Russell G. Worden
Managing Director, State Regulatory Operations
April 6, 2016
ADVICE 3334-E-A
(U 338-E)
PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
ENERGY DIVISION
SUBJECT:
I.
Supplement to Advice 3334-E, Submission of the First Solar
Contracts for Procurement of Renewable Energy From SCE’s
2014 Renewables Portfolio Standard Solicitation
PURPOSE
Southern California Edison Company (“SCE”) submits this supplemental advice
filing to correct valuation and other information that impacts the Appendices to
Advice Letter (AL) 3334-E.
These changes are made in accordance with General Order (“GO”) 96-B,
General Rule 7.5.1, which authorizes utilities to make additional changes to an
advice letter through the filing of a supplemental advice filing. Except as
indicated in this supplemental advice filing, this supplemental advice filing
supplements in part and does not change the substance of AL 3334-E.
II.
CORRECTIONS TO APPENDICES A THROUGH D
Since SCE filed AL 3334-E, SCE discovered that there was an error in its
calculation of the locational congestion adders SCE’s valuation tool used to
evaluate offers in SCE’s 2014 Renewables Portfolio Standard (“RPS”)
solicitation. The error caused congestion adders to be undervalued for some
projects. Specifically, for projects in locations and during time periods with
forecasted congestion benefits, the projects were incorrectly valued as having
congestion costs by the same amount.
To correct this error, SCE has re-run the valuation analysis with the correct
congestion adders to determine the degree to which, if any, the congestion
adders affected valuation and selection. SCE determined that the congestion
adders had an immaterial impact on valuation and selection.
P.O. Box 800
8631 Rush Street
Rosemead, California 91770
(626) 302-4177
Fax (626) 302-4829
ADVICE 3334-E-A
(U 338-E)
-2-
April 6, 2016
This supplemental advice filing provides correct valuation figures that were
calculated using the correct congestion adders. As a result of the correct
congestion adders, the net market value of the First Solar contracts increased for
two out of three First Solar contracts and stayed the same for one out of three
First Solar contracts.
III.
LIST OF APPENDICES
SCE modifies and corrects Appendices A through D. Changes are indicated in
red with strike throughs for deletions and underlines for additions. Appendices A
and B are replaced in their entirety. Appendix C amends portions of the Report
of the Independent Evaluator Review. SCE provides only the corrected page to
Appendix D.
SCE requests that the California Public Utilities Commission (“Commission” or
“CPUC”) issue a resolution containing findings in the form requested in this
Supplemental Advice Letter within three months.
In accordance with GO 96-B, the confidentiality of information included in this
Supplemental Advice Letter is described below. This Supplemental Advice Letter
contains confidential appendices as listed below.
Corrected Confidential Appendix A:
Consistency with Commission
Decisions and Rules and Project
Development Status
Corrected Confidential Appendix B:
2014 Solicitation Overview
Corrected Confidential/Public Appendix C:
Amended Independent Evaluator
Report
Corrected Confidential Appendix D-(1-3):
Contract Summary
IV.
CONFIDENTIALITY
As in AL 3334-E, SCE requests confidential treatment of corrected Appendices A
through D to this supplemental advice filing. The information for which SCE is
seeking confidential treatment is identified in the Confidentiality Declaration
attached as Appendix H to AL 3334-E.
The confidential version of this supplemental advice filing 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 supplemental
advice filing may contact Rebecca Meiers-De Pastino in SCE’s Law Department
ADVICE 3334-E-A
(U 338-E)
-3-
April 6, 2016
at Rebecca.Meiers.DePastino@sce.com or 626-302-6016 to obtain a
non-disclosure agreement.
In accordance with GO 96-B, a copy of SCE’s Proposed Protective Order was
attached as Appendix I to AL 3334-E. 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.06-06-066,1 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 supplemental 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 to AL 3334-E. This information is entitled to confidentiality protection
pursuant to D.06-06-066 (as provided in the Investor-Owned Utility (“IOU”)
Matrix).2 The specific provisions of the IOU Matrix that apply to the confidential
information in this Advice Letter are identified in Appendix H to AL 3334-E.
V.
TIER DESIGNATION
Pursuant to GO 96-B, Energy Industry Rule 5.3, SCE submits this Supplemental
Advice Letter with a Tier 3 designation, which is the same designation as the
original AL 3334-E.
VI.
EFFECTIVE DATE
This Supplemental Advice Letter will become effective upon Commission
approval.
VII.
NOTICE
SCE asks that the Commission, pursuant to GO 96-B, General Rule 7.5.1,
maintain the original protest and comment period designated in Advice 3334-E
and not reopen the protest period. The modifications included in this
supplemental advice filing do not make substantive changes
In accordance with Section 4 of GO 96-B, SCE is furnishing copies of this
Supplemental Advice Letter to the interested parties shown on the attached
R.15-02-020 and GO 96-B service lists. Address change requests to the GO
96-B service list should be directed to AdviceTariffManager@sce.com or
1
2
D.06-06-066 at 80 (Ordering Paragraphs 1 and 2).
Id., Appendix 1.
ADVICE 3334-E-A
(U 338-E)
-4-
April 6, 2016
(626) 302-3719. For changes to any other service list, please contact the
Commission’s Process Office at (415) 703-2021 or ProcessOffice@cpuc.ca.gov.
Further, in accordance with Public Utilities Code Section 491, notice to the public
is hereby given by filing and keeping the Supplemental 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/advice-letters.
All questions concerning this Supplemental Advice Letter should be directed to
Dawn Anaiscourt at (415) 929-5518 or by electronic mail at
Dawn.Anaiscourt@sce.com.
Southern California Edison Company
/s/ Russell G. Worden
Russell G. Worden
RGW:rmdp:cm
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
3334-E-A
Tier Designation:
3
Supplement to Advice 3334-E, Submission of the First Solar Contracts for Procurement of
Renewable Energy From SCE’s 2014 Renewables Portfolio Standard Solicitation
Keywords (choose from CPUC listing):
Compliance, Agreements, 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 See Appendix H in Advice 3334-E
If yes, specification of confidential information:
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:
Rebecca Meiers-De Pastino, Law Department, (626) 302-6016 or Rebecca.Meiers.DePastino@sce.com
Resolution Required? Yes No
Requested effective date:
Upon Commission
Approval
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:
N/A
Service affected and changes proposed1:
Pending advice letters that revise the same tariff sheets:
1
Discuss in AL if more space is needed.
None
All other correspondence regarding this AL filing, unless otherwise authorized by the Commission shall
be sent to:
CPUC, Energy Division
Attention: Tariff Unit
505 Van Ness Avenue
San Francisco, California 94102
E-mail: EDTariffUnit@cpuc.ca.gov
Russell G. Worden
Managing Director, State 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:
Rebecca Meiers-De Pastino
Attorney
Southern California Edison Company
2244 Walnut Grove Avenue, 3rd Floor
Rosemead, CA 91770
Facsimile: (626) 302-6962
E-mail: Rebecca.Meiers.DePastino@sce.com
Corrected CONFIDENTIAL Appendix A
Consistency with Commission Decisions & Rules and Project Development Status
Confidential Protected Materials – Public Disclosure Prohibited
Corrected CONFIDENTIAL Appendix B
2014 Solicitation Overview
Confidential Protected Materials – Public Disclosure Prohibited
Corrected CONFIDENTIAL Appendix C
Amended Independent Evaluator Report
Confidential Protected Materials – Public Disclosure Prohibited
Corrected PUBLIC Appendix C
Amended Independent Evaluator Report
Southern California Edison Company
2014 Renewable Resource Solicitation
RevisedAmended Report of the Independent Evaluator
Review of Power Purchase Agreements with
North Rosamond Solar, LLC,
Willow Springs Solar, LLC, and
Sunshine Valley Solar, LLC
AprilDecember, 20165
Prepared by
Merrimack Energy Group, Inc.
Merrimack
M
Energy
And
New Energy Opportunities, Inc.
Table of Contents
Executive Summary …………………………………………………………………….. 2
I. 2014 Renewable RFP Overview……………….…………………….……….….…..11
II. Role of the Independent Evaluator……………………..………………..……….......17
III. Adequacy of Outreach to Potential Sellers…….. ……………………………….…..24
IV. Fairness and Appropriateness of RPS Bid Evaluation and Selection Methodology.. 30
V. Administration of the Bid Evaluation Process ……………………………………….51
VI. Reasonableness of the Evaluation, Selection and Contract Negotiation Process..… .64
VII. The Rosamond, Willow Springs and Sunshine Valley PPAs and the Fairness of the
Contract
Negotiations………............................................................................................689
VIII. Do the Rosamond, Willow Springs and Sunshine Valley PPAs Merit Commission
Approval?...........................................................................................................................78
Appendix A: SCE’s Least Cost Best Fit Evaluation Methodology
Appendix B: Time of Delivery Periods and Product Payment Allocation Factors
Appendix C: SCE 2014 RPS RFP Proposal List and Summary
Appendix D: SCE Shortlisted Proposals – 2014 RPS RFP
Appendix E: SCE Final Evaluation
Merrimack Energy Group, Inc.
1
Executive Summary
Effective October 9, 2015, Southern California Edison Company (“SCE”) executed four
power purchase and sale agreements (“PPAs”) with affiliates of First Solar, Inc. (“First
Solar”) for the purchase of all the electric energy, capacity, Resource Adequacy (“RA”)
benefits, and Green Attributes produced by four solar photovoltaic (“PV”) generating
facilities. The solar PV projects and associated contract capacities are:




The 160 MW North Rosamond Solar Project, with North Rosamond Solar, LLC
(“Rosamond”) as seller, to be constructed in Rosamond, California;
The 108 MW Willow Springs Solar Project, with Willow Springs Solar, LLC
(“Willow Springs”) as seller, to be constructed in Rosamond, California;
The 104 MW Sunshine Valley Solar Project, with Sunshine Valley Solar, LLC
(“Sunshine Valley”) as seller, to be constructed in Amargosa Valley, Nevada;
The 160 MW Sun Streams Solar Project, with Sun Streams, LLC (“Sun Streams”)
as seller, to be constructed in Tonopah, Arizona.
This Independent Evaluator (“IE”) report addresses three of the PPAs—those with
Rosamond, Willow Springs and Sunshine Valley as Seller
These three
PPAs—the Rosamond PPA, the Willow Springs PPA, and the Sunshine Valley PPA
(collectively, the “First Solar PPAs”)—were executed by SCE pursuant to the company’s
2014 Request for Proposals from Eligible Renewable Energy Resource Suppliers for
Renewable Products (“2014 Renewable RFP”). SCE launched the 2014 Renewable RFP
on December 18, 2014, and received proposals on February 2, 2015. SCE had initially
expected to execute a total of
including a total of 372 MW of Contract Capacity and associated energy and Green
Attributes purchased under the PPAs with Rosamond, Willow Springs and Sunshine
Valley.1
Through the 2014 Renewable RFP, SCE solicited Proposals from bidders (“Seller” or
“Sellers”) to supply either a Bundled Energy Product (product qualifying as Portfolio
Content Category 1 product) or REC Product (Product qualifying as Portfolio Content
Category 3) from Eligible Renewable Energy Resources (“ERR” or “ERR Generating
Facility”). Products qualifying as Portfolio Content Category 12 include all electric energy
1
Capitalized terms when used with reference to the First Solar PPAs and not otherwise defined herein are
as defined in the First Solar PPAs.
2
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
Merrimack Energy Group, Inc.
2
produced by an ERR 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. Products qualifying as Category
3 encompass only Renewable Energy Credits, all associated Green Attributes, and Western
Renewable Energy Generation Information System (“WREGIS”) certificates evidencing
the authenticity of the REC product.3
Pursuant to the 2014 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 Procurement Protocol document for
the solicitation, evaluated and ranked the proposals, and determined which of those
proposals to include on a short list for potential negotiations and contracting.
Table ES-1 provides a short description of the projects for which
contracts were expected to be executed.
Tables ES-1: Contracts from 2014 Renewable Energy Solicitation
Term
(Years)
Contract
Capacity
(MW)4
Annual
Deliveries
(GWh)
New
Forecasted
Commercial
Operation
Date
1/1/2017
20
100.815
283
Solar PV
New
1/1/2020
15
160
467
Solar PV
New
1/1/2020
15
160
488
Solar PV
New
1/1/2020
15
108
330
Seller Parent
Company
Project
Name
Type
Vintage
Sempra U.S.
Gas & Power
First Solar Inc.
Mesquite
Solar 2
Sun
Streams
Rosamond
Solar PV
Willow
Springs
First Solar Inc.
First Solar Inc.
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.
3
Category 3 products are generally unbundled RECs and are as defined in Public Utilities Code Section
399.16(b)(3) and D.11-12-052.
4
Contract Capacity amounts are as set forth in Section 1.01(h) of each PPA.
Merrimack Energy Group, Inc.
3
NextEra
Energy
Resources5
Broadview
Energy KW,
LLC6
Broadview
Energy JN,
LLC
Recurrent
Energy LLC7
First Solar,
Inc.
Iberdrola S.A
NextEra
Energy
Resources
Blythe
Solar II
Solar PV
New
11/1/2016
20
131.2
366
Broadview
Energy
KW, LLC
Broadview
Energy JN,
LLC
RE
Garland
Sunshine
Valley
Solar
Tule Wind
Project
SEGS III
Wind
New
12/1/2016
20
142.6
604
Wind
New
12/1/2016
20
181.7
769
Solar PV
New
4/1/2017
15
186.966
555
Solar PV
New
1/1/2020
15
104
302
Wind
New
9/1/2017
15
132
381
Solar
Thermal
Existing
3/1/2017
10
30
67
5
Merrimack Energy Group, Inc.
4
NextEra
Energy
Resources
NextEra
Energy
Resources
Enel Green
Power
Calpine
Corporation
SEGS IV
Solar
Thermal
Existing
3/1/2017
10
30
69
SEGS V
Solar
Thermal
Existing
2/1/2018
10
30
68
TKO
(South
Bear
Creek)
Geysers
Small Hydro
Existing
1/15/2016
15
2.834
10
Geothermal
Existing
1/1/2018
10
50
438
The Rosamond, Willow Springs and Sunshine Valley PPAs have the following similarities
(and differences, where noted):


