and believe and thereon allege that the data in the table in

paragraph 2 above has never been made publicly available.

I declare under penalty of perjury under the laws of the State of California that the

foregoing is true and correct.

Executed on May 8, 2020 at Rosemead, California.

/s/ Raafay Ahmed

Raafay Ahmed

PUBLIC Appendix E Proposed Protective Order

1

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

2021-2023 AES Alamitos Resource Adequacy Power Purchase Agreement to Meet Resource Adequacy Requirements

) ) Advice 4209-E

PROPOSED PROTECTIVE ORDER

1. Scope. This Protective Order shall govern access to and the use of Protected

Materials, produced by, or on behalf of, any Disclosing Party (as defined in Paragraph 2 below)

in this proceeding.

2. Definitions

In addition to the terms defined and capitalized in other sections of this Protective Order,

the following terms are defined for the purposes of this Protective Order:

A. For purposes of this Protective Order, the term “Protected Materials”

means: (i) trade secret, market sensitive, or other confidential and/or proprietary information as

determined by the Disclosing Party in accordance with the provisions of Decision (“D.”) 06-06-

066 and subsequent decisions, including D.14-10-033 which governs the treatment of market

sensitive greenhouse gas data and information, General Order 66-C, Public Utilities Code section

454.5(g), or any other right of confidentiality provided by law; or (ii) any other materials that are

made subject to this Protective Order by the Assigned Administrative Law Judge (“Assigned

ALJ”), Law and Motion Administrative Law Judge (“Law and Motion ALJ”), Assigned

Commissioner, the California Public Utilities Commission (“Commission”), or any court or

other body having appropriate authority. Protected Materials also include memoranda,

handwritten notes, spreadsheets, computer files and reports, and any other form of information

(including information in electronic form) that copies, discloses, incorporates, includes or

2

compiles other Protected Materials or from which such materials may be derived (except that any

derivative materials must be separately shown to be confidential). Protected Materials do not

include: (i) any information or document contained in the public files of the Commission or any

other state or federal agency, or in any state or federal court; or (ii) any information that is public

knowledge, or which becomes public knowledge, other than through disclosure in violation of

this Protective Order or any other nondisclosure agreement or protective order.

B. The term “redacted” refers to situations in which Protected Material in a

document, whether the document is in paper or electronic form, have been covered, blocked out,

or removed.

C. The term “Disclosing Party” means a party who initially discloses any

specified Protected Material in this proceeding.

D. The term “Requesting Party” means any party that is requesting receipt of

Protected Material from a Disclosing Party.

E. The term “Party” refers to the Requesting Party or the Disclosing Party

and the term “Parties” refers to both the Requesting Party and the Disclosing Party.

F. The term “Market Participant” refers to a Requesting Party that is:

1) A person or entity, or an employee of an entity, that engages in the wholesale purchase, sale or marketing of energy or capacity, or the bidding on or purchasing of power plants, or bidding on utility procurement solicitations, or consulting on such matters, subject to the limitations in 3) below.

2) A trade association or similar organization, or an employee of such organization,

a) whose primary focus in proceedings at the Commission is to advocate for persons/entities that purchase, sell or market energy or capacity at wholesale; bid on, own, or purchase power plants; or bid on utility procurement solicitations; or

b) a majority of whose members purchase, sell or market energy

3

or capacity at wholesale; bid on, own, or purchase power plants; or bid on utility procurement solicitations; or

c) formed for the purpose of obtaining Protected Materials; or

d) controlled or primarily funded by a person or entity whose primary purpose is to purchase, sell or market energy or capacity at wholesale; bid on, own, or purchase power plants; or bid on utility procurement solicitations.

