STATE OF CALIFORNIA
Edmund G. Brown Jr., Governor
PUBLIC UTILITIES COMMISSION
505 VAN NESS AVENUE
SAN FRANCISCO, CA 94102-3298
March 19, 2015
Advice Letters: 3121-E
Russell G. Worden
Director, State Regulatory Operations
Southern California Edison Company
8631 Rush Street
Rosemead, California 91770
SUBJECT: Submission of Contracts for Procurement of Renewable Energy from
SCE's 2013 Renewables Portfolio Standard Solicitation.
Dear Ms. Scott-Kakures:
Advice Letter 3121-E is effective as of March 12, 2015, per Resolution E-4704 Ordering
Paragraphs.
Sincerely,
Edward Randolph, Director
Energy Division
ADVICE LETTER (AL) SUSPENSION NOTICE
ENERGY DIVISION
Utility Name: Southern California Edison
Date Utility Notified: November 21, 2014
Utility Number/Type: U 338-E
[X ] E-Mailed to: AdviceTariffManager@sce.com
Advice Letter Number(s): 3121-E
ED Staff Contact: Scarlett Liang-Uejio
Date AL(s) Filed: October 28, 2014
ED Staff Email: scarlett.liang-uejio@cpuc.ca.gov
Utility Contact Person: Darrah Morgan
ED Staff Phone No.: (415) 703-1851
Utility Phone No.: (626) 302-2086
[X] INITIAL SUSPENSION (up to 120 DAYS from the expiration of the initial review period)
This is to notify that the above-indicated AL is suspended for up to 120 days beginning
November 27, 2014 for the following reason(s) below. If the AL requires a Commission resolution and
the Commission’s deliberation on the resolution prepared by Energy Division extends beyond the
expiration of the initial suspension period, the advice letter will be automatically suspended for up to
180 days beyond the initial suspension period.
[X] A Commission Resolution is Required to Dispose of the Advice Letter
[X] Advice Letter Requests a Commission Order
[X] Advice Letter Requires Staff Review
The expected duration of initial suspension period is 120 days
[ ] FURTHER SUSPENSION (up to 180 DAYS beyond initial suspension period)
The AL requires a Commission resolution and the Commission’s deliberation on the resolution
prepared by Energy Division has extended beyond the expiration of the initial suspension period. The
advice letter is suspended for up to 180 days beyond the initial suspension period.
_____________________________________________
If you have any questions regarding this matter, please contact Scarlett Liang-Uejio at scarlett.lianguejio@cpuc.ca.gov.
cc:
Energy Division Tariff Unit
* Note: reference – Decision D.02-02-049, dated February 21, 2002, and Rule 7.5 in appendix A of D.O7-01-024
Megan Scott-Kakures
Vice President, Regulatory Operations
`
October 28, 2014
ADVICE 3121-E
(U 338-E)
PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
ENERGY DIVISION
SUBJECT:
I.
Submission of Contracts for Procurement of Renewable
Energy From SCE’s 2013 Renewables Portfolio Standard
Solicitation
INTRODUCTION
A.
Purpose of the Advice Letter
Southern California Edison Company (“SCE”) submits this Advice Letter pursuant
to California Public Utilities Code Section 399.11 et seq. (the “RPS Legislation”)
seeking approval of two Renewables Portfolio Standard (“RPS”) power purchase
agreements (the “Mount Signal II Contract” and the “Mount Signal V Contract,”
together, the “Mount Signal Contracts”). The Mount Signal II Contract is between
SCE and 88FT 8me LLC (“Seller”), a project wholly owned by a joint venture
between Silver Ridge Power (“SRP”) and 8minutenergy Renewables, LLC
(“8me”). The Mount Signal V Contract is between SCE and 93LF 8me LLC
(“Seller”), also a project wholly owned by a joint venture between SRP and 8me.
The following table summarizes the Mount Signal Contracts:
Seller
88FT 8me
LLC (Mount
Signal II
Contract)
93LF 8me
LLC (Mount
Signal V
Contract)
P.O. Box 800
Generation
Type
Size
Megawatts
(MW)
Estimated
Average
Energy
(GWh/yr)
Forecasted
Commercial
Operation
Date
Term of
Agreement
(Years)
Solar
photovoltaic
153.52
402
June 1, 2020
20
Solar
photovoltaic
252.32
660
February 1,
2019
20
8631 Rush Street
Rosemead, California 91770
(626) 302-6855
Fax (626) 302-4829
ADVICE 3121-E
(U 338-E)
-2-
October 28, 2014
SCE requests that the California Public Utilities Commission (“Commission” or
“CPUC”) issue a final resolution containing findings in the form requested in this
Advice Letter within six months (April 28, 2015).
In accordance with General Order (“GO”) 96-B, the confidentiality of information
included in this Advice Letter is described below. This Advice Letter contains
both confidential and public appendices as listed below.
Confidential Appendix A:
Consistency with Commission Decisions and
Rules and Project Development Status
Confidential Appendix B:
2013 Solicitation Overview
Confidential/Public Appendix C:
Independent Evaluator Report
Confidential Appendix D.1:
Contract Summary for Mount Signal II Contract
Confidential Appendix D.2:
Contract Summary for Mount Signal V Contract
Confidential Appendix E:
Comparison of Mount Signal II Contract and
the Mount Signal V Contract with SCE’s 2013
Pro Forma Renewable Power Purchase And
Sale Agreement
Confidential Appendix F:
Mount Signal II Contract and the Mount Signal
V Contract
Confidential/Public Appendix G: Renewable Net Short Calculations
Appendix H:
Confidentiality Declaration
Appendix I:
Proposed Protective Order
B.
Subject of the Advice Letter
The project that is contemplated by the Mount Signal II Contract (“Mount Signal
Solar Farm II”) is a proposed 153.52 MW solar photovoltaic (“PV”) facility. The
project that is contemplated by the Mount Signal V Contract (“Mount Signal Solar
Farm V”) is a proposed 252.32 MW solar PV facility. Both projects (the “Mount
Signal Projects”) are to be located in southern Imperial County, approximately
two miles west of the City of Calexico (the “Site”). Both projects will interconnect
at San Diego Gas & Electric Company’s (“SDG&E”) Imperial Valley substation.
The Seller under the Mount Signal II Contract is 88FT 8me LLC. The Seller
under the Mount Signal V Contract is 93LF 8me LLC. Both Sellers are wholly
ADVICE 3121-E
(U 338-E)
-3-
October 28, 2014
owned by a joint venture between SRP and 8me. The Mount Signal Contracts
are new contracts that originated from SCE’s 2013 RPS solicitation.
C.
General Project Description
Project Name
Mount Signal Solar Farm II
Mount Signal Solar Farm V
Technology
Solar PV
Solar PV
Capacity (MW)1
153.52
252.32
Capacity Factor (Term Year 1)
31.3%
31.3%
Expected Generation (GWh/Year)2
402
660
Initial Commercial Operation Date
6/1/2020
2/1/2019
Date Contract Delivery Term Begins
6/1/2020
2/1/2019
Delivery Term (Years)
20
20
Vintage (New / Existing / Repower)
New
New
Location (City and State)
City of Calexico, California
City of Calexico, California
Control Area (e.g., CAISO, BPA)
California Independent
System Operator (“CAISO”)
CAISO
Nearest Competitive Renewable
Energy Zone (CREZ) as identified by
the Renewable Energy Transmission
Initiative (RETI)
CREZ 30 Imperial South
CREZ 30 Imperial South
Type of Cooling, if Applicable
Not applicable
Not applicable
D.
Project Location
The Site for the Mount Signal Projects is located in southern Imperial County,
California. The Projects are co-located approximately two miles west of the City
of Calexico. The Site is currently being used as agricultural land. Refer to
Appendix A, Section C.3 for information on the Site and relevant permits. Refer
to Appendix F, Exhibit B for a map of the Mount Signal Projects’ location.
1
2
See Appendices D-1 and D-2, Section D under “Capacity” for further details on the
Mount Signal Projects’ capacities.
This expected generation represents the annual average generation that SCE
expects to make payments on over the contract term.
ADVICE 3121-E
(U 338-E)
E.
-4-
October 28, 2014
General Deal Structure
The Mount Signal Contracts are based on SCE’s 2013 Pro Forma Renewable
Power Purchase and Sale Agreement, which was accepted by the Commission
in Decision (“D.”) 13-11-024 on November 14, 2013.3
SCE is purchasing all electric energy produced by both of the Mount Signal
Projects throughout each respective contract term, net of station use (if any), and
all green attributes, capacity attributes, and resource adequacy benefits
generated by, associated with, or attributable to the Mount Signal Projects.
The delivery point for the Mount Signal Projects is the point of interconnection
with the CAISO-controlled grid at SDG&E’s Imperial Valley substation.
Additional information regarding the deal structure of the Mount Signal II Contract
and Mount Signal V Contract is provided in Appendices D-1 and D-2. The Mount
Signal Projects also met all of the eligibility requirements and preferred project
characteristics for SCE’s 2013 Request for Proposals (“RFP”), which are
described in further detail in Sections A.2 and A.3. The Mount Signal Projects
are expected to deliver a portfolio content category 1 (“Category 1”) product, and
have their first point of interconnection within a California Balancing Authority.
F.
RPS Statutory Goals & Requirements
By providing renewable energy from an eligible renewable energy resource
(“ERR”) as defined in the RPS Legislation, the Mount Signal Contracts are
consistent with, and contribute to, the RPS program’s statutory goals. Pursuant
to Public Utilities Code Section 399.11(b), the Legislature determined that
procurement of electricity products from ERRs, such as the Mount Signal
Projects, provides unique benefits to California, including among other things,
displacing fossil fuel consumption within the state, reducing air pollution in the
state, meeting the state’s climate change goals by reducing emissions of
greenhouse gases associated with electrical generation, and meeting the state’s
need for a diversified and balanced energy generation portfolio.
Based on SCE’s analysis of its renewable net short (“RNS”) position, SCE
projects a long-term renewable procurement need in the third compliance period
and beyond. Consistent with this need, the Mount Signal Projects will provide
long-term RPS and Category 1-eligible energy over 20-year terms, starting in
2019 and 2020, respectively. SCE’s RNS calculations are included in Appendix
G.
3
D.13-11-024 at 69 (Ordering Paragraph 1).
ADVICE 3121-E
(U 338-E)
G.
-5-
October 28, 2014
Confidentiality
SCE is requesting confidential treatment of Appendices A, B, and D.1 through F,
and the confidential versions of Appendices C and G to this Advice Letter. The
information for which SCE is seeking confidential treatment is identified in the
Confidentiality Declaration attached as Appendix H. The confidential version of
this Advice Letter will be made available to appropriate parties (in accordance
with SCE’s Proposed Protective Order, as discussed below) upon execution of
the required non-disclosure agreement. Parties wishing to obtain access to the
confidential version of this Advice Letter may contact Amber Wyatt in SCE’s Law
Department at amber.wyatt@sce.com or 626-302-6961 to obtain a
non-disclosure agreement. In accordance with GO 96-B, a copy of SCE’s
Proposed Protective Order is attached as Appendix I. It is appropriate to accord
confidential treatment to the information for which SCE requests confidential
treatment in the first instance in the advice letter process because such
information is entitled to confidentiality protection pursuant to D.06-06-066,4 and
is required to be filed by advice letter as part of the process for obtaining
Commission approval of RPS power purchase and sale agreements. SCE would
object if the information were disclosed in an aggregated format.
The information in this Advice Letter for which SCE requests confidential
treatment, the pages on which the information appears, and the length of time for
which the information should remain confidential, are provided in Appendix H.
This information is entitled to confidentiality protection pursuant to D.06-06-066
(as provided in the Investor-Owned Utility (“IOU”) Matrix).5 The specific
provisions of the IOU Matrix that apply to the confidential information in this
Advice Letter are identified in Appendix H.
II.
CONSISTENCY WITH COMMISSION DECISIONS
A.
SCE’s 2013 RPS Procurement Plan
1.
SCE’s 2013 RPS Procurement Plan Was Approved by
the Commission and SCE Adhered to Commission
Guidelines for Filing and Revisions
SCE filed its 2013 RPS Procurement Plan on June 28, 2013. On August 28,
2013, SCE filed a motion to amend its 2013 RPS Procurement Plan, which
included an amended 2013 RPS Procurement Plan as an attachment.
In D.13-11-024, the Commission conditionally accepted SCE’s 2013 RPS
Procurement Plan, including the solicitation materials for SCE’s 2013 RPS
4
5
D.06-06-066 at 80 (Ordering Paragraphs 1 and 2).
Id., Appendix 1.
ADVICE 3121-E
(U 338-E)
-6-
October 28, 2014
solicitation.6 The Commission also ordered SCE to make certain changes to its
2013 RPS Procurement Plan and to file a final plan by December 4, 2013. On
December 4, 2013, SCE filed and served its final 2013 RPS Procurement Plan.
On December 13, 2013, SCE re-filed and served its final 2013 RPS Procurement
Plan to make some minor corrections. Consistent with the schedule set forth in
D.13-11-024, SCE issued its 2013 RFP on January 6, 2014.
2.
Summary of SCE’s Assessment of Portfolio Needs and
Preferred Project Characteristics
As explained in SCE’s 2013 RPS Procurement Plan and shown in SCE’s RNS
calculations, SCE has a long-term need for renewable energy in the third
compliance period and beyond. In the 2013 RPS Procurement Plan, SCE
received approval to conduct a targeted solicitation to meet SCE’s need for
renewable resources. In its 2013 RPS RFP, SCE accepted proposals for
projects with commercial operation dates of January 1, 2016 or later, and limited
its procurement to Category 17 products. SCE also required that projects have
either a Phase II Interconnection Study or an equivalent or better process or
exemption in order to submit a proposal.
Projects with a contract capacity of 1.5 MW or greater were eligible to participate
in SCE’s 2013 RPS RFP. However, SCE indicated a strong preference for
projects with contract capacities: (1) greater than 20 MW – for projects located
within the service territories of SCE, Pacific Gas and Electric Company (“PG&E”),
and SDG&E and directly interconnected to the CAISO or the distribution systems
of SCE, PG&E, or SDG&E; (2) 3 MW or greater – for projects located outside the
service territories of SCE, PG&E, and SDG&E and directly interconnected to the
transmission or distribution system of a California Balancing Authority; or (3) 1.5
MW or greater – for projects located within the Western Los Angeles sub-area of
the Los Angeles basin local reliability area, or in the Moorpark sub-area of the
Big Creek/Ventura local reliability area.
Additionally, for in-state generating facilities that are, or will be, interconnected to
the CAISO, SCE required that the delivery point be where the generating facility
connects to the CAISO controlled grid. For in-state generating facilities that are,
or will be interconnected to a California Balancing Authority other than the
CAISO, SCE required the delivery point be the intertie point where the seller’s
transmission provider ties to the CAISO.
SCE decided on the total projected contract energy it signed based on several
factors laid out in the 2013 RPS Procurement Plan, including projected long-and
6
7
D.13-11-024 at 69 (Ordering Paragraph 1).
As defined in Public Utilities Code Section 399.16(b)(1) and D.11-12-052.
ADVICE 3121-E
(U 338-E)
-7-
October 28, 2014
short-term needs, the impact of reducing federal tax credits, and expected
contract success rates.
3.
The Mount Signal Contracts Are Consistent With SCE’s
2013 RPS Procurement Plan, Portfolio Needs, and
Preferred Project Characteristics
The Mount Signal Contracts align with the portfolio needs identified in SCE’s
2013 RPS Procurement Plan. Specifically, the Mount Signal Contracts will
provide renewable energy from new solar PV facilities starting in 2019 and 2020,
respectively, for 20-year terms, consistent with SCE’s long-term renewable
procurement need in the third compliance period and beyond.
The Mount Signal Solar Farm II and Mount Signal Solar Farm V Projects also
met all of the eligibility requirements and preferred project characteristics for
SCE’s 2013 RFP. The first point of interconnection for both Mount Signal
Projects will be with the CAISO, and thus the Mount Signal Projects will provide
Category 1 products. Additionally, the Mount Signal Projects’ contract capacities
(approximately 154 MW and 252 MW, respectively) are consistent with SCE’s
preference for projects with contract capacities of 20 MW or greater (for projects
located within the service territories of SCE, PG&E, and SDG&E and directly
interconnected to the CAISO or the distribution systems of SCE, PG&E, or
SDG&E). The Mount Signal Projects will also satisfy the delivery requirements
for SCE’s 2013 RFP, because the projects’ delivery points will be where they
connect to the CAISO-controlled grid.
4.
The Mount Signal Contracts Optimize SCE’s RPS
Portfolio
As described in detail in SCE’s 2013 RPS Procurement Plan,8 the objective of
SCE’s renewables portfolio optimization strategy is to minimize costs to its
customers while ensuring that RPS procurement goals are met or exceeded.
SCE determines the procurement target for each RPS solicitation based, in part,
on its assessment of SCE’s renewable procurement position and need, i.e.,
SCE’s RNS. This includes a calculation of SCE’s net short or long renewables
position and SCE’s bank. SCE carefully evaluates its renewable procurement
need by assessing bundled retail sales, the performance and variability of
existing generation, the likelihood of new generation achieving commercial
operation, expected commercial operation dates, technology mix, expected
curtailment, and the impact of pre-approved procurement programs, among other
factors.
8
See Southern California Edison Company’s (U 338-E) Final 2013 Renewables
Portfolio Standard Procurement Plan, December 4, 2013 (“Final 2013 RPS Plan”), at
22-25.
ADVICE 3121-E
(U 338-E)
-8-
October 28, 2014
The Mount Signal Contracts meet the primary objectives of SCE’s portfolio
optimization strategy. The Mount Signal Contracts are expected to start
deliveries in 2019 and 2020, respectively, which will help meet SCE’s renewable
procurement need in the third compliance period and beyond. Additional
information is included in Appendix A, Section A.7.
B.
Least-Cost Best-Fit (“LCBF”) Methodology and Evaluation
SCE evaluates and ranks proposals based on LCBF principles that comply with
criteria set forth by the Commission in D.03-06-071 and D.04-07-029 (the “LCBF
Decisions”).9 The goal of SCE’s evaluation and selection criteria and processes
is to provide decision metrics so that SCE can procure renewable energy
economically, while providing the most value to its customers. The LCBF
analysis evaluates both quantitative and qualitative aspects of each proposal to
estimate its value to SCE’s customers and its relative value in comparison to
other proposals.
Although assumptions and methodologies have evolved slightly over time, the
basic components of SCE’s evaluation and selection criteria and process for
RPS contracts were established by the Commission’s LCBF Decisions.
Consistent with those LCBF Decisions, the three main steps undertaken by SCE
in its evaluation and selection process were: (i) initial data gathering and
validation; (ii) a quantitative assessment of proposals; and (iii) adjustments to
selections based on proposals’ qualitative attributes. SCE applied these criteria
to the proposals received in its 2013 RPS RFP in order to establish a short list of
proposals from sellers with whom SCE would engage in a final round of contract
discussions.
Prior to receiving proposals, SCE finalized the short list selection criteria with the
Independent Evaluator (“IE”). SCE then finalized the major assumptions and
methodologies that underlie SCE’s valuation, including power and gas price
forecasts, SCE’s existing and forecast resource portfolio, and SCE’s firm
capacity value forecast. SCE also finalized and published congestion adders for
sellers to use in preparing their proposals.
Once proposals were received, SCE began an initial review of proposals for
completeness and conformity with the solicitation protocol. The review included
an initial screen for required submission criteria such as a conforming delivery
point, commercial operation date in 2016 or later, a valid interconnection study,
minimum project size, and the submission of particular proposal package
elements. Sellers lacking any of these items were allowed a reasonable cure
period to remedy any deficiencies. Following this check for conformity, SCE
9
The Commission has also made rulings on various evaluation criteria in its decisions
on the IOUs’ RPS procurement plans.
ADVICE 3121-E
(U 338-E)
-9-
October 28, 2014
conducted an additional review to determine the reasonableness of proposal
parameters such as generation profiles and capacity factors. SCE worked
directly with sellers to resolve any issues and ensure the data was ready for
evaluation.
After these reviews, SCE performed a quantitative assessment of each proposal
individually and subsequently ranked them based on the proposal’s benefit and
cost relationship. Specifically, the total benefits and total costs were used to
calculate the net levelized cost or “renewable premium” for each complete and
conforming proposal. Benefits were comprised of separate capacity, energy, and
congestion components, while costs included the contract payments, debt
equivalence, congestion cost, and transmission cost. SCE discounted the
monthly benefit and cost streams to a common base date. The result of the
quantitative analysis was a merit-order ranking of all complete and conforming
proposals’ renewable premiums that helped define the preliminary short list.
In parallel with the quantitative analysis, SCE conducted an in-depth assessment
of the qualitative attributes of the top proposals with a competitive renewable
premium. This analysis utilized the Project Viability Calculator to assess certain
factors, including the company/development team, technology, and development
milestones. Additional attributes such as transmission area, facility
interconnection process progress, portfolio fit of commercial operation date,
resource diversity, and counterparty concentration were also considered in the
qualitative analysis. These qualitative attributes were then considered to either
eliminate non-viable proposals or add projects with high viability or other
beneficial qualitative attributes to the final short list of proposals, or to break ties,
if any.
Following both its quantitative and qualitative analyses, SCE consulted with its
Procurement Review Group (“PRG”) regarding the final short list and specific
evaluation criteria. SCE then negotiated with the shortlisted sellers for a 90 day
period. At the end of the contract negotiation period, all sellers that completed
negotiations had a one-time opportunity to submit new pricing. SCE then made
final selections based on the new pricing and consulted with its IE and the PRG
prior to the execution of the successfully negotiated contracts.
SCE’s 2013 RPS Short List Report was submitted to the Commission on April 21,
2014 in Advice 3029-E. On June 26, 2014, SCE filed a supplement to Advice
3029-E to identify two projects that withdrew from the short list. The Energy
Division approved SCE’s 2013 RPS Short List Report effective as of July 8,
2014. Using the SCE’s LCBF methodology, the Mount Signal Projects compared
favorably to other proposals received in the 2013 RPS RFP, as well as other
procurement options available to SCE.
ADVICE 3121-E
(U 338-E)
C.
- 10 -
October 28, 2014
Compliance With Standard Terms and Conditions
In D.04-06-014, the Commission established a number of “modifiable” and “nonmodifiable” standard terms and conditions to be used by retail sellers when
contracting for RPS-eligible resources.10 In D.07-11-025, the Commission
reduced the number of non-modifiable terms to the following four terms: (1)
“CPUC Approval;” (2) “RECs and Green Attributes;”11 (3) “Eligibility;” and (4)
“Applicable Law.”12 The remaining non-modifiable terms were converted to
modifiable terms.13 In D.10-03-021, as modified by D.11-01-025, the
Commission added two new non-modifiable standard terms and conditions for
both bundled contracts and contracts for renewable energy credits (“RECs”) only:
(1) “Transfer of Renewable Energy Credits;” and (2) “Tracking of RECs in
WREGIS.”14 The Commission also added a new version of the non-modifiable
“CPUC Approval” standard term and condition for REC-only contracts, and held
that the non-modifiable “Applicable Law” standard term and condition also
applies to REC-only contracts.15 In D.13-11-024, the Commission updated the
non-modifiable “RECs and Green Attributes” term to a modifiable “Bioenergy
Transactions” term.16
The Mount Signal Contracts include all non-modifiable standard terms and
conditions for bundled contracts without change as indicated in the table below.
NON-MODIFIABLE
TERM
CONTRACT
SECTION NUMBER
CONTRACT
PAGE NUMBER
STC 1: CPUC Approval
Exhibit A, #57 (See
also Section 2.01)
Exhibit A, page 5
(Section 2.01 is
on page 9)
STC 6: Eligibility
10.02(b)
Page 61
STC 17: Applicable Law
10.07
Page 67
STC REC 1: Transfer of RECs
10.02(c)
Page 61
10
11
12
13
14
15
16
D.04-06-014 at 20 (Ordering Paragraph 1) and Appendix A.
In D.08-08-028, Appendix B, the Commission revised the non-modifiable “RECs and
Green Attributes” standard term and condition.
D.07-11-025 at 33 (Ordering Paragraph 1.a).
Id. at 34 (Ordering Paragraph 1.b). Subsequently, in D.08-04-009, the Commission
compiled the standard terms and conditions in one document and deleted the
modifiable standard term and condition on supplemental energy payments.
D.11-01-025 at 46 (Ordering Paragraph 3.P).
Id. at 47-48 (Ordering Paragraph 3.Q).
D.13-11-024 at 24-25, 70 (Ordering Paragraph 6).
ADVICE 3121-E
(U 338-E)
STC REC 2: Tracking of RECs in
WREGIS
- 11 -
10.02(e)
October 28, 2014
Page 61
Comparisons of the Mount Signal II Contract and Mount Signal V Contract
against SCE’s 2013 Pro Forma Renewable Power Purchase and Sale
Agreement are provided in Appendix E.
D.
Portfolio Content Category Claim and Upfront Showing
In D.11-12-052, the Commission found that “[a] retail seller claiming that
procurement for compliance with the California renewables portfolio standard
from a procurement contract or ownership agreement signed . . . on or after June
1, 2010 counts in the portfolio content category described in Pub. Util. Code §
399.16(b)(1), must provide information to the Director of Energy Division
sufficient to demonstrate that the generation facility from which the electricity is
procured is certified as eligible for the California renewables portfolio standard.”17
Additionally, retail sellers claiming procurement counts as a Category 1 product
must provide information to the Energy Division Director sufficient to demonstrate
that the generating facility from which the electricity is procured meets the
statutory definition of Category 1 products set forth in Public Utilities Code
Section 399.16(b)(1).18 One way to make this demonstration is to show that the
facility “has its first point of interconnection to the Western Electricity
Coordinating Council transmission grid within the metered boundaries of a
California balancing authority area.”19 “The retail seller must also demonstrate
that the renewable energy credits originally associated with the electricity have
not been unbundled and transferred to another owner, and that all other
requirements for procurement for compliance with the California renewables
portfolio standard are met by the procurement.”20
Furthermore, D.11-12-052 provides that the utilities, in seeking approval of
contracts for procurement, should enable the Commission to evaluate the
following: “the claimed portfolio content category of the proposed procurement;
the risks that the procurement will not ultimately be classified in the claimed
portfolio content category; the value to ratepayers of the procurement as
proposed and the value to ratepayers if the procurement is not ultimately
classified in the claimed portfolio content category.”21
17
18
19
20
21
D.11-12-052 at 75-76 (Ordering Paragraph 1).
See id.
Id.
Id. at 76 (Ordering Paragraph 1).
Id. at 80 (Ordering Paragraph 9).
ADVICE 3121-E
(U 338-E)
- 12 -
October 28, 2014
Pursuant to the provisions of the Mount Signal Contracts, SCE will procure
energy (and associated renewable energy attributes via Western Renewable
Energy Generation Information System (“WREGIS”) certificates) generated from
California-based eligible renewable resources with a first point of interconnection
within the CAISO. In addition, per the contracts, the Mount Signal Projects must
obtain and keep current California Energy Commission (“CEC”) certification as
ERRs,22 as well as perform all actions necessary to effectuate the transfer of
RECs to SCE in WREGIS. The RECs associated with the electricity from the
Mount Signal Projects are yet to be delivered and therefore have not been
unbundled or transferred to another owner. Such RECs will be transferred to
SCE pursuant to the terms of the Mount Signal II Contract and Mount Signal V
Contract, respectively. Accordingly, these contracts are Category 1 transactions
pursuant to the Public Utilities Code Section 399.16(b)(1) and D.11-12-052.23 A
risk that the Mount Signal Contracts will fail to deliver Category 1 RECs has not
been identified.
Forecast of Portfolio Balance
Requirements24
Compliance
Period 2
(2014-2016)
GWh
Compliance
Period 3
(2017-2020)
GWh
PCC 1 Balance Requirement
CP 2 = 65% of RECs applied to procurement quantity requirement
CP 3 = 75% of RECs applied to procurement quantity requirement
Quantity of PCC 1 RECs25
(under contract, not including
proposed contract)
8,622
33,633
Quantity of PCC 1 RECs from
proposed contract
0
1,573
0
0
Quantity of PCC 2 RECs
(under contract, not including
proposed contract)
22
23
24
25
The projects must qualify and be certified by the CEC as ERRs as that term is
defined in Public Utilities Code Section 399.12(e).
D.11-12-052 at 75-76 (Ordering Paragraph 1).
SCE’s forecast assumes a 100% success rate for projects in development, not yet
online.
The “Quantity of PCC 1 RECs (under contract, not including proposed contract)”
represents the total forecasted energy deliveries for all executed RPS eligible
contracts, including the 2013 RPS RFP contracts, minus the forecasted energy
deliveries from the Mount Signal Contracts.
ADVICE 3121-E
(U 338-E)
- 13 -
Quantity of PCC 2 RECs from
proposed contract
0
October 28, 2014
0
PCC 3 Balance Limitation
CP 2 = 15% of RECs applied to procurement quantity requirement
CP 3 = 10% of RECs applied to procurement quantity requirement
Quantity of PCC 3 RECs
(under contract, not including
proposed contract)
0
0
Quantity of PCC 3 RECs from
proposed contract
0
0
E.
Long-Term Contracting Requirement
In D.12-06-038, the Commission held that, “[i]n order to count procurement from
contracts of less than 10 years duration signed after June 1, 2010 for compliance
with the California renewables portfolio standard in a compliance period, a retail
seller . . . must sign in the compliance period in which the short-term contract is
signed, contracts of at least 10 years in duration with expected generation equal
to at least 0.25 percent of its retail sales for the immediately prior compliance
period.”26 Because there was not a compliance period prior to the 2011-2013
compliance period, the requirement is 0.25 percent of 2010 retail sales for that
compliance period.27
The Mount Signal Contracts are 20-year contracts. Therefore, the long-term
contracting requirement does not apply.
F.
Interim Emissions Performance Standard
The California Legislature passed Senate Bill (“SB”) 1368 on August 31, 2006,
and Governor Schwarzenegger signed the bill into law on September 29, 2006.
Section 2 of SB 1368 adds Public Utilities Code Section 8341(a), which provides,
“No load-serving entity or local publicly owned electric utility may enter into a
long-term financial commitment unless any baseload generation supplied under
the long-term financial commitment complies with the greenhouse gases
emission performance standard established by the commission, pursuant to
subdivision (d), for a load serving entity . . . .”28
In order to institute the provisions of SB 1368, the Commission instituted
Rulemaking 06-04-009. That proceeding resulted in the establishment of a
26
27
28
D.12-06-038 at 98 (Ordering Paragraph 15).
See id. at 98 (Ordering Paragraph 16).
Cal. Pub. Util. Code § 8341(a).
ADVICE 3121-E
(U 338-E)
- 14 -
October 28, 2014
greenhouse gas (“GHG”) emissions performance standard (“EPS”), for carbon
dioxide (“CO2”). In D.07-01-039, the Commission noted, “SB 1368 establishes a
minimum performance requirement for any long-term financial commitment for
baseload generation that will be supplying power to California ratepayers. The
new law establishes that the GHG emissions rates for these facilities must be no
higher than the GHG emissions rate of a combined-cycle gas turbine (‘CCGT’)
powerplant.”29 The decision further explains:
SB 1368 describes what types of generation and
financial commitments will be subject to the EPS
(“covered procurements”). Under SB 1368, the EPS
applies to “baseload generation,” but the requirement
to comply with it is triggered only if there is a “longterm financial commitment” by an LSE. The statute
defines baseload generation as “electricity generation
from a powerplant that is designed and intended to
provide electricity at an annualized plant capacity
factor of at least 60%.” . . . For baseload generation
procured under contract, there is a long-term
commitment when the LSE enters into “a new or
renewed contract with a term of five or more years.”30
The Mount Signal Contracts are exempt from EPS regulations because they
have an expected annualized capacity factor well below the threshold baseload
capacity factor of 60%, above which the EPS rules would apply.31
G.
PRG Participation
SCE’s PRG was formed on or around September 10, 2002. Participants include
representatives from various divisions within the Commission, the Office of
Ratepayer Advocates, The Utility Reform Network, California Utility Employees,
the Union of Concerned Scientists, and the California Department of Water
Resources.
SCE consulted with its PRG during each milestone of the 2013 RPS solicitation
process. Among other things, SCE informed the PRG of the initial results of its
RFP, explained the evaluation process, and updated the PRG periodically
concerning the status of contract formation. On March 19, 2014, SCE advised
the PRG of its proposed short list of bids for its 2013 RPS solicitation. On July
16, 2014, SCE briefed the PRG on the proposed execution of the Mount Signal
Contracts.
29
30
31
D.07-01-039 at 2-3.
Id. at 4.
See id., Attachment 7 at 1.
ADVICE 3121-E
(U 338-E)
H.
- 15 -
October 28, 2014
IE
The IE for the 2013 RPS solicitation was Merrimack Energy Group, Inc. The IE
joined and contributed to a number of conference calls and negotiation sessions.
In addition, the IE reviewed email traffic, the Mount Signal Contracts, and other
documents exchanged by the parties. The IE also participated in the PRG
review. The IE Report is included as Appendix C.
III.
PROJECT DEVELOPMENT STATUS32
A.
Company/Development Team
The Mount Signal Projects are owned by a joint venture between SRP and 8me.
SRP is an equal venture between SunEdison, Inc. and Riverstone Holdings, LLC,
and is experienced in developing, financing, constructing, and operating largescale PV installations. SRP currently has more than 500 MW of PV projects in
operation and employs a team of more than 100 professionals. 8me is an
experienced developer in California, focused on land acquisition and
interconnection for solar projects both independently and as a co-development
partner for the past four years. Most recently, together SRP and 8me completed
development of the Mount Signal Solar Farm I, a 200 MW solar PV facility that
began generating in May, 2014.
B.
Technology
1.
Technology Type and Level of Technology Maturity
The Mount Signal Projects will use mature and proven solar PV technology from
financeable panel, inverter, and racking system manufacturers with proven
deployment on utility-scale generation projects. The projects will not deploy early
stage or unproven technologies. All technologies will be designed for utility-scale
operation with significant operating history.
32
Some of the information in this section was provided by Sellers and not
independently verified by SCE.
ADVICE 3121-E
(U 338-E)
2.
- 16 -
October 28, 2014
Quality of Renewable Resource
The Mount Signal Projects are located in Southern Imperial County, California,
an area well-recognized for its robust solar resources as demonstrated by
several sources of solar generation throughout the region. SCE believes that the
Mount Signal Projects will be able to meet the terms of the contracts given the
quality of the renewable resources, which is substantiated by the projects’
location.
3.
Other Resources Required
No additional fuel supply is required for the Mount Signal Projects. The water
supply is anticipated to be sufficient to cover the projects’ expected need.
C.
Development Milestones
1.
Site Control
The Mount Signal Projects will both be located in the City of Calexico, California.
Additional information regarding site control is included in Appendix A.
2.
Equipment Procurement
As of the filing date of this Advice Letter, neither 88FT 8me LLC nor 93LF 8me
LLC have identified any equipment procurement issues that will affect the
projects’ ability to meet their respective commercial operation dates. Additional
information is included in Appendix A.
3.
Permitting/Certifications Status
Information regarding permitting/certifications status is included in Appendix A.
4.
Production Tax Credits (“PTCs”) / Investment Tax
Credits (“ITCs”)
Information regarding PTCs and ITCs is provided in Appendix A.
5.
Transmission
Information regarding transmission is provided in Appendix A.
D.
Financing Plan
Information regarding financing is provided in Appendix A.
ADVICE 3121-E
(U 338-E)
IV.
- 17 -
October 28, 2014
CONTINGENCIES AND MILESTONES
The Mount Signal Solar Farm II Project is expected to begin commercial
operation on June 1, 2020. The Mount Signal Solar Farm V Project is expected
to begin commercial operation on February 1, 2019. Specific information
regarding performance criteria and guaranteed milestones is provided in
Appendices D.1 through F.
V.
SAFETY CONSIDERATIONS
SCE is strongly committed to safety in all aspects of its business. Renewable
sellers are responsible for the safe construction and operation of their generating
facilities and compliance with all applicable safety regulations. SCE has taken
several steps to address those issues over which it has the most visibility and
control – the delivery of renewable electricity products to SCE in a reliable, safe,
and operationally sound manner. SCE’s 2013 Pro Forma Renewable Power
Purchase and Sale Agreement already provided that the seller must operate the
generating facility in accordance with Prudent Electrical Practices.33
Consistent with SCE’s focus on safety, SCE added a provision to its 2013 Pro
Forma Renewable Power Purchase and Sale Agreement providing that, prior to
commencement of any construction activities on the project site, the seller must
provide to SCE a report from an independent engineer certifying that the seller
has a written plan for the safe construction and operation of the generating
facility in accordance with Prudent Electrical Practices.34
See Appendix D for more details.
33
34
See Final 2013 RPS Plan, Appendix G.1 at Section 3.12(a), Exhibit A, #215.
Prudent Electrical Practices means “those practices, methods and acts that would be
implemented and followed by prudent operators of electric generating facilities in the
Western United States, similar to the Generating Facility, during the relevant time
period, which practices, methods and acts, in the exercise of prudent and
responsible professional judgment in the light of the facts known at the time a
decision was made, could reasonably have been expected to accomplish the desired
result consistent with good business practices, reliability and safety.” Prudent
Electrical Practices includes, “at a minimum, those professionally responsible
practices, methods and acts described in the preceding sentence that comply with
the manufacturer’s warranties, restrictions in this Agreement, and the requirement of
Governmental Authorities, WECC standards, the CAISO and Applicable Laws....”
See id., Appendix G.1, Section 3.11(e).
ADVICE 3121-E
(U 338-E)
VI.
- 18 -
October 28, 2014
REQUEST FOR COMMISSION APPROVAL
The terms of the Mount Signal Contracts are conditioned on the occurrence of
final “CPUC Approval,” as it is described in the Mount Signal Contracts. In order
to satisfy that condition with respect to the Mount Signal Contracts, SCE requests
that the Commission issue a final resolution no later than April 28, 2015,
containing:
1. Approval of the Mount Signal Contracts in their entirety;
2. A finding that the Mount Signal Contracts are consistent with SCE’s 2013
RPS Procurement Plan;
3. A finding that the Mount Signal Contracts are compliant with the
Emissions Performance Standard;
4. A finding that any procurement pursuant to the Mount Signal Contracts is
procurement from eligible renewable energy resources for purposes of
determining SCE’s compliance with any obligation that it may have to
procure eligible renewable energy resources pursuant to the California
Renewables Portfolio Standard (Public Utilities Code Section 399.11 et
seq.), Decision 03-06-071, or other applicable law;
5. A finding that the Mount Signal Contracts, and SCE’s entry into them, is
reasonable and prudent for all purposes, including, but not limited to,
recovery in rates of payments made pursuant to the Mount Signal
Contracts and administrative costs associated with the Mount Signal
Contracts, subject only to further review with respect to the
reasonableness of SCE’s administration of the Mount Signal Contracts;
and
6. Any other and further relief as the Commission finds just and reasonable.
VII.
TIER DESIGNATION
Pursuant to GO 96-B, Energy Industry Rule 5.3, SCE submits this Advice Letter
with a Tier 3 designation (effective after Commission approval).
VIII.
EFFECTIVE DATE
This Advice Letter will become effective upon Commission approval.
IX.
NOTICE
Anyone wishing to protest this advice letter may do so by letter via U.S. Mail,
facsimile, or electronically, any of which must be received by the Energy Division
ADVICE 3121-E
(U 338-E)
- 19 -
October 28, 2014
and SCE no later than 20 days after the date of this advice letter. Protests
should be mailed to:
CPUC, Energy Division
Attention: Tariff Unit
505 Van Ness Avenue
San Francisco, California 94102
E-mail: EDTariffUnit@cpuc.ca.gov
Copies should also be mailed to the attention of the Director, Energy Division,
Room 4004 (same address as above).
In addition, protests and other correspondence regarding this advice letter should
also be sent by letter and transmitted via facsimile or electronically to the
attention of:
Megan Scott-Kakures
Vice President, Regulatory Operations
Southern California Edison Company
8631 Rush Street
Rosemead, California 91770
Facsimile: (626) 302-4829
E-mail: AdviceTariffManager@sce.com
ADVICE 3121-E
(U 338-E)
- 20 -
October 28, 2014
Michael R. Hoover
Director, State Regulatory Affairs
Southern California Edison Company
c/o Karyn Gansecki
601 Van Ness Avenue, Suite 2030
San Francisco, California 94102
Facsimile: (415) 929-5544
E-mail: Karyn.Gansecki@sce.com
With a copy to:
Amber Wyatt
Senior Attorney
Southern California Edison Company
2244 Walnut Grove Avenue, 3rd Floor
Rosemead, CA 91770
Facsimile: 626-302-3990
E-mail: amber.wyatt@sce.com
There are no restrictions on who may file a protest, but the protest shall set forth
specifically the grounds upon which it is based and shall be submitted
expeditiously.
In accordance with Section 4 of GO 96-B, SCE is furnishing copies of this Advice
Letter to the interested parties shown on the attached R.11-05-005 and GO 96-B
service lists. Address change requests to the GO 96-B service list should be
directed to AdviceTariffManager@sce.com or (626) 302-4039. For changes to
any other service list, please contact the Commission’s Process Office at (415)
703-2021 or Process_Office@cpuc.ca.gov.
Further, in accordance with Public Utilities Code Section 491, notice to the public
is hereby given by filing and keeping the Advice Letter at SCE’s corporate
headquarters. To view other SCE advice letters filed with the Commission, log
on to SCE’s web site at https://www.sce.com/wps/portal/home/regulatory/adviceletters
ADVICE 3121-E
(U 338-E)
- 21 -
October 28, 2014
All questions concerning this Advice Letter should be directed to Katie Sloan at
(626) 302-6842 or by electronic mail at Katie.Sloan@sce.com.
Southern California Edison Company
/s/ Megan Scott-Kakures
Megan Scott-Kakures
MSK:ks:jm
Enclosures
CALIFORNIA PUBLIC UTILITIES COMMISSION
ADVICE LETTER FILING SUMMARY
ENERGY UTILITY
MUST BE COMPLETED BY UTILITY (Attach additional pages as needed)
Company name/CPUC Utility No.: Southern California Edison Company (U 338-E)
Utility type:
Contact Person: Darrah Morgan
 ELC
 GAS
 PLC
 HEAT
Phone #: (626) 302-2086
 WATER
E-mail: Darrah.Morgan@sce.com
E-mail Disposition Notice to: AdviceTariffManager@sce.com
EXPLANATION OF UTILITY TYPE
ELC = Electric
PLC = Pipeline
GAS = Gas
HEAT = Heat
Advice Letter (AL) #:
Subject of AL:
(Date Filed/ Received Stamp by CPUC)
WATER = Water
3121-E
Tier Designation:
3
Submission of Contract for Procurement of Renewable Energy From SCE’s 2013 Renewables
Portfolio Standard Solicitation
Keywords (choose from CPUC listing):
Compliance, Agreement, Procurement
AL filing type:  Monthly  Quarterly  Annual  One-Time  Other
If AL filed in compliance with a Commission order, indicate relevant Decision/Resolution #:
Does AL replace a withdrawn or rejected AL? If so, identify the prior AL:
Summarize differences between the AL and the prior withdrawn or rejected AL:
Confidential treatment requested?  Yes  No
If yes, specification of confidential information:
See Appendix H
Confidential information will be made available to appropriate parties who execute a nondisclosure agreement.
Name and contact information to request nondisclosure agreement/access to confidential information:
Amber Wyatt, Law Department, (626) 302-6961 or Amber.Wyatt@sce.com
Resolution Required?  Yes  No
Requested effective date:
4/28/15
No. of tariff sheets:
-0-
Estimated system annual revenue effect: (%):
Estimated system average rate effect (%):
When rates are affected by AL, include attachment in AL showing average rate effects on customer classes
(residential, small commercial, large C/I, agricultural, lighting).
Tariff schedules affected:
None
Service affected and changes proposed1:
Pending advice letters that revise the same tariff sheets:
1
Discuss in AL if more space is needed.
N/A
Protests and all other correspondence regarding this AL are due no later than 20 days after the date of
this filing, unless otherwise authorized by the Commission, and shall be sent to:
CPUC, Energy Division
Attention: Tariff Unit
505 Van Ness Avenue
San Francisco, California 94102
E-mail: EDTariffUnit@cpuc.ca.gov
Megan Scott-Kakures
Vice President, Regulatory Operations
Southern California Edison Company
8631 Rush Street
Rosemead, California 91770
Facsimile: (626) 302-4829
E-mail: AdviceTariffManager@sce.com
Michael R. Hoover
Director, State Regulatory Affairs
c/o Karyn Gansecki
Southern California Edison Company
601 Van Ness Avenue, Suite 2030
San Francisco, California 94102
Facsimile: (415) 929-5544
E-mail: Karyn.Gansecki@sce.com
With a copy to:
Amber Wyatt
Senior Attorney
2244 Walnut Grove Avenue, 3rd Floor
Rosemead, California 91770
Facsimile: (626) 302-3990
E-mail: Amber.Wyatt@sce.com
Confidential Appendix A
Consistency with Commission Decisions and Rules and
Project Development Status
Confidential Appendix B
2013 Solicitation Overview
Confidential Appendix C
Independent Evaluator Report
Public Appendix C
Independent Evaluator Report
Southern California Edison Company
2013 Renewable Resource Solicitation
Report of the Independent Evaluator
Final Selection Process and Review of Power Purchase
Agreements with 88FT 8me LLC and 93LF 8me LLC
October 2014
Prepared by
Merrimack Energy Group, Inc.
Merrimack
M
Energy
and
New Energy Opportunities, Inc.
Table of Contents
Executive Summary …………………………………………………………………….. 2
I. 2013 Renewable RFP Overview……………….…………………….……….………9
II. Role of the Independent Evaluator……………………..………………..……….….12
III. Adequacy of Outreach to Potential Sellers…….. …………………………………..18
IV. Fairness and Appropriateness of RPS Bid Evaluation and Selection Methodology. 24
V. Administration of the Bid Evaluation Process ………………………………………38
VI. Approval of Shortlist…………………………………………………………….… 54
VII. Fairness of Project Specific Negotiations ………………………………………….57
VIII. Does the Contract Merit CPUC Approval ………………………………………..66
Appendix A: SCE’s Least Cost Best Fit Evaluation Methodology
Appendix B: SCE 2013 RPS RFP Proposal List and Summary
Appendix C: SCE Shortlisted Proposals – 2013 RPS RFP
Appendix D: Indicative and Final Pricing – 2013 RPS RFP
Appendix E: SCE Final Evaluation Results
Merrimack Energy Group, Inc.
1
Executive Summary
Effective July 31, 2014, Southern California Edison Company (“SCE”) executed power
purchase agreements (“PPAs”) with 88FT 8me LLC (“Mount Signal Solar Farm II”) and
93LF 8me LLC (“Mount Signal Solar Farm V”)1 for the purchase of all the electric
energy, capacity, Resource Adequacy (“RA”) benefits, and Green Attributes produced by
both generating facilities.2 Mount Signal Solar Farm II is a proposed 153.52 MW (AC)
solar photovoltaic (“PV”) generating facility and Mount Signal Solar Farm V is a 252.32
MW AC solar PV generating facility. Both projects are to be constructed near the City of
Calexico in southern Imperial County, California pursuant to SCE’s 2013 Request for
Proposals from Eligible Renewable Energy Resource Suppliers for Renewable Products
(“2013 Renewable RFP”). SCE launched the 2013 Renewable RFP on January 6, 2014,
received indicative bids on January 31, 2014, and received final offers on June 25, 2014.
On July 29, 2014 and July 31, 2014, SCE signed eight power purchase agreements for
capacity, energy and other products from eight different projects representing a total of
approximately 1,550 MW, including 153.52 MW of energy, capacity and Green
Attributes purchased under the PPA with 88FT 8me LLC and 252.32 MW purchased
under the PPA with 93LF 8me LLC.3
Through the 2013 Renewable RFP solicitation, SCE sought Proposals for products
qualifying as Portfolio Content Category 14 which includes all electric energy produced
by an Eligible Renewable Energy Resource (“ERR” or “ERR Generating Facility”) as
well as all attributes, including all Green Attributes, all Capacity Attributes, and all
Resource Adequacy Benefits generated by, associated with or attributable to the output of
the ERR Generating Facility. Pursuant to the 2013 Renewable RFP, SCE received a large
number of proposals from renewable energy developers, reviewed and evaluated the
proposals relative to the eligibility and conformance requirements listed in the Protocol
1
The proposals for Mount Signal Solar Farms II and V
2
SCE is submitting one Advice Letter filing for both projects since the PPAs are identical with regard to all
terms with the exception of project specific information.
3
Capitalized terms when used with reference to the 8 Minute Energy Mount Signal PPAs and not otherwise
defined herein are as defined in the PPAs.
4
The first portfolio content category (“Category 1”) is delineated in the California Public Utilities
Commission’s Decision Implementing Portfolio Content Categories for the Renewables Portfolio Standard
Program, D. 11-12-052 (2011). It consists of products from renewable energy generators: with a first point
of interconnection to the Western Electric Coordinating Council transmission system within the boundaries
of a California Balancing Authority Area (“CBA”); or with a first point of interconnection with an
electricity distribution system used to serve end users within the boundaries of a CBA; or where the
renewable generation is scheduled into a CBA without substituting electricity from another source; or
where the generation from the renewable facility is dynamically transferred to a CBA.
Merrimack Energy Group, Inc.
2
Document, evaluated and ranked the proposals, and determined which of those offers to
include on a short list for potential negotiations and contracting.5
In March 2014, SCE selected
including three geothermal
projects selected out of economic rank order,
the 1,600 GWh/year target for this solicitation.
Subsequent to short list selection on or around March 19, 2014, for the next three months,
SCE negotiated contract terms with shortlisted bidders. Remaining Sellers who had
completed negotiations of a final Agreement were allowed to submit refreshed prices for
their project(s). Of the shortlisted projects,
SCE selected a total of eight projects with expected annual
output of 5,466 GWh or approximately 3.4 times need. Among the selected offers were
seven solar PV proposals,
totaling 3,494 GWh/year,
representing 2 times need. In addition, SCE selected a proposal for energy, capacity and
Green Attributes from Calpine’s geothermal Geysers project with annual output of 1,972
GWh/year,
Table ES-1
provides a short description of the projects for which contracts were executed.
Tables ES-1: Executed Contracts from 2013 Renewable Energy Solicitation
Selller
Recurrent
Energy
8 Minutenergy
Renewables
Sempra
First
Solar/Tribal
Solar
8 Minutenergy
Renewables and
Silver
Ridge
Power
Panoche Valley
Project
Name
Tranquillity
Type
Vintage
New
Start
Date
2019
Term
(Years)
15
Capacity
(MW)
206
Solar PV
Borden
Solar
Farms
Copper
Mountain
Solar
Fort
Mojave
Solar
Mount
Signal
Solar II
Solar PV
New
2020
20
51
Solar PV
New
2020
20
94
Solar PV
New
2019
20
328
Solar PV
New
2020
20
154
Panoche
Solar PV
New
2019
20
247
5
SCE implemented a two-step evaluation process for this solicitation. The shortlist selection was the first
step in the process. After shortlist selection, SCE initiated contract negotiations with shortlisted projects. At
the end of the negotiation period, Sellers who had reached agreement with SCE on the terms of a PPA
have a one-time opportunity to submit a final revised price. SCE made final selections and entered into
final PPAs based on the revised pricing and a quantitative and qualitative evaluation of the project
proposals.
Merrimack Energy Group, Inc.
3
Solar, LLC
8 Minutenergy
Renewables and
Silver
Ridge
Power
Calpine
Valley
Solar
Mount
Signal
Solar V
Geysers
Power
Solar PV
New
2019
20
252
Geothermal
Existing
2017
10
225
The Mount Signal Solar Farm II project is a 153.52 MW (AC) single axis tracking solar
PV project located in southern Imperial County, California near the City of Calexico.
The project is expected to produce approximately 402 GWh annually with an
approximately 31% capacity factor and
thereafter. The date for commencement of deliveries under the PPA is June 1, 2020,
The Mount Signal Solar Farm V project is a 252.32 MW (AC) single axis tracking solar
PV project located in southern Imperial County, California near the City of Calexico. The
project is expected to produce approximately 660 GWh annually with an approximately
31% capacity factor and
thereafter. The date
for commencement of deliveries under the PPA is February 1, 2019,
7
The delivery term under both PPAs is 20 years.
Prior to the launch of the RFP, SCE retained Merrimack Energy Group, Inc. (“Merrimack
Energy”) as the Independent Evaluator (“IE”) for the 2013 Renewable RFP in accordance
with regulatory requirements of the California Public Utilities Commission (“CPUC” or
“Commission”),8 Following the receipt and evaluation of proposals and selection of the
shortlist, Merrimack Energy submitted its Report on the Bid Evaluation and Short List
Selection Process and Results (“IE Short List Report”), which was filed with SCE’s
advice letter seeking approval of the short list.9 The Office of Ratepayer Advocates filed
a protest to SCE’s short listing of the geothermal projects selected out of economic rank
order, to which SCE filed a reply supporting its short list. The Energy Division’s Director
issued a letter order making the shortlist effective as of July 8, 2014.
7
26 U.S.C. § 48.
New Energy Opportunities, Inc. is serving as a subcontractor to Merrimack Energy in this engagement.
9
Advice 3029-E, dated April 21, 2014.
8
Merrimack Energy Group, Inc.
4
As addressed in the IE Short List Report, the IE is required to conduct a range of
activities to review, assess, and scrutinize SCE’s processes in implementing its
solicitation process. Generally, Merrimack Energy found that the short listing decisions
were reasonable based on the 2013 Renewable RFP requirements and evaluation criteria
set forth in SCE’s Procurement Protocol.10
The primary purpose of this report is (1) to describe and assess the fairness of the RFP
process following SCE’s short listing decisions, which includes (a) a three-month period
during which SCE and short listed bidders negotiated contract terms and conditions, (b)
bidder submission of final pricing, and (c) SCE’s evaluation of the final offers, final
selection decisions, and execution of PPAs; and (2) to describe, with specificity, the
fairness of the contract negotiation process with respect to the Mount Signal II and Mount
Signal V PPAs, the price, economic ranking, and other attributes of the Mount Signal II
and Mount Signal V PPAs, and whether the PPAs merit Commission approval. In
addition, this report includes an assessment of the entire RFP process, including a
description of IE activities and assessment of SCE’s process from the IE Short List
Report to final selection. Key findings are outlined in this executive summary.
SCE’s outreach activities, which included contacting a large number of prospective
Sellers, holding a RFP Conference for prospective Sellers, and disseminating substantial
information about the RFP on its website or the Accion Power website, were effective.
This was evidenced by the robust response to the RFP in terms of number of proposals,
types of resources proposed, initial delivery dates and maturity of the proposals
submitted.
SCE’s approach adopted for this RFP was to apply fairly strict threshold requirements,
notably, that Sellers had to have a Phase II Interconnection Study or equivalent in order
to participate. Although the number of proposals received in this RFP was lower than
recent RPS solicitations, the response was still very competitive with more mature and
viable projects competing.
This solicitation represented the first time SCE used a two-step process for this type of
RFP. Under this approach, once proposals are received, SCE begins an initial review for
completeness and conformity with the Procurement Protocol. After or during this review
and assessment, SCE performs a quantitative assessment of each proposal individually
and subsequently ranks them based on the Proposal’s benefit and cost relationship. The
result of the quantitative analysis is a merit-order ranking of all complete and conforming
Proposals’ Renewable Premiums that help define the preliminary shortlist. Based on this
analysis and qualitative considerations, a shortlist is selected. In the second step, SCE
negotiates with the shortlisted Sellers for a set period of time, and at the end of the
negotiation period, all Sellers that are able to complete negotiations have a one-time
opportunity to submit refreshed pricing. SCE then makes final selections and enters into
any final Agreements based on the new pricing.
10
The Procurement Protocol is a public document describing the renewable energy products being sought,
the 2013 Renewable RFP submission requirements, and SCE’s preferences and evaluation criteria.
Merrimack Energy Group, Inc.
5
This two-step process has several advantages and disadvantages relative to the one-step
process where a utility negotiates PPAs after it has selected bidders with which to
negotiate based on their price offers. Since a bidder in a two-step process will need to
expend resources to negotiate a PPA without knowing whether it will obtain an
agreement, even if contract terms are agreed upon, the tendency is that bidders will
participate in this process only if they believe their projects are reasonably mature, have a
reasonable chance of winning, and have the financial strength to assume this risk. In
addition, the pricing contained in the final contract reflects the entirety of the risk profile
in the contract executed by the parties, which should allow for “tighter” (i.e., lower)
pricing. Finally, the process provides for a pre-defined timeframe (that SCE was able to
implement punctually), which provides bidders with temporal certainty that is helpful to
many bidders as they progress in their project development cycle. One of the major
disadvantages of the process is the high cost and associated uncertainty to Sellers who
proceed through the negotiation process to final offer submission. The time and cost of
negotiations for cases where a contract may not be secured can be substantial. Similarly,
there is an additional cost to SCE, at least in terms of staff and management time, to
negotiate more PPAs than will obtain contracts. Ultimately, the question is whether the
process overall results in net benefits in terms of lower net costs to ratepayers, more
ratepayer-friendly PPA terms, and projects which are more likely to be built due to their
greater maturity, lower project risk, and greater experience, capability and financial
strength of their developers.
Overall, SCE maintained its schedule as outlined. Follow-up discussions with Shortlisted
Sellers (both with those that did and did not secure a contract) after completion of the
solicitation process illustrated that these Sellers felt the process was reasonable and was
conducted efficiently and in a timely manner by SCE (although not all favored the twostep process). All in all, the RFP process was fairly and timely conducted.
In terms of the selection process, SCE exercised discretion, primarily involving three
decisions that involved selection of projects not based entirely on rank order based on the
renewable premium metric:
1. Both in the shortlisting process and final selection process, SCE included in its
quantitative assessment network upgrade costs of projects interconnecting with
the Imperial Irrigation District (“IID”).
SCE has traditionally not included reimbursable network upgrade costs from
balancing authorities other than the California Independent System Operator
(“CAISO”) in its RPS evaluation process as transmission adders for the reason
that under existing CAISO tariffs IID customers and not California investorowned utility customers will ultimately pay for such transmission upgrades.11
SCE’s management determined that it imposed a risk on SCE’s customers not to
include the cost of such upgrades in its evaluation due to the risk that as IID
network upgrade costs increase to help support renewable projects to meet
California’s RPS obligations that the costs may ultimately be charged to CAISO
11
The Procurement Documents do not address this issue specifically.
Merrimack Energy Group, Inc.
6
and the California investor-owned utilities and their customers. Once these IID
transmission network upgrade costs were incorporated in SCE’s evaluation, three
solar PV projects fell out of economic rank order in the shortlist evaluation and
were not shortlisted.
2. In the final evaluation, SCE revised its congestion forecast for Four Corners
resources
since congestion at Four Corners will be significantly
reduced with the termination of historical deliveries of baseload power to SCE
from Four Corners as a result of SCE’s sale of Four Corners Steam Plant Units 4
and 5 to Arizona Public Service Company.12 This affected the evaluation of two
projects. Despite the fact that the modification to the expected evaluation
methodology improved the projects’ renewable premiums, it did not result in
either project being among those in economic rank order based on the 2 times
need cut-off.
The foregoing modifications to the renewable premium evaluation
methodology—inclusion of IID network upgrade costs and revised congestion
costs for Four Corners—were referred to by SCE as the “Alternative Renewable
Premium,” which SCE used in the final evaluation for economic rank ordering of
offers.
3. In the final selection process, SCE selected a proposal for 225 MW of baseload
renewable energy from the Geysers geothermal project
As an existing facility, the
project had little if any project viability risk. It offered fuel diversity in the context
of expectations of substantially higher solar PV penetration. Baseload renewable
energy provides more predictable output and the expectation of reduced need for
increasing SCE’s voluntary margin of over procurement.
The methodology and proposed short list selection were vetted with the PRG as were the
final selections.
12
The methodology used to derive the congestion forecast used a blend of historical information and a
simulation-based forward-looking forecast. Since the Four Corners generating facility will no longer be
delivering power to California, SCE believed it was more appropriate to use the congestion forecast only
and not include the historical component. The revised congestion forecast for Four Corners did not take
into account historical congestion.
Merrimack Energy Group, Inc.
7
In the IE’s opinion, SCE’s use of the Alternative Renewable Premium for economic rank
ordering in the final selection process was a reasonable exercise of discretion. Applying
network upgrade costs that will be incurred by IID in connection with renewable energy
procured by SCE appears consistent with fundamental cost causation principles. It does
not seem unreasonable that costs incurred to help meet statewide RPS goals should be
considered in solicitations to facilitate construction of projects to meet California RPS
goals. Moreover, to ignore the incurrence of real costs caused by a candidate project for a
power purchase agreement solely because some California constituencies other than the
power purchaser’s customers will have to pay for the costs is economically inefficient
from a societal standpoint. Including costs incurred by California balancing authorities
other than CAISO will also put generators interconnecting within CAISO and other
CBAs on an equal footing. Moreover, SCE’s evaluation in both the shortlist and final
offer stages was consistent in this regard. Also, SCE’s modification of its congestion
assessment for Four Corners was reasonable. While the congestion forecast has been
based on a combination of historical data and forecast data, use of historical data for Four
Corners is no longer a valid and reasonable representation of the expected congestion at
or near this delivery point.
SCE short listed three existing geothermal projects, although they were selected out of
economic rank order, in order to foster technology diversity, include strongly viable
projects on the shortlist, and to include some baseload, non-intermittent generation
among shortlisted projects. In the IE’s opinion, this was a reasonable exercise of business
judgment by SCE consistent with its Procurement Plan and Procurement Protocol to
foster a diverse, robust shortlist.
SCE’s selection of seven solar projects
was reasonable
SCE’s selection of Calpine’s final offer for its Geysers facility, however, raises more
difficult issues, which Merrimack Energy will address in more detail in its IE report
associated with SCE’s advice letter filing for approval of that PPA.
Overall, it is the IE’s assessment that SCE reasonably designed and fairly implemented
the 2013 Renewable RFP and appropriately selected the Mount Signal II and Mount
Signal V proposals,
The Mount
Signal II and Mount Signal V projects
Merrimack Energy Group, Inc.
8
the PPA was fairly negotiated, and, in the IE’s opinion, the Mount Signal II and
Mount Signal V PPAs merit Commission approval.
I. 2013 Renewable Request for Proposals (“RFP”) Overview
On January 6, 2014, Southern California Edison Company (“SCE”) issued its 2013
Renewable RFP. SCE solicited proposals from Bidders (“Sellers”) to supply Product
from Eligible Renewable Energy Resources sufficient to permit SCE to execute power
purchase and sale agreements (“PPAs”) in substantially the form as SCE’s Pro Forma
Renewable Power Purchase and Sale Agreement (“Pro Forma PPA”) posted on the
Accion Power RFP Website.
Through the 2013 Renewable RFP solicitation, SCE sought Proposals for product
qualifying as Portfolio Content Category 1 (“Category 1”) which includes all electric
energy produced by an ERR Generating Facility throughout the term of the Final
Agreement, net of Station Use; all Green Attributes; all Capacity Attributes, if any; and
all Resource Adequacy Benefits, if any; generated by, associated with, or attributable to
the output of the ERR Generating Facility.13
The basic solicitation requirements and conditions are set forth in the 2013 Renewable
RFP Procurement Protocol. These include the following:
1. SCE will only consider Proposals to purchase Product from ERR Generating
Facilities with commercial operation dates (the “COD”) and initial delivery dates
to SCE on January 1, 2016 or later;
2. SCE will consider Proposals from Sellers with ERR Generating Facilities that are
located outside the State of California but only if they can deliver Product that
qualifies as Category 1;14
3. SCE is only soliciting Product from ERR Generating Facilities which possess: (1)
a completed Phase II Interconnection Study or equivalent, (2) documentation
showing that the ERR Generating Facility has passed WDAT Fast Track Process
screens, (3) a signed Interconnection Agreement, or (4) an equivalent or better
interconnection study, agreement, process, or exemption. Further, the
interconnection arrangements must support the ERR Generating Facility’s
13
Capitalized terms in this report are as defined in the Procurement Protocol, unless otherwise specified or
where terms pertain to the Mount Signal II and Mount Signal V PPAs (and are defined in the Mount Signal
PPAs).
14
Category 1 projects are those: with a first point of interconnection to the Western Electric Coordinating
Council transmission system within the boundaries of a California Balancing Authority Area; or with a first
point of interconnection with an electricity distribution system used to serve end users within the
boundaries of a CBA; or where the renewable generation is scheduled into a CBA without substituting
electricity from another source; or where the generation from the renewable facility is dynamically
transferred to a CBA. The Procurement Protocol states that SCE will not consider Proposals for offers to
deliver any Portfolio Content Category 2 products, such as firmed and shaped products, or Portfolio
Content Category 3 products, such as Renewable Energy Credit-only transactions.
Merrimack Energy Group, Inc.
9
forecasted commercial operation date (“COD”). Should Seller’s interconnection
arrangement indicate an interconnection date later than the ERR Generating
Facility’s forecasted COD, the proposal will not be given further consideration;
4. Seller may propose any term length equal to or greater than 10 years. If a Seller
submits a long-term Proposal with a term length of more than 20 years, the Seller
shall also submit an alternative Proposal with a 20 year term;
5. SCE will accept mutually inclusive Proposals (i.e. “package deals” or any similar
requirements by Seller that an individual Proposal may only be selected by SCE if
other specific Proposals are also selected);
6. SCE will accept mutually-exclusive Proposals (e.g., flat vs escalating pricing for
the same ERR Generating Facility or 15-year vs 20-year term for the same ERR
Generating Facility);
7. Projects with a Contract Capacity of 1.5 MW or greater are eligible to participate
in this Renewable Energy RFP.15 ERR Generating Facilities that are located
within the service territory of either Pacific Gas & Electric (“PG&E”), San Diego
Gas & Electric (“SDG&E”), or SCE, and directly interconnected to the California
Independent System Operator (“CAISO”) or the distribution system of either
PG&E, SDG&E, or SCE must offer a proposed contract capacity greater than 20
MW;
8. Seller’s Proposal must demonstrate Site Control;
9. Seller’s generating facility must be a new, existing or repowered generating
facility that is an ERR;
10. SCE will consider Proposals with energy storage if the storage technology is only
capable of being charged 100% by an ERR and does not result in the delivery of
non-ERR electric energy;
11. SCE encourages ERR Generating Facilities in the Western Los Angeles sub-area
of the Los Angeles basin local reliability area, and in the Moorpark sub-area of
the Big Creek/Ventura local reliability area to participate in the Renewable
Energy RFP;
12. SCE encourages Women-Owned, Minority-Owned, and Service Disabled
Veteran-Owned Business Enterprises (“WMDVBE”) to participate in the RFP;
13. SCE will only consider Proposals that are substantially complete and include all
of the applicable information, representations, warranties, and covenants as set
forth in the Form of Seller’s Proposal;
15
SCE also identified preferences for projects that meet specific contract capacity guidelines as described
in the RFP document.
Merrimack Energy Group, Inc.
10
14. The only method for exchange of information or documents concerning this
Renewable Energy RFP, including any such exchange concerning the preparation
or submission of Proposals to SCE, will be via the RFP Website.
SCE evaluates and ranks Proposals based on Least-Cost Best-Fit principles in accordance
with criteria set forth by the CPUC in D.03-06-071 and D.04-07-029 (“LCBF
Decisions”). The LCBF analysis evaluates both quantitative and qualitative aspects of
each Proposal to estimate its value to SCE’s customers and its relative value in
comparison to other Proposals. SCE’s LCBF methodology will be discussed in detail in
Section IV of this Report.
SCE followed a multi-stage approach for shortlist and final selection as set forth in the
Procurement Protocol. In this process, Proposals were initially reviewed for completeness
and conformity with the Procurement Protocol. Sellers failing the initial screen were
given a limited time to cure and conform their Proposals to solicitation requirements.
SCE next evaluated and ranked the proposals based on their total benefits and costs using
a Renewable Premium metric. Following the quantitative analysis SCE conducted a
qualitative assessment, including use of the Project Viability Calculator for the most
competitive Proposals. The qualitative attributes are considered to either eliminate nonviable Proposals or add projects with high viability or other qualitative attributes to the
final shortlist of Proposals or to determine tie-breakers, if any. Following shortlist
selection, SCE then initiates negotiation of contracts with shortlisted projects. At the end
of the negotiation period, Sellers who have reached agreement with SCE on the terms of
a PPA will have a one-time opportunity to submit a revised price. SCE will then evaluate
the final offers, make final selections and enter into any final PPAs based on the revised
pricing.
SCE’s 2013 RPS RFP includes several changes from the company’s previous RPS
solicitations, including:





