Containing the Cost of California’s RPS Yuliya Shmidt, Senior Analyst February 2, 2012

Containing the Cost of California’s RPS

Yuliya Shmidt, Senior Analyst

February 2, 2012

The Division of Ratepayer Advocates (DRA) is a consumer advocate within the California Public Utilities Commission (CPUC) that represents customers’ interests on investor owned utility (IOU) matters.

DRA’s statutory mission is to obtain the lowest possible rates for utility services consistent with safe

and reliable service levels. In fulfilling this

goal, DRA also advocates for consumer and

environmental protections. The Voice of Consumers, Making a Difference! 2

About DRA

Renewables Portfolio Standard (RPS)

Legislation in California SB 107 (Simitian, 2006): Accelerated the RPS to 20% by

2010 with flexible compliance extending the deadline to 2013

SB 1036 (Perata, 2007): Adopted ratepayer protections through limits on above-market costs. Above-Market Funds (AMFs) are allocated to the costs

of each RPS contract above the Market Price Referent

AMFs for each utility were exhausted in 2009

SBx1 2 (Simitian, 2011): Established a 33% RPS by 2020. Requires reporting on total cost of program each year

Requires CPUC to establish and enforce a cost limitation for each investor-owned utility

Limits procurement to resources that can be procured without exceeding a de minimis increase in rates The Voice of Consumers, Making a Difference! 3

The Voice of Consumers, Making a Difference! 4

Expenditures of Above-Market Funds

$-

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

$7.0

Billi

ons

$773,106,060 $6,007,377,760

AMFs allocated AMFs incurred

Note: Data from August 2010 AMF Calculators. Figures in nominal dollars.

Implementation of 33% RPS Legislation by CPUC

Opened Rulemaking (R.) 11-05-005 to apply

SBx1 2

Addressed technical and definitional issues

in 2011

Addressing cost limitation mechanism in Q1

2012

Issued two Final Decisions in December 2011The Voice of Consumers, Making a Difference! 5

CPUC Decision: Implementing 33% RPS

Decision (D.) 11-12-052 on Portfolio Content Categories implements SBx1 2 restrictions on unbundled renewables


Compliance Period Bundled Unbundled

REC-only Firmed and Shaped

2011-2013 At least 50% Up to 25% Remainder



CPUC Decision: Implementing 33% RPS

Decision (D.) 11-12-020 on procurement quantity requirements


RPS Procurement Targets

20% 20% 20%21.7%

25%

27%

31%33%

29%

23.3%

0%

5%

10%

15%

20%

25%

30%

35%

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Compliance Period 1 Compliance Period 2 Compliance Period 3

Utilities are on Track to Meet 33%


Note: based on executed contracts

Risk Profile of Forecasted RPS Generation

California’s Renewable Mix


Renewable Technology Mix by Energy (GWh/yr)

biogas1%

geothermal21%

small hydro1%

wind36%

solar thermal17%

solar PV20%

biomass4%

Renewable Technology Mix by Capacity (MW)

biogas1%

geothermal8%

small hydro0%

wind44%

solar thermal19%

solar PV26%

biomass2%

Notes: Only contracts from 2002 and on are included. Includes contracts not yet online and those pending approval. Solar PV Program contracts are included but Feed-in Tariff and other programs are not. All data from http://www.cpuc.ca.gov/PUC/energy/Renewables/, updated January 2012.

http://www.cpuc.ca.gov/PUC/energy/Renewables/

Variety of Renewable ProgramsMultiple programs and procurement methods have

been createdto increase renewables:

Utility Requests for Offers (RFOs)

Bilaterally Negotiated RPS Contracts

Utility Owned Generation (UOG)

California Solar Initiative (CSI)

Feed-In-Tariff (FIT)

Qualifying Facilities (QFs)

Renewable Auction Mechanism (RAM)

Self Generation Incentive Program (SGIP)

Emerging Renewables Program (ERP)

Tradable Renewable Energy Credits (TRECs – now referred to as unbundled RECs)