Commercial Operation Deadline: January 1, 2020;
Delivery Term: 15 years following the month of the Commercial Operation Date;

Contract Capacity (MW)
o Rosamond: 160 MW
o Willow Springs: 108 MW
o Sunshine Valley: 104 MW
Interconnection Point / Delivery Point (to the California Independent System
Operator (“CAISO”)-controlled grid):
o Rosamond: Whirlwind 220 kV bus;
o Willow Springs: Whirlwind 220 kV bus;
o Sunshine Valley: Valley Electric Association’s 138 kV bus at the Valley
Substation;
First year capacity factor:
o Rosamond: 36.04%;
o Willow Springs: 36.11%;
o Sunshine Valley: 34.24%;


Merrimack Energy Group, Inc.
5
Prior to the launch of the RFP, SCE retained Merrimack Energy Group, Inc. (“Merrimack
Energy”) as the IE for the 2014 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 Imperial Irrigation District (“IID”) filed a protest to SCE’s short list,
primarily objecting to SCE’s use of transmission adders for projects interconnecting with
IID with network upgrade costs, to which SCE filed a reply supporting its short list. On
April 29, 2015, the Energy Division suspended a decision on the advice letter for up to 120
days effective May 23, 2015 in order to allow time for additional staff review. On
September 18, 2015, the Commission issued Resolution E-4726 and directed SCE to
reassess its evaluation of IID-interconnected bid projects in this solicitation, specifically to
consider the difference between the reimbursement method used by the CAISO—a
repayment with interest on network upgrade costs paid by a generator—and the method
used by IID—a credit of network upgrade costs to transmission costs incurred by the IID
generator.10
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 2014 Renewable RFP requirements and evaluation criteria set forth in SCE’s
Procurement Protocol.11
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 included a three-month period
during which SCE and short listed bidders negotiated contract terms and conditions,
conducted evaluations of any updated offers, and executed PPAs; and (2) to describe, with
specificity, the fairness of the contract negotiation process with respect to the First Solar
PPAs, the price, economic ranking, and other attributes of the First Solar PPAs and
projects, and whether the First Solar 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.
8
New Energy Opportunities, Inc. is serving as a subcontractor to Merrimack Energy in this engagement.
Advice Letter 3209-E, dated April 23, 2015.
10
On September 28, 2015, SCE filed a Tier 1 Advice Letter re-evaluating proposals from its 2014
solicitation that were interconnected to the Imperial Irrigation District’s electrical system such that the
differences between the CAISO Tariff and the Imperial Irrigation District Open Access Transmission Tariff
were considered.
11
The Procurement Protocol is a public document describing the renewable energy products being sought,
the 2014 Renewable RFP submission requirements, and SCE’s preferences and evaluation criteria.
9
Merrimack Energy Group, Inc.
6
SCE’s outreach activities, which included contacting a large number of prospective Sellers,
holding a 2014 RPS Solicitation Request for Proposals Conference via Webex for
prospective Sellers, and disseminating substantial information about the RFP on its website
or the Accion Power website, were effective, as evidenced by the robust response to the
RFP in terms of number of proposals, types of resources proposed, initial delivery dates,
quality of the proposals submitted and importantly, 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 responding to this RFP was lower than
recent RPS solicitations, including the 2013 Renewable RFP, the response was still very
competitive with a more balanced combination of existing and new projects as well as more
mature and viable projects competing.
SCE’s project team was thorough in conducting its due diligence review to determine if
the proposals received conformed to the completeness and eligibility requirements of the
RFP and SCE worked diligently with Sellers to remedy any curable deficiencies.
SCE’s Least Cost Best Fit (“LCBF”) evaluation methodology was generally implemented
in a consistent manner and was effective in assessing a range of projects, technologies,
contract terms and product sizes in a fair, consistent, and technology neutral manner. 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’
Net Market Value (previously referred to as Renewable Premiums)12 that help define the
preliminary shortlist. Based on this analysis and qualitative considerations, a short-list is
selected.
12
SCE had previously referred to its evaluation and ranking metric as Renewable Premium, which was
essentially costs minus benefits. In recent solicitations, a number of projects were evaluated with a negative
Renewable Premium value, indicating that the cost associated with the project was lower than the benefits
provided. For this solicitation, SCE transitioned to a Net Market Value metric which is essentially project
benefits minus project costs. As a result, under this metric, the best or highest ranked projects will have a
positive value instead of a negative value, as under the Renewable Premium metric.
13
Net Market Value is calculated by subtracting costs from benefits. Benefits are comprised of separate
capacity, energy, curtailment (if applicable), and congestion components (congestion reduction if
applicable). Costs include the contract payments, debt equivalence, congestion cost, renewable integration
cost adder, and, if applicable, transmission network upgrade costs. SCE discounts the annual benefit and
cost streams to a common base year. The result of the quantitative analysis is a merit order ranking of all
complete and conforming offers by Net Market Value, which is the foundation upon which a series of
alternative shortlist portfolios is established.
Merrimack Energy Group, Inc.
7
The IE has concluded that the proposal evaluation process was fairly administered and was
a thorough, consistent, and comprehensive process. Furthermore, the flexibility included
in the final selection and the portfolio approach used by SCE to inform the ultimate
selection served to lower expected gross costs for customers relative to a pure rank order
selection process (based on expected net costs taking into consideration forecasted market
values for energy and capacity).15
The methodology and proposed Short List selection were vetted with SCE’s Procurement
Review Group (“PRG”) prior to final selection.
15
Section IV of this report provides a detailed description of the evaluation methodology and the
adjustments made by SCE that led to lower expected gross customer costs
Merrimack Energy Group, Inc.
8
In terms of the short-list selection process, SCE exercised discretion, in several contexts,
In the short-listing process, SCE included a quantitative assessment of network upgrade
costs of projects interconnecting with IID (Alternative Net Market Value). Prior to the
2013 RPS solicitation, SCE had not included reimbursable network upgrade costs from
balancing authorities other than the CAISO in its RPS evaluation process as
transmission adders for the reason that under existing CAISO tariffs IID customers and
not California investor-owned utility customers will ultimately pay for such
transmission upgrades.18 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
possibility that, as IID network upgrade costs increase to help support renewable
projects to meet California’s RPS obligations, the costs may ultimately be charged to
CAISO and the California investor-owned utilities and their customers. In addition,
SCE also indicated that it believed that treating projects interconnecting to any
California balancing authority in the same manner put competing projects on a level
playing field and take into account costs that would be incurred by California customers
generally. While SCE characterized this treatment of non-CAISO California balancing
authority network upgrade costs as a “qualitative” consideration, SCE applied the
network upgrade costs quantitatively in what it referred to as the “Alternative
Renewable Premium” metric.
IID had protested SCE’s treatment of network upgrade costs in the context
of SCE’s 2013 RPS advice letters, and the Commission approved all of SCE’s advice
letters. Subsequently, in Resolution E-4726, the Commission directed SCE to reassess
its evaluation of IID-interconnected bid projects in this solicitation, specifically to
17
18
See Advice 3278-E.
The Procurement Documents do not address this issue specifically.
Merrimack Energy Group, Inc.
9
consider the difference between the reimbursement method used by the CAISO—a
repayment with interest on network upgrade costs paid by a generator—and the method
used by IID—a credit of network upgrade costs to transmission costs incurred by the
IID generator.
2.
While several of these factors
are included in the description of SCE’s Least-Cost Best-Fit (LCBF) methodology
some of the other factors used in decision making
were not explicitly addressed in SCE’s LCBF methodology and therefore not directly
communicated to bidders. If SCE wishes to use a similar approach (or a modified
approach) in the next RPS solicitation, Merrimack Energy recommends that it amend
its articulated LCBF methodology to reflect more closely how it intends to conduct its
evaluation and selection process.19 This should assist bidders in developing offers that
will better address SCE’s objectives. It will also facilitate Commission review of
SCE’s proposed evaluation methodology. For purposes of the 2014 RPS solicitation,
Merrimack Energy generally found SCE’s approach to be reasonable.
SCE utilized a “one-step” process to solicit offers and negotiate PPAs in the 2014 RPS
solicitation as opposed to the “two-step” process used in the 2013 RPS RFP.
In turn, the pricing of these projects likely reflected
the higher level of ITC—30% compared to 10%--available under current law for pre-2017
in-service dates. In the context of these contract negotiations, SCE used opportunities
presented when bidders offered changes from their original bids, such as earlier or later
start dates, to obtain contract concessions, usually in the form of lower prices. SCE decided
to execute contracts with all shortlisted counterparties with which it could reach agreement
on a PPA. The particular start dates, term length, and pricing tended to reflect SCE’s
priorities for earlier start dates, and more Compliance Period 3 MWs, lower gross costs,
and shorter contract term lengths.
In the IE’s
19
Merrimack Energy also suggests that SCE clarify the measures it desires to use to assess “lower cost,”
whether, for example, the focus should be on levelized cost per MWh, present value costs, nominal costs or
some combination of the foregoing and the relationship with contract term length.
Merrimack Energy Group, Inc.
10
opinion, this was a reasonable exercise of business judgment by SCE consistent with the
LCBF qualitative considerations of
.
Overall, it is the IE’s assessment that SCE reasonably designed and fairly implemented the
2014 Renewable RFP and appropriately selected the Rosamond, Willow Springs, and
Sunshine Valley proposals. These projects had high rankings in terms of economic value
to customers and project viability, the PPA was fairly negotiated, and, in the IE’s opinion,
the Rosamond, Willow Springs, and Sunshine Valley PPAs merit Commission approval.
I. 2014 Renewable Request for Proposals (“RFP”) Overview
On December 18, 2014, Southern California Edison Company (“SCE”) issued its 2014
Renewable RFP. SCE solicited proposals from Bidders (“Sellers”) to supply either
Bundled Energy Product or REC Product from Eligible Renewable Energy Resources
sufficient to permit SCE to execute renewable power purchase and sale agreements
(“PPAs”) in substantially the form as SCE’s Pro Forma Renewable Power Purchase and
Sale Agreement (“Pro Forma PPA”) or the Pro Forma Master Renewable Energy Credit
Purchase Agreement (“Pro Forma REC Purchase Agreement”), as applicable, both posted
on the Accion Power’s RPS Proposal Website.
Through the 2014 Renewable RFP solicitation, SCE sought Proposals for product
qualifying as Portfolio Content Category 1 (“Category 1”) or REC Product qualifying as
Portfolio Content Category 3 (“Category 3”). Category 1 includes all electric energy
produced by an ERR Generating Facility throughout the term of the Final Agreement, net
Merrimack Energy Group, Inc.
11
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.20 Category 3 encompasses only Renewable Energy Credits
(“RECs”), all associated Green Attributes, and Western Renewable Energy Generation
Information System (“WREGIS”) certificates evidencing the authenticity of the REC
Product. REC Product does not include the energy generated as part of the creation of the
RECs. All REC Product transactions must be for period of 10 years or more.
The basic solicitation requirements and conditions are set forth in the 2014 Renewable RFP
Procurement Protocol. These include:
1. SCE will only consider Proposals to purchase Bundled Energy Product or REC
Product from ERR Generating Facilities with commercial operation dates (the
“COD”) or initial delivery dates to SCE on January 1, 2016 or later;
2. SCE will consider proposals to purchase REC Product from new or existing ERR
Generating Facilities;
3. 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 or Category 3.21 SCE will not consider Proposals to deliver
any Portfolio Content Category 2 products, such as firmed and shaped product;
4. SCE is only soliciting Bundled Energy Product or REC Product from ERR
Generating Facilities which possess: (1) a completed Phase II Interconnection
Study or equivalent, (2) a signed Interconnection Agreement, or (3) an equivalent
or better interconnection study, agreement, process, or exemption. Further, the
interconnection arrangements must support the ERR Generating Facility’s
forecasted 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;
5. 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;
6. 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). Seller must clearly identify all Proposals
20
Capitalized terms in this report are as defined in the Procurement Protocol, unless otherwise specified or
where terms pertain to the First Solar PPAs (and are defined in the First Solar PPAs).
21
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. Category 3 Products primarily involve REC-only products.
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12
with a mutual-inclusive limitation. Seller must clearly identify the discount to the
individual Proposal or aggregate Product Price, if any, associated with any package
deal;
7. 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). Seller must clearly identify all Proposals with a mutualexclusivity limitation;
8. Proposals for Bundled Energy Product or REC Product delivered from ERR
Generating Facilities with Contract Capacity of 500 kW or greater are eligible to
participate in this RPS solicitation;
9. Seller’s Proposal must demonstrate Site Control or the Proposal will not be given
further consideration. SCE intends that the definition of “Site” and “Site Control”
not only mean the land upon which the ERR Generating Facility is expected 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;
10. For Bundled Energy Product, Seller’s generating facility must be a new, existing or
repowered generating facility that is an ERR;
11. Sellers must submit Product pricing for Proposals based on the inclusion of zero
(0) or fifty (50) hours per year of unpaid curtailment as further outlined in this
Protocol;
12. SCE will consider Proposals with energy storage. Sellers should include a
description as well as the operating parameters of the proposed storage facility in
the Proposal Structure Letter;
13. Through the RPS solicitation, SCE continues to solicit ERR Generating Facilities
in the Western Los Angeles sub-area of the Los Angeles basin local reliability area
(“Western LA Basin sub-area”) to meet local capacity requirements (“LCR”) and
specifically, resources that are interconnected to SCE’s distribution system in the
Johanna and Santiago sub-station area to meet SCE’s Preferred Resource Pilot
(“PRP”) goals, which may also be met by ERR Generating Facilities;
14. SCE encourages Women-Owned, Minority-Owned, and Service Disabled VeteranOwned Business Enterprises (“WMDVBE”) to participate in the RFP;
15. 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;
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16. The primary method for exchange of information or documents concerning this
RPS solicitation, including any such exchange concerning the preparation or
submission of Proposals to SCE, will be via the RPS Proposal 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”),
and D.14-11-042. 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 and Appendix A.
SCE followed a multi-step approach designed to result in shortlist selection as described in
the Procurement Protocol. In this process, once Proposals are received, SCE begins an
initial review for completeness and conformity with the Procurement Protocol. The review
includes an initial screen for required submission criteria such as, for Bundled Energy
Product, a conforming delivery point, commercial on-line date during 2016 or later, a valid
interconnection study, minimum project size, and the submission of all required Proposal
package elements. Sellers Proposals that are substantially complete but lacking required
information are allowed a reasonable cure period to remedy any deficiencies.
Following this check for conformity, SCE conducts an additional review to determine the
reasonableness of Proposal parameters such as generation profiles and capacity factors.
SCE works directly with Sellers to resolve any issues and ensure the data is ready for
evaluation. Through the Accion Power Website the IE is copied on any communications
between SCE and the Sellers.
After this review, SCE performs a quantitative assessment of each Proposal individually
and subsequently ranks them based on the Proposal’s benefit and cost relationship. The
total benefits and costs are used to calculate the Net Market Value for each complete and
conforming Proposal. Benefits are comprised of separate capacity and energy components,
congestion and curtailments benefits, while costs include the contract payments, debt
equivalence, integration cost, congestion cost, and transmission cost. SCE discounts the
monthly benefit and cost streams to a common base date. The result of the quantitative
analysis is a merit-order ranking of all complete and conforming proposal’s Net Market
Values that assist in defining the Short-List.
Following the quantitative analysis SCE conducts a qualitative assessment, including use
of the Project Viability Calculator for the most competitive Proposals. This analysis utilizes
the Project Viability Calculator to assess certain factors including the experience of the
company/development team, technology, and development milestones. Additional
attributes such as transmission area/cluster, generating facility location, seller
concentration, project size, dispatchability, and contribution to other program goals are also
considered in the qualitative analysis. These qualitative attributes are then considered to
either eliminate non-viable Proposals or Proposals with other qualitative attributes or add
Projects with high viability to the final short-list of Proposals, or to determine tie-breakers,
if any.
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Following its analysis, SCE consults with its PRG regarding the proposed Short-List and
specific evaluation criteria. SCE then develops a final Short-List and negotiates with the
Short-Listed Sellers after notification of Short-Listing.
Whether a Proposal selected through this process results in an executed contract depends
on the outcome of negotiations between SCE and the Seller. SCE executes contracts and
then submits them to the Commission for approval through advice letter filings.
SCE’s 2014 RPS RFP includes several changes from the company’s previous RPS
solicitations, including the following:

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
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SCE continued to require a Phase II Interconnection Study for projects (or an
equivalent of more advanced interconnection study or exemption) as it did in the
2013 RPS solicitation;
In addition to soliciting long-term Category 1 products, SCE sought proposals for
long-term Category 3 unbundled REC transactions;
Utilizing a one-step solicitation process rather than the two-step process used in the
2013 RPS solicitation (in the 2013 RPS solicitation, short-listed bidders were
required to negotiate PPAs before they submitted best and final offers, but in the
2014 RPS solicitation, SCE negotiated PPAs with short-listed bidders without a
second bid submission process);
SCE required bidders to propose pricing based on two economic curtailment
scenarios, both without the banked curtailment and “pay-back” provisions. The
Procurement Protocol requires sellers proposing Category 1 products to provide
two bids based on different curtailment protocols:
o Option 1: Sellers offer pricing based on SCE having the right to issue unpaid
curtailment orders for up to 50 hours per year. Any Curtailment Order (as
defined in Section 3.12(g)(iii) of the 2014 Pro Forma PPA) in excess of the
50 hours multiplied by the applicable contract capacity would be paid at the
contract price;
o Option 2: Sellers offer pricing based on SCE having to pay the contract
price for all Curtailment Orders.
SCE evaluated both bids and selected the bid that represents the best value to SCE’s
customers.
Some of these and other matters are addressed in the Commission’s decision adopting 2014
RPS procurement plans.22 In that decision, the Commission made the following directives
that pertain to SCE’s 2014 RPS RFP:

22
The Commission approved SCE’s proposal to use CAISO’s 10-year forecast of
import capability from IID in lieu of the previously ordered 1,400 MW capability
assumption;
D.14-11-042 (Nov. 24, 2014).
Merrimack Energy Group, Inc.
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SCE’s proposal to change the minimum size requirement for a RPS bid from 1.5
MW to 500 kW was approved;
SCE’s proposal to use one set of TOD factors rather than two based on
interconnection deliverability status, as was used in its 2013 RPS solicitation, was
approved;
The Commission approved SCE’s proposal to include in its Pro Forma PPA a
provision that gave SCE the right to approve material project design changes in its
sole discretion;
The Commission denied SCE’s request to remove Pro Forma PPA language that
provided (in the 2013 Pro Forma PPA) that in the event federal tax credits expire
before the project goes into operation the commercial operation date milestone
could be extended or the Seller would have the right to terminate the PPA;
A request to reinstate shortlist exclusivity (used prior to the 2013 RPS RFP) was
denied;
SCE’s proposal to reduce its payment obligations for excessive deliveries in its Pro
Forma PPA was approved;
SCE’s approach in requiring bidders to submit bids with two different economic
curtailment treatments (previously described) was approved;
The IOUs were required to incorporate a requirement for bidders that projects, at a
minimum, have a “project deemed complete” or equivalent status with respect to
their major land use permit application;
With respect to resource adequacy (“RA”) value in the quantitative evaluation, the
IOUs were directed to report (a) their RA price curves and (b) their bid rankings
based on Net Qualifying Capacities (“NQCs”) based on use of the existing
exceedance methodology (which would be used for evaluation purposes) and
effective load carrying capability (“ELCC”) capacity methodology;23
The Commission directed for purposes of the 2014 RPS solicitations that the IOUs
use an interim Renewable Integration Cost Adder (“RICA”), consisting of:
o A variable component: $3/MWh for solar and $4/MWh for wind; and
o A fixed component calculated by each IOU.
These solicitation elements were incorporated by SCE in its RPS Protocol, Pro Forma PPA,
and/or its evaluation process, as applicable.
23
SCE did not utilize an ELCC methodology to calculate RA value in this solicitation. Based on
discussions with SCE, it is our understanding that SCE completed an alternative Net Market Value
calculation using ELCC for informational purposes and intends to provide the results of its assessment of
the offers from the solicitation using an ELCC methodology with its Short-List Report.
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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.06-05-039 (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.24 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. 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 were 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
24
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).
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subject to feedback and any recommendations from the IOU’s PRG and the 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 2014 RPS Solicitation Shortlist
Report Template.
B. Description of Key IE Roles
In compliance with the CPUC requirements identified above, SCE retained Merrimack
Energy in early December 2014 to serve as IE for SCE’s 2014 RPS solicitation.25
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.26
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:
25
26
Merrimack Energy also served as IE for SCE’s 2013 RPS solicitation.
SCE did not receive any offers from affiliates.
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
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.
This report on the RPS solicitation process provides an assessment of SCE’s 2014
Renewable RFP solicitation from issuance of the RFP through selection of the short list
and contract negotiations with short-listed parties. It is organized based on the 2014 RPS
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Solicitation Shortlist Report Template provided by the CPUC’s Energy Division. This
report addresses Merrimack Energy’s assessment and conclusions with regard to the
following questions:
1. Did SCE do adequate outreach to participants and was the solicitation robust?
2. Was SCE’s Least-Cost Best-Fit methodology designed such that offers were fairly
evaluated?
3. Was SCE’s LCBF offer evaluation process fairly administered?
4. Did SCE fairly negotiate the terms and conditions of contracts with shortlisted
bidders?
5. Did SCE make reasonable and consistent choices regarding which bids were shortlisted and which offers were awarded contracts?
6. With regard to the First Solar PPAs, (a) did SCE fairly and reasonably negotiate
the contracts, (b) did SCE fairly and reasonably evaluate and select First Solar’s
offers, and (c) do the First Solar 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 short-list selection process, monitoring
contract negotiations with short-listed bidders, and assessment of the contract provisions
for the projects/contracts for which Commission approval is sought. Merrimack Energy
was retained by SCE approximately two weeks prior to the issuance of the RPS RFP.
Provided below is a description of the IE activities before receipt of proposals on February
2, 2015, IE activities associated with the receipt, evaluation, and selection of proposals for
purposes of selecting the shortlist, and IE activities subsequent to short-list selection up
through execution of the final PPAs.
IE Activities Prior to Receipt of Proposals
Prior to SCE’s receipt of proposals, Merrimack Energy:

Reviewed SCE’s Procurement Plan filing, including the LCBF methodology, and
prepared several clarification questions and comments on the proposed
methodology for discussion with SCE. The IE and SCE held conference calls to
discuss the details of the implementation of the methodology, notably revisions to
the process from the 2013 RPS RFP. Discussion items identified by the IE included:
o The methodology for the inclusion of integration costs in the evaluation
process, notably the fixed cost portion of integration costs;
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o Overall criteria to be applied for bid evaluation and selection from both a
quantitative and qualitative perspective;
o Expected availability of the forward curves for energy and capacity for
evaluation purposes;
o The expected evaluation approach for accounting for the two pricing offers
required from participants (i.e. one price with 50 hours of curtailment and
the other assuming SCE pays for all SCE instructed curtailment);
o Process and timing for completing the Project Viability Calculator,
particularly with regard to the number of Proposals evaluated;
o Methodology for determining the congestion cost adders and comparison to
the 2013 RPS RFP process;
o Proposed approach for treating network upgrade costs for California
projects not interconnecting to the CAISO in the evaluation;
o Basis for using a one-step evaluation and selection process for this
solicitation as opposed to the two-step process used on other solicitations;
o Methodology for evaluating projects with delivery points outside the
CAISO;
o How SCE will take into consideration the viability of solar projects in light
of the 12/31/2016 end date (date for solar projects to be placed in service)
for the 30% federal Investment Tax Credit under current law;
o The application of other qualitative criteria such as seller concentration.

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Participated in weekly meetings of the RPS project team to discuss the status of the
procurement process;
Attended SCE’s 2014 RPS Solicitation Request for Proposal Conference webinar
on January 12, 2015;27
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 in light of changes
made to the website over the past year and to better understand how the IE could
use the website to conduct an independent assessment of the proposals received;
Participated in a meeting with the PRG on December 18, 2014 where SCE
discussed the proposed launch of the 2014 RPS solicitation.
IE Activities After Receipt of Proposals
After receipt of proposals, Merrimack Energy:

Prepared several reports using the Accion Power website function to provide high
level summaries for each proposal. The IE prepared two primary reports including:
o High level summary of the project (i.e. Bidder, Project name, technology,
size (MW), location, COD, contract term, pricing);
27
The Bidders Conference was originally intended to be both an in-person and call-in Conference.
However, due to lack of interest on the part of Participants to attend in person SCE decided to conduct the
Bidders Conference as a webinar only.
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o Interconnection/location-specific information for each project;
Sorted pricing summary spreadsheet to develop preliminary ranking of proposals
by price;
Developed a detailed summary of the offers by counterparty and bid number;
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. The Company and IE
developed the same list of participants and total number of proposals;
Participated in calls with SCE’s project team to discuss the status of proposal
conformance with the minimum eligibility requirements of the RFP;
Participated in several discussions and meetings of SCE’s project team to discuss a
range of issues including the conformance of individual proposals and processes
for addressing specific proposals, discussions about SCE’s procurement strategy in
light of an estimated increase in RPS needs to meet Compliance Period 3
requirements with more certainty, and discussions of revisions to the evaluation
and selection criteria to allow for a more balanced selection of offers;28
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;
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 on the list overall as
well as specific projects included or not included;
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 meetings at SCE’s offices to discuss the ranking and economic
considerations of several portfolios as the basis for selecting the proposed shortlist
including internal project team meetings and pre-reads with SCE program area
management; participated in epRMC29 meeting with senior management, and the
PRG meeting of March 11, 2015 at which SCE discussed its short list selection.
The IE provided input and comments at all meetings, including observations based
on the solicitation results;
IE Activities Following Shortlisting Through Negotiations and Execution of PPAs
After selection of the short list, Merrimack Energy:

Prepared a report on the Short-List evaluation and selection process, which SCE
filed with its Advice Letter with respect to SCE’s short-list for this RPS solicitation;
28
SCE held an Advisory Team Meeting (attended by the IE) on February 19, 2015 to discuss SCE’s
updated forecasted RPS position based on the Compliance Period 3 mandate based on assessments of its
current position. The updated analysis led SCE to reconsider its 2014 RPS solicitation procurement targets
and strategy for procurement and short list recommendations associated with the 2014 RPS RFP.
29
Energy Procurement Risk Management Committee.
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

