Containing the Cost of California’s RPS

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

2. About DRA • 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!

3. 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!

4. Expenditures of Above-Market Funds Note: Data from August 2010 AMF Calculators. Figures in nominal dollars. The Voice of Consumers, Making a Difference!

5. 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 2011 The Voice of Consumers, Making a Difference!

6. CPUC Decision: Implementing 33% RPS Decision (D.) 11-12-052 on Portfolio Content Categories implements SBx1 2 restrictions on unbundled renewables The Voice of Consumers, Making a Difference!

7. CPUC Decision: Implementing 33% RPS Decision (D.) 11-12-020 on procurement quantity requirements The Voice of Consumers, Making a Difference!

8. Utilities are on Track to Meet 33% Risk Profile of Forecasted RPS Generation Note: based on executed contracts The Voice of Consumers, Making a Difference!

9. California’s Renewable Mix 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. The Voice of Consumers, Making a Difference!

10. Variety of Renewable Programs Multiple programs and procurement methods have been created to 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 Voice of Consumers, Making a Difference!

11. 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 Note: Not to Scale DRA Guide: www.dra.ca.gov/dra/jungle.htm The Voice of Consumers, Making a Difference!

12. Renewable Programs by Technology & Size The Voice of Consumers, Making a Difference!

13. 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 The Voice of Consumers, Making a Difference!

14. 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 The Voice of Consumers, Making a Difference!

15. Revenue Requirement Breakdown 2010 IOU Revenue Requirement Summary (000) Source: AB 67 Report, April 2011, p. 7. The Voice of Consumers, Making a Difference!

16. 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 away The Voice of Consumers, Making a Difference!

17. Contact InformationYuliya Shmidtys2 @cpuc.ca.govwww.dra.ca.gov