Limiting the procurement to Category 1 products;
Requiring that projects have a Phase II Interconnection Study or an equivalent or
better process or exemption in order to submit a proposal;
Utilizing a two-step solicitation process, with final selection occurring after (a)
shortlisting, (b) a defined period for negotiating contract terms with shortlisted
Sellers, and (c) final pricing for Sellers that have reached agreement with SCE on
contract terms;
Applying incremental congestion adders for energy-only projects; and
Elimination of an exclusivity obligation (“Shortlisting Exclusivity”) on shortlisted
Sellers who agree to negotiate PPA terms with SCE.
These changes were either proposed by SCE and approved by the Commission in a
decision conditionally approving the major utility RPS procurement plans (Decision 1311-024 (2013) or in the case of elimination of Shortlisting Exclusivity, directed by the
Commission.
Merrimack Energy Group, Inc.
11
II. Role of the Independent Evaluator
A. Regulatory Requirements for the Independent Evaluator
The requirements for participation by an IE in utility solicitations are outlined in
Decisions (“D”).04-12-048 (Findings of Fact 94-95, Ordering Paragraph 28), D.06-05039 (Finding of Fact 20, Conclusion of Law 3, Ordering Paragraph 8) of the CPUC,
D.09-06-050 and D.10-07-042.
The role of the IEs in California IOU procurement processes has evolved over the past
ten years. In D.04-12-048 (December 16, 2004), the CPUC required the use of an IE by
investor-owned utilities (“IOUs”) in resource solicitations where there is an affiliated
bidder or bidders, or where the utility proposed to build a project or where a bidder
proposed to sell a project or build a project under a turnkey contract that would ultimately
be owned by a utility. The CPUC generally endorsed the guidelines issued by the Federal
Energy Regulatory Commission (“FERC”) for independent evaluation where an affiliate
of the purchaser is a bidder in a competitive solicitation, but stated that the role of the IE
would not be to make binding decisions on behalf of the utilities or administer the entire
process.16 Instead, the IE would be consulted by the IOU, along with the Procurement
Review Group (“PRG”) on the design, administration, and evaluation aspects of the
Request for Proposals (“RFP”). The Decision identifies the technical expertise and
experience of the IE with regard to industry contracts, quantitative evaluation
methodologies, power market derivatives, and other aspects of power project
development. From a process standpoint, the IOU could contract directly with the IE, in
consultation with its PRG, but the IE would coordinate with the Energy Division.
In D.06-05-039 (May 25, 2006), the CPUC required each IOU to employ an IE regarding
all RFPs issued pursuant to the RPS, regardless of whether there are any utility-owned or
affiliate-owned projects under consideration. This was extended to any long-term
contract for new generation in D.06-07-029 (July 21, 2006). In addition, the CPUC
directed the IE for each RFP to provide separate reports (a preliminary report with the
shortlist and final reports with IOU advice letters to approve contracts) on the entire bid,
solicitation, evaluation and selection process, with the reports submitted to the utility,
PRG, and CPUC and made available to the public (subject to confidential treatment of
protected information). The IE would also make periodic presentations regarding its
findings to the utility and the utility’s PRG consistent with preserving the independence
of the IE by ensuring free and unfettered communication between the IE and the CPUC’s
Energy Division, and an open, fair, and transparent process that the PRG could confirm.
In 2007, the use of an IE was required for any competitive solicitation seeking products
for a term of more than three months in D.07-12-052 (December 21, 2007). Also, the
process for retaining IEs was modified substantially, with IOUs developing a pool of
qualified IEs subject to feedback and any recommendations from the IOU’s PRG and the
16
Decision 04-12-048 at 129-37. The FERC guidelines are set forth in Ameren Energy Generating
Company, 108 FERC ¶ 61,081 (June 29, 2004).
Merrimack Energy Group, Inc.
12
Energy Division, an internal review process for IE candidates, and final approval of IEs
by the Energy Division.
In 2008, in D.08-11-008, the CPUC changed the minimum term requirements from three
months to two years, and reiterated that an IE must be utilized whenever an affiliate or
utility bidder participates in the RFO, regardless of contract duration.
In D.09-06-050 issued on June 18, 2009 in Rulemaking 08-08-009, Order Instituting
Rulemaking to Continue Implementation and Administration of California Renewable
Portfolio Standard Program, the CPUC required that bilateral contracts should be
reviewed according to the same processes and standards as contracts that come through a
solicitation. This includes review by the utility’s PRG and its IE, including a report filed
by the IE.
In D.10-07-042 issued on July 29, 2010, the Commission reaffirmed the role of the IE
and required the Energy Division to revise the IE Template to ensure that the IEs focus
on their core responsibility of evaluating whether an IOU conducted a well-designed, fair,
and transparent RFO for the purpose of obtaining the lowest market prices for ratepayers,
taking into account many factors (e.g. project viability, transmission access, etc.).
This IE report is submitted in conformance with the above requirements and is generally
consistent with the requirements outlined in the CPUC’s 2013 RPS Solicitation Shortlist
Report Template.
B. Description of Key IE Roles
In compliance with the CPUC requirements identified above, SCE retained Merrimack
Energy in July 2013 to serve as IE for SCE’s 2013 RPS solicitation. Merrimack Energy
was retained to provide an independent evaluation of SCE’s bid evaluation methodology
and selection process and to provide SCE, SCE’s PRG, and the Energy Division with
periodic presentations, findings and other reports as requested. The objective of the role
of the IE is to ensure that the solicitation process is undertaken in a fair, consistent,
unbiased and objective manner and that the best resources are selected and acquired
consistent with the solicitation requirements and criteria. In addition, the IE is required to
ensure that no SCE affiliate has an undue advantage over non-affiliates in the solicitation.
The IE will be required to make a determination as to whether SCE’s final selection was
fair and free from anti-competitive behavior, and was not unfairly influenced by any
affiliate relationships.17
In addition to the requirements identified in CPUC Orders, the Purchase Order between
Merrimack Energy and SCE identifies the responsibilities and tasks to be performed by
the IE. These include the following responsibilities and tasks:
17
SCE did not receive any offers from affiliates. Moreover, Edison International, SCE’s parent company,
closed the sale of substantially all of the assets of Edison Mission Energy, Edison International’s
independent power generation subsidiary, several months ago.
http://www.nawindpower.com/e107_plugins/content/content.php?content.12799.
Merrimack Energy Group, Inc.
13

