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California's three large investor owned utilities issue annual solicitations for renewable energy. The RPS solicitation process is the primary policy framework for the development of utility‐scale renewable energy in California. Utilities may also procure renewable energy through all-source solicitations and bilateral contracts. In addition, the Commission has recently created or is considering a variety of programs to encourage procurement of distributed generation.

Utilities can accept renewable energy bids from anywhere within the Western Electricity Coordinating Council (WECC). Bidders located outside the California Independent System Operator's (CAISO) control area are responsible for delivering their energy – which must be firmed, not intermittent – to the CAISO control area. When evaluating bids, utilities may adjust bid prices to account for any increased costs (remarketing, swaps, transmission costs, congestion, etc.) that may be associated with generation located outside of the utility's service territory or the CAISO control area.

RPS Solicitations

Below is an outline of the RPS procurement process:

·         The utility files its RPS procurement plan and bidding protocol with the CPUC. The CPUC and an independent evaluator review the bidding protocol. The CPUC approves the plan and bidding protocol. 

·         The utility issues a request for offers (RFO) for renewable energy which is overseen by the CPUC and the Independent Evaluator.

·         Respondents file notices to bid.

·         Respondents submit their bids to the utility.

·         The utility notifies the CPUC when bidding is closed, and the Independent Evaluator drafts a solicitation report for the CPUC's review.

·         The utility evaluates all of the bids using a "least-cost, best-fit" evaluation process approved by the CPUC, and develops a "short list" of acceptable bids.

·         The utility's Procurement Review Group reviews the solicitation results and the proposed short list.

·         The utility requests CPUC approval of its final short list .

·         The utility and short listed bidders negotiate and execute contracts.

·         The utility files with the CPUC an advice letter or application requesting approval of a contract, and the Independent Evaluator submits its final report for the contract via the advice letter (or application).

·         The CPUC reviews the submitted RPS contracts.

The CPUC approves or rejects the RPS contract by issuing a resolution (if responding to an advice letter) or a decision (if responding to an application).

Purpose and Use of the Project Viability Calculator

The Commission directs Pacific Gas and Electric Company, Southern California Edison Company and San Diego Gas & Electric Company to consider the viability of renewable projects when evaluating the value, costs and benefits of power purchase agreements offered to the utilities through solicitations and bilaterally.  Energy Division staff developed the Project Viability Calculator with stakeholder participation from utilities, renewable project developers and ratepayer advocates.

The Project Viability Calculator is a tool for the utilities to evaluate the viability of a renewable energy project, relative to all other projects that bid into the California utilities' Renewables Portfolio Standard (RPS) solicitations.  The Project Viability Calculator uses standardized categories and criteria to quantify a project's strengths and weaknesses in key areas of renewable project development.  A project's score is only indicative of a project's likelihood to achieve commercial development.  The Project Viability Calculator is used as a screening tool, not to determine the exact merit of a particular project or contract. 

Least-cost Best-fit

The RPS statute requires utilities to select renewable resources that are least cost, including the direct costs of renewable energy generation and any indirect costs due integration of the resource and needed transmission investment. In addition, utilities are required to consider renewable resources that best fit their system needs. Least-cost best-fit criteria were determined in D.04-07-029.

At the beginning of each RPS solicitation cycle, each IOU submits its RPS procurement plan and bidding protocol to the CPUC for approval. Filed with the plan and bidding protocol is a detailed description of the IOU's least-cost best-fit methodology. Parties are given the opportunity to file comments on all aspects of the plan, including the least-cost best-fit methodology. Following CPUC approval of its plan and protocol, an IOU can initiate its RPS solicitation.

Independent Evaluators

The CPUC requires an Independent Evaluator (IE) for each RPS solicitation. The IE provides third party oversight of the RPS procurement process. At the conclusion of the solicitation, the IE writes a report which is submit via the IOU to the CPUC providing a critical assessment of the robustness of the solicitation, the effectiveness of the least-cost best-fit methodology, and a determination of whether that methodology was fairly administered. The IE also completes a contract-specific report whenever a bid from a solicitation is submitted as a contract to the CPUC.Procurement Review Groups

In D.02-08-071, the Commission required each utility to establish a "Procurement Review Group" (PRG) whose members, subject to an appropriate non-disclosure agreement, would have the right to consult with the utility and review the details of the utility's:

  • Overall procurement strategy
  • Proposed procurement processes including, but not limited to, RFOs
  • Proposed procurement contracts, before those contracts are submitted to the Commission for review.

