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RPS Cost Containment

Background

Senate Bill (SB) 1078 (Statues of 2002, Chapter 516, Sher) established the supplemental energy payments (SEPs) program to contain the total costs of the RPS program.  Under the SEPs program, renewable generators that had eligible above-market costs could request SEPs from the California Energy Commission (CEC), which held a limited amount of funds available for eligible above-MPR costs.  SB 1036 (Statues of 2007, Chapter 685, Perata) modified the cost containment program.  Instead of generators requesting SEPs, electrical corporations are now required to seek approval of both the contract and cost recovery of any eligible above-market contract costs from the California Public Utilities Commission (CPUC) at the same time.  The total cost limitation was not modified; that is, the total amount of eligible above-market contract costs electrical corporations may request is equivalent to the funds that would have been available under the SEPs program. 

 

The Cost Limitation

Public Utilities Code § 399.15(d) defines the cost limitation as “a limitation on the total costs expended above the MPR for the procurement of eligible renewable energy resources procured to satisfy RPS goals”.  The amount of above-market costs that count towards the cost limitation is determined by comparing the contract price to the appropriate market price referent (MPR).  The positive difference between the contract price and the MPR is the amount that counts towards the electrical corporations cost limitation. We call the contract costs that are applied to the cost limitation, “above-MPR funds (AMFs)”.

 

Implementation

Resolution E-4160 and Resolution E-4199 implemented SB 1036.  Resolution E-4160 directed PG&E, SDGE, and SCE to make adjustments to their rates reflecting the changes resulting from the elimination of the SEPs program.  Resolution E-4199 established the AMFs program by adopting:

 

  1. Cost limitations for Bear Valley Electric Service, Pacific Gas and Electric, San Diego Gas & Electric, and Southern California Edison:

Total AMFs for Each Utility

   
Utility Amount (2008$)
BVES  $ 328,376
PG&E  $ 381,969,452
SDG&E   $ 69,028,864
SCE  $ 322,107,744
Total  $ 773,434,436

  1. Eligibility criteria for above-MPR RPS contracts to be applied to the cost limitation: a
    • The contract has been approved by the Commission and was selected through a competitive solicitation.
    • The contract term is at least 10 years in length.
    • The contract is with a project that is a new or repowered facility commencing commercial operations on or after January 1, 2005.
    •  Contract is not for the purchase of renewable energy credits.
    • The above-MPR costs of a contract do not include any indirect expenses including imbalance energy charges, sale of excess energy, decreased generation from existing resources, or transmission upgrades.
  2. Reasonableness standards for Commission review of AMFs-eligible RPS contracts that are above the MPR;
    • Price reasonableness based on bid supply curves, least-cost best-fit analysis, and additional data, as needed
    • General reasonableness based on compliance with Commission decisions, project viability, and consistency with IOUs Commission-approved RPS Procurement Plan.
  3. An AMFs Calculator to calculate contract-specific AMFs requests and to track an electrical corporation’s AMFs balance; and
  4. General program rules for the AMFs.

RPS Cost Containment Documents




Last Modified: 10/29/2010



 
 
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