Assist in the development and review of SCE’s existing RFO and RFP protocols
and design of the solicitation processes;

Monitor the RFO or RFP solicitation process, energy auction, or bilateral
negotiation to ensure that all bidders, if applicable, or counterparties, receive
access to relevant communications in a non-discriminatory manner;

Monitor the RFO or RFP solicitation process, energy auction, or bilateral
negotiations and promptly submit recommendations to SCE management to
ensure that no bidder has an information advantage provided by SCE;

Provide recommendations concerning the precise definition of products sought
and price and non-price evaluation criteria, so that all aspects of the products are
clearly understood and all bidders may effectively respond to the solicitation;

Review the comprehensive quantitative and qualitative bid evaluation criteria and
methodologies and assess whether these are applied to all bids in a fair and nondiscriminatory manner;

Promptly submit to SCE management any recommendations consistent with the
objectives of ensuring a competitive and fair process, and to ensure that the
overall scope of the RFO or RFP process is not unnecessarily broad or too
narrow;

Assess whether SCE’s final selection was fair and was not unduly influenced by
affiliate relationships;

Provide periodic presentations as requested to SCE management and to the PRG
concerning the IE’s findings;

Provide final written assessment on whether the solicitation or auction process
was competitive and fair and whether any bidder received material information
that gave them a competitive advantage or disadvantage relative to other bidders;

Report on the outcome of the RFP to the CPUC using the appropriate CPUC
Independent Evaluator Report Template.
With regard to the role of the IE, Merrimack Energy views that one of the primary roles
is to independently evaluate and “challenge” the results of the utility’s evaluation and
selection process. Our objective is to ensure that the utility evaluation team can prove that
the results of their evaluation are accurate, reasonable and consistent. This role generally
involves a detailed review and assessment of the evaluation process and the results of the
quantitative and qualitative analysis.
Merrimack Energy Group, Inc.
14
This report on the RPS solicitation process provides an assessment of SCE’s 2013
Renewable RFP solicitation from development of the components of the process through
selection of the short list, contract negotiations with shortlisted parties, and, finally,
SCE’s evaluation and selection of final offers. It is generally organized based on the
template provided by the CPUC’s Energy Division entitled 2013 RPS Solicitation
Shortlist Report Template (2/19/2014). This report addresses Merrimack Energy’s
assessment and conclusions with regard to the following questions:
1. Did SCE conduct adequate outreach to potential bidders and was the solicitation
robust?
2. Was SCE’s Least-Cost Best-Fit methodology designed such that all bids were
fairly and reasonably evaluated?
3. Was SCE’s LCBF bid evaluation and selection process fairly administered?
4. Did SCE fairly negotiate the terms of contracts with shortlisted bidders?
5. Did SCE make reasonable and consistent choices regarding which indicative bids
were shortlisted and which final offers were awarded contracts?
6. With specific regard to the Mount Signal II and Mount Signal V PPAs, did SCE (a)
fairly and reasonably negotiate the contract, (b) fairly and reasonably evaluate and
select the Mount Signal II and Mount Signal V offers, and (c) do the Mount Signal II
and Mount Signal V PPAs merit Commission approval?
C. Description of IE Oversight Activities
In performing its oversight role, the IE participated in and undertook a number of
activities in connection with SCE’s outreach activities, implementation of its evaluation
criteria, evaluation methodology, bid evaluation and shortlist selection process,
monitoring contract negotiations with shortlisted bidders, and assessment of the final
projects selected for contract execution. Merrimack Energy was retained by SCE prior to
the development of the Procurement Protocol and therefore had the opportunity to
oversee and participate in the development of the evaluation criteria and methodology.
Provided below is a description of IE activities in connection with the 2013 Renewable
RFP.
IE Activities Prior to Receipt of Offers
Prior to SCE’s receipt of indicative offers, Merrimack Energy:


Reviewed and commented on SCE’s draft Procurement Protocol document;
Reviewed SCE’s Procurement Plan filing, including the LCBF methodology, and
prepared a number of clarification questions and comments on the proposed
methodology for discussion with SCE. The IE held several meetings (in person
Merrimack Energy Group, Inc.
15
and over the phone) with the SCE project team to discuss the details of the
implementation of the methodology. Issues identified by the IE and addressed
with SCE included:
o Schedule for conducting the bid evaluation process;
o Criteria to be applied for bid evaluation and selection from both a
quantitative and qualitative perspective;
o Expected date to receive forward curves for lock down prior to the
evaluation;
o Application of the Project Viability Calculator with regard to the number
of Proposals evaluated;
o Capacity price forecast and its application;
o Methodology for determining the congestion cost adders;
o Method for assessing transmission cost adders;
o Methodology for evaluating projects with delivery points outside the
CAISO;
o Credit issues such as the application of collateral adders;18
o The application of other qualitative criteria such as seller concentration.