Monitored contract negotiations between SCE and the short-listed counterparties;
Attended weekly SCE staff meetings (by teleconference) regarding the progress of
negotiations and other issues pertaining to contract provisions, including issues
common to several contract negotiations as well as issues specific to individual
projects;
Monitored and reviewed emails and other documents exchanged between SCE and
the counterparties during the contract negotiation process;
Reviewed any updates to the evaluation results for specific offers based on
revisions to project pricing;30
Participated in pre-reads, epRMC meetings, and PRG meetings regarding selection
and approval of contracts with short listed counterparties.
D. Any other relevant information or observations
Following final selection of PPAs in this solicitation, SCE discovered an error in the model
used to calculate energy costs and Net Market Value.31 Specifically, the Time of Delivery
(“TOD”) periods used in the adjustments of bid prices were incorrect. While SCE planned
to use new TOD periods and Product Payment Allocation factors for the 2014 RPS RFP,
as shown in Appendix B hereto, it used the correct Product Payment Allocation factors for
the 2014 RPS RFP but used the TOD periods from SCE’s 2013 RPS solicitation (also
shown in Appendix B). SCE reran its evaluation using the correct 2014 RPS RFP TOD
periods for both its evaluation of bids leading up to its shortlisting decisions and its
evaluation of the final PPAs it had negotiated.
In addition, SCE identified two other errors:


For those proposals that had a RA guaranty date that was different from the
forecasted Commercial Operation Date (other than Energy Only proposals), SCE
provided RA value for the full delivery term rather than only for the period
following the RA guaranty date;
For all of the proposals, SCE did not include in its evaluation the last delivery
month.
SCE’s revised evaluation takes into account the impact of the RA guaranty date. SCE did
not reevaluate all of the offers due to the last month being cut off in its analysis. SCE
decided not to redo the evaluation to take into consideration the cut off last month due to
the considerable time it would take and the de minimis impact it would likely have on the
results, a matter in which the IE concurs.
The IE reviewed SCE’s reevaluation of the proposals leading up to its shortlist and as well
as its reevaluation of the
In addition,
30
For example, some bidders provided reduced prices in exchange for an earlier contract start date for their
projects.
31
The error was caught by SCE in preparing for the RAM 6 RFO.
Merrimack Energy Group, Inc.
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Merrimack Energy prepared and submitted an amendment to its IE shortlist report and an
amended IE report in connection with the Mesquite PPA.
Finally, in preparation for the 2015 RPS solicitation, SCE identified a problem in the
manner in which locational congestion impacts were valued in the 2014 RPS evaluation.
Specifically, for projects in locations and during time periods with forecasted negative
congestion, the projects were incorrectly evaluated as having forecasted positive
congestion by the same amount. SCE reevaluated the 2014 RPS bids using the corrected
sign for congestion. For some projects this had the effect of increasing the forecasted
energy market value (relative to the prior valuations) which increased the net market value
for a number of bids.33 Generally, there was little change in bid ranking order.
SCE has decided at this time not to take any further action with respect to the 2014
RFP other than notifying Energy Division and making any appropriate filings to correct
the record.35
III. Did SCE Do Adequate Outreach to Bidders and Was the Solicitation
Robust?
For its 2014 RPS solicitation, SCE initially sought to meet an RPS solicitation goal of
approximately
33
See Confidential Appendix D.
35
The revised valuations of the final PPAs executed in the 2014 RPS solicitation are in Confidential
Appendix E.
Merrimack Energy Group, Inc.
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.36 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 the company’s objectives.
A. Were Notifications/Announcements of the Solicitation Adequately Distributed?
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 served as the
database for Seller contact and outreach. SCE sent emails to all potential Sellers on this list
informing them of the 2014 RPS RFP process and the issuance of the Procurement
Protocol. SCE did not issue a press release or contact industry trade publications
announcing its 2014 RPS RFP.
B. 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? Provide Suggestions for Improvements for Subsequent Solicitations.
The IE had the opportunity to review the solicitation documents and related materials and
was very familiar with the documents, information required from participants, and offer
forms and similar documents based on our experience in serving as IE for the 2013 RPS
solicitation. Similar to the 2013 RPS solicitation, SCE required Sellers to post their
proposal documents on a website, designed by Accion Power, for this solicitation.37 All
submissions by Sellers as well as written communications between the Seller and SCE took
place via the Accion Power website and therefore Sellers were required to understand how
to use the website to allow for proposal submission. In addition, the Accion Power website
includes a tab which provides a tutorial for Sellers regarding access to and use of the
website and for this solicitation included video instructions for the Participants. Based on
receipt of proposals and review of the submittals, it was clear that the majority of Sellers
were able to successfully navigate and utilize the website effectively during the solicitation
process.38
36
SCE revised its RPS requirements after undertaking an assessment of recent experience with existing
renewable projects and the success rates of projects not yet on line. SCE also undertook a probabilistic
assessment of the likelihood of meeting various solicitation goals for RPS, including scenarios in which the
RPS target would be increased to 50%.
37
This was second RPS solicitation in which the Accion Power Website was used as the primary
mechanism to communicate with bidders. Accion Power also made some modifications to the website for
this solicitation to allow SCE to more effectively address issues associated with bid submission, review,
and evaluation. The major improvements to the website included: (1) enhanced and improved inclusive and
exclusive offer designations; (2) customization of the website administrative features for SCE’s use
including the ability to assign SCE contract managers to specific counterparties which allowed SCE to
respond to incoming messages from bidders more expeditiously; (3) created the interface and ability for
bidders to submit offers for Category 3 products.
38
A few Sellers were not able to successfully submit specific proposal offers because they were late in
posting the offers and were still trying to submit information at the closing date and time identified by SCE.
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All of SCE’s RFP documents were posted on the Accion Power website. The eligibility
requirements of Sellers and the documents that Sellers are required to submit with their
proposals were clearly identified in the Procurement Protocol and on the Accion website.
In addition, the Procurement Protocol identifies the documents required of Sellers, provides
a description of the evaluation and selection process, and contains a schedule for the
solicitation. The Accion website has a tab entitled Program Documents which includes the
Procurement Protocol, Form of Sellers Proposal, CPUC Decisions, Bidders Conference
materials and Proposal Form worksheet. The Form of Seller’s Proposal, which is included
on the Accion Website, sets forth the documents and data that each Seller must include in
its proposal. This tab identified all the documents to be included in the Bidders E-Binder
when uploading documents to the website 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 as part of its proposal package:
 Fully executed Proposal Structure Letter that provides a brief summary of the
proposal and project as well as an introduction to the entities that comprise the
Seller;
 Fully executed Seller’s Acknowledgement Letter;
 Fully executed Consent for Release of Interconnection Related Information;
 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;
 Form of Letter of Credit for Short-List Deposit;
 A copy of all the Generating Facility’s Interconnection studies;
 A completed Geographic Information System file of the project boundaries and
associated gen-tie;
 A copy of the letter from the lead land use permitting agency documenting that the
land use permit application for the project has been deemed complete to begin the
permitting review process.
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 reasonable 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 cure or correct
inconsistencies between the Proposal Form and Proposal Structure letter or to ensure all
required information was provided. For the most part, Sellers were able to cure any
outstanding deficiencies or inconsistencies in their proposals in short order.
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Merrimack Energy believes that the contents of SCE’s 2014 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
in the Procurement Protocol and on the Accion Power website provided Sellers with a
substantial base of information to allow them to determine how they could best compete in
the RPS solicitation process. While a few Sellers were not able to complete and
successfully submit all the offers they had hoped to submit, the problem with the failure to
submit offers was attributed largely to Sellers attempting to post offers at the last minute
before the website shutdown. A few Sellers made errors in filling out their submissions
which led to non-acceptance of their offers at the deadline for submitting offers as specified
in the Protocol and on the Accion Power website. Sellers who were not able to submit a
complete proposal were not eligible once the time limit on proposal submission was
reached.
The Accion Power website was also used by SCE and the short-listed counterparties during
the contract negotiation process. The parties generally posted any contract turns under the
PPA tab of the project files for each short-listed counterparty. The IE was notified via email
whenever a document or email was posted to the website by either SCE or a specific shortlisted counterparty. The project number for each short-listed option was included with the
email, which allowed for a consistent record of activity for each short-listed option.
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
easily 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. In addition, based on the organization of offers on the website by
bid number in sequence, the IE was able to complete its bid summary document in
a limited amount of time compared to other solicitations;

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, and following up with some detailed questions about
several offers, much of the communications with Sellers involved clarification of
the information provided. Clarifying questions regarding whether offers were
mutually exclusive or inclusive, about the generation profile, or 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)
early on in the evaluation process;
Merrimack Energy Group, Inc.
27

There appeared to be fewer requests for information by SCE and a more seamless
use of the website by the Sellers for this RFP indicating that Sellers are becoming
more familiar with the website applications;

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
expressed an interest in receiving proposals with different contract term lengths and
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. Most Sellers conformed to this requirement as
illustrated by the variety of contract terms submitted;

The Accion Power website was effective for allowing the IE to monitor and
organize the documents and information associated with the contract negotiation
process for each counterparty. Based on the large number of contracts initiated, this
aspect of the website proved to be efficient for organizing pertinent information.
Contrary to the approach taken for the 2013 RPS RFP, wherein SCE posted the Protocol
documents and other documents on its website as well as including the same documents on
the Accion Power website, for the 2014 solicitation SCE only included a link to the Accion
Power website and the solicitation schedule on its internal webpage for the 2014 RPS
solicitation. The IE suggests that SCE continue to post publicly available documents
regarding the RPS RFP on its website including the Procurement Protocol, the public
version of the Company’s Renewable Procurement Plan, and applicable Commission
Decisions and Orders. The IE feels this will facilitate access to parties that have not
registered on the Accion Power website for this event but may be interested in competing
in future solicitations.
In addition to the program documents, the Accion Power website contained a list of
questions and answers related to the solicitation. The Accion Power website also included
an Announcement tab with latest information about the RFP, a solicitation schedule tab,
and a tutorial on the use of the website for bidders. The IE found the Accion Power website
easy to access and navigate.
C. Was a Bidder’s Conference Held or Other Forum Available for Communications
Regarding the Solicitation? Any Comments Regarding Information Provided or
Questions Received.
The 2014 Solicitation Request for Proposals Conference was held by SCE for prospective
Sellers on January 12, 2015. The agenda for the Request for Proposals Conference included
the following items:



Overview if the solicitation process
Supplier Diversity
RPS Schedule
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





Description of the process, products, and eligibility criteria
Website and proposal requirements
Description of the Pro Forma Power Purchase Agreement
Proposal evaluation methodology and process
Interconnection issues
Q&A
The Request for Proposals Conference was originally scheduled to be an in-person
conference as well as a webex option. However, few prospective bidders indicated they
would attend in person and SCE decided to conduct the Conference as webex only. For the
2013 RPS RFP, SCE held an in-person Request for Proposals Conference as well as the
opportunity for others to call into the Conference. The 2013 RFP Bidders Conference was
particularly well attended in person. The IE was surprised that there was so little interest
by the prospective bidders to attend the Conference in-person but perhaps an indication
that there would be no additional value to attend in-person rather than participate via
webex. We would suggest that SCE include questions on its survey of the solicitation
process with regard to bidder preference for webex conferences rather than in-person
conferences.
D. Did the IOU’s Seek Adequate Feedback About the Bidding/Bid Evaluation
Process From All Bidders After the Solicitation Was Complete?
Similar to the 2013 RPS solicitation process 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 short-list. Several
bidders have requested de-brief calls with SCE. The IE has attended the calls with Bidders.
Bidders generally wanted to know the relationship between their prices and those of the
successful short-listed projects. SCE provided general direction but was not specific with
regard to the magnitude of the difference.
E. Provide Any Other Relevant Information or Observations Regarding Outreach
and Robustness of the Solicitation
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. However, the
number of Sellers and projects was less than in the 2013 RPS solicitation, perhaps
reflecting the situation whereby the response to the 2013 RPS RFP was driven by the
interest of solar project developers to attempt to take advantage of the window for getting
a project in-service before the scheduled reduction of the federal Investment Tax Credit
from 30% to 10% for solar projects placed in service after December 31, 2016. For the
2013 RPS RFP, 81 unique solar PV projects were submitted with a total of 242 offers
compared to 25 unique solar PV projects submitted into the 2014 RPS RFP, as illustrated
below. Interestingly, the unique number of projects submitted for other technologies was
very similar between the 2013 and 2014 RPS solicitations.
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As noted, the overall result of this outreach activity was still a 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. In addition, it
appears clear that the decline in the number of proposals from 2013 to 2014 was not due to
any issues associated with the solicitation requirements but is likely due to anticipated
changes in the federal Investment Tax Credits for solar projects.
Proposals were 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, biomass, small-scale hydro and Municipal Solid
Waste. Information regarding the proposals including MW and GWh quantities, types of
resources bid, project location, pricing options, contract term, COD date, vintage, and
deliverability status is contained in Appendix C 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
and wind projects, which accounted for over 60% of the total unique projects offered and
80% of total capacity. Also, approximately 35% of the unique projects submitted were
existing projects.
Table 1: SCE’s RPS Proposals Received by Technology
Technology
Biomass
Geothermal
Wind
Solar PV
Solar Thermal
Small Hydro
MSW
Total
All Proposals
# of Proposals
43
16
43
105
9
1
1
Capacity (MW
Total)
520
321
2,356
2,909
450
3.1
20
Unique Projects39
218
6,579
83
14
7
27
25
8
1
1
The response indicates that the 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.
39
The number of unique projects identified by the IE differs slightly with regard to the number presented
by SCE in its shortlist presentation to the PRG on March 10, 2015. SCE’s total of 77 unique projects
reflects only the eligible projects, while the IE’s list includes the projects originally submitted.
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In conclusion, the robust response of the market to SCE’s 2014 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.
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. Identify 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 2014 RPS 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 offers?