Net Energy Metering (NEM)

New Solar Homes Partnership (NSHP)


The Renewable Jungle


CSI = California Solar Initiative

ERP = Emerging Renewables Program

FIT = Feed-in Tariff

NEM = Net Energy Metering

NSHP = New Solar Homes Partnership

PPA = Power Purchase Agreement

QFs = Qualifying Facilities

RAM = Renewables Auction Mechanism

RFO = Request for Offers

RPS = Renewables Portfolio Standard

SGIP = Small Generator Incentive Program

SPVP = Solar Photovoltaic Program

TRECs = Tradable Renewable Energy Credits

UOG = Utility Owned Generation

DRA Guide: www.dra.ca.gov/dra/jungle.htm

Note: Not to Scale

http://www.dra.ca.gov/dra/jungle.htm

Renewable Programs by Technology & Size

Size Solar PV Wind Other

Less than 1 MW

California Solar Initiative

New Solar Homes Partnership

Emerging Renewables Program

Net Energy Metering

Emerging Renewables Program

Small Generator Incentive Program

Net Energy Metering

Net Energy Metering

1-3 MW Feed-in Tariff

Renewables Auction Mechanism

Solar Photovoltaic Program

Request for Offers Power Purchase Agreement

Bilateral Power Purchase Agreement

Feed-in Tariff


Small Generator Incentive Program



Feed-in Tariff




1-20 MW Solar Photovoltaic Program










Greater than 20 MW


Utility Owned Generation

Solar Photovoltaic Program









Renewable Program Costs

Solicited RPS Contracts: estimated $20.8 billion to be expended 2003 - 2020

Bilateral RPS Contracts: estimated $13.3 billion to be expended 2003 - 2020

Qualifying Facilities: estimated $20.7 billion to be expended on renewable

QFs 2003 - 2020

California Solar Initiative: $2.1 billion budgeted for the program

New Solar Homes Partnership: $400 million budgeted for the program

Small Generator Incentive Program: $623 million spent from 2001 - 2009


Rate Impacts

Rate impacts of renewables are not yet known

A substantial portion of each utility’s RPS

portfolio has not yet come online and therefore

not yet entered rates

Rates are likely to increase but it is unclear how

much of that is due to renewables

Renewable costs may increase the utilities’

revenue requirement in several areas including:

cost of purchased power, utility-owned

generation, transmission, and distribution


Revenue Requirement Breakdown

PG&E SCE SDG&E Total %

Generation/Energy Procurement

Purchased Power $4,739,030 $3,723,745 $1,080,290 $9,543,065 37%

Utility Owned Generation $1,561,807 $1,909,857 $343,157 $3,814,821 15%

Distribution (includes taxes) $3,267,148 $3,663,902 $982,858 $7,913,908 30%

Transmission $752,286 $591,273 $279,789 $1,623,348 6%

Demand Side Management $726,316 $795,646 $219,246 $1,741,208 7%

Bonds & Fees $808,151 $500,441 $111,821 $1,420,413 5%

Total 2010 Revenue Requirement $11,854,738 $11,184,863 $3,017,161 $26,056,763 100%


2010 IOU Revenue Requirement Summary (000)

Source: AB 67 Report, April 2011, p. 7.

Containing RPS Costs

SBx1 2 (Sec. 399.15(c)):“The commission shall establish a limitation for each

electrical corporation on the procurement expenditures for all

eligible renewable energy resources used to comply with

the renewables portfolio standard.”

The CPUC is currently seeking input from parties on

the design of the cost containment mechanism

Stakeholders will file comments on February 16 and

March 1

A lengthy process involving workshops and

stakeholder input will likely ensue with a final decision

months awayThe Voice of Consumers, Making a Difference! 16

Contact Information

Yuliya Shmidtys2 @cpuc.ca.gov

www.dra.ca.gov

Documents

Containing the Cost of California’s RPS Yuliya Shmidt, Senior Analyst February 2, 2012