Participated in weekly meetings of the RPS project team to discuss the status of
the procurement process;
Attended SCE’s Request for Proposals Conference on January 13, 2014 and
provided a description of the role of the IE in the procurement process;
Reviewed the questions submitted by Sellers to the SCE website and responses
provided by SCE and commented on the response to a few questions prior to
posting on the website;
Reviewed Form of Sellers Proposal submittal requirements prior to posting on the
Accion Power website;
Reviewed the Accion Power website and held several discussions with Accion
Power personnel to review website operations and applications and to better
understand how the IE could use the website to conduct an independent
assessment of the proposals received;
Tested the website through the development of specific reports for summarizing
proposals received based on key data and criteria;
Prepared a conformance spreadsheet to assess whether the Sellers met the
eligibility and other requirements of the RFP upon submission of proposals.
Information contained on the spreadsheet;
Participated in two meetings with the PRG prior to receipt of offers to discuss the
Short List Valuation and Selection Methodology (January 29, 2014) and the
Congestion Adder Methodology (December 13, 2013).
18
SCE informed the IE that SCE would not include collateral adders in this solicitation because Sellers
were required to submit their proposals based on the collateral requirements set forth in the Pro Forma
PPA.
Merrimack Energy Group, Inc.
16
IE Activities After Submission of Indicative Offers Through Short Listing
After receipt of indicative offers, Merrimack Energy:












Prepared several reports using the Accion Power website function to provide high
level summaries for each proposal;
Compared proposal compilation developed by the IE to SCE’s list of proposals to
ensure all proposals were accounted for by the IE and SCE;
Conducted a proposal completeness and conformance check;
Participated in weekly project team meetings to discuss the status of the proposal
conformance and the evaluation process;
Participated in several discussions and meetings of SCE’s project team to discuss
the conformance of individual proposals and processes for addressing any issues
with specific proposals;
Reviewed SCE’s preliminary evaluation results and tested the reasonableness of
the evaluation results based on project pricing, location, transmission cost, and
other factors; raised issues with SCE if results appeared to be inconsistent with
the expected results based on project pricing, associated costs, and generation
profile;
Conducted spot checks for the highest ranked projects based on calculation of the
levelized cost of the proposals submitted;
Reviewed the emails exchanged between SCE and Sellers regarding any missing
information, or requests by SCE for Sellers to clarify proposal information or to
explain the basis for information;
Reviewed SCE’s proposed shortlist and provided comments;
Conducted an independent assessment of the shortlisted proposals and others
proximate to the shortlist with respect to the Project Viability Calculator based on
the information submitted by Sellers;
Participated in several meetings to discuss the proposed shortlist including
internal project team meetings, pre-reads with SCE program area management,
epRMC19 meeting with senior management, and the PRG meeting of March 19,
2014 at which SCE discussed its short list selection. The IE provided input and
comments at all meetings, including observations based on the solicitation results;
Participated in a number of calls with Sellers that were not selected for the
shortlist but requested a debriefing from SCE.
IE Activities Following Shortlisting Through Negotiations and Execution of PPAs
Evaluated and Selected Based on Final Offers Submitted by Shortlisted Bidders
After SCE decided which offers to shortlist, Merrimack Energy:


19
Prepared a short list report, which SCE filed with its Advice Letter with respect to
SCE’s short list for this RPS solicitation;
Monitored contract negotiations between SCE and the short listed counterparties;
Energy Procurement Risk Management Committee.
Merrimack Energy Group, Inc.
17





Attended weekly SCE staff meetings (by teleconference) regarding the progress
of negotiations and common issues raised in the various negotiations;
o Participated in project-specific discussions regarding how to address
issues pertaining to site control, project viability and other matters;
Monitored and reviewed emails, and other documents exchanged between the
parties during the negotiation process;
Reviewed SCE’s evaluation of final offers;
Reviewed and discussed with SCE the Company’s selection decisions;
Participated in pre-reads, epRMC meeting, and the PRG meeting of July 16, 2014
regarding selection of final offers.
D. Any other relevant information or observations
No additional information or observations.
III. Did SCE Do Adequate Outreach to Bidders and Was the Solicitation
Robust?
For its 2013 RPS solicitation, SCE sought to procure approximately 1,600 GWh of
annual additions starting in 2017 for this solicitation. This section of the report assesses
SCE’s process for conducting outreach to potential bidders in an attempt to encourage
robust competition and whether the processes used by SCE were successful in meeting its
objectives.
A. Were the Solicitation Materials Clear and Concise to Ensure That the
Information Required by the Utility to Conduct its Evaluation Was Provided by the
Bidders?
The IE had the opportunity to review and comment on draft solicitation documents and
materials. The purpose of our comments was to ensure that the information was
consistent and clear to Sellers. In addition, for the first time in an RPS solicitation SCE
required Sellers to post their proposal documents on a website, designed by Accion
Power, for this solicitation. All submissions by Sellers as well as substantive
communications between the Seller and SCE took place via the Accion Power website,
thereby requiring Sellers to understand how to use the website for proposal submission.
A representative of Accion Power provided an overview of the Accion Power website at
SCE’s Request for Proposals Conference on January 13, 2014 and described how to
access and use the website for uploading Proposals. In addition, the Accion Power
website includes a tab which provides a tutorial for Sellers regarding access to and use of
the website. Based on receipt of Proposals and review of the submittals, it appears that
Sellers were able to successfully navigate and utilize the website effectively during the
solicitation process.
All of SCE’s RFP documents were posted on the Accion Power website. The eligibility
requirements of Sellers and the documents required of Sellers were clearly identified in
the Procurement Protocol. In addition, the Procurement Protocol identifies the documents
Merrimack Energy Group, Inc.
18
required of Sellers, provides a description of the evaluation and selection process, and
contains a schedule for the solicitation. For example, Associated Document A – Form of
Seller’s Proposal – sets forth the documents and data that each Seller must include in its
Proposal. This document identified all the documents to be included in the Bidders EBinder and also included a check list for Sellers to review to ensure they included all the
information requested. Furthermore, the Accion Power website was set up to allow
Sellers to upload their Proposal documents in consistent files to ensure all Sellers
essentially submitted the exact form Proposal.
The following information was required from each Seller:










Fully executed Proposal Structure Letter that provided a brief summary of the
proposal and project;
Fully executed Seller’s Acknowledgement Letter;
Fully executed Consent for Release of Interconnection Related Information;
Fully executed Project Viability Calculator completed by the Seller;
Complete project generation profile;
Fully executed Team Development Experience Letter;
Fully executed Site Control Acknowledgement Letter;
Fully completed Short-Term Non-Disclosure Agreement;
A copy of all the Generating Facility’s Interconnection studies;
A detailed Proposal Form that contained project specific information for each
proposal that would be used as input into the evaluation of each proposal,
including pricing information, project deliverability status, delivery date, project
capacity, location, etc.
Also, as previously noted, the Procurement Protocol document contained a number of
eligibility requirements or preferences of SCE that guided Sellers in the submission of
Proposals. For the most part, Sellers conformed their Proposals to these requirements or
preferences. Although there was a significant amount of communications between SCE
and the Sellers after submission of the Proposals, most of the communications involved
clarifying questions from SCE about specific aspects of the Proposals to correct
inconsistencies between the Proposal Form and Proposal Structure letter or similar issues.
For the most part, Sellers were able to cure any outstanding deficiencies or
inconsistencies in their Proposals in short order.
Merrimack Energy believes that the contents of SCE’s 2013 RPS RFP solicitation
protocol provided clear and comprehensible direction to Sellers on how to prepare and
submit a complete Proposal package. In addition, the IE is of the view that the
information available publicly and in the Procurement Protocol provided Sellers will a
substantial base of information to allow them to determine how they could best compete
in the RPS solicitation process.
Since the Accion Power website was used for the first time for an RPS solicitation it
could be expected that there may have been some glitches associated with Seller use of
Merrimack Energy Group, Inc.
19
the system. However, it appeared that this was not the case. Sellers seemed to use the
website to upload documents and communicate with SCE with relative ease.
Merrimack Energy’s observations regarding the solicitation documents, use of the
website, and other means of providing information to Sellers (i.e. Request for Proposals
Conference, Frequently Asked Questions, etc.) are provided below:




Overall, the Accion Power website was an effective tool for communicating with
Sellers and provided a repository of Seller Proposal information which could be
accessed by the IE and SCE’s project team. The IE found the website to be very
effective for allowing the IE to prepare summary reports on each of the Proposals
which the IE used to aid in the assessment of SCE’s evaluation and selection
process;
Nearly all the Proposals submitted were complete and conforming packages.
Although SCE spent a considerable amount of time reviewing the Proposals for
conformity and completeness, much of the communications with Sellers involved
clarification of the information provided. Issues such as whether Proposals were
mutually exclusive or inclusive, clarifying questions about the generation profile,
or clarifying questions about the status of the interconnection process were
common. SCE and the Sellers were able to correct remaining deficiencies (where
it was substantively possible to do so) prior to the completion of the evaluation
process;
As noted in Section 1 of this report, SCE’s Procurement Protocol documents
identified a number of eligibility requirements and SCE preferences. The results
of the Proposal submission process indicated that Sellers were well aware of these
requirements and satisfied them, with relatively few exceptions. For example,
SCE indicated that if a Seller provided a Proposal for a 25 year term it also had to
provide a Proposal for a 20 year term. Sellers conformed to this requirement;
Sellers, or at least those proposing to build solar projects, were generally planning
on meeting a 2016 in-service date deadline to qualify for the 30% Investment Tax
Credit (“ITC”) (the ITC reverts back to 10%, under current law, for solar projects
with in-service dates after December 31, 2016), while SCE’s needs for new
renewable generation are more focused on subsequent years. A significant
number of Sellers understood this issue and submitted Proposals more in line with
both their own objectives and SCE’s objectives.
In follow-up sessions held between SCE and non-shortlisted Sellers, several Sellers said
that they did not understand SCE’s bid evaluation process and methodology. The IE
found this surprising given that a general description of the methodology can be found
through CPUC orders and SCE filings and was also addressed in the Request for
Proposals conference.
Outreach activities are important to the success of a competitive solicitation process.
SCE’s outreach efforts targeted a large number of potential Sellers based on contacts
from previous solicitations and business relationships developed since then. SCE
prepared a detailed list of potential Sellers with approximately 2,300 contacts that serves
Merrimack Energy Group, Inc.
20
as the database for Seller contact and outreach. SCE sent emails to all potential Sellers on
this list informing them of the RPS RFP process and the issuance of the Procurement
Protocol. SCE did not issue a press release or contact industry trade publications
announcing its 2013 Renewable RFP.
SCE also established a link on SCE’s RPS 2013 Solicitation webpage for Accion Power’s
website, on which the RFP Program documents were accessible to prospective Sellers.
SCE’s RPS 2013 Solicitation webpage contains the RPS RFP Proposal Conference
Presentation, the CPUC Decision (D.13-11-024) conditionally accepting 2013 Renewable
Portfolio Standard Procurement Plans and Integrated Resource Plan and On-Year
Supplement, Final Congestion Adders for LCBF valuation, CEC RPS Eligibility
Guidebook, and the web address for the Accion Power website for this solicitation. In
addition to the program documents, the Accion Power website contained a list of
questions and answers related to the solicitation. A total of 28 questions and answers
were posted prior to receipt of the Proposals. The Accion Power website also included an
Announcement tab with latest information about the RFP, and a calendar. The IE found
both the SCE web page and the Accion Power website easy to access and navigate. The
IE’s one recommendation with regard to outreach activities for future solicitations is that
the SCE web page for the solicitation should also include the solicitation protocol
documents to ensure easier access.
The Request for Proposals Conference held by SCE for prospective Sellers (on January
13, 2013) provided useful information, including an overview of the solicitation process,
schedule, eligibility requirements, products sought by SCE, RFP website documentation,
discussion of the Pro Forma PPA, description of the proposal evaluation process, a
discussion of the interconnection process, and keys to Seller success. The conference was
well attended, with over 150 attendees in person plus others on the phone.
A total of 76 Sellers registered on the Accion Power website to submit Proposals and 56
Sellers ultimately did submit Proposals as required.
The IE concludes that SCE conducted reasonable and sufficient outreach for this
solicitation. The level of interest in the solicitation and the participation in the process
indicate that SCE’s outreach was effective in generating a robust response. Although the
number of Sellers and projects was much less than in the 2011 RPS solicitation which
drew about 1,400 Proposals, the reason for the reduced number of Proposals, in our view,
are the stricter minimum requirements in this solicitation relative to the 2011 solicitation,
particularly the requirement that each project must have at least a Phase II
interconnection study or equivalent.
The overall result of this outreach activity was a very robust response from Sellers, even
in light of the stricter threshold or minimum requirements established by SCE,
demonstrating the maturity of the renewable energy market in California. Proposals were
also received from a diverse set of Sellers including experienced, well-financed Sellers as
well as new market entrants, involving a variety of technologies, including wind, solar
(PV and solar thermal), geothermal, and biomass. Information regarding the Proposals,
Merrimack Energy Group, Inc.
21
MW and GWh quantities, types of resources bid, project location, pricing options and
project evaluation results are contained in Appendix B to this report.
Table 1 provides a summary, by technology, of the Proposals and unique projects
submitted. As the table indicates, the response to the solicitation is dominated by solar
PV projects which represent 60% of the total number of projects and 73% of the total
capacity.
Table 1: SCE’s RPS Proposals Received by Technology
Technology
Biomass
Landfill Gas
Geothermal
Solar PV
Solar Thermal
Wind
Total
All Proposals
# of Proposals
34
1
15
242
9
66
Capacity (MW
Total)
856
43
1,788
33,123
370
7,055
Unique
Projects
12
1
6
81
7
27
Capacity (MW
Unique)
304
43
470
9,122
310
2,185
367
43,235
134
12,434
According to SCE, approximately 35,000 GWh/year of RPS energy was offered by the
unique proposals or projects.20 This compares to SCE’s target for this solicitation of
approximately 1,600 GWh or nearly 22 times need. SCE also estimates that the 134
unique projects submitted represented 12,434 MW (AC) of capacity. Overall, SCE
received 367 Proposals21
There was also an interesting mix of new projects, existing renewable projects coming off
of
their contracts looking for a market, and repowering options. Approximately
unique RPS Solicitation projects are expected to come on-line in 2016 to capture the ITC
benefit. In addition,
of the 367 Proposals submitted included an energy storage
component.
20
SCE received a number of alternative proposals for the same project including different pricing options,
delivery dates and contract term lengths. Also, Sellers offered battery storage options for some projects.
SCE’s approach was to include only the most highly ranked Proposal from the options submitted for the
same project in the stack of projects to be ranked and evaluated.
21
SCE and the IE compared the results of the Proposals submitted and initially the IE had accounted for
eight fewer Proposals than SCE. Upon review, it was determined that there were several mutually exclusive
offers that the IE had not included in its Proposal totals that SCE had included. SCE identified the project
numbers and the IE was then able to conform the total number of Proposals to the totals identified by SCE.
22
Of the 134 unique projects submitted,
Merrimack Energy Group, Inc.
22
In conclusion, the outstanding response of the market to SCE’s 2013 Renewable RFP is
evidence that the outreach activities of SCE were effective and Sellers felt they had an
adequate opportunity to receive a contract from the process.
B. Did the IOU’s Seek Adequate Feedback About the Bidding/Bid Evaluation
Process From All Bidders After the Solicitation Was Complete?
As noted, SCE offered to talk with non-shortlisted Sellers and answer reasonable
questions about the solicitation process and the general reasons why the Seller was not
successful in being selected for the shortlist. The IE attended many of the calls. Overall,
the Sellers were very appreciative of the opportunity to discuss their projects with SCE
and the reasons for non-selection.
In addition, following SCE’s announcement of its selection or non-selection of shortlisted
bids for contract award, SCE provided both winning and losing bidders with the
opportunity to participate in a debriefing session, with the IE in attendance. Several
bidders took advantage of this opportunity. During the calls, Merrimack Energy asked
participants what they viewed as positive and negative aspects of the solicitation process.
Almost all, if not all, of the participants stated that they strongly approved of the
timelines set forth in the RFP process and SCE’s adherence to those timelines. This
enhanced the predictability of the process from their perspective. Other participants spoke
highly of the quality of information provided at the bidder’s conference and the
responsiveness of SCE’s contract managers in terms of being available for conference
calls and contract negotiations. Since this was the first time in an RPS solicitation that
SCE utilized the “two step” process whereby shortlisted parties were given a period to
negotiate contract terms before submitting final offers, counterparties addressed the
structure of the process in their comments. Almost all of the counterparties liked the time
certain associated with the contract negotiation period, although one participant said that
it would have liked to have another month to negotiate the contract (there were some
unusually difficult issues associated with its particular proposal). Several participants
stated that the process required an expenditure of time and funds on legal resources to
negotiate the contract terms before they knew that they had a “deal” with the utility,
which they viewed as being a negative attribute of the process. However, the majority of
counterparties generally viewed the process favorably.
Following notification to bidders as to whether their Proposals were shortlisted, SCE
conducted a survey similar to the surveys taken for other RPS solicitations. Although
there were relatively few responses (seven in all), the bidders who did respond generally
reported favorably with respect to the straightforwardness of RPS requirements, the
usefulness of the Accion website, and the timeliness of SCE’s responses to questions.
C. Any Other Relevant Information or Observations
The IE has served in a similar function in a number of solicitation processes throughout
the United States and Canada. The approach used by SCE to require that Sellers meet
higher threshold standards than in the past has likely served to reduce the number of
Merrimack Energy Group, Inc.
23
Proposals but has led to a higher percentage of more mature and viable projects. The
response indicates that the California renewable energy market is very mature and that
establishing stricter thresholds can be a reasonable and effective strategy to solicit more
highly developed projects, while still obtaining a very robust response from the market.
IV. Was the IOU’s LCBF Methodology Designed Such that Offers were
Fairly Evaluated?
This section of the report identifies the principles used by the IE to evaluate SCE’s LCBF
evaluation methodology, including its strengths and weaknesses, and identifies how the
methodology was applied to the evaluation of the RPS proposals.
A. The Principles the IE Used to Evaluate the IOU’s Offer Evaluation Methodology
This section of the report addresses the principles and framework underlying Merrimack
Energy’s review of SCE’s methodology for Renewable Resource proposal evaluation and
selection. While the Energy Division has suggested a set of principles for evaluating the
process used by IOU’s for selecting Offers in competitive renewable solicitations,
Merrimack Energy has included several additional principles that we often apply in other
solicitations. These are included along with the Energy Division’s principles. Key areas
of inquiry by the IE and the underlying principles used by the IE to evaluate the
methodology include the following:

Were the procurement targets, objectives, preferences, products solicited,
principles and objectives clearly defined in SCE’s RFP and other materials?

Were the bid evaluation and selection process and criteria reasonably
transparent such that bidders would have a reasonable indication as to how
they would be evaluated and selected?

Was SCE’s bid evaluation based on and consistent with the information
requested in the RFP to be submitted by bidders in their Proposal documents?

Did the evaluation methodology reasonably identify the quantitative and
qualitative criteria and describe how they would be used to rank Proposals?

Were the bid evaluation criteria consistently applied to all Proposals?

Was the quantitative evaluation methodology reasonably consistent with
industry standards and did it adequately account for all reasonable costs and
benefits identified in the Procurement Protocol?

Did the evaluation methodology adequately treat all eligible resources and
technologies in a technology neutral manner?
Merrimack Energy Group, Inc.
24

Does the price evaluation system allow for consistent evaluation of bids of
different sizes, in-service dates, and length of contract?

Did the bid evaluation criteria and evaluation process contain any undue or
unreasonable bias that might influence project ranking and selection results or
in any way favor affiliate Proposals?

Was the RFP clear and concise to ensure that the information required by SCE
to conduct its evaluation was provided by project sponsors?
B. Evaluation of the Strengths and Weaknesses of SCE’s Evaluation and
Shortlisting Methodology in This Solicitation
As defined in the Shortlist Report Template, the following considerations should be
included in the IE’s overall review of the strengths and weaknesses of the IOU’s
methodology in this solicitation:
1. Evaluation of consistency with RPS procurement plan, requested products, and
portfolio fit. Did the IOU adequately incorporate needs and preferences stated and
approved in the RPS procurement plan and protocol? For instance, did the IOU
account for contract start dates, contract lengths, and varying generation amounts?
Did the IOU adequately take into account a project’s characteristics related to
portfolio fit preferences?
2. Market valuation. Were both price and value taken into consideration when
projects were shortlisted as well as for final selection? Did the IOU adequately
take into consideration all financial benefits and costs of a project when
determining the value of projects that were shortlisted and eventually selected for
contract award? Did the IOU include the cost of transmission upgrades in the
value calculation of projects that were shortlisted? In your opinion, were any costs
or benefits that should have been included in the IOU’s LCBF calculation not
included?
3. Evaluation of offers’ transmission costs. Did the IOU rely more on TRCR studies
than Phase I or Phase II studies to ascertain transmission costs? Did the IOU
weigh the total cost of transmission upgrades for a project against the relative
value in resource adequacy that the transmission upgrade will provide for each
project? Did the IOU perform any data conformance checks related to
transmission study results and cost information for projects before they were
included on the shortlist?
4. Evaluation of offers’ project viability. Did the IOU (or IE or developer)
reasonably measure the viability of each project in the offer evaluation process?
Did the IOU perform conformance checks related to the accuracy of the project’s
viability scores before the projects were included on the shortlist?
Merrimack Energy Group, Inc.
25
5. Other
1. Evaluation of Consistency with RPS Procurement Plan, Requested
Products and Portfolio Fit
This section discusses whether SCE’s evaluation and selection process and methodology
is consistent with its final 2013 Renewable Energy Procurement Plan. Overall, the IE
finds that the methodology is generally consistent with the approved plan. The findings of
the IE are discussed below.

While SCE provided information regarding its annual procurement target in
confidential information provided to the PRG, SCE did not communicate its
procurement target, or an approximate range of what it intended to procure, to
prospective Sellers in any public presentation or document associated with this
solicitation.

The solicitation Protocol clearly identifies the eligibility requirements of Sellers,
including those eligibility requirements and criteria specified in the 2013
Renewable Energy Procurement Plan including the requirements for a Phase II
interconnection study or better as well as the type of product required (i.e.
Category 1), the commercial operation date (i.e. January 1, 2016 or later), and
eligible project sizes.

SCE’s Renewable Energy Procurement Plan and Protocol requires Sellers to limit
projects with a commercial operation date of January 1, 2016 or later. However,
the documents do not specifically identify a preference for projects that begin
deliveries at a later date. Not surprisingly, a number of Sellers submitted multiple
proposals from the same projects with different initial delivery dates and contract
terms.

The Protocol indicated that Sellers may propose any term length equal to or
greater than 10 years. If a Seller submits a long-term proposal with a term length
greater than 20 years, the Seller is also required to submit an alternative Proposal
with a 20 year term. While the Protocol clearly requires that a Seller who
submitted a proposal with a term greater than 20 years would also have to submit
a proposal for 20 years, SCE had little interest in entertaining proposals for
greater than 20 years due to SCE’s concern that contracts greater than 20 years
would trigger capital lease accounting treatment.

The solicitation accepts proposals from new projects and from existing operating
facilities (as long as such projects meet the eligibility requirements) and does not
state a specific preference for either type.23 SCE did receive proposals for both
23
While the Project Viability Calculator yields higher viability scores for existing projects relative to new
projects, there is no bias because existing projects are generally more viable than projects under
development.
Merrimack Energy Group, Inc.
26
new and existing projects and the evaluation methodology did not contain any
biases in the evaluation of one type of resource over another.

SCE’s evaluation methodology and process resulted in a shortlist that contained
multiple technology types (Solar PV, Solar thermal, wind, and geothermal) and
project sizes. Although SCE short listed a few geothermal offers for portfolio
diversity reasons,
the IE found that there was no apparent bias toward
any type of technology or project size based on the evaluation methodology
design.

The 2013 Renewable Energy Procurement Plan and the Procurement Protocol
indicate that SCE seeks proposals that enable SCE to comply with its Resource
Adequacy Requirements. The plan and Protocol explain issues of concern with
Energy Only Deliverability status relative to Full Capacity Deliverability status
and describes how Energy-Only and Full Capacity Deliverability projects will be
evaluated.24 Importantly, SCE illustrates that the valuation methodology will
essentially reward Full Capacity Deliverability Status interconnections by
allocating a capacity value to the project to reflect the RA benefit. Sellers
essentially have to weigh whether the additional cost to achieve Full Capacity
Deliverability Status is worth the additional capacity value attributed to the
project.