Were the bid evaluation criteria consistently applied to all bids?

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?
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
Did the evaluation methodology adequately treat all eligible resources and
technologies in a technology neutral manner?

Does the quantitative 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 bids?

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 the 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 individual criteria calculated consistent with the protocol
and Commission direction? In your opinion, were any costs or benefits that should
not have been included in the IOU’s LCBF calculation included (or vice versa)?
Why or why not (e.g. double-counting, poor approximation of cost/benefit,
inconsistent with the protocol, etc.)? Any recommendations for improvement to the
methodologies?
3. Evaluation of offers’ transmission costs: Were costs calculated consistent with the
protocol and Commission direction? Did the IOU weight the total cost of
transmission upgrades for a project against the relative value in resource adequacy
that the transmission upgrade will provide to each project? Any additional
information, observations, or recommendations regarding the IOU’s evaluation
methodology (e.g. capacity valuation, congestion cost adder, curtailment,
integration cost adder, etc.).
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
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perform conformance checks related to the accuracy of the project’s viability scores
before the projects were included on the shortlist?
5. What future LCBF improvements would you recommend?
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 2014 Renewable Energy Procurement Plan and Protocol
document. While SCE generally applied the LCBF methodology in a consistent manner as
outlined in the Protocol and the Procurement Plan, SCE did apply additional components
to the overall evaluation and selection methodology that were not readily transparent to
bidders and not addressed in the Protocol or Procurement Plan. The revisions to SCE’s
procurement strategy and the implications are described in this section of the report.
Some key objectives identified by SCE for the 2014 RPS solicitation were as follows:

As a guiding principle, meet SCE’s Compliance Period 3 obligation of 33%
renewable by 2020;

Consider qualitative factors such as earlier commercial operation dates, a
portfolio of contract terms, project viability, and fuel diversity, among others.
As in previous solicitations, SCE applied its Net Market Value metric to rank order offers
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41
This table reflects the portfolio evaluation with the corrected evaluation. Portfolios 2 and 3 are identical
to the original portfolios, with the revised evaluation. Portfolio 1 was selected based on the same criteria as
the original portfolio. Below is the original summary results for the three portfolios (before correction of
the evaluation).
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While overall, the IE finds that the underlying methodology is generally consistent with
the approved plan, there were adjustments to the solicitation process that occurred during
the evaluation period which were not referenced in the RFP and were therefore not
transparent to bidders. The findings of the IE with regard to these and other issues 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.
Merrimack Energy Group, Inc.
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
The solicitation Protocol clearly identifies the eligibility requirements, including
those eligibility requirements and criteria specified in the 2014 Renewable
Procurement Plan; among these are the requirements for a Phase II interconnection
study or better as well as the type of products required (i.e. Category 1 and Category
3), the commercial operation date (i.e. January 1, 2016 or later), and eligible project
sizes (greater than 500 kW).

SCE’s Renewable Energy Procurement Plan and Protocol requires that proposals
have a commercial operation date (or initial delivery date) of January 1, 2016 or
later. However, the documents do not specifically identify a preference for projects
that begin deliveries either at an earlier or at a later date.
The Protocol indicated that Sellers may propose any term length equal to or greater
than 10 years. Any Seller submitting a long-term proposal with a term length
greater than 20 years was also required to submit an alternative Proposal with a 20
Merrimack Energy Group, Inc.
36
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,

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.43 SCE did receive proposals for both 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 short-list that contained
multiple technology types
in-service dates and project sizes.
the IE
found that there was no apparent bias toward any type of technology or project size
based on the evaluation methodology.

The 2014 Renewable Energy Procurement Plan and the Procurement Protocol
indicate that SCE seeks proposals that enable SCE to comply with its Resource
Adequacy Requirements. For the delivery of Bundled Energy Product, Seller must
bid an ERR Generating Facility based on an interconnection assuming either
Energy Only Deliverability Status (“EO”), or such proposals that include the
conferment by the CAISO of FCDS, Partial Capacity Deliverability Status
(“PCDS”) or Interim Deliverability Status (“IDS”) and a CAISO NQC assignment.
EO projects will be deemed to have an NQC of zero and, therefore, cannot be
considered to be a Resource Adequacy Resource. 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 2014 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 reimbursable 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 cost enhances the accuracy of the evaluation process relative to a methodology
that attempts to use transmission adders or less certain cost information to assess project
43
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.
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economics. In summary, SCE’s evaluation methodology and evaluation process and
criteria are generally consistent with its 2014 Renewable Procurement Plan and are
generally consistent with the plans stated preferences, eligibility requirements, evaluation
criteria, and evaluation process.
As a result, the basic LCBF
components identified in the Protocol and Plan are still applicable for the evaluation and
selection.
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.
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 2014 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,44 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 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 project data is ready for evaluation.
44
For this solicitation, proposals were received via Accion Power’s website established specifically for this
solicitation.
Merrimack Energy Group, Inc.
38
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
Net Market Value for each proposal. 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 as well as congestion and curtailments benefits. Costs include
contract payments based on the bid price, debt equivalents, integration costs, congestion
costs and transmission upgrade costs. SCE discounts the monthly benefit and cost streams
to a common base date. Specifically, Net Market Value is defined as Levelized Benefits –
Levelized Costs. The components of the Levelized Cost and Levelized Benefits that
comprise the Net Market Value calculation are illustrated in Table 3.
Table 3: Comparison of Cost and Benefit Valuation Categories
Levelized Costs
Contract Payments – TOD-adjusted
based on the proposed energy price,
expected generation profile and contract
term
Transmission Costs – Cost adder to
reflect the cost of building required
network upgrades based on the latest
Interconnection Study or Agreement
Debt Equivalence Cost – Cost of
mitigating contract commitments on SCE’s
balance sheet
Merrimack Energy Group, Inc.
Levelized Benefits
Energy Benefits – Benefit received from
expected payments from the day-ahead
market for energy (market value of energy)
based on SCE’s internal forecast, taking
into account dispatchability of the
resource. Additional ancillary services and
real time benefits may be applied to
dispatchable projects.
Capacity Benefits – Benefit expected to
be received from a resource as a result of
its contribution towards the system and
local Resource Adequacy requirement.
Based on SCE’s forecast of net capacity
value and the expected quantity of
Resource Adequacy (RA). RA quantities
are based on the Commission’s applicable
accounting rules (e.g. exceedance
methodology for solar and wind).
Congestion – Locational benefit resulting
from certain resource locations.
39
Renewable Integration Cost Adder Curtailment Benefit – Benefit expected to
(Fixed) – Fixed cost component of the be received as a result of not paying the
integration cost. This includes the costs for counterparty for curtailed hours.
meeting new and existing flexible capacity
requirements.
Renewable Integration Cost Adder
(Variable) – Variable component of the
integration cost. This includes ancillary
service costs, inter and intra hour flexible
ramping capacity costs. Static values for
wind and solar from WECC studies have
been used for the variable component.
Congestion – Locational cost resulting
from certain resource locations. For
Energy-Only projects, an incremental cost
adder is included.
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 regard to 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’ Net Market Value.45
Following the quantitative analysis, SCE conducts an assessment of the qualitative
attributes for the top ranked proposals. The analysis utilizes the Project Viability Calculator
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
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/expected generation, dispatchability,
contribution to other programs goals, portfolio fit (of initial deliveries or otherwise),
significant transmission network upgrade costs outside of the CAISO, and resource
diversity are also considered in the qualitative analysis.
Following its analysis, SCE consulted with its Procurement Review Group (“PRG”)
regarding the short list and results of its evaluation. SCE then began negotiations with the
projects on the shortlist with the goal of completing negotiations over an approximate 3month period.
SCE’s overall LCBF methodology and approach is described in more detail in Appendix
A to this report.
45
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 also identified the best offer for each proposal.
Merrimack Energy Group, Inc.
40
Congestion Cost Adders
SCE developed congestion adders for the 2014 RPS RFP that are based on the same
methodology used to develop congestion adders in the 2013 RPS solicitation. There are
two elements of congestion costs that are incorporated into SCE’s quantitative evaluation:
(1) locational adders; and (2) energy-only cost adder.
Locational Adders
SCE’s LCBF methodology 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
.
SCE posted on the Accion website its long-term (2015-2024) forecast of locational
congestion adders by eight delivery periods (quarterly on-peak and quarterly off-peak).46
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 378 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.47
The IE views SCE’s nodal-level energy price forecast as an improvement over energy
forecasts with less local differentiation, which were used prior to the 2013 RPS solicitation.
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 2013 RPS 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
46
https://scerps.accionpower.com/_scerps_1401/documents.asp?strFolder=e. Bidders Conference
Materials/&filedown=&HideFiles=True. 47
SCE applied locational congestion adders to all projects in California.
Merrimack Energy Group, Inc.
41
that their energy can serve load and avoid localized congestion. The Commission accepted
use of an Energy Only congestion adder for the 2013 RPS solicitation on the grounds that
“energy-only interconnections may increase congestion risk.”48
For the 2013 RPS solicitation, SCE developed a congestion adder, which was $.47/MWh
and incremental to the locational congestion adder. The EO congestion cost adder applied
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 was based on SCE’s estimate of the average impact on system congestion from
adding incremental capacity without any incremental deliverability network upgrades. It
was the same amount for all EO projects.
SCE used the same
methodology for the 2014 RPS RFP as it used in the 2013 RPS solicitation to derive the
congestion adder.
The methodology used by SCE seems reasonable,
We 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.
Renewable Integration Cost Adder
Integration costs are the additional system costs required to provide sufficient operational
flexibility to ensure adequate system reliability as more intermittent renewable resources
join the grid. In D.14-11-042, the Commission approved an interim renewable integration
48
D 13-11-024, p. 52.
Merrimack Energy Group, Inc.
42
cost adder (“RICA”) methodology, and directed SCE to include an interim RICA for the
2014 RPS solicitation.
There are two components of the RICA methodology approved for the 2014 RPS RFP:


A variable cost component of $4/MWh for wind projects and $3/MWh for solar
projects;
A fixed component calculated by SCE.
The fixed component is based on SCE’s portfolio need to secure additional capacity to
meet its flexible and non-flexible RA requirements over the contract period, which, in turn,
is the product of two parameters:


SCE’s projection of a monthly premium for flexible RA expressed in $/kW-month;
and
The Monthly increase (or decrease) in the need for flexible RA associated with one
MW of installed capacity of wind or solar expressed as MW of flex capacity
needed/MW of wind or solar capacity.
SCE calculates this change in flexible RA need by using the hourly aggregate system
profile for load, wind, and solar from the 2014 LTPP Trajectory Scenario. This hourly data
is used to calculate the hourly three hour net-load ramp for each hour of the year, consistent
with the CAISO’s Flexible Capacity study. SCE then identifies the maximum three hour
net-load ramp for each month, and determines the relative contributions from wind and
solar to that maximum ramp. Finally, SCE determines the monthly increase (or decrease)
in the need for flexible capacity associated with one MW of installed capacity of wind and
solar. This is determined based on the relative contribution of wind/solar indicated above
and the total installed capacity of wind/solar in the system. Maximum generation for
wind/solar from the 2014 LTPP Trajectory Scenario is used as the estimate for the total
installed wind/solar capacity for the system. The result of flexible capacity needs for
wind/solar based on the described methodology is summarized in Table 4 below:
Table 4: Contribution of 1 MW of Installed Capacity to Flexible RA
Month
January
February
March
April
May
June
July
August
September
October
November
Merrimack Energy Group, Inc.
Solar
0.52
0.75
0.63
0.78
0.66
0.58
0.58
0.61
0.78
0.66
0.59
Wind
0.12
0.09
0.15
0.13
0.01
0.07
0.04
0.05
0.20
0.02
0.00
43
December
0.63
0.20
In terms of bid evaluation, SCE multiplies the estimate for flexible RA value by the need
for flexible capacity for the wind or solar product and converts this fixed component to
$/MWh by summing the fixed component for each month over the course of a year and
dividing by the forecasted generation. The variable RICA amount in $/MWh is then added
to derive the total RICA in $/MWh.
As indicated previously, this is an interim methodology, and the Commission will review
the methodology to determine RICA on a more permanent basis.
Curtailment Cap and Benefit Calculation
For bundled energy product, Sellers are required to submit proposal pricing based on two
curtailment scenarios:
1. 50 Hour Curtailment Cap – without payment, of up to 50 hours times the
Contract Capacity for each year during the Term of the Renewable PPA. After
50 hours, if the ERR Generating Facility is capable of delivering product, SCE
will pay for SCE instructed curtailment (excluding curtailments ordered by
CAISO, the Transmission Provider, or in an Emergency) at the Product Price;
2. No Curtailment Cap – If the ERR Generating Facility is capable of delivering
Product, SCE will pay for SCE instructed curtailments (excluding curtailments
ordered by CAISO, the Transmission Provider, or in an Emergency) at the
Product Price as detailed in the Renewable PPA. Under this scenario, no
Curtailment Cap would apply.
The IE prepared several questions regarding SCE’s approach on curtailment. The IE asked
SCE to explain how the two pricing proposals for curtailment would be accounted for in
the project evaluation assessment and for ranking purposes. The IE initially inquired
whether one pricing option would be used as a “base case” for offer ranking and the other
as an indicator of the additional cost/benefit to reflect curtailment value, or whether the
two options would be valued separately and included in one ranking list. The IE asked how
SCE would specifically value the “free” curtailment of up to 50 hours/year multiplied by
the contract capacity.
SCE responded that it was developing a methodology to calculate the curtailment benefit.
SCE subsequently discussed its proposed methodology with the IE. Under this
methodology, the monthly energy to be curtailed is 1/12 of the annual curtailment amount
(i.e. 50 hours * contract capacity * (1/12)). SCE assumes that the curtailment occurs during
the highest cost hours first. The benefit calculation is based on the sum of the dollars not
paid to the counterparty under the PPA. SCE assumes that real-time prices are zero when
it curtails, so there is no positive impact on real-time costs to load associated with the
curtailment of the resource. This simplifies the analysis because the value of curtailment is
Merrimack Energy Group, Inc.
44
calculated simply as the value of not having to pay a generator during the highest value
hours in a month for each month.
SCE included the curtailment benefit as a component of the calculation of the Renewable
Premium value for each offer. While generally the curtailment benefit values were fairly
small
,
the methodology to account for this factor was not referenced in the Protocol or
Procurement Plan and was developed shortly prior to offer submission.
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 each Seller in its
Proposal) plus other costs to ratepayers (including the transmission rate impact associated
with required network upgrades, congestion cost impacts, integration costs and the
implications of the estimated cost of imputed debt on the utility’s balance sheet).
Importantly, all projects are 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 Net Market Value or similar
process used by other utilities is common and generally accepted in the industry;

For this RPS RFP, the evaluation methodology accounts for integration costs
associated with intermittent renewable resources.
Merrimack Energy Group, Inc.
45
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. Reimbursable network upgrade costs can have a
significant impact on the ranking of projects which could influence shortlist
selection;

The methodology to account for integration costs is being used for the first time
and will likely evolve over time to produce more accurate estimates.

