Details for: SCE's Comments on Draft Comments on Resolution E-4922.pdf


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

March 12, 2018

Energy Division
California Public Utilities Commission
505 Van Ness Avenue
San Francisco, CA 94102

Re:

Comments of Southern California Edison Company on
Draft Resolution E-4922

Southern California Edison Company (SCE) respectfully submits these comments on
draft Resolution E-4922, issued February 16, 2018 (Draft Resolution). As discussed
below, the Commission should make discrete changes to the Draft Resolution to make
clear that the IOUs are directed to execute new contracts for projects that accept a
BioMAT price and remain eligible for BioMAT, to provide an additional 30 days for the
IOUs to prepare contracts for execution, and to eliminate the requirement that the
executed contracts be filed with the Commission. The Commission should reject the
recommendations of Allco Renewable Energy Limited (Allco), contained in its comments
on the Draft Resolution filed February 18, 2018, because they do not provide a
reasonable means of modifying BioMAT. Rather, the Energy Division should, in
resolving its review of BioMAT, recommend that the Commission undertake prompt
review of BioMAT and ReMAT and either eliminate them, or otherwise modify them to
be consistent with the requirements of the Public Utility Regulatory Policies Act
(PURPA).
DISCUSSION
The Draft Resolution directs the investor-owned utilities (IOUs), pending the Energy
Division’s review of BioMAT, to continue to accept new BioMAT applications and
execute new contracts for projects that accept a BioMAT price. The offer price cap of
$199.72/MWh, imposed by the Energy Division for Category 3 (sustainable forest
management) projects absent seller’s commitment to use at least 60% high hazard
zones (HHZ) fuel, remains in place under the Draft Resolution pending the Energy
Division’s program review. The Draft Resolution directs the IOUs to file the executed
contracts within 45 days of the final Resolution via a Tier 1 advice letter.
The Draft Resolution (at p. 5) states that BioMAT helps to support the Governor’s
Emergency Proclamation to address bark beetle- and drought-caused tree mortality and
the hazards associated with tree mortality, as observed in the Draft Resolution. For this
reason, SCE does not oppose the Draft Resolution’s directive to continue the program
pending the Energy Division’s review, with the understanding that SCE is entitled to cost
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8631 Rush Street, Rosemead, California 91770 (626) 302-9645 Fax (626) 302-6396