The 2013 Renewable Energy Procurement Plan indicates that SCE will use the
network upgrade cost results from the Phase II study or Interconnection
Agreement as the basis for including network upgrade costs in the analysis. The
Phase II interconnection requirements help to ensure that more viable projects are
the ones competing in the solicitation. At the same time, the availability of more
refined and more certain network upgrade costs enhances the accuracy of the
evaluation process relative to a methodology that attempts to use less reliable
transmission cost estimates to assess project economics (i.e. Phase I studies or
TRCRs).
In summary, SCE’s evaluation methodology and evaluation process and criteria are
consistent with its 2013 Renewable Procurement Plan and are generally consistent with
the plan’s stated preferences, eligibility requirements, evaluation criteria, and evaluation
process. However, there are a few “preferences” or information requirements that could
lead to more transparency to assist Sellers in structuring their proposals in future
solicitations. These are described in Section IV.C of this report, along with other
suggestions for future LCFB improvements. SCE has required Sellers to propose a 20
year term if they also want to offer a Proposal greater than 20 years. All Sellers who
proposed a 25 year term conformed to these requirements by also offering a 20 year
option.
24
SCE applied a cost adder for energy only projects of $.47/MWh. The IE found that the adder had no
impact on the ranking of proposals and had no influence on shortlist or final selection or economic ranking.
Merrimack Energy Group, Inc.
27
2. Market Valuation
As a starting point for addressing the strengths and weaknesses of SCE’s market
valuation, this section of the report provides an overall description of SCE’s evaluation
methodology and criteria applicable to the 2013 Renewable Resources RFP. SCE
evaluates and ranks proposals based on LCBF principles intended to comply with criteria
set forth by the CPUC in D.03-06-071 and D.04-07-029 (“LCBF Decisions”). The LCBF
methodology includes evaluation of both quantitative and qualitative aspects of each
proposal to estimate its value to SCE’s customers and relative value in comparison to
other proposals.
Bid Evaluation Methodology and Selection Process
SCE utilizes a “multi-step” bid evaluation and selection process from receipt of proposals
through final selection. Once proposals are received,25 SCE begins an initial screen for
completeness and conformity with the solicitation protocols and bidder requirements. The
review includes an initial screen for required submission criteria and eligibility
requirements such as a conforming delivery point, commercial on-line date in 2016 or
later, a valid Phase II interconnection study, minimum project size, and submission of
particular proposal package elements. Sellers lacking any of these will be allowed a
reasonable period to cure any deficiencies. Following this check for conformity, SCE will
determine which proposals are clear outliers. For proposals deemed clear outliers, SCE
will not conclude any further review. For the remaining proposals, SCE will conduct an
additional review to determine the reasonableness of proposal parameters such as
generation profiles and capacity factors. SCE’s goal is to work directly with Sellers to
resolve any issues and ensure the data is ready for evaluation.
After the reviews are undertaken and the data for eligible projects is deemed complete,
SCE will perform a quantitative assessment of each proposal individually and rank the
proposals based on the relationship between the benefits and costs attributable to the
proposal. Total benefits and total costs are combined to calculate the net levelized cost or
“Renewable Premium” for each Proposal.26 Benefits are comprised of the value of a
Proposal relative to its energy and capacity value in the market based on SCE’s forecast
of capacity and energy market values. Costs include contract payments based on the bid
price, debt equivalence, congestion costs and transmission upgrade costs. SCE discounts
the monthly benefit and cost streams to a common base date. Specifically, the Renewable
Premium is defined as Levelized Cost minus Levelized Benefit. The components of the
Levelized Cost and Levelized Benefits that comprise the Renewable Premium calculation
are illustrated in Table 2.
25
For this solicitation, proposals were received via Accion Power’s website established specifically for this
solicitation.
26
As previously noted in this report, SCE also calculated the values for what it calls Alternative Renewable
Premium for purposes of undertaking the final evaluation assessments.
Merrimack Energy Group, Inc.
28
Table 2: Comparison of Cost and Benefit Valuation Categories
Levelized Costs
Levelized Benefits
Contract Payments – TOD-adjusted based Energy Benefits – Market value of energy
on the proposed energy price, expected based on SCE’s internal forecast, taking
generation profile and contract term
into account dispatchability of the resource.
Additional ancillary services and real time
benefits may be applied to dispatchable
projects.
Transmission Costs – Cost adders for Capacity Benefits – Based on SCE’s
required network upgrades based on the forecast of net capacity value and the
latest Interconnection study or Agreement
expected quantity of Resource Adequacy .
RA quantities are based on the
Commission’s applicable accounting rules
(e.g. exceedance methodology for solar and
wind)
Debt Equivalence Cost – Cost of Congestion – Locational benefit resulting
mitigating contract commitments on SCE’s from certain resource locations.
balance sheet
Integration Costs – Cost of maintaining a
reliable energy supply. Pursuant to D.1311-024, the integration cost = $0/MWh
Congestion – Locational cost resulting
from
certain
resource
locations.
Incremental cost adder for Energy-Only
projects.
In developing its relative merit order ranking of proposals, SCE’s evaluation
methodology incorporates information provided by Sellers as well as assumptions
prescribed and set by the Company with its internal methodologies and forecasts of
market conditions. The result of the quantitative analysis is a merit-order ranking of all
complete and conforming Proposals’ Renewable Premiums.27
Following the quantitative analysis, SCE conducts an assessment of the top proposals’
qualitative attributes. The analysis utilizes the Project Viability Calculator28 to assess
certain factors including the company/development team experience, technology, and
development milestones. The Project Viability Calculator is a tool whose purpose is to
27
SCE initially ranked all the proposals submitted including the mutually exclusive proposals, such as the
type of proposals submitted by a number of Sellers who offered the same project but with different delivery
dates, contract terms or pricing mechanism. SCE evaluated all the proposals but in the process of ranking
proposals for shortlist selection only selected the best offer for each proposal. SCE followed the same
general process in evaluating the final offers.
28
For the initial evaluation, the IE also completed the Project Viability Calculator scoring for each project
included on the proposed shortlist as well as other projects which were on the fringes of the shortlist. For
the final qualitative evaluation the IE along with SCE conducted independent evaluation of final offers
based on the Project Viability Calculators and taking into account information about the projects gleaned
through the negotiation process and final submittals.
Merrimack Energy Group, Inc.
29
help assess the relative likelihood that proposed projects will be successfully developed
and constructed. Additional attributes such as transmission area/cluster, generating
facility location, seller concentration, project size, dispatchability, and contribution to
other programs goals are also considered in the qualitative analysis.
Following its analysis, SCE consults with its Procurement Review Group (“PRG”)
regarding the short list and the results of its evaluation. SCE then negotiates with the
shortlisted Sellers, and at the end of the negotiation period, all Sellers that have
successfully completed negotiations have a one-time opportunity to submit new pricing.
SCE then evaluates the remaining Proposals based on the same Renewable Premium
metric (along with an Alternative Renewable Premium29 metric) to rank projects and
make final selections and enter into final agreements based on the revised pricing.
SCE’s overall LCBF methodology and approach is described in more detail in Appendix
A to this report.
Congestion Cost Adders
The congestion adders used in the 2013 RPS RFP are new for SCE RPS solicitations. As
a result, we address them in detail. There are two elements of congestion costs that are
incorporated into SCE’s quantitative evaluation: (1) locational adders; and (2) energyonly cost adder.
Locational Adders
SCE’s LCBF methodology, contained in its final Procurement Plan, specifies that SCE
will apply a locational congestion adder, which may be positive or negative depending on
expected congestion in the area, to differentiate the value of energy between different
project locations. The locational adders are based on SCE’s forecast of energy locational
marginal prices (“LMPs”) in the CAISO market in the location that the seller plans to
interconnect or to which it plans to inject energy. SCE produced the forecast using the
GridView production simulation model.
SCE posted on its website its long-term (2014-2023) forecast of locational congestion
adders by eight delivery periods (quarterly on-peak and quarterly off-peak).30 By posting
this information, SCE provided prospective bidders information regarding the relative
value of locating generation at different locations. The information provided was on a
nodal level, with 381 pricing points. Congestion varies from approximately negative $11/MWh on average (Malin) to various pricing nodes with low single digit average
positive $/MWh values. These values are based on delivery points to CAISO locations.
The forecast was based on a combination of historical data and a long-term forecast.31
29
The Alternative Renewable Premium includes revised congestion forecast for Four Corners resources
and IID network upgrade costs.
30
https://www.sce.com/wps/wcm/connect/508bf252-72a8-42e5-98205a2dc066b420/2013_RPSFinalCongestionAddersforLCBFValuation.pdf?MOD=AJPERES. 31
SCE applied locational congestion adders to all projects in California.
Merrimack Energy Group, Inc.
30
The IE views SCE’s nodal-level energy price forecast as an improvement over energy
forecasts with less local differentiation. In addition, providing the locational adders to
prospective bidders provides important guidance regarding the positive and negative
values associated with locations for new projects.
Energy-Only Adder
In addition to the locational adders, SCE developed an additional congestion adder for
Energy Only projects. These are projects that are not Full Capacity Deliverability Status
(“FCDS”) interconnection projects and do not fund transmission delivery network
upgrades. As such Energy Only (“EO”) projects do not qualify as capacity resources and
do not receive RA capacity benefit value in SCE’s quantitative evaluation.
In its draft Procurement Plan, SCE proposed a congestion adder for Energy Only projects
on the basis that these projects increase the risk of congestion to a degree greater than
FCDS projects because they do not fund the deliverability upgrades needed to ensure that
their energy can serve load and avoid localized congestion. The Commission accepted
use of an Energy Only congestion adder for this solicitation on the grounds that “energyonly interconnections may increase congestion risk.”32 However, the Commission did so
only for this solicitation, stating that “we expect Energy Division to monitor the impacts
of SCE change in LCBF methodology and anticipate that this issue will be further
examined in this proceeding when we review LCBF.”33
SCE developed a congestion adder for this solicitation, which is $.47/MWh and is
incremental to the locational congestion adder. SCE posted this on its website with the
locational congestion adder. The EO congestion cost adder applies to all CAISO projects
that selected an EO interconnection, or any EO portion of the contract term if FCDS
status is expected to be achieved after the commercial on-line date. This adder is based on
SCE’s estimate of the average impact on system congestion from adding incremental
capacity without any incremental deliverability network upgrades. It is the same amount
for all EO projects.
32
33
D 13-11-024, p. 52.
Id.
Merrimack Energy Group, Inc.
31
The resulting congestion adder--$.47/MW—is relatively modest. It did not have a
material impact on shortlisting or final selection decisions by SCE. While 24% of the
unique projects bid with EO interconnections, only one of the shortlisted projects had an
EO interconnection. The bigger difference was the foregone capacity value for EO
projects—
for solar PV projects with FCDS
interconnections.
The methodology used by SCE seems reasonable on its face. However, the assumptions
regarding the amount of renewable generation that could reasonably be built in SP15 on
an Energy-Only basis in the foreseeable future appears far in excess of what is likely to
occur.
However, we do not know what the impact would be on the analysis if SCE
assumed a smaller increment of generation built on an EO basis.34
In any event, the amount of the EO congestion adder is relatively small and does not
appear unreasonable for purposes of this solicitation. We also concur with SCE’s
rationale for incorporating the EO congestion cost adder as part of the LCBF
methodology. Adding new generation without network upgrades to assure deliverability
is likely to add to congestion. Incorporating the adder, we believe, sends a proper price
signal to generators, as does making the amount of the adder public as part of the
solicitation process.
Overall Market Valuation Assessment
As previously described, SCE’s valuation methodology takes into account both the
proposed costs and benefits for each project submitted based on the specific proposal
submitted. The valuation methodology takes into consideration the total cost to ratepayers
of a proposal by including the proposed contract payments (as bid by the Sellers in its
Proposal) plus other costs to ratepayers (including the transmission rate impact associated
with required network upgrades, congestion cost impacts, and the implications of the
estimated cost of imputed debt on the utility’s balance sheet). Importantly, all projects are
34
Merrimack Energy Group, Inc.
32
treated equally using this methodology which allows for a comparison of different types
of technologies, with different terms and start dates.
Some of the major strengths of the LCBF methodology used by SCE include:

All Proposals are treated the same with regard to the cost and benefit components
and assessment for each project;

All Proposals are evaluated using the same consistent set of input price forecasts
for energy, capacity, congestion, and transmission costs;

The methodology can be efficiently utilized to evaluate a large number of
proposals in a fairly quick manner as compared to other utility methodologies
which may rely on detailed system-wide simulation or optimization model
assessments;

The evaluation methodology generally treated all eligible resources and
technologies in a technology neutral manner with no undue biases toward any
technology or resource type. This was particularly true of the quantitative
evaluation methodology which we felt was generally balanced and technology
neutral;

The use of a Market Valuation approach such as Renewable Premium or similar
process used by other utilities is common and generally accepted in the industry.
The weaknesses of this methodology include:

There is still much uncertainty associated with transmission access and cost,
status of new transmission projects, and the expectations about the initial
operation date of the transmission facilities. Network upgrade costs can have a
significant impact on the ranking of projects which could influence shortlist
selection;

The evaluation methodology does not account for integration costs for certain
renewable resources which may distort resource decisions.
3. Evaluation of Transmission Costs
SCE’s evaluation methodology assigns estimated transmission costs to the contract price
of generation in order to compare offers fairly and equitably. Transmission costs are
based on the estimated cost of reimbursable network upgrades attributable to individual
projects. One of the primary changes in the LCBF methodology has been attributed to
SCE’s requirement that all Proposals must demonstrate that they have a Phase II
interconnection study or better. To participate in the 2013 RPS RFP, SCE requires Sellers
to have an existing Phase II Interconnection Study or an equivalent or better process or
exemption in order to submit a proposal. Transmission costs applicable to the project will
Merrimack Energy Group, Inc.
33
be based on the applicable completed interconnection study or interconnection
agreement.
For the 2013 RPS RFP, Sellers were required to provide copies of their Interconnection
Studies (at least a Phase II study) and Interconnection Agreement (if they had one) with
their proposal, which was uploaded into the Accion Power website. In addition, the
Proposal Form required the Seller to provide a significant amount of information on the
transmission arrangements for their project including:
 whether they were interconnecting to a new transmission project;
 whether the project has an interconnection queue position;
 what interconnection cluster are they in;
 what is their interconnection queue position number;
 what is the interconnection point;
 whether the project is connecting to a West LA Basin or Moorpark high voltage
substation;
 name of Balancing Authority or utility;
 whether the Seller will dynamically transfer the product into a California
Balancing Authority;
 interconnection documents provided;
 status of the project’s interconnection;
 delivery point;
 date of interconnection document from which the Delivery Point is transcribed;
 is conferment of deliverability status by the CAISO subject to the completion of
the Tehachapi Renewable Transportation Project (“TRTP”);
 commercial operation date from Interconnection Agreement;
 estimated time to construct;
 name of interconnection document from which the estimated time to construct is
transcribed;
 page number from the Interconnection Document with regard to the time to
construct;
 Seller’s estimated date to sign an Interconnection Agreement;
 deliverability status (full capacity deliverability or energy only);
 network upgrade costs;
 document and page number from which the upgrade is provided;
 cost of reliability network upgrades and deliverability network upgrades.
The information provided to the website allowed SCE to complete a number of cross
checks on the information to determine whether the information is consistent. SCE’s RPS
project team also provided the transmission information for each project to its
transmission group for review and assessment to ensure that the information is reasonable
and credible. The SCE project team also sought input from the Transmission and
Distribution Group regarding validation of the projects’ transmission information and any
other information regarding transmission access and cost.
Merrimack Energy Group, Inc.
34
SCE uses the interconnection studies submitted as part of the offer submittal package to
determine the applicable network upgrade costs for all projects. SCE applies the required
network upgrade costs associated with delivery of the project’s energy to the nearest
defined market (e.g. NP15, SP15, ZP26 Generation Trading Hubs).
Once total network upgrade costs are determined, SCE allocates the transmission costs
over 40 years using a 16% capital cost recovery factor to determine levelized costs.
In this solicitation, SCE did not use TRCR studies to assess transmission costs to
individual projects.
The methodology used by SCE to determine transmission upgrade costs is a major
improvement over methodologies that rely on high level estimates (such as TRCR studies
or Phase I interconnection studies), since the transmission upgrades are more defined and
should be more accurate. Since all Sellers must have completed a Phase II study at a
minimum, the projects are also placed on a more level playing field in the evaluation
process.
Inclusion of more accurate transmission cost estimates in the evaluation also provides a
more complete view of all costs attributable to a specific project, including the cost to
California ratepayers associated with a new transmission project.
The information required of the Sellers by SCE also provides valuable information
regarding whether a project will be fully deliverable at the time the project reaches its
commercial operation date, which is relevant for assessing project viability capacity value
and congestion cost impacts.
As will be discussed later in this report, transmission access and cost issues had an
influence on final project ranking and selection and affect the contract negotiation
process.
4. Evaluation of Offers’ Project Viability
Use of the Project Viability Calculator (“PVC”) was incorporated into SCE’s evaluation
of the proposals both at the indicative bid and final offer evaluation stages. SCE asked the
Sellers to complete the PVC based on their assessment of their own projects, including
providing scores for the project and supporting justification for the scores. Also, both the
IE and SCE completed the PVC scores (a) at the indicative bid stage for proposed
shortlisted projects as well as projects that were close to the shortlist and (b) at the final
offer stage for all offers.
The original objective of the PVC was to evaluate the viability of renewable energy
projects at different stages of development based on a number of traditional project
viability criteria such as developers experience, site control, project financing status,
environmental permitting status, status of interconnection progress, technical feasibility,
transmission system upgrade requirements, and reasonableness of the expected
Merrimack Energy Group, Inc.
35
Commercial Operation Date. SCE’s approach for this solicitation to include stricter
thresholds essentially changed to a large degree the importance of the PVC as structured.
Through the IE’s work on numerous competitive procurement processes throughout the
United States and Canada, our assessment is that there is generally a trade-off between
stricter threshold criteria and qualitative evaluation criteria such as those effectively
included in the PVC. Stricter thresholds generally mean a project has to be more mature
in the development process to compete and therefore should score more highly based on
qualitative criteria. That proved to be the case in this solicitation.
Nevertheless, the PVC has several strengths and weaknesses as a component of the
evaluation and selection process. The advantages of the PVC include:




The PVC represents a standardized tool to evaluate all projects;
The PVC is a transparent tool;
As a result, the PVC sends an important signal to Sellers regarding the qualitative
criteria, at least those pertaining to project viability, of importance when
developing their projects. The IE has found in other processes where the utility
conducts a quantitative and qualitative evaluation that the weights and rankings
of the various criteria are not explicitly defined but are used by the utility as an
internal evaluation and scoring process;
The PVC scores along with supporting documentation provided by the Sellers to
support its scores provide a valuable base of information on which to evaluate
projects. We do note, however, that the Sellers generally scored their own
projects more favorably from a project viability perspective than SCE and the IE.
There are also disadvantages associated with the PVC that should be considered in future
solicitations. These include:

While several of the criteria and guidelines are objective and scoring and ranking
is fairly obvious, there are several criteria that are ambiguous and unclear and
require the analyst to develop his/her own basis for scoring. For some of the
criteria personal judgment is used which may vary among analysts.
Reasonableness of the COD, Project Financing Status, and Transmission System
Upgrade Requirements are somewhat ambiguous criteria.

Even in this recent SCE solicitation process, there were differences in the IE and
SCE PVC scores for initial shortlist evaluation primarily related to scores
associated with Project Development Experience and Project Financing Status. In
general, for new projects the IE interpreted the requirements literally based on the
criteria specified. For example, the Project Development Experience scores
identified are specific. To receive a score of 10 in this category, the company or
its development team has to demonstrate that it has completed 2 or more projects
of similar technology and similar or larger capacity. There were several cases
where a Seller was proposing a solar PV or wind project that was larger than it
had previously developed even though the developer had successfully developed
several smaller projects of similar technology. The IE interpreted the criteria
Merrimack Energy Group, Inc.
36
literally and scored the project based on the literal interpretation. The view of the
IE is that such an interpretation is the only way to ensure fairness in the
evaluation of the projects from a viability perspective. For final evaluation, the
scores generated by the IE and SCE were the same or much closer since more
detailed project information became available during the contract negotiation
process.

As noted, the current PVC has been a valuable tool for assessing project viability
in previous solicitations where the threshold criteria were more lenient. However,
assuming that SCE continues to maintain stricter threshold criteria it may be
worthwhile to reassess the PVC criteria, weights and scores for each criteria to
reflect the more mature development status of renewable project proposals in
California RPS solicitations.
C. Recommended Future LCBF Improvements
The IE has several recommendations for future LCBF and solicitation improvements.

Identify a target of GWhs to be procured or at least a range of requirements for
each year of the solicitation period in a public document. For example, SCE
stated in its presentation to the PRG that its procurement target for this
solicitation was 1,600 GWh of annual renewable additions per year. If SCE is
concerned about being too exact with regard to how much renewable energy it is
looking for, the solution could be to provide a range of expected requirements
with the caveat that this is an estimate only and not a guaranteed amount.

In accordance with a 2009 Commission decision,35 SCE is required to accept and
evaluate any proposal with a contract delivery term of more than 20 years. In
this RFP, SCE required Sellers to propose a 20 year term if they also want to
offer a proposal greater than 20 years, but treated the 20-year proposals in the
evaluation as the best offer, even if the quantitative evaluation indicated a
superior renewable premium under a 25 year contract term. This is apparently
due primarily to SCE’s concerns regarding the potential for adverse accounting
treatment—capital lease accounting—associated with PPAs with contract terms
longer than 20 years. SCE’s approach did not adversely impact any Seller relative
to other Sellers since all Sellers who submitted 25-year proposals also submitted
proposals for 20 years as required and their 20-year offers were fairly evaluated.
However, in future solicitations, it would promote transparency if the
procurement documents addressed how proposals with contract terms of greater
than 20 years would be treated in the evaluation.

In light of SCE’s and the Commission’s concerns regarding project viability—the
likelihood that projects selected in the RPS solicitation process will be permitted,
financed and placed in service—consideration should be given to placing the risk
35
Decision Conditionally Accepting 2009 Renewables Portfolio Standard Procurement Plans and
Integrated Resource Plan Supplements. D. 09-06-018 (June 8, 2009) pp.39-40.
Merrimack Energy Group, Inc.
37
of permitting failure on the Seller in the Pro Forma PPA. Under Section 2.03(a)
of the Pro Forma PPA,
the
Seller has the right to terminate the PPA and get back its security deposit if it
fails to obtain necessary construction permits. It is far more typical in renewable
energy solicitations of which Merrimack Energy is aware that Sellers who fail to
achieve commercial operation due to failure to receiver permits take the financial
risk in the PPA—by forfeiting all or a portion of the security deposit as liquidated
damages. This may help in reducing the “contract failure” rate, by deterring
developers with major project permitting risks from bidding or by requiring them
to price the risk into their bids.
D. Additional Information or Observations Regarding SCE’s Evaluation
Methodology
No additional information or observations are provided.
V. Did SCE Fairly Administer the Evaluation and Selection Process?
This section of the report discusses SCE’s administration of the evaluation and selection
process and whether or not the process was conducted fairly and consistently. The IE’s
conclusion is that overall the evaluation process was conducted in a fair and consistent
manner. The IE agreed with the depth of the shortlist selected by SCE and the proposals
selected for the shortlist, including several geothermal proposals that were selected out of
economic rank order but offered portfolio diversity to SCE. The IE also concurred with
the reasonableness of the evaluation process for final offers. With regard to the selection
of final offers, the IE agreed with the seven project proposals selected
order to meet a two times need quantity36, but has reservations regarding the selection of
the Geysers geothermal proposal, which raises a variety of policy and factual questions
for the Commission to address in a competitive solicitation context. This section of the
report discusses the evaluation and selection process that led first to the shortlist and then
to final offer selections and describes the fairness and reasonableness of the decisions.
36
The seven projects selected
The IE was supportive of selection based on two times need because of the risk that
several of these projects might not achieve commercial operation.
Merrimack Energy Group, Inc.
38
A. Principles and Guidelines Used to Determine Fairness of Process
In evaluating SCE’s performance in implementing its evaluation and selection process,
Merrimack Energy has applied a number of principles and factors, which incorporate
those suggested by the Commission’s Energy Division as well as additional principles
that Merrimack Energy has used in its oversight of other competitive bidding processes.
These include:

Were all proposals treated the same regardless of the identity of the Seller?

Were Seller questions answered fairly and consistently and the answers made
available to all, where appropriate?

Was the economic evaluation of the proposals fair and consistent to all Sellers?

What quantitative and qualitative factors were used to evaluate proposals?

Did the bid evaluation team maintain consistent scoring and evaluation among
and across projects, including different types of projects?

Were the requirements and criteria listed in the Procurement Protocol applied in
the same manner to all proposals?

Was there evidence of any undue bias regarding the evaluation and selection of
different type of technologies, project structures, bid sizes, or contract terms that
cannot be reasonably explained?

Were the proposals given equal credibility in the economic evaluation?

Did SCE ask for “clarifications” in a manner that provided a Seller an unfair
advantage over others?

Did all Sellers have access to the same information?

Were all cost factors (e.g. imputed debt, transmission costs) treated in an
equitable and consistent manner?

Did SCE consistently apply the requirements, procedures and criteria of the
evaluation process as identified in the RFP documents to different proposals and
types of projects?

Was the evaluation and selection process based on adequate information about
each proposal and a thorough investigation by SCE’s project team?
During the discussions leading up to selection of the shortlist, SCE also considered
qualitative attributes to either eliminate or add projects. The qualitative attributes
Merrimack Energy Group, Inc.
39
considered included attributes that were identified in SCE’s Procurement Plan as well as
specific attributes that were considered based on the circumstances in the market
influencing this solicitation.37 The following qualitative attributes were considered in the
development of the shortlist:







Project viability: new vs. existing projects
Term of the offer (10, 15, 20 and 25 years)
TRTP timing of build-out
IID network upgrade costs spread across transmission access customers
Out-of-state resource eligibility—Category 1 (for example; dynamic scheduling)
Fuel diversity and the inclusion of geothermal
Environmental considerations: SCE reviewed projects using the Nature
Conservancy Goggle Earth maps to assess potential environmental impacts and
permitting challenges
Some of these same issues were considered by SCE in making selections of final offers,
especially (a) project viability and diversity benefits of existing geothermal capacity and
(b) IID network upgrade costs,
B. Description of IE Methodology Used to Evaluate Administration of SCE’s LCBF
Process
SCE provided the IE access to the data inputs used in the evaluation model as well as the
outputs which served as the basis for selection of the shortlist. SCE provided several
output files for IE review and comments during the evaluation process, with revisions to
the outputs based on updates to proposal information obtained during the cure and
conformance period.
As previously noted, SCE used the Accion Power website as the bidding platform. Sellers
were able to upload their proposals to the website and were required to provide the
proposals in consistent file format which facilitated review. Sellers were also provided
37
Several market issues had an influence in informing SCE’s use of business judgment in shortlist
selection. First, the inherent conflict between the developers’ interest to construct their projects by
December 2016 to take advantage of the current 30% Investment Tax Credit and SCE’s need for energy in
the 2019-2020 timeframe led to challenges in evaluation and selection. While SCE’s goal was to allow
projects to achieve an earlier commercial operation date (to allow solar projects to qualify for the 30% ITC)
to lower cost for customers), SCE preferred a later delivery date for the energy, capacity and renewable
attributes. Second, a few projects proposed to deliver power via the Tehachapi Renewable Transmission
Project with a proposed delivery date in the 2016 timeframe. SCE’s view was that the TRTP facilities
would not be completed in time for a 2016 delivery and therefore SCE did not want to take the risk
associated with the generation available in the 2016 timeframe if the TRTP was delayed until 2018 or later.
SCE initiated calls with shortlisted Sellers who proposed to deliver energy to TRTP to identify the risk SCE
was concerned about and to attempt to reach a resolution to allow the projects to remain on the shortlist. As
a result, SCE still selected the projects for the shortlist and attempted to work with the Sellers to find a
solution rather than eliminating the proposal from consideration. The IE participated in calls with the
affected Sellers to discuss options for addressing this issue. One project proposing to deliver to TRTP
withdrew prior to submitting a final offer. The one project for which a resolution was reached on this issue
submitted a final offer but was not selected for economic reasons.
Merrimack Energy Group, Inc.
40
with a bid number, with a unique identifier for each proposal.38 The IE had access to all
proposals and documents submitted to the website. The IE also had access to all
questions and communications between SCE and the Seller throughout the process. Most
importantly, one of the most attractive features of the website was the ability to create
reports to summarize proposal information and to then transform the files into Excel to
manage the data. The IE created several reports immediately after submission of the
proposals to summarize pertinent high level project information, the pricing proposal, and
interconnection and deliverability information. The website also maintained a record of
all communications and follow-up information provided by the Sellers, which allowed
the IE to remotely monitor all activity and communications.
During the course of proposal review, the IE raised a number of questions and comments
about the evaluation results, specific questions about individual proposals, and apparent
inconsistencies for several proposals.
The IE was also present via teleconference for all project team meetings, project
management meetings, and epRMC meetings in which proposal review and shortlist and
final selection decisions were taking place. The IE raised comments and was asked for its
opinion on shortlist selection as well as final offer selection. The basis for selection
decisions was made evident at these meetings.
The IE conducted a review and assessment of both the quantitative and qualitative
aspects of proposal evaluation and selection. With respect to the quantitative analysis, the
IE:

Reviewed the pricing formulas proposed by each Seller and developed a
general ranking of proposals based on the pricing ranges proposed;

Conducted a levelized cost analysis for a sample of the lowest cost proposals
received after conducting an initial assessment of the offer prices based on the
reporting function associated with the Accion Power website;

Conducted an initial assessment of each shortlisted proposal based on the
Project Viability Calculator prior to shortlisting;

Conducted an additional assessment of each final project proposal based on
the Project Viability Calculator and including any additional information
about the project gleaned during the contract negotiation process;

Conducted a comparison of the rankings of selected proposals by SCE in
comparison to the rankings based on the IE’s analysis;
38
For example, a Seller who offered three proposals and was classified as Bidder 100, may have proposals
100-1, 100-2 and 100-3 as the identifiers for the three proposals submitted. This allowed SCE and the IE to
easily identify specific proposals in reviewing and discussing the offers.
Merrimack Energy Group, Inc.
41

Reviewed the output generated by SCE and reviewed the results of the
evaluation with SCE’s project team lead;

Audited the communications between SCE and Sellers by reviewing the email
traffic between the parties during all stages of the solicitation process (i.e.
leading up to and after proposal submission, and following shortlist selection
through final contract execution) by reviewing the email exchanges on the
Accion Power website;

Maintained communications with the SCE project team during this process
regarding the status of conformance of proposals with SCE eligibility
requirements and identifying any proposals that were not yet in conformance
with requirements;

Reviewed and assessed the decisions made by SCE regarding shortlist and
final selection, including revisions to the renewable premium values for
specific projects based on updated information;

Compared SCE’s evaluation of final offers to the evaluation of indicative bids
to check for any potential inconsistencies or potential issues in the evaluation;