3) A person or entity that meets the criteria of 1) above is not a Market Participant for purpose of access to Protected Materials unless the person/entity seeking access to Protected Materials has the potential to materially affect the price paid or received for electricity if in possession of such information. An entity will be considered not to have such potential if:

a) the person or entity’s participation in the California electricity market is de minimis in nature. In the resource adequacy proceeding (R.05-12-013) it was determined in D.06-06-064 § 3.3.2 that the resource adequacy requirement should be rounded to the nearest megawatt (MW), and load serving entities (LSEs) with local resource adequacy requirements less than 1 MW are not required to make a showing. Therefore, a de minimis amount of energy would be less than 1 MW of capacity per year, and/or an equivalent of energy; and/or

b) the person or entity has no ability to dictate the price of electricity it purchases or sells because such price is set by a process over which the person or entity has no control, i.e., where the prices for power put to the grid are completely overseen by the Commission, such as subject to a standard offer contract or tariff price. A person or entity that currently has no ability to dictate the price of electricity it purchases or sells under this section, but that will have such ability within one year because its contract is expiring or other circumstances are changing, does not meet this exception; and/or

c) the person or entity is a cogenerator that consumes all the power it generates in its own industrial and commercial processes, if it can establish a legitimate need for Protected Materials.

4

G. The term “Non-Market Participant” refers to a Requesting Party that does

not meet the definition of Market Participant. The California Independent System Operator is

deemed a Non-Market Participant for purposes of this Protective Order.

H. “Reviewing Representatives” are limited to person(s) designated in

accordance with Paragraph 5 who meet the following criteria:

1) Reviewing Representatives may not currently be engaged in: (a) a transaction for the purchase, sale, or marketing at wholesale of electrical energy or capacity or natural gas (or the direct supervision of any employee(s) engagement in such a transaction); (b) the bidding on or purchasing of power plants (or the direct supervision of any employee(s) engagement in such a transaction); or (c) knowingly providing electricity or gas marketing consulting or advisory services to others in connection with a transaction for the purchase, sale, or marketing at wholesale of electrical energy or capacity or natural gas or the bidding on or purchasing of power plants (or the direct supervision of any employee(s) engagement in such a transaction or consulting).

2) Reviewing Representatives may not be an employee of a Market Participant. If the Market Participant or Non-Market Participant chooses to retain outside attorneys, consultants, or experts in the same law firm or consulting firm to provide advice in connection with marketing activities, then the attorney, consultant, or expert serving as a Reviewing Representative must be separated by an ethics wall consistent with the ethics wall requirements in D.11-07-028, as that decision may be subsequently modified or changed by the Commission, from those in the firm who are involved in wholesale commercial dealings.

3) Reviewing Representatives shall use Protected Materials only for the purpose of participating in the Commission proceeding in which they received the information.

4) Reviewing Representatives are permitted to participate in regulatory proceedings on behalf of Market Participants and Non-Market Participants.

5) All Reviewing Representatives are required to execute the Nondisclosure Certificate attached to this Protective Order and are bound by the terms of this Protective Order.

5

I. The term “Authorized Reviewers” refers to: (1) a Requesting Party that is

a Non-Market Participant; or (2) a Reviewing Representative of a Requesting Party. A

Requesting Party that is a Market Participant is not an Authorized Reviewer but it may designate

a Reviewing Representative in accordance with Paragraph 5.

J. The term “Nondisclosure Certificate” refers to the Nondisclosure

Certificate attached as Appendix A.

3. Designation, Filing, and Service of Protected Materials.

When filing or providing in discovery any documents or items containing Protected

Materials, a party shall physically mark such documents (or in the case of non-documentary

materials such as computer diskettes, on each item) as “PROTECTED MATERIALS SUBJECT

TO PROTECTIVE ORDER,” or with words of similar import as long as one or more of the

terms “Protected Materials” or “Protective Order” is included in the designation to indicate that

the materials in question are Protected Materials. All materials so designated shall be treated as

Protected Materials unless and until: (a) the designation is withdrawn pursuant to Paragraph 14

hereof; (b) an Assigned ALJ, Law and Motion ALJ, Assigned Commissioner, or the Commission

makes a determination that: (i) the document does not contain Protected Materials or does not

warrant confidential treatment or (ii) denies a motion to file the document under seal; or (c) the

document or information becomes public knowledge, other than through disclosure in violation

of this Protective Order or any other nondisclosure agreement or protective order. However, the

Disclosing Party has the burden of showing that the documents are Protected Materials, and

merely marking a document “Protected Materials” is insufficient to meet that burden.

