Procurement Process

California's three large investor owned utilities are required to issue annual solicitations for renewable energy, until they reach the 20 percent requirement. Utilities may also procure renewable energy through all-source solicitations and bilateral contracts.

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. Utilities may adjust bid prices to account for any increased costs (remarketing, swaps, transmission congestion, etc.) that may be associated with generation located outside of the utility's service territory or the CAISO control area.

Below is an outline of the RPS procurement process:

1. The utility files a 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. 
2. The utility issues a request for offers (RFO) for renewable energy which is overseen by the CPUC and the Independent Evaluator.
3. Respondents file notices to bid.
4. Respondents submit their bids to the utility.
5. The utility notifies the CPUC when bidding is closed, and the Independent Evaluator drafts a solicitation report for the CPUC's review.
6. 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.
7. The utility's Procurement Review Group reviews the solicitation results and the proposed short list.
8. The utility notifies the CPUC when its initial short list is completed.
9. The CPUC calculates and publicly releases the market price referent once all the utilities have notified their short listed bidders.
10. The utility and bidders negotiate and execute contracts. In Decision 04-06-014 (Rulemaking 04-04-026), the CPUC adopted standard terms and conditions for contracts to be offered to renewable energy generators that successfully bid into a utility's renewable energy solicitation.
11. 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.
12. The CPUC reviews the submitted RPS contracts. Contracts priced at or below the market price referent may be considered per se reasonable by the CPUC. SB 1036 (2007) reformed the process for cost recovery of the above MPR portion of contracts priced above the MPR. Implementations details are currently being considered by the CPUC and CEC.
13. 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).

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 a short-term 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 is required to submit a report 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 is also required to submit 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:

1. Overall procurement strategy;
2. Proposed procurement processes including, but not limited to, RFOs; and
3. 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, Natural Resources Defense Council (NRDC), Union of Concerned Scientists (UCS), Division of Ratepayer Advocates (DRA), Aglet Consumer Alliance (Aglet), 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.