CPUC Accepts Renewables Auction

By Published On: August 19, 2011

Nearly all the energy matters set for discussion and vote at the California Public Utilities Commission’s Aug. 18 business meeting were pulled off the agenda. The item voted upon was a resolution pertaining to the mechanics of utilities’ small capacity renewables auctions. The auction mechanism is expected to reduce the cost of renewables projects to consumers, according to some commissioners. It facilitates “more renewables on line rather than more money spent on renewables,” said commissioner Mike Florio. It is also supposed to lead to new projects being sized according to demand, and “avoid incentives to build larger facilities than necessary,” said commission Mark Ferron. The commission voted unanimously to refine the process for the state’s three investor-owned utilities continued use of what is known as a renewable auction mechanism to procure power from distributed generation projects. The mechanism is an offshoot of feed-in tariffs, which strive to increase the amount of renewable deals below 20 MW. These tariffs provide standard terms and set long-term, transparent prices between independent producers and private utilities. The investor-owned utilities vigorously opposed regulators setting the price of renewable energy, which gave rise to the auction mechanism. At the end of last year, the CPUC ordered utilities to hold competitive auctions twice a year until they have purchased a statewide total of 1,000 MW of power capacity from the small renewable energy project developers. “Projects in this size range can play an important role in the renewables portfolio standard program,” CPUC president Mike Peevey said Dec. 16. He pointed out these types of projects can be built on brownfields and other sites within utility service areas, reducing the need for “massive” transmission lines (Current, Dec. 17, 2010). The auction mechanism was created in response to complaints that the processing of renewable deals was too slow. Regulators attempted to speed things up by allowing utilities to seek approval for competitively bid renewable deals via advice letter, in place of a regulatory decision. The advice letter process is supposed to be limited to non policy issues. However, complaints arose that policy issues crept into multi-page advice letters utilities submitted that sought approval for competitive renewable bids. Under the adopted resolution, the commission authorizes utilities to continue using the auction mechanism to reach the goal of 1,000 MW renewable resources. It also standardizes rules for the bid process. Key changes require the utilities to hold two auctions a year every six months. Each auction is supposed to aim at procuring 25 percent of a utility’s unfulfilled portion of the renewable auction mechanism (RAM) program’s total goal of 1,000 MW. To date, the utilities collectively have procured 239 MW of distributed generation through RAM. The aim then, is for another 761 MW combined. In another key change, projects must be at least 1 MW in size and no larger than 5 MW, though separate projects of at least 500 kW can be aggregated to reach these totals as long as they connect to the same node in a utility’s distribution system. Utilities generally cannot procure more than 20 MW from any single seller in any individual auction. The revised mechanism cracks open a wee bit the power purchase agreement door. It orders utilities to publicly report the auction responses and project milestones. Before bidding, project developers must complete studies so they can factor the cost of interconnecting with utility distribution systems into their bids. During this week’s meeting, a vote was postponed on a decision to cut $2.3 from Southern California Edison’s rate base because of outages at its nuclear plant and Mammoth Pool, allowing $23.7 million in rate recovery. Also pulled from the agenda were proposals to revise rules aimed at reducing fire hazards on power lines and ones expanding technologies that qualify for ratepayer-funded self generation incentives. The focus has been eligible solar, wind, fuel cells and biogas.

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