Reviewed and assessed the decisions made by SCE regarding final offer
selection.
For qualitative factors, the IE independently scored all of the shortlisted proposals based
on the Project Viability Calculator. In scoring for shortlisting purposes, both SCE and the
IE generally accepted Seller representations without documentation based on Seller
attestations or representations, unless the Seller representations were not merited based
on the information submitted with the proposal. Both SCE and the IE also scored all
projects that submitted final offers. The IE and SCE conducted a more detailed review
and assessment of the qualitative factors for final evaluation.
At both stages of the evaluation process, the IE had differences with SCE on some
proposals, but the differences were relatively small and were understood based on
discussions with SCE contract managers and the IE. Overall, the PVC scoring indicated
that the shortlisted projects and projects selected for contracts appeared on the whole to
be highly viable and SCE’s scoring was reasonable and consistent.
We conclude that SCE on the whole reasonably followed the criteria outlined in the
Procurement Protocol. In addition, the evaluation was consistent and equitable across
different types of proposals and technologies and reflected the totality of costs and
benefits identified in the Procurement Protocol. In the course of the evaluation and
selection process, there were several matters that arose that presented some difficult
factual matters that SCE needed to address. These are addressed in the following sections
of this report.
Merrimack Energy Group, Inc.
42
In addition, based on our assessment of the evaluation process relative to the above
criteria, it is our opinion that all Sellers were treated fairly and consistently and all had
access to the same amount and quality of information. SCE maintained a website
dedicated to the 2013 RPS RFP and utilized the Accion Power website which provided
same time access to information for all Sellers. The Request for Proposals Conference
held by SCE provided useful information to all Sellers with regard to the evaluation
methodology and the requirements for Sellers to provide the information requested. We
also observed no difference in the treatment of Sellers regarding clarification questions
for Sellers, correspondence and communications with Sellers, and follow-up contacts.
Finally, SCE generally implemented the evaluation criteria and methodologies as
outlined in the Procurement Protocol.
C. Did the Utility Identify, for Each Offer, the Terms that Deviate From the Utility
RFO? Did the IOU Identify Nonconforming Offers Fairly – Fair Both to the
Nonconforming Offers and to Conforming Participants?
Shortly after proposals were uploaded by Sellers to Accion Power’s website, SCE
performed a detailed review of the proposal packages to identify any deficiencies with
the regard to the information required from Sellers and to assess if any offers did not
meet the eligibility requirements listed in the Protocol. SCE followed up via the website
with regard to any deficiencies in the information required or with clarification questions
for the Seller. Sellers were generally cooperative in curing any deficiencies. Common
deficiencies included failure to provide a signature page for attestations associated with
site control and project experience and failure to provide all interconnection studies
secured.
There were several issues involving non-conformance based on the status of project
interconnection studies and arrangements. As discussed previously, the RFP required that
bidders have at least a Phase II interconnection study or equivalent.40 In addition, the
Procurement Protocol provides “Should Seller’s interconnection arrangement indicate an
39
We will provide our detailed assessment of the Geysers PPA and the pros and cons as to whether it
merits Commission approval in the IE report associated with SCE’s advice letter with respect to that PPA.
40
Procurement Protocol Section 1.03(c).
Merrimack Energy Group, Inc.
43
interconnection date later than the ERR Generating Facility’s forecasted COD, the
Proposal will not be given further consideration.”41
One of the Sellers,
However, no study had been performed for the
SCE called the Seller with the IE present on the conference call. SCE
confirmed that in fact no interconnection study had been performed for
and that the deficiency could not be timely cured. SCE informed the Seller that
it did not have sufficient information to properly evaluate the offer.
There were also issues regarding whether certain proposals
had sufficient site control for proposed gen-tie lines in order to meet
the requirements of the RFP. Section 1.03(h) of the Procurement Protocol provides:
SCE intends that the definition of “Site” and “Site Control” not only mean the
land upon which the ERR Generating Facility is expect to be located, but also
encompass any rights-of-way or other real property rights (e.g. land on which
Seller’s generation tie line between the ERR Generating Facility and the
Interconnection Point shall be constructed) necessary for Seller to be able to
deliver the Product to SCE. Seller’s Proposal must demonstrate Site Control or
the Proposal will not be given further consideration.
SCE did not make a final determination of non-conformity; the projects were not
shortlisted on the basis that the offers for these projects were not economically
competitive. Based on the information submitted by the Seller, it appears that these
proposals did not meet the threshold requirements for site control.
Another offer that had conformance issues was a proposal
.
None of the non-conforming bids were sufficiently competitive to make the shortlist on
the basis of their renewable premium scores.
Both before and after shortlisting, there were questions as to whether
SCE evaluated the final
41
Id.
Merrimack Energy Group, Inc.
44
offer, which was not sufficiently economically attractive for final selection based on the 2
times need criterion.
During the short listing process, SCE’s project leader indicated that no proposal was
rejected due to being incomplete. Rather, they indicated that SCE kept a record of
proposals that were incomplete, expecting to revisit any of these proposals that were
ranked as economically competitive based on their Renewable Premium scores. In
addressing non-conformities issues of a less substantive nature, such as incomplete
information, SCE was fairly lenient in allowing a variety of shortcomings, such as errors
in submittals, to be cured so that the proposals, as revised, would be sufficiently complete
and conforming and could compete in the process. In our view, SCE’s approach was fair,
reasonable, and inclusive.
D. If the IOU Conducted Any Part of the Offer Evaluation, Were the Parameters
and Inputs to the Evaluation Criteria Determined Reasonably and Fairly? What
Controls Were in Place to Ensure the Parameters and Inputs Were Reasonable and
Fair?
The parameters and inputs for the quantitative evaluation were largely developed
internally by SCE and were locked down prior to submission of the proposals. The IE had
the opportunity to review the input files and forecasts and held discussions with SCE
project team members to address the approach used to generate the inputs prior to receipt
of proposals.42
All the forward curves were locked down prior to receipt of proposals and would
therefore not be influenced by any offer. The IE reviewed the methodology used by SCE
to develop its forward curves for energy at different pricing points and felt that the
methodology (e.g. use of market quotes in the near term followed by a fundamental
forecast for the mid-term and trend analysis beyond a certain date)43 was reasonable and
consistent with industry practices.
SCE updated its energy price forecasts prior to undertaking the final evaluation and
therefore used its May, 2014 market price forecast for undertaking the evaluation of the
final offers in June, 2014.
42
The IE was familiar with SCE’s approach for developing its input forecasts based on serving as IE on
other solicitations such as the CHP RFO 1 and 2 solicitations.
Merrimack Energy Group, Inc.
45
SCE also prepared a forecast of capacity prices for purposes of calculating the capacity
benefit for eligible proposals.44 The methodology used to develop the capacity price
forecast deviates slightly from the previous forecast and results in a lower long-term
capacity price relative to the previous forecast.
SCE used its October, 2013 capacity value forecast for both the short list and final offer
evaluation.
Other inputs such as TOD factors, transmission adders, etc. were identified in the
Procurement Protocol and were consistently applied in the evaluation. Furthermore, the
quantitative methodology was consistently applied to all Sellers, with the overall
methodology (except for the inputs) revised (with some improvements) from the previous
solicitation.
From the qualitative perspective, the Project Viability Calculator tool developed by the
Energy Division was used in the PVC scoring of shortlisted projects. SCE did not make
any adjustments to the PVC.
Merrimack Energy Group, Inc.
46
E. If the IE or a Third Party Conducted Any Part of the Bid Evaluation, What
Information/Data Did the Utility Communicate to that Party and What Controls
Did SCE Exercise Over the Quality or Specifics of the Out-Sourced Analysis?
As noted, the IE conducted a preliminary independent evaluation of shortlisted proposals
and then an evaluation of final offers using the same Project Viability Calculator as SCE.
SCE did not attempt to influence the IE’s scoring and evaluation of the proposals. The IE
had the same access to information as did SCE in the PVC assessment.
Other than the IE’s independent PVC scoring, there was no third party participation in the
conduct of the bid evaluation.
F. Were Transmission Cost Adders and Integration Costs Properly Assessed and
Applied to Bids?
SCE’s preferred approach was to use at a minimum the Phase II interconnection study
results as the basis for assessing network upgrade costs to individual projects. If a project
already had executed an Interconnection Agreement, the costs included in the Agreement
were used (except as noted below).
There were several issues associated with applying transmission cost adders to particular
bids:


Determining the extent to which transmission network upgrade costs outside of
CAISO should be assigned to the project in the economic evaluation;
Assessing the extent to which transmission upgrade costs incurred within CAISO
are caused by the particular generator, with costs spread to California ratepayers;
Network Upgrade Costs Outside of CAISO
SCE’s LCBF methodology does not specifically address whether there should be a
transmission cost adder for a project that (a) requires transmission network upgrades, (b)
is located in a balancing area outside CAISO, and (c) does not propose to directly
interconnect to CAISO. Historically, SCE has not assigned a transmission cost adder for
these types of projects, whether they are located outside California or in another
balancing authority within California, on the basis that SCE’s customers (or California
IOU customers) will not be responsible for paying for any of the transmission network
upgrade costs.
SCE calculated transmission adders for a number of projects proposing to interconnect
with IID. SCE calculated them in the same manner as projects that would interconnect
with CAISO. However, SCE did not include the results in the renewable premium
quantitative metric and presented them separately as an alternative renewable premium.
SCE took this approach since it viewed the transmission adders for IID projects as being
part of the qualitative evaluation rather than part of the quantitative evaluation. The
Procurement Protocol does not specify that transmission adders apply to projects
Merrimack Energy Group, Inc.
47
interconnecting outside of CAISO as part of the quantitative analysis, while
“transmission area/cluster” and “generating facility location” are listed as criteria that are
part of the qualitative analysis.45
Several of the proposed projects within IID would trigger expensive network upgrades,
which, in turn, would trigger increased rates to IID’s ratepayers, all in order to serve the
California IOUs and their customers in order to meet RPS obligations. SCE’s
management expressed a concern that IID would prevail upon CAISO to assume those
costs, or at least a substantial share of them, under the theory that the California IOUs
were causing the costs to be incurred. SCE’s management expressed concern that it could
be perceived as being irresponsible to enter into contracts based on lower perceived costs
while there was a significant risk that the costs its customers might have to pay was much
higher. To put this in perspective, the cost of network upgrades for two of the projects
represented adders of 33-38% to the cost of the associated generation, an unusually high
percentage. At the same time, there were many other projects, including several from the
same developer, with very attractive prices without high transmission network upgrade
costs.
The IE has no independent basis to assess the risk that SCE’s customers may have to pay
for network upgrade costs to IID’s system at some future time. However, SCE’s
assessment does not appear to be unreasonable. SCE’s approach is consistent with
fundamental cost causation principles. It seems reasonable that costs incurred to help
meet statewide RPS goals should be considered in solicitations to facilitate construction
of projects to meet California RPS goals. Moreover, to ignore the incurrence of real costs
caused by a candidate project for a PPA solely because some constituency other than the
power purchaser’s customers will have to pay for the costs is economically inefficient
from a societal standpoint.
At the same time, SCE has drawn the line at the state’s border. Network upgrade costs
that will be ultimately paid by ratepayers outside California were not considered in the
45
Procurement Protocol 4.01; see also Procurement Plan, Public Appendix H.1, (LCBF Methodology)
II.A.1.b, f,
Merrimack Energy Group, Inc.
48
economic evaluation.
6
SCE was consistent in its treatment of non-CAISO network upgrade costs in both the
shortlisting and final evaluation stages.
On its merits, we do not find SCE’s approach to be unreasonable. It is consistent with
fundamental cost causation principles with respect to costs incurred inside California.
Consequently, it does not seem unreasonable that there is a risk that at some point in time
renewable energy purchases of California IOUs resulting in costs to non-CAISO
California balancing authorities will be assigned, at least, in part to CAISO, the
California IOUs and their customers. In any event, not to assign a transmission cost adder
to IID projects would appear to give them an undue competitive advantage over other
California projects within the CAISO.47 At the same time, treating non-California
projects differently—there appears to be no realistic risk that network upgrade costs
would have to be incurred by California customers—seems to be a reasonable distinction.
In light of SCE’s historical approach to not include in its evaluation transmission network
upgrade costs in non-CAISO California balancing authorities, SCE’s approach in doing
so for this solicitation, whether it is viewed as being part of the quantitative or qualitative
evaluation, can reasonably be criticized as a weakness from a procedural standpoint as
not having a strong basis in the solicitation documents.
46
We also note that to satisfy RPS Category 1 requirements, out-of-state projects must schedule their
energy into a California balancing authority without substituting electricity from another source or must
dynamically schedule their energy to a California balancing authority.
47
In fact, the bidder for one of the IID projects with very high network upgrade costs touted that its
proposal would result in no network upgrade costs to SCE’s customers.
Merrimack Energy Group, Inc.
49
The IE recognizes that SCE’s Procurement Plan and Procurement Protocol were not
specific on this issue and SCE’s practice in this solicitation was not consistent with its
past practice. In the future, we recommend that the issue of treating in-state reimbursable
transmission network upgrade costs incurred in CBAs other than CAISO as transmission
cost adders be incorporated in the procurement documents in order to inform prospective
Sellers and to facilitate transparency, unless, of course, the Commission decided against
this approach.
Application of Transmission Cost Adder Methodology to Projects Inside CAISO
SCE’s LCBF methodology provides that it will calculate transmission cost adders based
on the estimated cost of reimbursable network upgrades attributable to individual projects
based on the applicable completed interconnection study (Phase 2 or equivalent) or
interconnection agreement. SCE applied these principles to a variety of projects with
Phase 2 interconnection studies and interconnection agreements.
With respect to one project, SCE determined, based on the facts and circumstances, that
to apply this approach in a strict fashion would result in a large overestimate of costs
assigned to the project.
Most of the investment was for network upgrades that SCE had agreed to finance
up-front, and much of the reliability network upgrades have already been built or are in
progress. A downsizing of
also reduced the need for some network
upgrades. The reduction in transmission costs assigned to the project materially improved
the quantitative evaluation of the project, but it was not sufficient for the project to be
shortlisted.
The IE reviewed the documentation provided by the bidder and attended a conference
call with the bidder’s representative and SCE’s transmission expert. In the IE’s opinion,
SCE’s consideration of changes in circumstances since the execution of the
interconnection agreement was reasonable. Also, the substantive assessment on
assignability of transmission costs appeared reasonable as well.
SCE’s review of interconnection arrangements and calculation of transmission adders
appeared reasonable and in accordance with the solicitation documents.
Merrimack Energy Group, Inc.
50
SCE did not utilize any integration cost adders in its evaluation. This is consistent with
its Procurement Plan and several Commission decisions.
G. Describe any additional measures the utility exercised in evaluating affiliate,
buyout, and turnkey offers.
There were no affiliate, buyout, or turnkey offers.
H. Describe Any Additional Criteria or Analysis Used in Creating its Short List (e.g.
Seller Concentration, Online Date, Transmission Availability, etc.). Were the
Additional Criteria Included in the Solicitation Materials?
While SCE rank ordered projects based on the Renewable Premium, there were several
areas where SCE exercised judgment in creating the shortlist. The shortlist selection
process and the additional criteria used in developing the shortlist are described below.
1. First, SCE finalized its procurement target—1,600 GWh per year. The target
was based on SCE’s projected needs to ratably satisfy its RPS obligations. As
indicated previously, the procurement target was not in any of the solicitation
documents.
2. Once SCE had rank ordered bid projects according to Renewable Premium, it
developed several potential shortlists based on multiples of the procurement
target. The potential shortlists considered were
3. SCE selected the shortlist
based
on the following qualitative factors:
need was needed to have a sufficiently robust
a. A shortlist of at least
number of counterparties;
b. Due to lack of an exclusivity negotiating obligation on the part of
counterparties, some shortlisted projects were expected to drop off the
shortlist;
c. A larger shortlist would include more projects with contract start dates that
were in the timeframe of SCE’s greatest need;
d. Technology, size, fuel and location diversity was considered;
e. Expiration of the 30% ITC for solar projects in 2016 favored a larger
shortlist;
f. Project viability in terms of new vs. existing projects;
g. Projects associated with build out of the Tehachapi Renewable
Transmission Project; and
h. As previously mentioned, concerns relating to IID network upgrade costs.
Merrimack Energy Group, Inc.
51
4. Three solar PV projects located in IID that otherwise would have been
shortlisted because of renewable premium ranking were not shortlisted when
IID transmission network upgrade costs were
5. Three existing geothermal projects were added to the shortlist
SCE’s rationale was that these existing geothermal
projects added value to the shortlist because they had high viability as existing
projects and offered non-intermittent production while all other shortlisted
projects were solar photovoltaic, wind and solar thermal. SCE also concluded
that the pricing offered by these projects compared favorably to pricing
generally offered by geothermal projects.
6. Two projects,
bid expected
commercial operation dates in December 2016. These projects are on the
TRTP transmission project. SCE’s project team expressed concerns of their
management that the TRTP would not be ready by that time and that negative
energy pricing and risk of curtailments might occur before TRTP could be in
service and mitigate the problem.
Several Sellers proposed energy storage as additional elements of project proposals,
including shortlisted projects, but the energy storage offers tended to be vague and not as
economically attractive as the offers for the same projects without energy storage. SCE
selected the offers without energy storage but indicated that it would entertain more
specific offers that included energy storage for shortlisted projects if Sellers wanted to
negotiate contract terms that would provide for energy storage features.
Merrimack Energy Group, Inc.
52
The result of SCE’s approach was a short list that took into consideration a variety of
risks (bidder concentration/project viability/technology/IID network upgrade costs) while
being more diverse, with the potential for being larger in size, than if the short list was
chosen solely based on the Renewable Premium metric and SCE’s initial procurement
target. Since SCE is using a two-stage process for final evaluation and selection of
proposals, a deep shortlist should not be an issue and should result in more competitive
price pressures for those Sellers and proposals still under consideration. In the IE’s view,
SCE’s decision to select a deep short list and use the factors identified above for purposes
of structuring the short list was generally reasonable and consistent with the Procurement
Protocol.
I. Results Analysis
1. Identify instances where the IE and the IOU disagreed in the LCBF
evaluation process
The IE raised a number of clarifying questions with SCE about its interpretation of the
proposals by a few bidders as well as potential inconsistencies in the evaluation results.
Generally, the IE identified potential inconsistencies or errors, brought these to SCE’s
attention, and held a discussion or exchanged emails with SCE until the issue was
resolved. One area where the IE had an issue with shortlist selection was associated with
the
The IE interpreted the proposal to be mutually exclusive
among the three offers while SCE did not view the proposals as being mutually exclusive
but offered the option to take any or all projects. After shortlist selection,
2. Overall, was the overall offer evaluation fairly administered
In the IE’s opinion, the overall offer evaluation was fairly administered for the reasons
previously stated in this report, with the qualification that the selection of the Geysers
project proposal
SCE, however, presented a strong rationale for its selection of the Geysers
proposal, subject to review and approval of the resulting PPA by the Commission,
J. Any Other Relevant Information or Observations
The IE has replicated the shortlist in Appendix C. The final offers submitted by the
shortlisted projects are summarized in Appendix D. Appendix E provides a summary of
the final evaluation results.
Merrimack Energy Group, Inc.
53
VI. Does the Proposed RPS Shortlist Merit Commission Approval?;
Was the Evaluation and Selection Process for Final Offers Reasonable
and in Accord with the Procurement Protocol?
This section addresses whether SCE’s shortlist merited CPUC approval. The CPUC in a
letter order determined that the shortlist was effective, albeit without explanation. This
section of the report also addresses the reasonableness of SCE’s evaluation of final offers
and its selection decisions.
A. Did the IOU Conduct a Fair Solicitation That Was Consistent with Commission
Decisions and its Approved LCBF Methodology?
For the reasons stated herein, Merrimack Energy concludes that SCE conducted a fair,
thorough and detailed solicitation process leading to shortlist selection that was consistent
with Commission decisions and SCE’s approved LCBF methodology. SCE followed its
stated evaluation process from receipt and initial review of proposals to final shortlist
selection. SCE used its LCBF methodology as described to calculate the Renewable
Premium values for all proposals, including options proposed by Sellers for the same
projects. SCE then selected the option for each proposal or project which had the highest
Renewable Premium value, after eliminating proposals with a 25 year term. From there,
all proposals were ranked based on the highest to lowest values based on Renewable
Premium. Since SCE’s ranking focused on the highest valued proposals for each project,
the final shortlist is primarily comprised of the offers that provide the highest value.
The three proposals that were not selected were IID projects that had high
estimated upgrade costs. SCE chose to augment its shortlist with three geothermal
projects that “jumped over” a number of projects on the economic merit order list based
on considerations of fuel and technology diversity and project viability. SCE’s
shortlisting decisions were reasonable and were grounded in the requirements, evaluation
criteria and stated preferences set forth in the Procurement Protocol. The selection of the
short list was very inclusive and erred on the side of including more proposals.
B. Did the IOU Choose Projects for the Shortlist That Provide the Best Overall
Value to Ratepayers While Meeting the IOU’s RPS Compliance Needs? Could
the IOU Have Incorporated a Decision-Making Process That Provided for a
Different Portfolio of Projects That Provide Better Overall Ratepayer Value
While Meeting the IOU’s RPS Compliance Needs?
As noted above, SCE selected projects in merit order up to the top
, with the
exception of three IID projects on the initial shortlist that fell out of economic merit
order, when network upgrade costs were assigned to the Renewable Premium evaluation
of these bids. Even without these three projects, the total GWhs included on the merit
order ranking would still be nearly
the estimated procurement target. The only
proposals taken out of merit order were the geothermal proposals which have the highest
Renewable Premium values.
Merrimack Energy Group, Inc.
54
As a result, the projects on the shortlist included the most highly ranked projects from a
purely quantitative perspective, eliminated the three projects with the highest risk of very
high transmission costs being assigned to SCE customers that were not included in the
initial quantitative assessment, and provided for inclusion of three existing nonintermittent geothermal facilities
While it is a matter of judgment whether this particular shortlist provides the
best overall value for SCE and its customers, the IE concurred with the reasonableness of
SCE’s shortlisting decisions to consider IID network upgrade costs in its evaluation and
to include the geothermal projects to provide resource diversity at prices that were
deemed low for geothermal projects.
C. Did the Shortlist Conform to the Needs of the IOU’s Portfolio, RPS
Requirements, RPS Procurement Plan and Protocol?
The shortlist conforms well to SCEs needs as identified in the RPS Protocol and RPS
Procurement Plan. All shortlisted proposals had either an Interconnection Agreement or
Phase II interconnection study as required. A large number of the proposals selected have
a COD date that conforms to SCE’s needs in the 2019-2020 timeframe. There is also a
mix of proposals that include new and existing proposals along with proposals with 10,
15, and 20 year contract terms. Although the shortlist portfolio is heavily weighted
toward solar projects, there is a mix of solar PV projects and solar thermal projects. Wind
and geothermal projects are also represented on the shortlist. While counterparty
concentration is fairly high for one Seller
, as the depth of the shortlist
increases, supplier concentration ratios decline as more Sellers are brought into the
shortlist. With
on the shortlist, supplier concentration does not appear
problematic.
The IE believes that overall SCE followed the methodology described in its RPS
Procurement Plan and Procurement Protocol in developing and finalizing a short list
using the applicable metrics and criteria and applying reasoned judgment. Overall, SCE’s
decisions were consistent with the RPS Procurement Plan, Procurement Protocol and
with LCBF principles.
D, Did SCE Reasonably Evaluate the Final Offers and Make Reasonable Selection
Decisions in Accord with the Procurement Plan and Protocol?
As previously noted, in its Procurement Plan SCE proposed to adopt a two-step
evaluation process for this evaluation. As in prior solicitations, sellers will submit their
proposals and, after evaluating each proposal, SCE selects the best proposals for
inclusion on a short list. SCE and shortlisted sellers then negotiates contract terms over a
set negotiation period, expected to be approximately three months. Should SCE and a
seller be unable to complete negotiations in the time frame, the seller’s proposal is
Merrimack Energy Group, Inc.
55
dropped from consideration. At the end of the negotiation period, sellers have an
opportunity to refresh their proposed pricing, but no other elements of their proposal or
the negotiated contract terms may be changed. SCE then re-evaluates proposals based on
the refreshed pricing and execute those contracts that it determines will provide the best
value to its customers. SCE indicated in its Procurement Plan that it expects this structure
to significantly reduce the amount of time required to negotiate contract terms for both
SCE and sellers. Additionally, the two-step solicitation process will alleviate the problem
of pricing terms becoming stale because of the time period between shortlisting, contract
execution, and Commission review of the contract, which the Commission has identified
as a potential problem.
After shortlist selection, SCE began to initiate Step 2 in the process.
For the remaining projects, SCE
identified a Contract Manager to lead contract negotiations with each counterparty, along
with an attorney and representative from Credit as the team for the negotiation process
with each counterparty. Earlier in the process, SCE had posted the pro forma PPA to the
Accion website. SCE now requested the remaining shortlisted sellers to review the PPA
and provide a red-line as soon as possible. Once the red-lines were submitted contract
negotiations would begin.
SCE also offered a debriefing session for any Seller that was not shortlisted. A number of
Sellers requested debriefing sessions and SCE accommodated the requests. The IE was a
participant on most of the calls.
During the early stages of contract negotiations,
Once final offers were received, SCE conducted its final evaluation and assessment of
each offer and rank ordered the projects based on Renewable Premium and Alternative
Renewable Premium values.
Merrimack Energy Group, Inc.
56
While the IE was in agreement with
the seven solar projects selected we do have some concerns about the Geysers project
We will
address the relative merits of the Geysers PPA in detail in the IE report associated with
SCE’s advice letter for that contract. However, it is our perspective that whether or not
the Commission approves the Calpine Geysers PPA should not bear upon the merits of
the seven solar PV PPAs
VII. The Mount Signal II and Mount Signal V PPAs and the
Fairness of the Project-Specific Negotiations
A.
The Mount Signal II and Mount Signal V Projects and PPAs
8minutenergy Renewables and Silver Ridge Power
Mount Signal II
and Mount Signal V proposed solar PV projects being developed in southern Imperial
County west of the City of Calexico. 8minutenergy Renewables and Silver Ridge Power
submitted
8minutenergy Renewables and Silver Ridge Power also submitted
Mount Signal V,
for
Commercial Terms of the Mount Signal II and V PPAs
8minuteenergy Renewables and Silver Ridge Power were successful in reaching timely
agreement on contract terms with SCE, which allowed them to submit final offers for the
Mount Signal II and Mount Signal V projects. The PPAs were executed on July 31, 2014.
This section of the report will provide an overview of the key provisions of the Mount
Signal II and Mount Signal V PPAs including project specific provisions, performance
and operational provisions. In addition the report addresses
Merrimack Energy Group, Inc.
57
There were several issues and considerations associated with the negotiation of contract
provisions with the Mount Signal Solar Farms projects, including the following:
The key project specific terms of the Mount Signal II and Mount Signal V PPAs are
summarized below.
Generating Facility Name
(Section 1.01(a))
Product (Section 1.01(d))
Type of Facility (Section
1.01(g))
Delivery Point – Section
1.01(f)
Location of Facility (Section
1.01(b), Exhibit B
Delivery Term – Section 1.05
Mount Signal Solar Farms II
Mount Signal Solar Farms V
All electric energy produced by the
generating facility, net of Station
use; all green attributes; all
capacity attributes; and all resource
adequacy benefits.
Solar PV Single access tracking
All electric energy produced by the
generating facility, net of Station
use; all green attributes; all
capacity attributes; and all resource
adequacy benefits
Solar PV Single access tracking
At the point of interconnection
with the CAISO controlled grid at
the Imperial Valley substation
City of Calexico, in southern
Imperial County, CA
20 years from the Commercial
Operation Date
At the point of interconnection
with the CAISO controlled grid at
the Imperial Valley substation
City of Calexico, in southern
Imperial County, CA
20 years from the Commercial
Operation Date
Merrimack Energy Group, Inc.
58
Contract Capacity (Section
1.01(h))
Price (Section 1.06(a))
Annual degradation factor
(Section 1.01(j))
Commercial Operation Date –
Section 1.04
153.52 MW (AC);
252.32 MW (AC);
June 1, 2020
February 1, 2019
.
Time of Delivery Periods (“TOD Periods”)
TOD Period
Summer
Jun 1st – Sep 30th
Winter
Oct 1st – May 31st
Applicable Days
On-Peak
Noon – 6:00 p.m.
Not Applicable.
Weekdays except Holidays.
Mid-Peak
8:00 a.m. – Noon
8:00 a.m. - 9:00 p.m.
Weekdays except Holidays.
6:00 p.m. – 11:00 p.m.
Off-Peak
Super-Off-Peak
11:00 p.m. – 8:00 a.m.
Weekdays except Holidays.
6:00 a.m. – 8:00 a.m.
Weekdays except Holidays.
9:00 p.m. – Midnight
Weekdays except Holidays.
Midnight – Midnight
6:00 a.m. – Midnight
Weekends and Holidays
Not Applicable.
Midnight – 6:00 a.m.
Weekdays, Weekends and Holidays
Merrimack Energy Group, Inc.
59
TOD Period
Summer
On-Peak
Fixed Value.
2.64
Mid-Peak
Fixed Value.
1.27
Off-Peak
Fixed Value.
0.82
Mid-Peak
Fixed Value.
0.96
Off-Peak
Fixed Value.
0.87
Super-Off-Peak
Fixed Value.
0.74
Winter
Calculation Method
Full Capacity Deliverability Status
Product Payment Allocation Factor
Season
“Holiday” is defined as New Year’s Day, Presidents’ Day, Memorial Day, Independence Day, Labor Day,
Veterans Day, Thanksgiving Day, and Christmas Day.
When any Holiday falls on a Sunday, the following Monday will be recognized as a Holiday. No change will be
made for Holidays falling on Saturday.
SCE’s economic analysis of the costs of the Project was based on post-TOD payments in
light of the Project’s production profile.
Other PPA Contract Terms and Conditions
Merrimack Energy Group, Inc.
60
Merrimack Energy Group, Inc.
61
B. Identify principles used to evaluate the fairness of the negotiations
The general principles followed by the IE in evaluating contract negotiations include
assurance that the risk allocation provisions in the contract are reasonably balanced
between the counterparties and that the utility customers are not placed at undue risk as
result of the contracting process. The IE generally “monitors” but does not actively
participate in the contract negotiation process but will identify issues to the utility
transactors if negotiations are moving off track, if there are biases or inconsistencies in
the process, or if the IE wants to ensure that all similar projects being negotiated are
treated in a similar manner. It has been our experience in monitoring a number of
negotiation processes that contract negotiations can divert off course but eventually
return to a balance after contested provisions are resolved. We also attempt to ensure that
similarly situated counterparties are treated the same or similarly and that all
counterparties are provided with the same message. For example, SCE informed
shortlisted bidders throughout the process that this was still a very competitive process
with no guarantee of a bidder being awarded a contract since more projects were
shortlisted than the amount of renewable energy it was seeking to contract in the
solicitation. While SCE did not directly inform shortlisted bidders how much they needed
to lower their price to be competitive, there was a clear message that all shortlisted
bidders should sharpen their pencils for the final offer pricing.
C. Using the above principles (Section V.A.), please evaluate fairness of
project-specific negotiations
SCE established contract
negotiation teams for each counterparty that included a commercial contract manager,
attorney and credit analyst. In addition, SCE established a core team to address issues that
arose during the contract negotiation process from an internal policy perspective to
ensure a consistent message and internal policy was conveyed to all contract negotiation
teams. In addition, SCE held weekly core team meetings as well as weekly meetings of
the contract negotiation teams to assess the status of negotiations, discuss any policy of
contract negotiation issues that may arise and ensure that all contract negotiation teams
were fully aware of any issues that may emerge in other contract negotiation processes.
The IE found this process to be particularly valuable for keeping everyone on the contract
Merrimack Energy Group, Inc.
62
negotiation teams up to speed on any issues that were emerging during the contract
negotiation sessions.
While the IE concludes that all counterparties were fairly treated during the contract
negotiation process, it is fair to say that the time crunch during the final push to finalize
contracts prior to the execution date created challenges and the possibility of inconsistent
treatment. However, the checks and balances process undertaken by SCE to review and
internally approve all contracts prior to execution resulted in consistent treatment for all
counterparties, and all of the contract negotiations that were in process were successfully
concluded prior to submission of final offers.50
SCE also held a training session for Contract Managers to address the contract
negotiation process and ensure all Contract Managers were familiar with the key
provisions of the PPA prior to beginning the negotiation process. An SCE attorney
conducted the session and walked the participants through each Article in the PPA,
identifying the provisions that bidders had previously requested revisions as well as
management positions on several provisions and CPUC non-modifiable provisions. The
SCE attorney also described the process internally in cases where the counterparties
propose new contracting provisions that may affect several PPAs. The attorney noted that
if a material change is requested a number of managers at SCE have to sign off. The IE
found the session to be informative and an important step in the process to maintain
consistency in the negotiation process among different bidders.
In the IE’s opinion,
SCE acted fairly and responsibly in the contract negotiations and treated Mount Signal II
and Mount Signal V in a similar manner to other counter parties in light of the nature of
the Mount Signal II and Mount Signal V projects and the contract issues raised by
8minutenergy Renewables and Silver Ridge Power as their developers.
D. Identify the terms and conditions that underwent significant changes
during the course of negotiations?
This section of the report will address the standard PPA terms and conditions that
underwent significant change during the course of negotiations. In the case of SCE’s RPS
solicitation process, the IE will address two areas of interest. The first are those contract
provisions that were revised or added to the PPA that affected many of the shortlisted
50
There were a few contract matters that arose after final offers that required resolution, but they were not
of a material nature.
Merrimack Energy Group, Inc.
63
projects. The second are provisions that underwent changes for the specific PPA that is
the subject of this Advice Letter report.
General PPA Changes
The starting point for negotiations with all counterparties was the standard Pro Forma
Renewable PPA. SCE posted the Pro Forma PPA on the website. SCE’s Pro Forma PPA
is structured under the assumption that:

Seller’s proposal is based upon the greenfield development of a new Generating
Facility;

The Generating Facility’s first point of interconnection will be with the CAISO;
and

SCE will be the Scheduling Coordinator.
Shortlisted Bidders were requested to provide a red-line version of the PPA as soon as
practical after shortlist notification, although it was typical that red-lines were submitted
to the Accion website two to four weeks after shortlist notification. SCE informed the
shortlisted Bidders that there was only a three month window for negotiations and
encouraged shortlisted Bidders to post the red-line of the Pro Forma within a reasonable
timeframe since contract negotiations could not begin in earnest until the red-line had
been posted.
Several contract provisions were revised or provisions added during the course of
negotiations to address issues that were pertinent to most or several projects.
Merrimack Energy Group, Inc.
64
Merrimack Energy Group, Inc.
65
E. Was similar information/options made available to other
participants, e.g. if a participant was told to reduce its price down to
$X, was the same information made available to others?
The IE concludes that similar information and options were made available to all
participants. Not only were SCE’s processes and procedures established with a goal of
ensuring that all projects had access to the same information but SCE on several
occasions sent emails and other notification to all shortlisted bidders informing them of
the schedule for completing negotiations and finalizing contracts.
F.
Any other relevant information or observations, such as other
data or information used to inform the negotiations
VIII. Does the Contract Merit CPUC Approval?
A. Provide narrative for each category and describe the project’s ranking relative to: 1)
other offers from the solicitation (or recent bilaterals or market information if used in
reasonableness comparison; 2) other procurement opportunities (e.g. distributed
generation programs); and 3) from an overall market perspective:
1.
Contract Price, including transmission cost adders
2.
Project’s net market value
3.
Consistency with stated RFO goals
4.
Portfolio Fit
5.
Project Viability
6.
a.
Project Viability Calculator score
b.
IOU-specific project viability measures
c.
Other (credit and collateral, developer’s project
development portfolio, transmission, other site-related
matters, etc.)
Any other relevant factors
Merrimack Energy Group, Inc.
66
Merrimack Energy Group, Inc.
67
Both the Mount Solar Farms II and Mount Solar Farms V projects and PPAs meet the key
goals of SCE’s 2013 RPS RFP.
The projects are being developed by reasonably experienced solar PV
developers that are very familiar and active in the California market.
From a portfolio fit perspective, both Solar Farms II and V fit SCE’s needs. Combined,
the projects are expected to provide approximately 1,062 GWh/year of generation.
Also, from a portfolio fit perspective,
the delivery date under the contract to SCE will conform to the date of SCE’s need for
the renewable energy in the 2019-2020 timeframe.
Merrimack Energy Group, Inc.
68
The Project Viability Calculator serves to highlight project strengths and weaknesses in
terms of the developer’s likelihood of being able to successfully finance and build the
proposed project if the PPA receives regulatory approval. Areas where a project receives
less than all of the points in a category can highlight a project weakness in some cases; in
other cases, a less than perfect score is not really problematic.
For example, 8minutenergy Renewables and Silver Ridge Power have very experienced
and apparently very capable project development teams, with a track record of successful
completion of hundreds of MWs of solar PV projects.
Similarly, the project sponsors have a very strong track record of having obtained
financing of projects it has successfully developed.
The Mount Signal Solar Farms II and V projects have significant strengths that contribute
to project viability.
Merrimack Energy Group, Inc.
69
.
B. Do you agree with the IOU that the contract merits CPUC approval? Explain
the merits of the contract based on offer evaluation, contract negotiations, final
price, and viability.
Merrimack Energy agrees with SCE that the Mount Signal Solar Farm II and Mount
Signal Solar Farm V projects merit CPUC approval.
The PPAs were
reasonably negotiated with contract terms that taken as a whole appropriately protect the
interests of SCE’s ratepayers.
All in all, there are very strong reasons to support approving the Mount Signal
Solar Farm II and Mount Signal Solar Farm V PPAs.
C. Any other relevant information or observations
SCE executed eight PPAs arising out of the 2013 RPS solicitation, with expected energy
production
While exception might be taken to one or more other PPAs that arose out of
this RPS solicitation, Merrimack Energy sees no reason why the Mount Signal Solar
Farm II and Mount Signal Solar Farm V PPAs should not receive CPUC approval.
Merrimack Energy Group, Inc.
70
Appendix A: SCE’s Least Cost Best Fit Evaluation Methodology
Market Valuation
SCE will evaluate the quantifiable attributes of each Proposal individually and
subsequently rank them based on the Proposal’s benefit and cost relationship, specifically
the net levelized cost of the project or Renewable Premium. These individual quantitative
components include: capacity benefits, energy benefits, contract payments, debt
equivalence mitigation cost, transmission cost, and congestion cost. In developing its
relative merit order ranking of Proposals, SCE’s evaluation methodology incorporates
information provided by Sellers and assumptions prescribed and set by the Commission
with its internal methodologies and forecasts of market conditions. The objective of the
quantitative assessment and relative Renewable Premium ranking is to develop a
preliminary shortlist that is further refined based on the non-quantifiable attributes
discussed below.
Each of the elements for the RPS quantitative analysis is described below.
Benefits
1. Capacity Benefit
Each proposal is assigned a capacity benefit, if applicable, based on SCE’s forecast of net
capacity value and the quantity of Resource Adequacy derived by SCE based on the
seller’s offer capped at the generating facility’s peak capacity contribution factor,
calculated for each facility pursuant to the Qualifying Capacity Methodology Manual,
based on the hourly generation profile submitted as part of the offer submittal package.
For wind and solar Proposals, peak capacity contribution factors are calculated in a
manner consistent with the Commission’s Resource Adequacy accounting rules (D.0906-028) utilizing a 70% exceedance factor methodology based on the hourly generation
profile submitted as part of the offer submittal package. Peak capacity contribution
factors are both technology and location-specific. Technological differentiation does not
refer to the fuel source, but rather the method of converting other energy sources into
electricity (e.g. solar trough, solar photovoltaic). For Proposals with dispatchable
capabilities at SCE’s control, the peak capacity contribution factor is based on the
availability of the proposed project. For other technologies without dispatchable
capabilities, the quantity of Resource Adequacy benefits is based on a three-year rolling
average of production during certain hours.
Monthly capacity benefits include the product of SCE’s net capacity value forecast and
the quantity of Resource Adequacy capacity determined for each month of the year.
Capacity benefits are only applied for those months in which SCE has a capacity need.
Additional value will be attributed to facilities located in the Los Angeles Basin or Big
Creek/Ventura local reliability areas.
Merrimack Energy Group, Inc.
71
2. Energy Benefit
SCE measures the energy benefits, as applicable, of a Proposal by evaluating the
estimated market value of energy. The evaluation of energy benefits is performed with a
base portfolio and system that is consistent with Track II of SCE’s most recent LongTerm Procurement Plan (“LTPP”), with some updates to account for the latest gas price
and the results of recent procurement activities. In the event that a Proposal provides
additional value to SCE from the provision of one or more ancillary services (regulation,
spin, or non-spin), SCE may use an internal forecast for ancillary service prices as a
means of evaluating any incremental benefit.
For Proposals with must-take energy, SCE calculates the energy benefits of a Proposal
based on SCE’s internal forecast of the market value of energy. The hourly energy
benefit for the Proposal is the resulting market price multiplied by the hourly sellerprovided generation profile.
For Proposals with dispatchable capabilities at SCE’s control, SCE calculates the net
energy benefits based on the market value of the energy when the proposed resource
dispatches. SCE utilizes Ventyx’s Prosym model to determine the dispatch economics for
the proposed resource according to the unit characteristics provided by the seller.
SCE’s gas price and power price forecasts are based on a blend of a near-term market
view and a longer-term fundamental view of prices.
The simulation model, and hence the energy benefit calculation, captures additional
quantitative effects that SCE has been asked to consider by the Commission, including
dispatchability. The dispatchability benefits, such as ancillary services and real-time
flexibility, are implied in the energy benefit and are not addressed separately.
Costs
1. Contract Payments
The primary costs associated with each Proposal are the contract payments that SCE
makes to sellers for the expected renewable energy deliveries.
Proposals typically include an all-in price for delivered renewable energy, which is
adjusted in each time-of-delivery period by the applicable energy payment allocation
factors (“TOD factors”). Total payments are determined by multiplying the generation by
the contract price, adjusted for each TOD period
2. Debt Equivalence
“Debt Equivalence” is the term used by credit rating agencies to describe the fixed
financial obligation resulting from long-term power purchase agreements (“PPAs”).
Merrimack Energy Group, Inc.
72
Pursuant to D.04-12-048, the Commission permitted the IOUs to recognize costs
associated with the effect debt equivalence has on the IOU’s credit quality and cost of
borrowing in their evaluation process. In D.07-12-052, the Commission reversed this
position. SCE, however, filed a petition for modification of D.07-12-052. In November
2008, the Commission issued D.08-11-008, which authorized the IOUs to recognize the
effects of debt equivalence when comparing PPAs in their bid evaluations, but not when
the IOUs are considering a utility-owned generation project. As such, SCE considers debt
equivalence in the evaluation process.
3. Congestion Cost
Localized congestion may cause a reduction in prices at a particular locational marginal
price (“LMP”) in the California Independent System Operator’s (“CAISO”) Market
Redesign and Technology Upgrade (“MRTU”) market. In D.11-04-030, the Commission
held that the IOUs must incorporate an assessment of these congestion costs in their
LCBF evaluation.
SCE applies a locational congestion adder to all projects to differentiate between project
locations. These locational adders may be positive or negative depending on the expected
congestion in the area. The locational adders are based on SCE’s forecast of LMPs in the
CAISO market in the location that seller plans to interconnect.
Projects that select an Energy-only (“EO”) interconnection do not fund the deliverability
upgrades needed to ensure their energy can serve load and avoid localized congestion. As
such, these projects increase the risk of congestion in these locations to a degree greater
than projects with a Full Capacity Deliverability Status (“FCDS”) interconnection. In
order to capture this difference, SCE applies an incremental congestion cost adder to all
CAISO projects that selected an EO interconnection, or any EO portion of the contract
term if FCDS status is expected to be achieved after the commercial on-line date. The
adder is based on LMPs in the MRTU market in the location that the seller plans to
interconnect.
4. Transmission Costs
Transmission costs are based on the estimated cost of the reimbursable network upgrades
attributable to individual projects. To participate in the 2013 RPS RFP, SCE requires
sellers to have an existing Phase II Interconnection study, or an equivalent of better
process or exemption. Transmission costs applicable to the project will be based on the
applicable completed interconnection study or interconnection agreement.
SCE uses the interconnection studies submitted as part of the offer submittal package to
determine the applicable network upgrade costs for all projects. These costs will not be
imputed for projects in transmission-constrained areas. SCE applies the required upgrade
costs to get the project delivered to the nearest defined market (e.g. NP15, SP15, ZP26
Generation Trading Hubs). For projects with an assumed delivery point outside the
Merrimack Energy Group, Inc.
73
CAISO (e.g. liquid power trading hub), SCE applies a power swapping methodology,
where the power is assumed to be sold into the local market.
5. Integration Cost
Integration costs, where applicable, are the additional system costs required to provide
sufficient ancillary service capability including load following and frequency regulation
to integrate renewable resources. As California continues to procure additional
intermittent renewable resources, SCE believes that current levels of intermittent
renewable resources will require an increase in the provision of ancillary services
mentioned above, and that an integration study that reflects updated regulatory and
procurement expectations should be used as the basis for integration costs. Moreover,
new Public Utilities Code Section 399.13(a)(4)(A)(i) provides that the Commission shall
adopt LCBF criteria that take into account estimates of indirect costs associated with
needed transmission investments and ongoing electrical corporation expenses resulting
from integrating and operating eligible renewable energy resources. However, in D.1211-016, the Commission declined to all the use of non-zero integration cost adders.
Portfolio Fit
SCE’s LCBF quantitative evaluation process inherently captures the impact of portfolio
fit. For example, as different Proposals are added to the overall portfolio, the resultant
residual net short or net long position is impacted. Projects that more often increase
SCE’s net long capacity positions are assigned less capacity benefits than those projects
that are more often filling net short positions.
SCE also considers portfolio fit in its qualitative analysis. Specifically, when assessing
additional qualitative characteristics to determine advancement to the shortlist or tiebreakers, SCE’s preference is for those projects that have commercial operation dates that
match periods of SCE’s need for renewable energy.
Credit and Collateral Requirements
In order to ensure comparable pricing for ranking, SCE requires sellers to bid conforming
Proposals committing to posting SCE’s pro forma performance assurance amount. SCE
accepts lesser performance assurance to be bid as long as a conforming Proposal is also
submitted. Performance assurance is the collateral posted by the seller during the
operating period.
Project Viability
SCE assesses the following attributes using the Project Viability Calculator:



Company/Development Team
Project Development Experience
Ownership/O&M Experience
Merrimack Energy Group, Inc.
74











Technology
Technical Feasibility
Resource Quality
Manufacturing Supply Chain
Development Milestones
Site Control
Permitting Status
Project Financing Status
Interconnection Progress
Transmission Requirements
Reasonableness of Commercial Operation Date (COD)
Other Qualitative Criteria/Preferences
Following the Project Viability Calculator qualitative assessment, SCE considers
additional qualitative characteristics to determine advancement to the shortlist or tiebreakers, if any. These additional characteristics may include:
