The IE views SCE’s portfolio approach of combining Net Market Value
to identify the best projects with judgment and further analysis to consider the
“cost” side of a project in more detail as a positive step to consider for future
solicitations as a potential means of seeking lower costs for consumers. However,
in future solicitations, SCE should be more explicit in its LCBF methodology
regarding its evaluation and selection approach, including what it will use as a
measure of costs, such as levelized cost per MWh or some other metric.
3. Evaluation of Transmission Costs
SCE’s evaluation methodology assigns estimated reimbursable transmission network
upgrade 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. SCE requires that all Proposals must
demonstrate that they have a Phase II interconnection study or better or an equivalent.
Transmission costs applicable to the project will be based on the applicable completed
interconnection study or interconnection agreement.
For the 2014 RPS RFP, Sellers were required to provide copies of their Interconnection
Studies (at least a Phase II study) and Interconnection Agreement (if they had an
Agreement) with their proposals, which were uploaded into the Accion Power website. In
addition, the Proposal Form required each Seller to provide a significant amount of
information on the transmission arrangements for its 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;
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46






















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 or point of interconnection;
interconnection voltage;
date of interconnection document from which the Delivery Point is transcribed;
is the project located in the IID;
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;
deliverability status (full capacity deliverability status, partial capacity
deliverability status, interim deliverability status, energy only deliverability
status);
full capacity deliverability date or partial capacity deliverability date;
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;
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 was 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 was
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.
SCE uses the interconnection studies submitted as part of the offer submittal package to
determine the applicable reimbursable 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).
Merrimack Energy Group, Inc.
47
Once total network upgrade costs are determined, SCE allocates the reimbursable
transmission costs over 40 years (i.e. assumed asset life) using a 16% capital cost recovery
factor to determine levelized costs.
The methodology used by SCE to determine reimbursable transmission upgrade costs is a
major improvement over methodologies that rely on high level estimates, 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.
For the next solicitation, SCE should evaluate whether it should include only network costs
that its customers or California IOU customers incur, which are network upgrades for
projects interconnected to the CAISO, as opposed to network upgrades for projects
interconnected with any California balancing authority. While a desire to consider costs
socialized among all California customers may have some appeal, the RPS procurements
are for the purpose of satisfying SCE’s RPS obligations with respect to its own customers.
4. Evaluation of Offer’s Project Viability
Use of the Project Viability Calculator (“PVC”) was incorporated into SCE’s evaluation of
the proposals in connection with short-listing. 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 for short-listed projects. SCE also conducted an internal due diligence evaluation of
all the short-listed projects to assess project viability based on publicly available
information about the project and counterparty.49 SCE provided a summary of the due
diligence assessment to the IE.
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
49
SCE not only conducted a due diligence assessment based on the information provided by the Seller in its
proposal but also conducted internet research on the Seller and the project in an attempt to gain knowledge
about the status of the project and any issues identified in the local press or other publicly available source.
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48
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 taken into
consideration with respect to 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.

The current PVC has been a valuable tool for assessing project viability in previous
solicitations where the threshold criteria were more lenient. However, with stricter
threshold requirements and a more mature market, the PVC perhaps is now overly
general resulting in high scores for most projects and limited ability to distinguish
potential project development issues or “red-flags” that may influence project
viability for purposes of selecting the final short-list or informing contract
negotiations.
C. Recommended Future LCBF Improvements
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49
The IE has several recommendations for future LCBF and solicitation improvements. We
also assume that continued development of the methodology to derive integration costs
will be a factor going forward as part of the RPS Procurement Planning process.

The IE felt that SCE’s use of a portfolio assessment process for short-list
identification and selection was a positive step forward for informing selection of
the final shortlist for RPS projects. While the Net Market Value concept as the
basis for rank ordering projects has been utilized for a number of RPS solicitations
(and is a common evaluation tool), the use of this metric for rank ordering and
selecting projects does not address the cost to consumers of securing renewable
resources to meet RPS requirements without respect to value.
The IE believes that in future RPS
solicitations, SCE should continue to utilize the portfolio approach along with the
Net Market Value methodology to inform the resource selection decision. In
addition, SCE should also encourage bidders to offer pricing for different project
in-service dates to provide a more robust set of options to evaluate.50 Importantly,
SCE should include in its procurement documents, and should communicate to
prospective bidders, that it is considering costs and not just Net Market Value in
its evaluation and selection process if in fact SCE plans to do so in the future and
the metric or metrics it will utilize in evaluating costs.
Finally, in the next solicitation, SCE should state a preference for projects with
earlier in-service dates if it values earlier deliveries in order to provide greater
certainty of RPS compliance (or, alternatively, that it would prefer earlier
deliveries if, at the time of the evaluation, it is projecting, or still projecting,
significant net short positions in early years). In addition, SCE may want to
strongly encourage Sellers to offer multiple options with different start dates and
contract terms to provide additional flexibility to inform the evaluation and
selection decision. This approach is valuable with additional market and
compliance uncertainty as the amount of RPS requirements increases and the
amount of renewable energy in the utility portfolio continues to increase. This
would send the proper signal to potential bidders and likely elicit more offers that
50
As SCE encouraged bidders to submit proposals with different contract term lengths, SCE could take the
same approach with respect to initial delivery dates.
Merrimack Energy Group, Inc.
50
better meet SCE’s needs, ideally affording more flexibility to the utility to develop
its portfolio.

In light of SCE’s and the Commission’s concern regarding project viability--the
likelihood that projects selected in the RPS solicitation process will be permitted,
financed, and placed into service--consideration should be given to placing the risk
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 receive 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.51
D. Additional Information or Observations Regarding SCE’s Evaluation
Methodology
There is a need for improving the quality control aspects of SCE’s evaluation of proposals.
Based on discussions with SCE, the Company recognizes the need for improvements in
this area.
V. Did SCE Fairly Administer the Evaluation 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 that the depth of the shortlist selected by SCE and the proposals
selected for the shortlist were reasonable,
This section of
the report discusses the evaluation and selection process that led to the shortlist selected by
SCE and describes the fairness and reasonableness of the decision process.
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
51
In light of the increased risk removal of the “permitting out” provision would have on developers, SCE
should consider whether it should revise the development security amounts in its Pro Forma PPA, which
might be warranted if many bidders have considerable permitting risks and either the development security
amounts are higher than for other California IOUs and/or the company believes that removal of the
“permitting out” provision would tend to significantly increase bid prices.
Merrimack Energy Group, Inc.
51
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 offers treated the same regardless of the identity of the Participant?

Were Participant questions answered fairly and consistently and the answers made
available to all Participants, where appropriate?

Did the utility ask for “clarifications” that provided one Participant an advantage
over others?

Was the economic evaluation of the offers fair and consistent to all Participants?

Was there a reasonable justification for any fixed parameters that were a part of the
IOU’s LCBF methodology (e.g. RMR values, debt equivalence parameters)?

Were the quantitative and qualitative factors that were used to evaluate offers fair
to all offers?

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?
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 short-list. 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 based on a consistent Bid Form or file format which facilitated review and
evaluation. Sellers were also provided with a bid number, including a unique identifier for
each option proposed.52 The IE had access to all proposals and documents submitted to the
52
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.
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website. The IE also had access to all questions and communications between SCE and the
Sellers throughout the process. The IE was notified via email any time a Seller submitted
a question or posted information on the website as well as when a response was submitted
by SCE. The IE also had the option to review all email communication between SCE and
the Sellers and questions and answers posted to the website.
Most importantly, one of the most attractive features of the website was the ability for the
IE and SCE team 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 proposals submitted, and interconnection and deliverability information, including
cost information. The IE was able to use both the information generated through the report
function on the website along with review of each of the offers submitted to prepare a
detailed summary of the offers submitted quickly after receipt of proposals. The summary
proved valuable with regard to the discussion of offers with the SCE team and assessment
of SCE’s evaluation results.
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 questions and comments about the
components of the evaluation results, specific questions about individual proposals, and
possible inconsistencies for several proposals.
The IE participated in on-site meetings at SCE’s offices at a crucial time in the bid
evaluation and selection process designed to walk through the evaluation results overall as
well as specific projects and to develop the portfolios utilized for informing project
selection.
The IE was also present via teleconference for all project team meetings, project
management meetings, and epRMC meetings in which proposal review and shortlist
selection decisions were taking place. The IE raised comments and was asked for its
opinion on shortlist selection.
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 an assessment of each shortlisted proposal based on the Project
Viability Calculator;
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
Conducted a comparison of the rankings of selected proposals by SCE in
comparison to the rankings based on the IE’s analysis and met with the SCE
project team to review the rankings and basis for project selection;

Reviewed the output generated by SCE and reviewed the results of the
evaluation with SCE’s project team leads, including raising questions and
comments about the evaluation of specific projects that seemed inconsistent
with the IE’s views of the expected results;

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 short list 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 short-list
selection, including development of project portfolios and the cost impacts
associated with each portfolio, calculation of Net Market Values for each
project option, calculation of the Alternative Net Market Values for California
projects not interconnecting to the CAISO, and the application of qualitative
factors used to assist in project ranking and selection.
For qualitative factors, the IE independently scored all of the short-listed proposals based
on the Project Viability Calculator. The IE and SCE were generally consistent with regard
to scoring of projects based on the PVC, with one or two exceptions. Overall, the PVC
scores for all projects would indicate that the short-listed projects as a whole would appear
to be very viable and feasible.
With a few exceptions, we conclude that SCE on the whole reasonably followed the criteria
outlined in the Procurement Protocol.
Notwithstanding this deviation, 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.
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Furthermore, 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 2014 RPS RFP and utilized the Accion Power website which provided same time
access to information for all Sellers. 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?
As illustrated in Table 1, SCE received 218 individual offers.53 A total of 221 offers were
originally submitted but three offers from one Seller were withdrawn at the time of
submission. Three Sellers contacted SCE after the due date and time for proposal
submission complaining that they had wanted to submit additional offers but the offers
were not accepted by the Accion Power website. Upon review, it was determined that the
Sellers attempted to complete their proposals very close to the deadline for submission and
were not able to submit their offers prior to the deadline. As a result, their partial proposals
were rejected from consideration by the Accion Power website which “shut down” at the
scheduled time identified in the Protocol.
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
regard to the information required from Sellers. This review would be used to seek
information from Sellers to cure any deficiencies. Another SCE objective was to assess
whether any offers did not meet the eligibility requirements listed in the Protocol. SCE’s
follow-up with Sellers via the website immediately after submission of proposals focused
on three areas:

Clarification of information submitted - The primary areas for clarification
included mutual exclusivity of offers submitted, pricing proposals and escalation
rates, storage options, Energy-Only or Firm Capacity Deliverability status, and
curtailment rights. SCE submitted questions to the Sellers regarding specific issues
and was able to resolve these issues via email exchange with the affected Sellers.
Based on our review of the email exchanges, it appeared that all Sellers provided
adequate information as requested by SCE;

Missing information – Several Sellers did not provide all the information required
in their offers. SCE identified documents which were not complete and contacted
the affected Sellers regarding the missing information. Common examples of
missing information included incomplete Project Viability Calculators, failure of
53
This total does not account for the differentiation of offers with and without curtailment, which for PCC
1 projects essentially doubles the offer count as each project is required to submit two prices for every offer
to reflect the curtailment option.
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the Seller to sign required attestations, and incomplete information forms. Sellers
were able to cure any missing information and posted complete documents to the
website;