All documents containing Protected Materials that are tendered for filing with the

Commission shall be placed in sealed envelopes or otherwise appropriately protected and shall

be tendered with a motion to file the document under seal pursuant to Rule 11.4 of the

6

Commission’s Rules of Practice and Procedure. All documents containing Protected Materials

that are served on parties in a proceeding shall be placed in sealed envelopes or otherwise

appropriately protected and shall be endorsed to the effect that they are served under seal

pursuant to this Protective Order. Such documents shall only be served upon Authorized

Reviewers and persons employed by or working on behalf of the Commission. Service upon

Authorized Reviewers and persons employed by or working on behalf of the Commission may

either be: (a) by electronic mail in accordance with the procedures adopted in this proceeding;

(b) by facsimile; or (c) by overnight mail or messenger service. Whenever service of a document

containing Protected Materials is made by overnight mail or messenger service, the Assigned

ALJ shall be served with such document by the same means and at the same time.

4. Redaction of Documents. Whenever a Party files, serves or provides in discovery

a document that includes Protected Materials (including but not limited to briefs, testimony,

exhibits, and responses to data requests), such Party shall also prepare a redacted version of such

document. The redacted version shall enable persons familiar with this proceeding to determine

with reasonable certainty the nature of the data that has been redacted and where the redactions

occurred. The redacted version of a document to be filed shall be served on all persons on the

service list, and the redacted version of a discovery document shall be served on all persons

entitled thereto.

5. Designation of Reviewing Representatives. The Requesting Party shall provide

written notice identifying its proposed Reviewing Representative(s) to the Disclosing Party

before the Disclosing Party provides any Protected Materials to the Requesting Party’s

Authorized Reviewers. The written notice shall include the information identified in this

paragraph. If the Requesting Party decides to designate any additional Reviewing

Representative(s) after the Requesting Party’s Authorized Reviewers receive Protected

7

Materials, the Requesting Party shall identify the additional proposed Reviewing

Representative(s) to the Disclosing Party before the Requesting Party provides Protected

Materials to the additional Reviewing Representative(s). Within five (5) business days after

receiving written notice of the identity of any Reviewing Representative, the Disclosing Party

may provide the Requesting Party with a written objection to a specific Reviewing

Representative stating the grounds for the objection. Any dispute concerning whether an

identified person or entity is an appropriate Reviewing Representative shall be resolved through

the dispute resolution procedures in Paragraph 11 of this Protective Order. If a Disclosing Party

objects to a specific Reviewing Representative within five (5) business days after the Reviewing

Representative is identified, the Parties shall not provide any Protected Materials to the disputed

Reviewing Representative until the Parties are able to resolve the dispute consistent with the

dispute resolution procedures in Paragraph 11. Failure by the Disclosing Party to object within

five (5) business days does not waive the Disclosing Party’s right to later object to the Reviewing

Representative, even if Protected Materials has already been disclosed. However, further

disclosure of Protected Materials would be stayed until the parties are able to resolve the dispute

consistent with the dispute resolution procedures in Paragraph 11.

Reviewing Representative(s) have a duty to disclose to the Disclosing Party any potential

conflict of interest that puts the Reviewing Representative in violation of D.06-12-030, as

modified by subsequent decisions of the Commission. A resume or curriculum vitae is

reasonable disclosure of such potential conflicts, and should be the default evidence provided in

most cases.

6. Nondisclosure Certificates. A Reviewing Representative shall not inspect,

participate in discussions regarding, or otherwise be granted access to, Protected Materials unless

and until he or she has first completed and executed a Nondisclosure Certificate, attached hereto

8

as Appendix A, and delivered the signed Nondisclosure Certificate to the Disclosing Party. The

Disclosing Party shall retain the executed Nondisclosure Certificates pertaining to the Protected

Materials it has disclosed and shall promptly provide copies of the Nondisclosure Certificates to

Commission Staff upon request.

7. Access to Protected Materials and Use of Protected Materials. Subject to the

terms of this Protective Order, Authorized Reviewers shall be entitled to access any Protected

Materials and may make copies of Protected Materials, but such copies become Protected

Materials. Authorized Reviewers may make notes of Protected Materials, which shall be treated

as Protected Materials if such notes disclose any Protected Materials. Protected Materials

obtained by a Party in this proceeding may also be requested by that Party in a subsequent

Commission proceeding, subject to the terms of any nondisclosure agreement or protective order

governing that subsequent proceeding, without constituting a violation of this Protective Order.