Contribution to other SCE program goals (e.g. GHG reductions pursuant to the
CHP Settlement Agreement);
Transmission area (e.g. Tehachapi, Sunrise, within SCE’s load pocket);
Congestion, negative price, and curtailment considerations not captured in the
quantitative valuation;
EO concentration;
Facility interconnection process progress;
Portfolio fit of COD;
Seller concentration;
Contract capacity (MW);
Expected generation (GWh/year);
Dispatchability;
Alternative Renewable Premium;
Environmental Impact of seller’s proposed project on California water quality;
Resource diversity;
Benefits to minority and low income communities;
Local reliability;
Environmental stewardship.
Merrimack Energy Group, Inc.
75
Confidential Appendix D.1
Contract Summary for Mount Signal II Contract
Confidential Appendix D.2
Contract Summary for Mount Signal V Contract
Confidential Appendix E
Comparison of the Mount Signal II Contract and the Mount
Signal V Contract with SCE’s 2013 Pro Forma Renewable
Power Purchase and Sale Agreement
Confidential Appendix F
Mount Signal II Contract and Mount Signal V Contract
Confidential Appendix G
Renewable Net Short Calculations
Public Appendix G
Renewable Net Short Calculations
Physical Renewable Net Short Calculations Based on CPUC Assumptions
Deficit from RPS
Variable
Calculation
Item
prior to
2011
2012
2013
Reporting Year
Actuals
Actuals
Actuals
Forecast Year
2011-2013
CP1
2014
2015
2016
Forecast
Forecast
Forecast
1
2
3
21.7%
23.3%
25.0%
2014-2016
CP2
2017
2018
2019
2020
Forecast
Forecast
Forecast
Forecast
4
5
6
7
2017-2020
CP3
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
Forecast
Forecast
Forecast
Forecast
Forecast
Forecast
Forecast
Forecast
Forecast
Forecast
Forecast
Forecast
Forecast
8
9
10
11
12
13
14
15
16
17
18
19
20
33.0%
33.0%
33.0%
Annual RPS Requirement
1
Bundled Retail Sales Forecast (LTPP)
A
B
RPS Procurement Quantity Requirement (%)
C
A*B
D
Gross RPS Procurement Quantity Requirement (GWh)
Voluntary Margin of Over-procurement
E
C+D
Net RPS Procurement Need (GWh)
73,777
20.0%
14,755
75,597
20.0%
15,119
74,480
223,854
20.0%
14,896
75,747
27.0%
44,771
-
-
-
-
14,755
15,119
14,896
44,771
29.0%
21,967
-
-
-
-
-
75,089
31.0%
23,277
75,662
76,194
33.0%
33.0%
24,968
-
-
-
21,967
23,277
24,968
25,144
-
76,660
33.0%
25,298
76,980
33.0%
25,404
77,205
33.0%
25,478
84,909
33.0%
28,020
86,495
33.0%
28,543
88,203
33.0%
29,107
90,012
33.0%
29,704
91,941
33.0%
30,340
94,003
33.0%
31,021
-
-
-
-
-
-
-
-
-
-
25,144
25,298
25,404
25,478
28,020
28,543
29,107
29,704
30,340
31,021
9,034
RPS-Eligible Procurement
Fa
Risk-Adjusted RECs from Online Generation
15,654
15,821
16,479
47,953
16,867
16,677
15,892
49,436
15,045
14,688
14,651
13,816
58,200
13,187
13,107
13,109
13,016
12,975
12,779
11,412
10,581
10,425
Faa
Forecast Failure Rate for Online Generation (%)
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
Fb
Risk-Adjusted RECs from RPS Facilities in Development
-
-
56
56
1,058
2,293
3,364
6,715
3,802
3,839
5,083
6,065
18,790
6,142
6,117
6,093
6,083
6,044
5,999
5,976
5,966
5,929
5,906
Fbb
Forecast Failure Rate for RPS Facilities in Development (%)
N/A
N/A
0.0%
0.0%
6.0%
22.1%
31.3%
25.1%
32.6%
32.4%
35.5%
38.4%
35.3%
38.7%
38.7%
38.8%
38.8%
38.8%
38.8%
38.8%
38.9%
38.9%
38.9%
Fc
Pre-Approved Generic RECs
-
-
-
-
-
37
145
182
809
904
907
910
3,529
907
907
907
910
907
907
907
910
907
907
Fe
Executed REC Sales
362
778
473
1,614
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
15,291
15,043
16,062
46,396
17,926
19,006
19,401
56,333
19,656
19,431
20,640
20,791
80,519
20,235
20,131
20,109
20,009
19,926
19,685
18,294
17,457
17,262
15,848
2
Fa+Fb+Fc-Fe Total RPS Eligible Procurement (GW
F
F0
Category 0 RECs 3
15,239
14,912
15,822
45,973
16,887
16,752
15,820
49,460
13,929
12,724
12,527
11,686
50,865
11,055
10,969
10,967
10,870
10,839
10,638
10,420
10,399
10,237
8,841
F1
Category 1 RECs 3
52
131
240
423
1,038
2,217
3,436
6,692
4,918
5,804
7,207
8,196
26,124
8,273
8,255
8,236
8,229
8,180
8,140
6,967
6,148
6,117
6,100
F2
Category 2 RECs 3
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,166
1,625
(2,535)
(2,637)
(4,177)
(4,909)
(5,167)
(5,294)
(5,469)
(8,094)
(8,858)
(10,813)
(12,247)
(13,079)
(15,173)
21.6%
20.7%
25.7%
27.5%
27.5%
26.6%
26.3%
26.1%
25.9%
23.5%
22.8%
20.7%
19.4%
18.8%
16.9%
Category 3 RECs
F3
Gross RPS Position (Physical Net Short)
Ga
F-E
Annual Gross RPS Position (GWh)
Gb
F/A
Annual Gross RPS Position (%)
536
20.7%
(76)
19.9%
Application of Bank
Ha
Existing Banked RECs above the PQR
Hb
RECs above the PQR added to Bank
536
Hc
Non-bankable RECs above the PQR
-
Gross Balance of RECs above the PQR
Ia
Planned Application of RECs above the PQR towards RPS Comp
Ib
Planned Sales of RECs above the PQR
0
0
0
Net Balance of RECs above the PQR
536
451
1,586
H
Ha+Hb
J
H-Ia-Ib
3
J0
Category 0 RECs
J1
Category 1 RECs 3
J2
Category 2 RECs 3
0
451
0
5,709
5,709
5,709
5,709
5,709
5,709
5,709
5,709
5,709
5,709
5,709
5,709
5,709
1,136
1,586
-
-
-
-
-
-
-
-
-
-
-
-
-
9
30
39
-
-
-
-
-
-
-
-
-
-
-
-
-
536
451
1,586
1,586
5,709
5,709
5,709
5,709
5,709
5,709
5,709
5,709
5,709
5,709
5,709
5,709
5,709
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,164
536
(85)
-
-
1,586
-
1,586
0
0
0
-
0
-
0
0
0
1,586
5,709
5,709
-
0
0
0
0
0
0
0
0
0
0
5,709
5,709
5,709
5,709
5,709
5,709
5,709
5,709
5,709
5,709
5,709
-
-
1,164
-
-
-
-
-
-
-
-
-
-
-
-
-
52
131
240
423
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,903
8,050
8,922
9,511
9,824
9,921
10,078
10,071
10,309
10,518
10,574
10,686
11,279
Expiring Contracts
K
2,029
RECs from Expiring RPS Contracts
2,524
3,627
8,181
5,589
29,464
Net RPS Position (Optimized Net Short)
La
Ga+Ia-Ib-Hc Annual Net RPS Position after Bank Optimization (GWh)
Lb
(F+Ia-Ib-Hc)/AAnnual Net RPS Position after Bank Optimization (%)
536
20.7%
(85)
19.9%
1,136
1,586
(2,535)
(2,637)
(4,177)
(4,909)
(5,167)
(5,294)
(5,469)
(8,094)
(8,858)
(10,813)
(12,247)
(13,079)
(15,173)
21.5%
20.7%
25.7%
27.5%
27.5%
26.6%
26.3%
26.1%
25.9%
23.5%
22.8%
20.7%
19.4%
18.8%
16.9%
Note: Fields in grey are potected as Confidential under CPUC Confidentiality Rules
Note: Values are shown in GWhs
Notes:
1 Bundled retail sales forecast for 2014‐2018 and 2025‐2030 is from SCE's bundled retail sales forecast; bundled retail sales forecast for 2019‐2024 is forcast that will be used in 2014 LTPP
2 Includes all contracts executed through 7/31/14; new generation forecast based on individual project specific success rates for large near‐term projects and flat average success rate for remaining projects based on these projects' overall weighted average success rate
3 Forecast of deliveries by portfolio content categories is for executed contracts only; does not include program generics
Physical Renewable Net Short Calculations Based on SCE Assumptions
Deficit from RPS
Variable
Calculation
Item
prior to
2011
2012
2013
Reporting Year
Actuals
Actuals
Actuals
Forecast Year
2011-2013
CP1
2014
2015
2016
Forecast
Forecast
Forecast
1
2
3
21.7%
23.3%
25.0%
2014-2016
CP2
2017
2018
2019
2020
Forecast
Forecast
Forecast
Forecast
4
5
6
7
2017-2020
CP3
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
Forecast
Forecast
Forecast
Forecast
Forecast
Forecast
Forecast
Forecast
Forecast
Forecast
Forecast
Forecast
Forecast
8
9
10
11
12
13
14
15
16
17
18
19
20
33.0%
33.0%
33.0%
Annual RPS Requirement
A
SCE Bundled Sales Forecast1
B
RPS Procurement Quantity Requirement (%)
C
A*B
D
Gross RPS Procurement Quantity Requirement (GWh)
Voluntary Margin of Over-procurement
E
C+D
Net RPS Procurement Need (GWh)
73,777
20.0%
14,755
75,597
20.0%
15,119
74,480
223,854
20.0%
14,896
75,747
27.0%
44,771
-
-
-
-
14,755
15,119
14,896
44,771
29.0%
21,967
-
-
-
-
-
76,613
31.0%
23,750
77,673
78,782
33.0%
33.0%
25,632
-
-
-
21,967
23,750
25,632
25,998
-
80,115
33.0%
26,438
81,663
33.0%
26,949
83,350
33.0%
27,505
84,909
33.0%
28,020
86,495
33.0%
28,543
88,203
33.0%
29,107
90,012
33.0%
29,704
91,941
33.0%
30,340
94,003
33.0%
31,021
-
-
-
-
-
-
-
-
-
-
25,998
26,438
26,949
27,505
28,020
28,543
29,107
29,704
30,340
31,021
9,034
RPS-Eligible Procurement
Fa
Risk-Adjusted RECs from Online Generation
15,654
15,821
16,479
47,953
16,867
16,677
15,892
49,436
15,045
14,688
14,651
13,816
58,200
13,187
13,107
13,109
13,016
12,975
12,779
11,412
10,581
10,425
Faa
Forecast Failure Rate for Online Generation (%)
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
Fb
Risk-Adjusted RECs from RPS Facilities in Development
-
-
56
56
1,058
2,293
3,364
6,715
3,802
3,839
5,083
6,065
18,790
6,142
6,117
6,093
6,083
6,044
5,999
5,976
5,966
5,929
5,906
Fbb
Forecast Failure Rate for RPS Facilities in Development (%)
N/A
N/A
0.0%
0.0%
6.0%
22.1%
31.3%
25.1%
32.6%
32.4%
35.5%
38.4%
35.3%
38.7%
38.7%
38.8%
38.8%
38.8%
38.8%
38.8%
38.9%
38.9%
38.9%
Fc
Pre-Approved Generic RECs
-
-
-
-
-
37
145
182
809
904
907
910
3,529
907
907
907
910
907
907
907
910
907
907
Fe
Executed REC Sales
362
778
473
1,614
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
15,291
15,043
16,062
46,396
17,926
19,006
19,401
56,333
19,656
19,431
20,640
20,791
80,519
20,235
20,131
20,109
20,009
19,926
19,685
18,294
17,457
17,262
15,848
2
Fa+Fb+Fc-Fe Total RPS Eligible Procurement (GW
F
F0
Category 0 RECs 3
15,239
14,912
15,822
45,973
16,887
16,752
15,820
49,460
13,929
12,724
12,527
11,686
50,865
11,055
10,969
10,967
10,870
10,839
10,638
10,420
10,399
10,237
8,841
F1
Category 1 RECs 3
52
131
240
423
1,038
2,217
3,436
6,692
4,918
5,804
7,207
8,196
26,124
8,273
8,255
8,236
8,229
8,180
8,140
6,967
6,148
6,117
6,100
F2
Category 2 RECs 3
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,166
1,625
(2,535)
(3,109)
(4,841)
(5,763)
(6,307)
(6,839)
(7,497)
(8,094)
(8,858)
(10,813)
(12,247)
(13,079)
(15,173)
21.6%
20.7%
25.7%
26.9%
26.8%
25.7%
25.1%
24.6%
24.0%
23.5%
22.8%
20.7%
19.4%
18.8%
16.9%
Category 3 RECs
F3
Gross RPS Position (Physical Net Short)
Ga
F-E
Annual Gross RPS Position (GWh)
Gb
F/A
Annual Gross RPS Position (%)
536
20.7%
(76)
19.9%
Application of Bank
Ha
Existing Banked RECs above the PQR
Hb
RECs above the PQR added to Bank
536
Hc
Non-bankable RECs above the PQR
-
Gross Balance of RECs above the PQR
Ia
Planned Application of RECs above the PQR towards RPS Comp
Ib
Planned Sales of RECs above the PQR
0
0
0
Net Balance of RECs above the PQR
536
451
1,586
H
Ha+Hb
J
H-Ia-Ib
3
J0
Category 0 RECs
J1
Category 1 RECs 3
J2
Category 2 RECs 3
0
451
0
5,709
5,709
5,709
5,709
5,709
5,709
5,709
5,709
5,709
5,709
5,709
5,709
5,709
1,136
1,586
-
-
-
-
-
-
-
-
-
-
-
-
-
9
30
39
-
-
-
-
-
-
-
-
-
-
-
-
-
536
451
1,586
1,586
5,709
5,709
5,709
5,709
5,709
5,709
5,709
5,709
5,709
5,709
5,709
5,709
5,709
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,164
536
(85)
-
-
1,586
-
1,586
0
0
0
-
0
-
0
0
0
1,586
5,709
5,709
-
0
0
0
0
0
0
0
0
0
0
5,709
5,709
5,709
5,709
5,709
5,709
5,709
5,709
5,709
5,709
5,709
-
-
1,164
-
-
-
-
-
-
-
-
-
-
-
-
-
52
131
240
423
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,903
8,050
8,922
9,511
9,824
9,921
10,078
10,071
10,309
10,518
10,574
10,686
11,279
Expiring Contracts
K
2,029
RECs from Expiring RPS Contracts
2,524
3,627
8,181
5,589
29,464
Net RPS Position (Optimized Net Short)
La
Ga+Ia-Ib-Hc Annual Net RPS Position after Bank Optimization (GWh)
Lb
(Ga+Ia-Ib-Hc)/ Annual Net RPS Position after Bank Optimization (%)
536
20.7%
(85)
19.9%
1,136
1,586
(2,535)
(3,109)
(4,841)
(5,763)
(6,307)
(6,839)
(7,497)
(8,094)
(8,858)
(10,813)
(12,247)
(13,079)
(15,173)
21.5%
20.7%
25.7%
26.9%
26.8%
25.7%
25.1%
24.6%
24.0%
23.5%
22.8%
20.7%
19.4%
18.8%
16.9%
Note: Fields in grey are potected as Confidential under CPUC Confidentiality Rules
Note: Values are shown in GWhs
Notes:
1 Based on SCE's March 2013 bundled retail sales forecast
2 Includes all contracts executed through 7/31/14; new generation forecast based on individual project specific success rates for large near‐term projects and flat average success rate for remaining projects based on these projects' overall weighted average success rate
3 Forecast of deliveries by portfolio content categories is for executed contracts only; does not include program generics
Appendix H
Confidentiality Declaration
Appendix I
Proposed Protective Order
BEFORE THE PUBLIC UTILITIES COMMISSION
OF THE STATE OF CALIFORNIA
Submission of Contracts for Procurement of
Renewable Energy From SCE’s 2013
Renewables Portfolio Standard Solicitation
)
)
)
Advice 3121-E
PROPOSED PROTECTIVE ORDER
1.
Scope. This Protective Order shall govern access to and the use of Protected
Materials, produced by, or on behalf of, any Disclosing Party (as defined in Paragraph 2 below)
in this proceeding.
2.
Definitions.
In addition to the terms defined and capitalized in other sections of this Protective Order,
the following terms are defined for the purposes of this Protective Order:
A.
For purposes of this Protective Order, the term “Protected Materials”
means: (i) trade secret, market sensitive, or other confidential and/or proprietary information as
determined by the Disclosing Party in accordance with the provisions of Decision (“D.”) 06-06066 and subsequent decisions, General Order 66-C, Public Utilities Code section 454.5(g), or
any other right of confidentiality provided by law; or (ii) any other materials that are made
subject to this Protective Order by the Assigned Administrative Law Judge (“Assigned ALJ”),
Law and Motion Administrative Law Judge (“Law and Motion ALJ”), Assigned Commissioner,
the California Public Utilities Commission (“Commission”), or any court or other body having
appropriate authority. Protected Materials also include memoranda, handwritten notes,
spreadsheets, computer files and reports, and any other form of information (including
information in electronic form) that copies, discloses, incorporates, includes or compiles other
Protected Materials or from which such materials may be derived (except that any derivative
1
materials must be separately shown to be confidential). Protected Materials do not include: (i)
any information or document contained in the public files of the Commission or any other state
or federal agency, or in any state or federal court; or (ii) any information that is public
knowledge, or which becomes public knowledge, other than through disclosure in violation of
this Protective Order or any other nondisclosure agreement or protective order.
B.
The term “redacted” refers to situations in which Protected Material in a
document, whether the document is in paper or electronic form, have been covered, blocked out,
or removed.
C.
The term “Disclosing Party” means a party who initially discloses any
specified Protected Material in this proceeding.
D.
The term “Requesting Party” means any party that is requesting receipt of
Protected Material from a Disclosing Party.
E.
The term “Party” refers to the Requesting Party or the Disclosing Party
and the term “Parties” refers to both the Requesting Party and the Disclosing Party.
F.
The term “Market Participant” refers to a Requesting Party that is:
1)
A person or entity, or an employee of an entity, that engages in the
wholesale purchase, sale or marketing of energy or capacity, or the
bidding on or purchasing of power plants, or bidding on utility
procurement solicitations, or consulting on such matters, subject to the
limitations in 3) below.
2)
A trade association or similar organization, or an employee of such
organization,
a)
whose primary focus in proceedings at the Commission is to
advocate for persons/entities that purchase, sell or market
energy or capacity at wholesale; bid on, own, or purchase
power plants; or bid on utility procurement solicitations; or
b)
a majority of whose members purchase, sell or market energy
or capacity at wholesale; bid on, own, or purchase power
plants; or bid on utility procurement solicitations; or
2
3)
G.
c)
formed for the purpose of obtaining Protected Materials; or
d)
controlled or primarily funded by a person or entity whose
primary purpose is to purchase, sell or market energy or
capacity at wholesale; bid on, own, or purchase power plants;
or bid on utility procurement solicitations.
A person or entity that meets the criteria of 1) above is not a Market
Participant for purpose of access to Protected Materials unless the
person/entity seeking access to Protected Materials has the potential to
materially affect the price paid or received for electricity if in
possession of such information. An entity will be considered not to
have such potential if:
a)
the person or entity’s participation in the California electricity
market is de minimis in nature. In the resource adequacy
proceeding (R.05-12-013) it was determined in D.06-06-064 §
3.3.2 that the resource adequacy requirement should be
rounded to the nearest megawatt (MW), and load serving
entities (LSEs) with local resource adequacy requirements less
than 1 MW are not required to make a showing. Therefore, a
de minimis amount of energy would be less than 1 MW of
capacity per year, and/or an equivalent of energy; and/or
b)
the person or entity has no ability to dictate the price of
electricity it purchases or sells because such price is set by a
process over which the person or entity has no control, i.e.,
where the prices for power put to the grid are completely
overseen by the Commission, such as subject to a standard
offer contract or tariff price. A person or entity that currently
has no ability to dictate the price of electricity it purchases or
sells under this section, but that will have such ability within
one year because its contract is expiring or other circumstances
are changing, does not meet this exception; and/or
c)
the person or entity is a cogenerator that consumes all the
power it generates in its own industrial and commercial
processes, if it can establish a legitimate need for Protected
Materials.
The term “Non-Market Participant” refers to a Requesting Party that does
not meet the definition of Market Participant.
H.
“Reviewing Representatives” are limited to person(s) designated in
accordance with Paragraph 5 who meet the following criteria:
3
I.
1)
Reviewing Representatives may not currently be engaged in: (a) a
transaction for the purchase, sale, or marketing at wholesale of
electrical energy or capacity or natural gas (or the direct supervision of
any employee(s) engagement in such a transaction); (b) the bidding on
or purchasing of power plants (or the direct supervision of any
employee(s) engagement in such a transaction); or (c) knowingly
providing electricity or gas marketing consulting or advisory services
to others in connection with a transaction for the purchase, sale, or
marketing at wholesale of electrical energy or capacity or natural gas
or the bidding on or purchasing of power plants (or the direct
supervision of any employee(s) engagement in such a transaction or
consulting).
2)
Reviewing Representatives may not be an employee of a Market
Participant. If the Market Participant or Non-Market Participant
chooses to retain outside attorneys, consultants, or experts in the same
law firm or consulting firm to provide advice in connection with
marketing activities, then the attorney, consultant, or expert serving as
a Reviewing Representative must be separated by an ethics wall
consistent with the ethics wall requirements in D.11-07-028, as that
decision may be subsequently modified or changed by the
Commission, from those in the firm who are involved in wholesale
commercial dealings.
3)
Reviewing Representatives shall use Protected Materials only for the
purpose of participating in the Commission proceeding in which they
received the information.
4)
Reviewing Representatives are permitted to participate in regulatory
proceedings on behalf of Market Participants and Non-Market
Participants.
5)
All Reviewing Representatives are required to execute the
Nondisclosure Certificate attached to this Protective Order and are
bound by the terms of this Protective Order.
The term “Authorized Reviewers” refers to: (1) a Requesting Party that is
a Non-Market Participant; or (2) a Reviewing Representative of a Requesting Party. A
Requesting Party that is a Market Participant is not an Authorized Reviewer but it may designate
a Reviewing Representative in accordance with Paragraph 5.
J.
The term “Nondisclosure Certificate” refers to the Nondisclosure
Certificate attached as Appendix A.
4
3.
Designation, Filing, and Service of Protected Materials.
When filing or providing in discovery any documents or items containing Protected
Materials, a party shall physically mark such documents (or in the case of non-documentary
materials such as computer diskettes, on each item) as “PROTECTED MATERIALS SUBJECT
TO PROTECTIVE ORDER,” or with words of similar import as long as one or more of the
terms “Protected Materials” or “Protective Order” is included in the designation to indicate that
the materials in question are Protected Materials. All materials so designated shall be treated as
Protected Materials unless and until: (a) the designation is withdrawn pursuant to Paragraph 14
hereof; (b) an Assigned ALJ, Law and Motion ALJ, Assigned Commissioner, or the Commission
makes a determination that: (i) the document does not contain Protected Materials or does not
warrant confidential treatment or (ii) denies a motion to file the document under seal; or (c) the
document or information becomes public knowledge, other than through disclosure in violation
of this Protective Order or any other nondisclosure agreement or protective order.
All documents containing Protected Materials that are tendered for filing with the
Commission shall be placed in sealed envelopes or otherwise appropriately protected and shall
be tendered with a motion to file the document under seal pursuant to Rule 11.4 of the
Commission’s Rules of Practice and Procedure. All documents containing Protected Materials
that are served on parties in a proceeding shall be placed in sealed envelopes or otherwise
appropriately protected and shall be endorsed to the effect that they are served under seal
pursuant to this Protective Order. Such documents shall only be served upon Authorized
Reviewers and persons employed by or working on behalf of the Commission. Service upon
Authorized Reviewers and persons employed by or working on behalf of the Commission may
either be: (a) by electronic mail in accordance with the procedures adopted in this proceeding;
(b) by facsimile; or (c) by overnight mail or messenger service. Whenever service of a document
5
containing Protected Materials is made by overnight mail or messenger service, the Assigned
ALJ shall be served with such document by the same means and at the same time.
4.
Redaction of Documents. Whenever a Party files, serves or provides in discovery
a document that includes Protected Materials (including but not limited to briefs, testimony,
exhibits, and responses to data requests), such Party shall also prepare a redacted version of such
document. The redacted version shall enable persons familiar with this proceeding to determine
with reasonable certainty the nature of the data that has been redacted and where the redactions
occurred. The redacted version of a document to be filed shall be served on all persons on the
service list, and the redacted version of a discovery document shall be served on all persons
entitled thereto.
5.
Designation of Reviewing Representatives. The Requesting Party shall provide
written notice identifying its proposed Reviewing Representative(s) to the Disclosing Party
before the Disclosing Party provides any Protected Materials to the Requesting Party’s
Authorized Reviewers. The written notice shall include the information identified in this
paragraph. If the Requesting Party decides to designate any additional Reviewing
Representative(s) after the Requesting Party’s Authorized Reviewers receive Protected
Materials, the Requesting Party shall identify the additional proposed Reviewing
Representative(s) to the Disclosing Party before the Requesting Party provides Protected
Materials to the additional Reviewing Representative(s). Within five (5) business days after
receiving written notice of the identity of any Reviewing Representative, the Disclosing Party
may provide the Requesting Party with a written objection to a specific Reviewing
Representative stating the grounds for the objection. Any dispute concerning whether an
identified person or entity is an appropriate Reviewing Representative shall be resolved through
the dispute resolution procedures in Paragraph 11 of this Protective Order. If a Disclosing Party
6
objects to a specific Reviewing Representative within five (5) business days after the Reviewing
Representative is identified, the Parties shall not provide any Protected Materials to the disputed
Reviewing Representative until the Parties are able to resolve the dispute consistent with the
dispute resolution procedures in Paragraph 11. Failure by the Disclosing Party to object within
five (5) business days does not waive the Disclosing Party’s right to later object to the Reviewing
Representative, even if Protected Materials has already been disclosed. However, further
disclosure of Protected Materials would be stayed until the parties are able to resolve the dispute
consistent with the dispute resolution procedures in Paragraph 11.
Reviewing Representative(s) have a duty to disclose to the Disclosing Party any potential
conflict of interest that puts the Reviewing Representative in violation of D.06-12-030, as
modified by subsequent decisions of the Commission. A resume or curriculum vitae is
reasonable disclosure of such potential conflicts, and should be the default evidence provided in
most cases.
6.
Nondisclosure Certificates. A Reviewing Representative shall not inspect,
participate in discussions regarding, or otherwise be granted access to, Protected Materials unless
and until he or she has first completed and executed a Nondisclosure Certificate, attached hereto
as Appendix A, and delivered the signed Nondisclosure Certificate to the Disclosing Party. The
Disclosing Party shall retain the executed Nondisclosure Certificates pertaining to the Protected
Materials it has disclosed and shall promptly provide copies of the Nondisclosure Certificates to
Commission Staff upon request.
7.
Access to Protected Materials and Use of Protected Materials. Subject to the
terms of this Protective Order, Authorized Reviewers shall be entitled to access any Protected
Materials and may make copies of Protected Materials, but such copies become Protected
Materials. Authorized Reviewers may make notes of Protected Materials, which shall be treated
7
as Protected Materials if such notes disclose any Protected Materials. Protected Materials
obtained by a Party in this proceeding may also be requested by that Party in a subsequent
Commission proceeding, subject to the terms of any nondisclosure agreement or protective order
governing that subsequent proceeding, without constituting a violation of this Protective Order.
8.
Maintaining Confidentiality of Protected Materials. Each Authorized Reviewer
shall treat Protected Materials as confidential in accordance with this Protective Order and the
Nondisclosure Certificate. Protected Materials shall not be used except as necessary for
participation in this proceeding, and shall not be disclosed in any manner to any person except:
(i) Authorized Reviewers; (ii) an Authorized Reviewer’s employees and administrative
personnel, such as clerks, secretaries, and word processors, to the extent necessary to assist the
Authorized Reviewer, provided that they shall first ensure that such personnel are familiar with
the terms of this Protective Order and have signed a Nondisclosure Certificate; and (iii) persons
employed by or working on behalf of the Commission. Authorized Reviewers shall adopt
suitable measures to maintain the confidentiality of Protected Materials they have obtained
pursuant to this Protective Order, and shall treat such Protected Materials in the same manner as
they treat their own most highly confidential information.
Authorized Reviewers shall be liable for any unauthorized disclosure or use by
themselves and/or employees, paralegals, or administrative staff. In the event any Authorized
Reviewer is requested or required by applicable laws or regulations, or in the course of
administrative or judicial proceedings (in response to oral questions, interrogatories, requests for
information or documents, subpoena, civil investigative demand or similar process) to disclose
any of Protected Materials, the Authorized Reviewer shall immediately inform the Disclosing
Party of the request, and the Disclosing Party may, at its sole discretion and cost, direct any
challenge or defense against the disclosure requirement, and the Authorized Reviewer shall
8
cooperate in good faith with such Party either to oppose the disclosure of the Protected Materials
consistent with applicable law, or to obtain confidential treatment of the Protected Materials by
the person or entity who wishes to receive them prior to any such disclosure. If there are
multiple requests for substantially similar Protected Materials in the same case or proceeding
where an Authorized Reviewer has been ordered to produce certain specific Protected Materials,
the Authorized Reviewer may, upon request for substantially similar materials by another person
or entity, respond in a manner consistent with that order to those substantially similar requests.
9.
Return or Destruction of Protected Materials. Protected Materials shall remain
available to Authorized Reviewers until an order terminating this proceeding becomes no longer
subject to judicial review. If requested to do so in writing after that date, the Authorized
Reviewers shall, within fifteen days after such request, return the Protected Materials to the
Disclosing Party that produced such Protected Materials, or shall destroy the materials, except
that copies of filings, official transcripts and exhibits in this proceeding that contain Protected
Materials, and notes of Protected Materials may be retained, if such Protected Materials are
maintained in accordance with Paragraph 8. Within such time period each Authorized Reviewer,
if requested to do so, shall also submit to the Disclosing Party an affidavit stating that, to the best
of its knowledge, all Protected Materials have been returned or have been destroyed or will be
maintained in accordance with Paragraph 8. To the extent Protected Materials are not returned
or destroyed, they shall remain subject to this Protective Order.
In the event that a Reviewing Representative to whom Protected Materials are disclosed
ceases to be engaged to provide services in this proceeding, then access to such materials by that
person shall be terminated and the Reviewing Representative shall immediately return or destroy
all Protected Materials, or provide an affidavit stating that all Protected Materials and all notes of
Protected Materials will be maintained in accordance with Paragraph 8. Even if a Reviewing
9
Representative is no longer engaged in this proceeding, every such person shall continue to be
bound by the provisions of this Protective Order and the Nondisclosure Certificate.
10.
Access and Use by Governmental Entities.
A.
In the event the Commission receives a request from the California Energy
Commission (“CEC”) for a copy of or access to any Party’s Protected Materials, the procedure
for handling such requests shall be as follows. Not less than five (5) business days after
delivering written notice to the Disclosing Party of the request, the Commission shall release
such Protected Materials to the CEC upon receipt from the CEC of an Interagency Information
Request and Confidentiality Agreement (“Interagency Confidentiality Agreement”). Such
Interagency Confidentiality Agreement shall: (i) provide that the CEC will treat the requested
Protected Materials as confidential in accordance with this Protective Order; (ii) include an
explanation of the purpose for the CEC’s request, as well as an explanation of how the request
relates to furtherance of the CEC’s functions; (iii) be signed by a person authorized to bind the
CEC contractually; and (iv) expressly state that furnishing of the requested Protected Materials
to employees or representatives of the CEC does not, by itself, make such Protected Materials
public. In addition, the Interagency Confidentiality Agreement shall include an express
acknowledgment of the Commission’s sole authority (subject to judicial review) to make the
determination whether the Protected Materials should remain confidential or be disclosed to the
public, notwithstanding any provision to the contrary in the statutes or regulations applicable to
the CEC.
B.
In the event the Commission receives a request for a copy of or access to a
party’s Protected Materials from a state governmental agency other than the CEC that is
authorized to enter into a written agreement sufficient to satisfy the requirements for maintaining
confidentiality set forth in Government Code Section 6254.5(e), the Commission may, not less
10
than five (5) business days after giving written notice to the Disclosing Party of the request,
release such Protected Materials to the requesting governmental agency, upon receiving from the
requesting agency an executed Interagency Confidentiality Agreement that contains the same
provisions described in Paragraph 10.A above.
C.
The CEC may use Protected Materials when needed to fulfill its statutory
responsibilities or cooperative agreements with the Commission. Commission confidentiality
designations will be maintained by the CEC in making such assessments, and the CEC will not
publish any assessment that directly reveals the data or allows the data submitted by an
individual load serving entity to be “reverse engineered.”
11.
Dispute Resolution. All disputes that arise under this Protective Order, including
but not limited to alleged violations of this Protective Order and disputes concerning whether
materials were properly designated as Protected Materials, shall first be addressed by the parties
through a meet and confer process in an attempt to resolve such disputes. If the meet and confer
process is unsuccessful, either party may present the dispute for resolution to the Assigned ALJ
or the Law and Motion ALJ.
12.
Other Objections to Use or Disclosure. Nothing in this Protective Order shall be
construed as limiting the right of a Party, the Commission Staff, or a state governmental agency
covered by Paragraph 10 to object to the use or disclosure of Protected Materials on any legal
ground, including relevance or privilege.
13.
Remedies. Any violation of this Protective Order shall constitute a violation of an
order of the Commission. Notwithstanding the foregoing, the parties and Commission Staff
reserve their rights to pursue any legal or equitable remedies that may be available in the event of
an actual or anticipated disclosure of Protected Materials.
11
14.
Withdrawal of Designation. A Disclosing Party may agree at any time to remove
the “Protected Materials” designation from any materials of such Party if, in its opinion,
confidentiality protection is no longer required. In such a case, the Disclosing Party will notify
all Requesting Parties that the Disclosing Party has agreed to withdraw its designation of
Protected Materials for specific documents or material.
15.
Modification. This Protective Order shall remain in effect unless and until it is
modified or terminated by the Commission or the Assigned ALJ. The identity of the parties
submitting Protected Materials may differ from time to time. In light of this situation,
modifications to this Protective Order may become necessary. The Parties shall work
cooperatively to develop such modifications and, to the extent the Parties are able to agree to
modifications, shall file a motion with the Assigned ALJ or the Commission seeking approval of
the modifications. To the extent Parties are unable to agree on modifications after a good faith
effort, each party governed by this Protective Order has the right to seek modifications in it as
appropriate from the Assigned ALJ or the Commission.
16.
Interpretation. Headings are for convenience only and may not be used to restrict
the scope of this Protective Order.
Entered: __________________________________
Administrative Law Judge
Date: __________________________________
12
APPENDIX A TO PROPOSED PROTECTIVE ORDER
BEFORE THE PUBLIC UTILITIES COMMISSION
OF THE STATE OF CALIFORNIA
Submission of Contracts for Procurement of
Renewable Energy From SCE’s 2013
Renewables Portfolio Standard Solicitation
)
)
)
Advice 3121-E
NON-DISCLOSURE CERTIFICATE
I hereby certify my understanding that access to Protected Materials is provided to me
pursuant to the terms and restrictions of the Protective Order in this proceeding, that I have been
given a copy of and have read the Protective Order, and that I agree to be bound by it. I
understand that the contents of the Protected Materials, any notes or other memoranda, or any
other form of information that copies or discloses Protected Materials shall not be disclosed to
anyone other than in accordance with that Protective Order. I acknowledge that a violation of
this certificate constitutes a violation of an order of California Public Utilities Commission.
Signed: _______________________
Name ________________________
Title: _________________________
Organization: __________________
Dated: ________________________