PRG participants include: California Department of Water Resources (DWR), the Commission's Energy Division, Union of Concerned Scientists (UCS), Division of Ratepayer Advocates (DRA), Coalition of California Utility Employees (CUE) and The Utility Reform Network (TURN).

Although Energy Division is a member of the PRG, it reserves its conclusions for review and recommendation on RPS contracts to the resolution process. The PRG advises utilities, not Energy Division.

Pro Forma Agreements

The IOU pro forma agreements can be found at the following links:

System-Side Distributed Generation Programs

The table below summarizes the current and proposed system-side DG programs:









Eligible Project Size

Program Size (MW)

Participating Buyers and Sellers

Eligible Technologies

CPUC Status

Market Opportunity

Feed-in Tariff

(AB 1969)

Up to 1.5 MW


All IOUs

All RPS-Eligible Technologies

Fully implemented per D.07-07-027

Contracts accepted on an ongoing basis until cap is reached

Senate Bill 32 (Negrete-McLeod 2009)


Up to 3 MW

750 total

(Includes 500 MW listed above)

IOUs and municipal utilities

All RPS-Eligible Technologies

CPUC working to implement statute for IOUs

Contracts accepted on an ongoing basis until cap is reached

Renewable Auction Mechanism


Up to 20 MW


3 large IOUs

All RPS-Eligible Technologies

Final Decision

Proposes 2 auctions per year

SCE Solar PV Program (SPVP)


1 – 2 MW


250 MW utility-owned generation (UOG)

250 MW IPP

Solar PV primarily rooftop

See link to the left

At least 1 auction per year, first auction occurred in April 2010

PG&E PV Program


1 – 20 MW


250 MW UOG

250 MW IPP

Solar PV primarily ground-mount

See link to the left

At least 1 auction per year, first auction will occur in Q1 2011

SDG&E PV Program


1 – 5 MW




Solar PV

primarily ground-mount

See link to the left

At least 1 auction per year, following program implementation








Very Short-term Price Reasonableness Benchmark (VShoT)

In D.09-06-050, the Commission set forth a Tier 2 advice letter or “fast-track” approval process for short-term renewables portfolio standards (RPS) contracts.  In order to request approval of a very short-term contract through the “fast track” process several conditions must be met:

    1. The contract is made with a generation facility that is in commercial operation or will commence commercial operation within six months from the date the contract is signed;

    2. The contract’s levelized price, including firming and shaping costs, does not exceed a price benchmark calculated as 150% of the forward price for a contract of the same duration for non-renewable energy and that price does not exceed 90% of the market price referent for a contract of 10 years duration;

    3. The terms and conditions in the contract are the same as those provided in a Commission-approved pro forma contract;

    4. The contract is reviewed by the utility’s Procurement Review Group and Independent Evaluator;

    5. The contract is consistent with the utility’s least-cost best-fit criteria for RPS procurement; and

    6. The contract otherwise is consistent with the utility’s approved RPS procurement plan.

The price benchmark for the very short-term contracts should be calculated using the price reasonableness benchmark methodology and the accompanying Very Short-Term Price Reasonableness Benchmark Model (VShoT).

Cost Containment

The CPUC will be implementing a new cost containment mechanism as mandated by the passage of Senate Bill No. 2 (SB2) in 2011 which establishes new guidelines for renewable energy procurement in California. SB2 requires that the CPUC establish a limitation for each electrical corporation on the procurement expenditures of all eligible renewable energy resources used to comply with the renewables portfolio standard.  In establishing this limitation SB2 mandates that the CPUC rely on (1) the most recent renewable energy procurement plan, (2) procurement expenditures that approximate the expected cost of building, owning, and operating eligible renewable energy resources, and (3) the potential that some planned resource additions may be delayed or cancelled.  The CPUC is currently in the process of developing a cost containment mechanism and a Decision to implement the new cost limitation will be voted on by the Commission.  Currently, there is no cost limitation requirement for RPS-eligible renewable resources delivering energy into the State of California.

Last Modified: 2/1/2012

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