8. Maintaining Confidentiality of Protected Materials. Each Authorized Reviewer

shall treat Protected Materials as confidential in accordance with this Protective Order and the

Nondisclosure Certificate. Protected Materials shall not be used except as necessary for

participation in this proceeding, and shall not be disclosed in any manner to any person except:

(i) Authorized Reviewers; (ii) an Authorized Reviewer’s employees and administrative

personnel, such as clerks, secretaries, and word processors, to the extent necessary to assist the

Authorized Reviewer, provided that they shall first ensure that such personnel are familiar with

the terms of this Protective Order and have signed a Nondisclosure Certificate; and (iii) persons

employed by or working on behalf of the Commission. Authorized Reviewers shall adopt

suitable measures to maintain the confidentiality of Protected Materials they have obtained

pursuant to this Protective Order, and shall treat such Protected Materials in the same manner as

they treat their own most highly confidential information.

9

Authorized Reviewers shall be liable for any unauthorized disclosure or use by

themselves and/or employees, paralegals, or administrative staff. In the event any Authorized

Reviewer is requested or required by applicable laws or regulations, or in the course of

administrative or judicial proceedings (in response to oral questions, interrogatories, requests for

information or documents, subpoena, civil investigative demand or similar process) to disclose

any of Protected Materials, the Authorized Reviewer shall immediately inform the Disclosing

Party of the request, and the Disclosing Party may, at its sole discretion and cost, direct any

challenge or defense against the disclosure requirement, and the Authorized Reviewer shall

cooperate in good faith with such Party either to oppose the disclosure of the Protected Materials

consistent with applicable law, or to obtain confidential treatment of the Protected Materials by

the person or entity who wishes to receive them prior to any such disclosure. If there are

multiple requests for substantially similar Protected Materials in the same case or proceeding

where an Authorized Reviewer has been ordered to produce certain specific Protected Materials,

the Authorized Reviewer may, upon request for substantially similar materials by another person

or entity, respond in a manner consistent with that order to those substantially similar requests.

9. Return or Destruction of Protected Materials. Protected Materials shall remain

available to Authorized Reviewers until an order terminating this proceeding becomes no longer

subject to judicial review. If requested to do so in writing after that date, the Authorized

Reviewers shall, within fifteen days after such request, return the Protected Materials to the

Disclosing Party that produced such Protected Materials, or shall destroy the materials, except

that copies of filings, official transcripts and exhibits in this proceeding that contain Protected

Materials, and notes of Protected Materials may be retained, if such Protected Materials are

maintained in accordance with Paragraph 8. Within such time period each Authorized Reviewer,

if requested to do so, shall also submit to the Disclosing Party an affidavit stating that, to the best

10

of its knowledge, all Protected Materials have been returned or have been destroyed or will be

maintained in accordance with Paragraph 8. To the extent Protected Materials are not returned

or destroyed, they shall remain subject to this Protective Order.

In the event that a Reviewing Representative to whom Protected Materials are disclosed

ceases to be engaged to provide services in this proceeding, then access to such materials by that

person shall be terminated and the Reviewing Representative shall immediately return or destroy

all Protected Materials, or provide an affidavit stating that all Protected Materials and all notes of

Protected Materials will be maintained in accordance with Paragraph 8. Even if a Reviewing

Representative is no longer engaged in this proceeding, every such person shall continue to be

bound by the provisions of this Protective Order and the Nondisclosure Certificate.

10. Access and Use by Governmental Entities.

A. In the event the Commission receives a request from the California Energy

Commission (“CEC”) for a copy of or access to any Party’s Protected Materials, the procedure

for handling such requests shall be as follows. Not less than five (5) business days after

delivering written notice to the Disclosing Party of the request, the Commission shall release

such Protected Materials to the CEC upon receipt from the CEC of an Interagency Information

Request and Confidentiality Agreement (“Interagency Confidentiality Agreement”). Such

Interagency Confidentiality Agreement shall: (i) provide that the CEC will treat the requested

Protected Materials as confidential in accordance with this Protective Order; (ii) include an

explanation of the purpose for the CEC’s request, as well as an explanation of how the request

relates to furtherance of the CEC’s functions; (iii) be signed by a person authorized to bind the

CEC contractually; and (iv) expressly state that furnishing of the requested Protected Materials

to employees or representatives of the CEC does not, by itself, make such Protected Materials

public. In addition, the Interagency Confidentiality Agreement shall include an express

11

acknowledgment of the Commission’s sole authority (subject to judicial review) to make the

determination whether the Protected Materials should remain confidential or be disclosed to the

public, notwithstanding any provision to the contrary in the statutes or regulations applicable to

the CEC.