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Energy Division Tariff Unit Page 2 March 12, 2018 recovery for the BioMAT contracts it executes in compliance with CPUC orders on BioMAT, including the BioMAT tariff. SCE recommends discrete changes to the final Resolution to make clear that the IOUs are directed to execute new contracts for projects that accept a BioMAT price, provided they remain eligible for the BioMAT program. SCE also recommends that the final Resolution provide an additional 30 days for the IOUs to prepare contracts for execution, and eliminate the requirement that the IOUs file the executed BioMAT contracts via a Tier 1 advice letter.1 The BioMAT contracts are based on standard, tariffed terms approved by the Commission and as such, the contract terms do not vary and the tariffs do not require BioMAT contracts to be filed with the Commission. Thus, there appears to be little reason to require the IOUs to file the batch of BioMAT contracts executed within 45 days of the final Resolution. The Energy Division can request copies of the executed contacts from the IOUs should it wish to see them. SCE’s proposed changes are set forth in Attachment A hereto. While SCE shares some of the concerns with BioMAT that Allco raises in its comments, SCE opposes Allco’s recommendations and they should be rejected in their entirety. It is not appropriate to modify BioMAT to eliminate the program cap and adjusting price mechanism, as Allco urges for PURPA compliance reasons based on Winding Creek,2 but to maintain an offer price for BioMAT (the starting price of $127.72/MWh), which, based on Winding Creek, would be found to violate PURPA because it is not based on utility avoided cost.3 Allco’s proposal to “fix” BioMAT conveniently overlooks this problem.4 1 See Ordering Paragraph (OP) 3 of the Draft Resolution. 2 Winding Creek Solar LLC v. Peevey, 2017 U.S. Dist. LEXIS 201893 at * 25-26 (N.D. Cal. 2017). 3 The Winding Creek court concluded that ReMAT’s price is not avoided cost because it was not based on costs the utility would otherwise incur if it generated power itself or procured from another source. Winding Creek Solar LLC v. Peevey, 2017 U.S. Dist. LEXIS 201893 at * 25-26 (N.D. Cal. 2017). The Winding Creek court found that avoided cost price should be a “but-for” cost, and – notably – the court did not find that the test is “but-for” what a utility would pay for from a renewable QF device under 3 MW. See id. 4 Allco’s comments (at p. 2) claim that the ReMAT starting price rate of $89.23 per MWh was not challenged by Winding Creek. Actually, before FERC, in Dkt. No. EL13-71, Winding Creek argued that the ReMAT pricing mechanism runs afoul of PURPA because it was set by an auction, and also because the price does not reflect what costs the utility would otherwise incur if it had generated power itself or procured from another source; rather the ReMAT price reflects a QF’s production costs. Petition for Enforcement Under the Public Utility Regulatory Policies Act of 1978 at 18, Dk. No. EL13-71 (June 13, 2013). Winding Creek stated that a Renewable Auction Mechanism (RAM) “is not a mechanism that can or should displace statutorily mandated avoided costs, or form the basis for a mechanism that does.” Id. at 23. Winding Creek explained to FERC that the ReMAT starting price was determined by reference to recent pricing received by the IOUs under the RAM program, which involved a request for proposals (“RFP”) solicitation for projects between 3MW and 20MW. Winding Creek argued that “[u]nder PURPA, whose goal is to displace fossil fuels
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Energy Division Tariff Unit Page 3 March 12, 2018 It is also inappropriate to provide every generator currently in the queue a contract based on rates in effect at the time they entered the queue, as Allco proposes.5 A qualifying facility (QF) is entitled under PURPA to a price determined at the time that a “legally enforceable obligation” is established for that QF. Merely entering a queue does not establish a legally enforceable obligation, and the avoided cost price cannot reasonably be determined years before a legally enforceable obligation is established. For example, a 2012 starting price would not reflect an IOU’s avoided cost in circumstances where renewable costs are declining and a legally enforceable obligation is established in 2018. SCE agrees that BioMAT, if challenged, would likely be found to violate PURPA, because BioMAT contains the same programmatic features the Winding Creek court reviewed for ReMAT and found to violate PURPA -- specifically, the program cap and the pricing, which is not based on the IOU’s avoided costs. However, to SCE’s knowledge no enforcement petition concerning BioMAT has been brought to FERC, no petitioner yet has standing to challenge it in federal district court, and BioMAT was not before the Winding Creek court.6 As such, the Draft Resolution is not directly contrary to the Winding Creek order, as Allco alleges.7 Moreover, the Draft Resolution does not claim to be the Commission’s means of complying with the Winding Creek order. Thus, the Commission has some leeway to review the BioMAT program and, along with ReMAT, take steps to eliminate these programs or otherwise modify them to be consistent with PURPA. SCE urges the Commission to undertake expedient actions to that end. Sincerely, /s/ Gary A. Stern, Ph.D. Gary A. Stern, Ph.D. GAS:sc:jm Enclosure (not other renewables), a multi-tier structure must start with a traditional base, or fossil fuel avoided cost, tier that reflects the highest marginal cost of the fossil fuel generation or market purchases being avoided, both over the short and long term.” Id.at 20. It was only in the later court litigation that Winding Creek withdrew its objection to the use of the RAMbased starting price. 5 See Allco’s comments, p. 2. 6 The Winding Creek court said nothing about the Bio-MAT program. Allco’s comments acknowledge that the orders at issue in Winding Creek were D.12-05-035, D.13-01-041 and D.13-05-034 (at fn. 1). The court’s order states the same. 7 See Allco’s comments, p. 1.
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Energy Division Tariff Unit Page 4 March 12, 2018 cc: Edward Randolph, Director, CPUC Energy Division Cheryl Lee, CPUC Energy Division James McGarry, CPUC Energy Division Service Lists R.15-02-020 and R.11-05-005 Parties on Service List for Draft Resolution E-4922
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ATTACHMENT A SCE’S PROPOSED REVISION TO THE DRAFT RESOLUTION E-4922
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THEREFORE IT IS ORDERED THAT: 1. Pacific Gas and Electric Company, Southern California Edison Company, and San Diego Gas & Electric Company shall continue to hold new BioMAT program periods, shall accept new BioMAT applications, and shall prepare executable contracts for BioMAT program participants that remain eligible for the BioMAT program and that have accepted a BioMAT contract price, offer such executable contracts to eligible BioMAT program participantsexecute BioMAT contracts for projects that accept a BioMAT price, and if such eligible BioMAT program participants execute the contract offered, the IOUs shall proceed with contract execution, each consistent with existing the applicable IOU’s BioMAT Tariff and existing Commission orders regarding the BioMAT program. 2. Pacific Gas and Electric Company, Southern California Edison Company, and San Diego Gas & Electric Company shall within 60 30 days of this Resolution prepare contracts for executione contracts with the developers BioMAT program participants that have already accepted a BioMAT offered price and continue to be eligible for the BioMAT program. 3. Pacific Gas and Electric Company, Southern California Edison Company, and San Diego Gas & Electric Company shall within 45 days of this Resolution file Tier 1 Advice Letter compliance filings with the contracts ordered in Ordering Paragraph 2.
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