Corrections to filed documents – The two primary areas in which incorrect
information was discovered by SCE were associated with errors in the generation
profiles of several Sellers as well as the GIS files submitted which showed project
boundaries. Again SCE contacted the affected Sellers who then provided the
information requested by SCE.
Sellers were generally able to cure the deficiencies identified by SCE associated with their
proposals and provided the information requested in a timely manner. No offers were
eliminated for failure to cure deficiencies. In addressing non-conformities 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.
Based on review of the offers, SCE identified offers that were viewed to be non-conforming
for various reasons. SCE and the IE held a conference call to discuss offers that were
potentially non-conforming and perhaps were not eligible or should be excluded from the
evaluation on February 9, 2015. In addition, other offers were excluded from consideration
as the review and evaluation process proceeded. The offers removed or withdrawn during
the bid review and evaluation process included the following:
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The IE had several discussions with SCE on decisions to remove project options from
consideration and was in agreement with SCE’s decisions. After removal of these options,
.
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 input files 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 prior to receipt of offers.54
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 (i.e.
use of market quotes in the near term followed by a fundamental forecast for the mid-term
and trend analysis beyond a certain date)55 was reasonable and consistent with industry
practices.
SCE also prepared a forecast of capacity prices for purposes of calculating the capacity
benefit for eligible proposals.
54
The IE was familiar with SCE’s approach for developing its input forecasts based on serving as IE on
other solicitations such as the 2013 RPS solicitation and the CHP RFO 1, 2 and 3 solicitations. The CHP
RFO 3 solicitation is being undertaken concurrently with the 2014 RPS solicitation.
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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 short-listed projects. SCE did not make
any adjustments to the PVC.
E. If the IE or a Third Party Conducted Any Part of the Offer 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 an independent evaluation of short-listed proposals 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, the IE did not conduct any part of the offer
evaluation.
F. Were Transmission Cost Adders and Integration Costs Properly Assessed and
Applied to Bids? Any Additional Information, Observations, or Recommendations
Regarding Integration Cost Adder Methodology.
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
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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 the costs of transmission network upgrades
occurring in California but 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 in California But Outside of CAISO
SCE’s 2014 RPS Procurement Plan provides for consideration of network upgrade costs in
SCE’s evaluation of generators interconnecting with balancing authorities in California
other than CAISO as well as with CAISO.56 Technically, SCE considered reimbursable
network upgrades with California balancing authorities other than CAISO as part of the
qualitative evaluation rather than quantitative renewable premium analysis. Hence,
projects such as those interconnecting with IID had Net Market Values with no network
upgrade costs assigned to them. With network upgrade costs assigned to the generator, the
resulting net cost or benefit was referred to as the Alternative Net Market Value. The
distinction is based on the fact that under current regulatory rules, network upgrades within
CAISO will ultimately be paid by the IOUs’ customers, while the network upgrades to
IID’s transmission system will ultimately be paid by IID’s customers. The 2013 RPS RFP
was the first solicitation conducted by SCE where the costs of network upgrades to be built
by a non-CAISO California balancing authority on behalf of a generator would be taken
into consideration in the evaluation of bids. The CPUC approved this practice in a number
of resolutions approving PPAs arising out of the 2013 RPS solicitation.
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
economic evaluation. This appears to be a reasonable point of distinction.
56
SCE’s Final 2014 RPS Procurement Plan (Dec. 8, 2014), Appendix I.1, SCE’s Least-Cost Best-Fit
Methodology, pp. 9-10.
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All in all, SCE’s treatment of network upgrade costs was consistent with its practice in its
last RPS solicitation, which the Commission approved, as well as the Company’s 2014
RPS Procurement Plan.57 However, the Commission subsequently issued Resolution
E-4726, which directed SCE to consider the differences in the reimbursement mechanisms
used by the CAISO and IID in its evaluation of costs associated with network upgrades.
SCE considered the differences and the impacts of such differences in a Tier 1 advice letter
submitted in response to the Commission’s directive
Application of Transmission Cost Adder Methodology to Projects Inside CAISO
57
With respect to IID’s claims that SCE was double counting IID network upgrade costs, the Commission
stated in approving a power purchase agreement arising out of the 2103 RPS solicitation:
For both CAISO and IID-interconnected projects the generator initially funds the transmission
network upgrade costs, which are later reimbursed to the generator. While the reimbursement
mechanism is different for the CAISO and IID-interconnected projects, in both instances ratepayers
ultimately fund the transmission costs. Thus, as with CAISO-interconnected projects, it is
reasonable to treat transmission costs as separate project costs, similar to price, congestion, and
transmission costs, for IID-interconnected projects when evaluating offers.
Resolution E-4705 (March 26, 2015) at 14. Our understanding is that IID credits generator network
upgrade from transmission costs the generators will incur to transmit their energy into CAISO. Delivery to
a CAISO interface is a requirement under Section 2.02 of SCE’s 2014 RPS Procurement Protocol. These
transmission costs are not incurred by projects interconnected with CAISO but are not unusual to be
incurred by a generator interconnecting with a different balancing authority that wishes to transmit its
energy to a different balancing authority.
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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.
Other than the specific issues described above, SCE’s review of interconnection
arrangements and calculation of transmission adders appeared reasonable and in
accordance with the solicitation documents.
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 Clearly Included in the Solicitation Materials?
While SCE rank ordered projects based on the Net Market Value, there were several areas
where SCE exercised judgment in creating the short-list. The shortlist selection process
and the additional criteria used in developing the short-list are described below.
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1.
As indicated previously, the
procurement target was not in any of the solicitation documents.
2. SCE conducted its evaluation of the eligible offers and rank ordered the offers
according to the Net Market Value metric. SCE used the rank ordering of the
projects as a basis for identifying the highest ranked offers.
3.
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During the discussions leading up to evaluation and selection, SCE considered qualitative
attributes to either eliminate or add projects to the short-list. The qualitative attributes
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. The following qualitative attributes were considered in the
development of the short-list:
In the IE’s view, SCE’s decision to select a deep short-list was
generally reasonable and consistent overall 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 several
proposals as well as potential inconsistencies in the evaluation results. Generally, the IE
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identified potential inconsistencies or potential errors, brought these to SCE’s attention,
and held discussions with SCE about the IE’s questions. All specific issues associated with
questions raised by the IE with regard to the evaluation of projects were resolved prior to
the completion of the evaluation and ranking process.
J. 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.
K. Any Other Relevant Information or Observations
For purposes of referring back to the actual shortlist selected with regard to the projects
identified in this section, the IE has replicated the shortlist in Appendix D with the updated
quantitative evaluation.
VI. Did the Proposed RPS Shortlist Merit Commission Approval? Was
the Evaluation, Selection and Contract Negotiation Process Reasonable
and in Accord with the Procurement Protocol?
This section addresses whether SCE’s shortlist merits CPUC approval. This section also
addresses the reasonableness of SCE’s evaluation and selection of final offers and the
contract negotiation process.
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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
solicitation process that was consistent with Commission decisions and SCE’s approved
LCBF methodology for the most part. SCE followed its stated evaluation process from
receipt and initial review of proposals to final short-list selection with a few exceptions.
This approach was not specifically reflected in SCE’s Approved LCBF Methodology.
However, it did help facilitate the higher level objectives of the solicitation—higher
certainty of achieving RPS compliance at the lowest reasonable cost to ratepayers.
Due to errors in the initial evaluation, SCE conducted a re-valuation
of the offers, as described in Section II.D of this report, which did not result in any changes
that would have affected SCE’s shortlist selection decisions or decisions to execute PPAs
arising out of the solicitation.
In this context, SCE’s shortlisting decisions were reasonable and were generally grounded
in the requirements, evaluation criteria and stated preferences set forth in the Procurement
Protocol, with modifications that were reasonable under the circumstances.
B. Did the IOU Choose Projects for the Short-list That Provide the Best Overall
Value to Ratepayers? Could the IOU Have Incorporated a Decision-Making
Process That Provided for a Different Portfolio of Projects That Provide Better
Overall Ratepayer Value?
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C. Did the Short-list Conform to the Needs of the IOU’s Portfolio, RPS
Requirements, RPS Procurement Plan and Protocol?
The short-list reasonably conforms to SCE’s needs as identified in the RPS Protocol and
RPS Procurement Plan. All short-listed proposals have either an Interconnection
Agreement or Phase II interconnection study as required. The proposals selected have an
initial delivery date that is consistent with SCE’s needs during Compliance Period 3,
The IE believes that overall SCE followed the general methodology described in its RPS
Procurement Plan and Procurement Protocol in evaluating offers and in developing and
finalizing a short-list while taking into consideration its most recent forecast regarding RPS
compliance and applying reasoned judgment. Overall, SCE’s decisions were consistent
with the RPS Procurement Plan, Procurement Protocol and with LCBF principles.
D. In the IE’s Opinion, is the IOU’s Proposed Short-list Reasonable
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The IE’s overall opinion is that the short-list merits CPUC approval,
SCE selected attractive offers with sufficient
GWh volumes to meet SCE’s requirements even if some projects withdraw or fail.
E. Contract Negotiation Process
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SCE made the decision to execute PPAs with each shortlisted party with which it could
reach agreement on contract terms and with any modifications to the short-listed proposals
that it found acceptable. This approach was not required but certainly allowable within the
context of the Procurement Protocol and was, in the IE’s opinion, a reasonable exercise of
discretion
and
historical and projected failure rates for selected proposed new projects.
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VII. The First Solar PPAs and the Fairness of the Project-Specific
Negotiations
A.
The Rosamond, Willow Springs and and Sunshine Valley
Projects and PPAs
Rosamond/Willow Springs
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Both the Rosamond and Willow Springs projects are being developed in Kern County,
California in relatively close proximity to each other. Both have Large Generator
Interconnection Agreements (“LGIAs”) and will interconnect to the Whirlwind substation
at 230 kV.69
The Rosamond project is fully permitted.
Willow Springs is still in the permitting process before Kern County.70
The Rosamond
and Willow Springs PPAs are practically identical with the following material differences:

Size:
o Rosamond has a contract capacity of 160 MW,
o Willow Springs has a contract capacity of 108 MW,
Rosamond already has received its material construction permits
Sunshine Valley
The Sunshine Valley project is a solar PV project located in the Amargosa Valley in Nye
County, Nevada, less than four miles from the California border. The project has a Contract
70
See http://psbweb.co.kern.ca.us/UtilityPages/Planning/StaffReports/PCHearings/StaffReport/2015/11-1215%20-Willow%20Springs%20Solar%20Project%20by%20Willow%20Springs%20Solar,%20LLC.pdf.
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Capacity of 104 MW,
According
to First Solar, the project has received its permit to construct from the Public Utilities
Commission of Nevada and other county-level approvals. The commercial operation date
is January 1, 2020.
The project will interconnect into the 138 kV transmission system of Valley Electric
Association (“VEA”). VEA is part of CAISO; hence, the project can deliver energy
directly into the CAISO power market. The project received its Phase II interconnection
studies in December 2014,
Sunshine Valley is a stand-alone project. Unlike Rosamond and Willow Springs,
The
Sunshine Valley PPA is similar to Rosamond with Sunshine Valley being different in the
following areas:

Size:
o Sunshine Valley has a contract capacity of 104 MW,

Price:
Contract Issues Common to All Three First Solar PPAs
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Terms and Conditions of the PPAs
Rosamond
Key terms of the Rosamond PPA are summarized below.
Delivery Term (Section 1.05)
Type of Facility (Section 1.01(f))
Vintage (Recital A)
Location of Facility (Section 1.01(b),
Exhibit B
Contract Capacity (Section 1.01(g))
Merrimack Energy Group, Inc.
15 years following the month of the
Commercial Operation Date
Solar PV
New
13901 Rosamond Boulevard, Rosamond,
CA 93560
160.0 MW
72
Products (Section 1.01(d))
Commercial Operation Deadline (Section
1.04)
Price (Section 1.06(a))
Expected first year energy output (Section
1.01(j))
Annual degradation factor (Section
1.01(j))
Interconnection Point (Section 1.01(e)
Delivery Point (Section 1.01(e))
Merrimack Energy Group, Inc.
All energy (net of station use), capacity,
Green Attributes, and RA benefits
produced by the Facility
January 1, 2020
505 GWh, with an approximate 36%
capacity factor
Whirlwind 220 kV bus
Point of interconnection with the CAISOcontrolled grid at the Whirlwind 220 kV
bus
73
Time of Delivery Periods (“TOD Periods”)
TOD Period
Time of Day
Applicable Days
On-Peak
2:00 p.m. – 8:00 p.m.
Weekdays except Holidays.
Off-Peak
8:00 a.m. – 2:00 p.m.
2:00 p.m. – 8:00 p.m.
Weekdays, Weekends and Holidays
H lid
Weekends and Holidays.
8:00 p.m. – 10:00 p.m.
Weekdays, Weekends and Holidays
10:00 p.m. -8:00 a.m.
Weekdays, Weekends and Holidays
Super-Off-Peak
Season
TOD Period
Full Capacity Deliverability Status
Product Payment Allocation Factor
Summer
June 1st – Sep 30th
On-Peak
1.29
Off-Peak
1.04
Super-Off-Peak
0.94
On-Peak
1.10
Off-Peak
0.96
Super-Off-Peak
0.95
Winter
Oct 1st – May 31st
“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.
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Willow Springs
Key terms of the Rosamond PPA are summarized below.
Delivery Term (Section 1.05)
Type of Facility (Section 1.01(f))
Vintage (Recital A)
Location of Facility (Section 1.01(b),
Exhibit B
Contract Capacity (Section 1.01(g))
Products (Section 1.01(d))
Commercial Operation Deadline (Section
1.04)
Merrimack Energy Group, Inc.
15 years following the month of the
Commercial Operation Date
Solar PV
New
Gaskell Avenue and 110th Street West
Rosamond, CA 93560
108.0 MW
All energy (net of station use), capacity,
Green Attributes, and RA benefits
produced by the Facility
January 1, 2020
75
Price (Section 1.06(a))
Expected first year energy output (Section
1.01(j))
Annual degradation factor (Section
1.01(j))
Interconnection Point (Section 1.01(e))
Delivery Point (Section 1.01(e))
Merrimack Energy Group, Inc.
342 GWh, with an approximate 36%
capacity factor
Whirlwind 220 kV bus
Point of interconnection with the CAISOcontrolled grid at the Whirlwind 220 kV
bus
76
Sunshine Valley
Key terms of the Sunshine Valley PPA are summarized below.
Delivery Term (Section 1.05)
Type of Facility (Section 1.01(f))
Vintage (Recital A)
Location of Facility (Section 1.01(b),
Exhibit B
Contract Capacity (Section 1.01(g))
Merrimack Energy Group, Inc.
15 years following the month of the
Commercial Operation Date
Solar PV
New
Power Line Road south of Anvil Road,
Amargosa Valley NV 89020
104.0 MW
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Products (Section 1.01(d))
Commercial Operation Deadline (Section
1.04)
Price (Section 1.06(a))
All energy (net of station use), capacity,
Green Attributes, and RA benefits
produced by the Facility
January 1, 2020
Expected first year energy output (Section 312 GWh, with an approximate 34%
1.01(j))
capacity factor
Annual degradation factor (Section
1.01(j))
Interconnection Point (Section 1.01(e))
Valley Electric Association's 138kV bus at
the Valley Substation
Delivery Point (Section 1.01(e))
Point of interconnection with the CAISOcontrolled grid, which is at the Valley
Substation 138 kV bus
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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 that if they sought any
changes in their proposals (such as accelerated or deferred CODs), SCE expected price
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concessions, especially if the change would be viewed by SCE as an adverse change from
an evaluation standpoint or where the change could benefit the Seller, by, for example,
allowing the Seller to qualify for a larger ITC. In this context, SCE notified bidders that
reduced prices were important to the company and its customers. SCE was able in this
manner to obtain offer revisions from a number of bidders that resulted in lower cost PPAs.
C.
Using the above principles (section V.A), please evaluate fairness of
project-specific negotiations
SCE’s process involved the initiation of contract negotiations with
counterparties,
several of which included multiple projects. Shortly after the selection of the short-list,
SCE notified the selected bidder of offer selection for the short-list. In the email conveying
short-list selection, SCE also informed the bidder that short-listing does not guarantee the
execution of the contract and that bidders were required to upload to the Accion website
the RPS Pro Forma PPA with any proposed changes shown in redline format as well as a
completed Exhibit B. SCE also informed the bidder that it must post an executed NonDisclosure Agreement. The notification was issued to all short-listed bidders at the same
time via the Accion website.
Internally, 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 negotiation teams up to speed on any issues that were emerging
during the contract negotiation sessions. In addition, attorneys at SCE were also assessing
revisions to pro forma contract language for key provisions that warranted review.
The IE concludes that all counterparties were fairly treated during the contract negotiation
process. Furthermore, 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.71
71
There were a few contract matters that arose after final offers that required resolution, but they were not
of a material nature. In addition,
but these issues did not involve whether SCE treated parties fairly in
the negotiation process.
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In the IE’s opinion, SCE acted fairly and responsibly in the contract negotiations and
treated First Solar in a similar manner to other counter parties in light of the nature of the
Rosamond, Willow Springs and Sunshine Valley projects and the contract issues raised by
First Solar.
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
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 three 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 or were
initiated based on SCE policy. For each provision, SCE made revisions to the Pro Forma
PPA and submitted the proposed revisions to the affected counterparties at the next contract
turn. The first two revisions--
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—were also addressed in the 2013 RPS solicitation. The primary revisions to the
Pro Forma PPA included the following:

Addition of Section 8.06 in the Pro Forma Agreement to include as a Section in
the PPA dealing with Consolidation of Seller’s Financial Statements. The
overall premise of this provision is listed in Section 8.06(a), which states:
Buyer shall determine through consultation with its internal accountants and
review with their independent registered public accounting firm, whether
Buyer is required to consolidate Seller’s financial statements with Buyer’s
financial statements for financial accounting purposes under Accounting
Standards Codification (ASC) 810/Accounting Standards Update 2009-17,
“Consolidation of Variable Interest Entities” (ASC 810), or future guidance
issued by accounting profession governance bodies or the SEC that affects
Buyer accounting treatment for this Agreement (the “Financial
Consolidation Requirement”).
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The remainder of this section defines the requirements for the Supplier if SCE
finds the consolidation requirement to be applicable.
The contract provisions that underwent changes in the negotiations with First Wind
regarding the Rosamond, Willow Springs and Sunshine Valley have been previously
addressed in this report.
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 through the Accion Power website.
F.
Any other relevant information or observations, such as other data or
information used to inform the negotiations
None.
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
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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
Rosamond
Rosamond is a 160 MW (Contract Capacity) solar PV project located in Kern County,
California with a January 2020 commercial operation date.
Because Congress did extend the investment tax credit at the
30 percent level for solar PV projects that commence construction on or before December
31, 2019,73 it appears likely that SCE and its customers will get the benefit of the lower
prices.
73
Consolidated Appropriations Act §303 (December 18, 2015).
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First Solar is a highly experienced developer, builder and operator of solar PV projects and
is a large scale manufacturer of thin film solar PV modules.
Willow Springs
Willow Springs is a 108 MW(Contract Capacity) solar PV project located in Kern County,
California with a January 2020 commercial operation date.
Sunshine Valley
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Sunshine Valley is a 104 MW (Contract Capacity) solar PV project located in Nye County,
Nevada with a January 2020 commercial operation date. The project interconnects with
VEA, which is now part of CAISO, so energy is delivered directly into the CAISO power
market.
The project is well developed, with the
project having a special use permit from Nye County, a Compliance Order for its Permit
to Construct from the Public Utilities Commission of Nevada, and Phase II interconnection
studies.
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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 Rosamond, Willow Springs and Sunshine
Valley PPAs merit CPUC approval.
In addition, the PPA, in the IE’s opinion, was reasonably negotiated with contract terms
that taken as a whole appropriate protect the interests of SCE’s ratepayers. Moreover, the
three projects are being developed by a highly experienced and capable firm with a strong
solar PV manufacturing base,
All in all, the three First Solar PPAs—Rosamond, Willow Springs, and
Sunshine Valley—merit Commission approval, in Merrimack Energy’s opinion.
C. Any other relevant information or observations
None.
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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 Net Market Value. These individual quantitative
components include: capacity benefits, energy benefits, contract payments, debt
equivalence mitigation cost, transmission cost, integration 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 Net Market Value 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 (“RA”) 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.09-06-028)
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.
For proposals located outside of the California Independent System Operator (“CAISO”),
SCE limits the monthly RA quantities to the available import allocation at each CAISO
intertie. SCE utilizes the CAISO’s Advisory Estimates of Future RA Import Capability
(“CAISO Advisory Estimates”) published on the CAISO website. Capacity benefits for all
Proposals located outside of the CAISO and delivering at a CAISO intertie, including
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Proposals located in the Imperial Irrigation District, will be capped by import capability
quantities indicated in the CAISO forecasts.
Monthly capacity benefits include the product of SCE’s net capacity value forecast and the
quantity of RA 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.
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 Long-Term
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 nonspin), 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 seller-provided
generation profile.
SCE will also take into account the value of proposed curtailment provisions. In the 2014
RPS RFP Procurement Protocol, SCE is asking bidders for two prices assuming: (1) up to
50 hours of unpaid discretionary curtailment orders under Section 3.12(g)(iii) of the 2014
Pro Forma; and (2) no discretionary curtailment orders under Section 3.12(g)(iii) of the
2014 Pro Forma. Proposals with more favorable curtailment provisions will be attributed
the incremental value of curtailment, while proposals with no unpaid curtailment hours will
not.
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 a production cost or equivalent 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
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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 (“TOD”) 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”). 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. Integration Cost
Integration costs, where applicable, are the additional system costs required to provide
sufficient operational flexibility to ensure adequate system reliability as more intermittent
renewable resources join the grid. In D.14-11-042, the Commission approved an interim
renewable integration cost adder (“RICA”) methodology, and directed SCE to include an
interim RICA for the 2014 RPS solicitation. The Commission also stated that a final RICA
methodology will be considered in the RPS proceeding and in coordination with the LTPP
proceeding and any other relevant proceeding in the future.
SCE will use an interim RICA in the LCBF evaluation process for its 2014 RPS
solicitation. Pursuant to D.14-11-042, this interim RICA will be calculated as the sum of
two cost components: variable costs and fixed costs. For the interim RICA, the variable
cost component is set at $/MWh for wind and $3/MWh for solar. SCE will calculate the
fixed cost component based on SCE’s portfolio need to secure additional capacity from
resources not already procured to meet its flexible and non-flexible RA requirements over
the contract period. Specifically, this component will be the product of two parameters:
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

SCE’s confidential projection of a monthly premium (which can be zero or
positive) for flexible RA expressed as $/kW-month; and
Monthly increase (or decrease) in the need for flexible RA associated with one MW
of installed capacity of wind or solar expressed as MW of flex capacity needed/MW
of wind or solar capacity.
SCE will calculate this change in flexible RA need by using the hourly aggregate system
profile for load, wind, and solar from the 2014 LTPP Trajectory Scenario. This hourly data
will be used to calculate the hourly three hour net-load ramp for each hour of the year,
consistent with the CAISO’s Flexible Capacity study. SCE will then identify the maximum
three hour net-load ramp for each month, and determine the relative contributions from
wind and solar to that maximum ramp. Finally, SCE will determine the monthly increase
(or decrease) in the need for flexible capacity associated with one MW of installed capacity
of wind and solar. This is determined based on the relative contribution of wind/solar
indicated above and the total installed capacity of wind/solar in the system. Maximum
generation number for wind/solar from the 2014 LTPP Trajectory Scenario will be used as
the estimate for the total installed wind/solar capacity for the system. The result of flexible
capacity needs for wind/solar based on the described methodology is summarized below:
Table A1: Contribution of 1 MW of Installed Capacity to Flexible RA
Month
January
February
March
April
May
June
July
August
September
October
November
December
Solar
0.52
0.75
0.63
0.78
0.66
0.58
0.58
0.61
0.78
0.66
0.59
0.63
Wind
0.12
0.09
0.15
0.13
0.01
0.07
0.04
0.05
0.20
0.02
0.00
0.20
SCE will apply the interim RICA in bid valuation by multiplying the monthly RICA
estimate in $/MWh to the generation profile for each wind/solar bid.
4. Congestion Cost
Localized congestion may cause a reduction in prices at a particular locational marginal
price (“LMP”) in the CAISO 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
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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 incremental
congestion cost adder is based on SCE’s estimate of the average impact on system
congestion from adding incremental capacity without any incremental deliverability
network upgrades, and is the same for all EO projects. The incremental congestion cost
adder is also based on SCE’s forecast of LMPs in the CAISO market in the location that
the seller plans to interconnect.
5. Transmission Costs
Transmission costs are based on the estimated cost of the reimbursable network upgrades
attributable to individual projects. To participate in the 2014 RPS RFP, SCE requires sellers
to have an existing Phase II Interconnection study, or to have an equivalent or better process
or exemption. Transmission costs applicable to the project will be based on the applicable
completed interconnection study or interconnection agreement. The Seller must provide
copies of all interconnection studies and/or agreements as part of seller’s proposal.
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 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.
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.
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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
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;
Significant transmission network upgrade costs outside of the CAISO
Seller concentration;
Expected generation (GWh/year);
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






Dispatchability;
Alternative Renewable Premium (i.e. Renewable Premium including integration
costs);
Environmental impacts of seller’s proposed project on California water quality and
use;
Resource diversity;
Benefits to minority and low income communities;
Local reliability;
Environmental stewardship.
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APPENDIX B
Time of Delivery Periods
and
Product Payment Allocation Factors
2014 RPS RFP
Time of Delivery Periods (“TOD Periods”)
TOD Period
Time of Day
Applicable Days
On-Peak
2:00 p.m. – 8:00 p.m.
Weekdays except Holidays.
Off-Peak
8:00 a.m. – 2:00 p.m.
Weekdays, Weekends and Holidays
2:00 p.m. – 8:00 p.m.
Weekends and Holidays.
8:00 p.m. – 10:00 p.m.
Weekdays, Weekends and Holidays
10:00 p.m. – 8:00 a.m.
Weekdays, Weekends and Holidays
Super-Off-Peak
Product Payment Allocation Factors
Season
TOD Period
Product Payment Allocation Factor
Summer
Jun 1st – Sep 30th
On-Peak
1.29
Off-Peak
1.04
Super-Off-Peak
0.94
On-Peak
1.10
Off-Peak
0.96
Super-Off-Peak
0.95
Winter
Oct 1st – May 31st
“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.
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2013 RPS SOLICITATION
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.
11:00 p.m. – 8:00 a.m.
Off-Peak
Super-Off-Peak
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
Product Payment Allocation Factors
Full Capacity
Deliverability Status
Product Payment
Allocation Factor
Season
TOD Period
Summer
On-Peak
Fixed Value.
1.22
2.64
Mid-Peak
Fixed Value.
1.11
1.27
Off-Peak
Fixed Value.
0.94
0.82
Mid-Peak
Fixed Value.
1.05
0.96
Off-Peak
Fixed Value.
1.01
0.87
Super-Off-Peak
Fixed Value.
0.85
0.74
Winter
Calculation Method
Energy-Only
Deliverability Status
Product Payment
Allocation Factor
“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.
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Corrected CONFIDENTIAL Appendix D-(1-3)
Contract Summary
Confidential Protected Materials – Public Disclosure Prohibited