B. In the event the Commission receives a request for a copy of or access to a

party’s Protected Materials from a state governmental agency other than the CEC that is

authorized to enter into a written agreement sufficient to satisfy the requirements for maintaining

confidentiality set forth in Government Code Section 6254.5(e), the Commission may, not less

than five (5) business days after giving written notice to the Disclosing Party of the request,

release such Protected Materials to the requesting governmental agency, upon receiving from the

requesting agency an executed Interagency Confidentiality Agreement that contains the same

provisions described in Paragraph 10.A above.

C. The CEC may use Protected Materials when needed to fulfill its statutory

responsibilities or cooperative agreements with the Commission. Commission confidentiality

designations will be maintained by the CEC in making such assessments, and the CEC will not

publish any assessment that directly reveals the data or allows the data submitted by an

individual load serving entity to be “reverse engineered.”

11. Dispute Resolution. All disputes that arise under this Protective Order, including

but not limited to alleged violations of this Protective Order and disputes concerning whether

materials were properly designated as Protected Materials, shall first be addressed by the parties

through a meet and confer process in an attempt to resolve such disputes. If the meet and confer

process is unsuccessful, either party may present the dispute for resolution to the Assigned ALJ

or the Law and Motion ALJ.

12

12. Other Objections to Use or Disclosure. Nothing in this Protective Order shall be

construed as limiting the right of a Party, the Commission Staff, or a state governmental agency

covered by Paragraph 10 to object to the use or disclosure of Protected Materials on any legal

ground, including relevance or privilege.

13. Remedies. Any violation of this Protective Order shall constitute a violation of an

order of the Commission. Notwithstanding the foregoing, the parties and Commission Staff

reserve their rights to pursue any legal or equitable remedies that may be available in the event of

an actual or anticipated disclosure of Protected Materials.

14. Withdrawal of Designation. A Disclosing Party may agree at any time to remove

the “Protected Materials” designation from any materials of such Party if, in its opinion,

confidentiality protection is no longer required. In such a case, the Disclosing Party will notify

all Requesting Parties that the Disclosing Party has agreed to withdraw its designation of

Protected Materials for specific documents or material.

15. Modification. This Protective Order shall remain in effect unless and until it is

modified or terminated by the Commission or the Assigned ALJ. The identity of the parties

submitting Protected Materials may differ from time to time. In light of this situation,

modifications to this Protective Order may become necessary. The Parties shall work

cooperatively to develop such modifications and, to the extent the Parties are able to agree to

modifications, shall file a motion with the Assigned ALJ or the Commission seeking approval of

the modifications. To the extent Parties are unable to agree on modifications after a good faith

effort, each party governed by this Protective Order has the right to seek modifications in it as

appropriate from the Assigned ALJ or the Commission.

16. Interpretation. Headings are for convenience only and may not be used to restrict

the scope of this Protective Order.

13

Entered: __________________________________

Administrative Law Judge

Date: __________________________________

APPENDIX A TO MODEL PROTECTIVE ORDER

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

2021-2023 AES Alamitos Resource Adequacy Power Purchase Agreement to Meet Resource Adequacy Requirements

) ) Advice 4209-E

NONDISCLOSURE CERTIFICATE

I hereby certify my understanding that access to Protected Materials is provided to me

pursuant to the terms and restrictions of the Protective Order in this proceeding, that I have been

given a copy of and have read the Protective Order, and that I agree to be bound by it. I

understand that the contents of the Protected Materials, any notes or other memoranda, or any

other form of information that copies or discloses Protected Materials shall not be disclosed to

anyone other than in accordance with that Protective Order. I acknowledge that a violation of

this certificate constitutes a violation of an order of California Public Utilities Commission. Signed: _______________________ Name ________________________ Title: _________________________ Organization: __________________ Dated: ________________________