Volume I. Part I - California Public Utilities Commission

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
elements of their projects completely secured when PG&E is required to file for
approval and disclose these projects’ identities. Such disclosure can put the projects
at a disadvantage if they do not have aspects such as site control or supplier contracts
completed.
Seventh, requirements regarding PRG consultation must be modified to
address changes in the market. The Commission currently requires consultation with
the PRG for all transactions that either: (1) begin deliveries more than 3 months in
the future, or (2) have a term greater than 3 months. 60 This requirement has achieved
the objective of communicating with the PRG and soliciting valuable feedback.
However, recent increases in market volatility have necessitated more frequent
hedging. Improved liquidity in the forward (3 to 12 months) markets presents
opportunities to hedge the market volatility, but PG&E is unable to do so efficiently
with the current consultation requirements. Changing the 3-month threshold
requirements to consult with the PRG to thresholds greater than six months would
allow PG&E to adapt to market developments and transact in a more efficient manner.
This proposed change is discussed in Volume 2, Section II.A.1.
2. Lessons Learned in Renewables Procurement
PG&E has now had several years of experience in procuring renewable
resources, including three annual RPS solicitations and bilateral negotiations. PG&E
has learned a number of lessons during this process, which have been identified in the
on-going RPS proceedings (R.06-05-027) and in annual RPS Procurement Plan
filings, such as the 2007 Procurement Plan that PG&E filed on September 26, 2006 in
R.06-05-027. PG&E provides a summary of these lessons learned below.
First, PG&E’s experience with the Supplemental Energy Payments (“SEPs”) is
that developers cannot obtain financing for this revenue stream due to the uncertainty
of its availability. Also, the SEP application process is slow, burdensome, inefficient
and needs reform.
Second, the Time-of-Delivery factors, used to differentiate a project’s
payments between time periods and allow the utility to value the project power output
in each time period should be updated based on recent forward market prices for
natural gas and wholesale power.
60 D.03-12-062; D.04-12-048 Conclusion of Law No. 15.
II-23