RPS ?Least-Cost/Best-Fit? Tangled in Complexity

By Published On: May 29, 2004

Trying to find consensus between two different schools of thought was the focus of a two-day California Public Utilities Commission workshop on defining the renewables portfolio standard ?least-cost/best-fit? criteria. Some stakeholders want clarity of terms prior to the long-awaited launch of RPS bids, while others insist the solicitations must go forward to see where the green chips may fall. But all are champing at the bit after months of delay. Listening to stakeholders try to reach agreement was often like watching a game of Twister. When the spinner landed on market referent price, confidentiality, integration costs, or utility ranking criteria, there was a mad scramble and one wondered when the whole pile of players would come crashing down. Southern California Edison, Pacific Gas & Electric, and San Diego Gas & Electric will need to use the criteria when ranking bids to meet the requisite 20 percent renewables levels. Just what the least-cost/ best-fit requirement means and the calculation methodology used to factor in several intertwining issues, including integration costs and transmission benefits and costs, have yet to be determined. ?Least cost? would include a bidder?s energy and capacity costs and utilities? operating costs. When the benchmark market referent price?tentatively set at 5.37 cents?will be factored in and how confidentiality issues will affect the equation remain to be seen. ?Best fit? is linked to a utility?s needs. ?We have done a fair amount of soul-searching to understand what?s feasible,? said Gary Allen, Edison manager of qualifying facility contracts. Much of the difficulty arises from the different project profiles and start dates, he said, explaining that Edison was working on a model to allow an ?apples-to-apples? comparison of green power bids. ?Throw it against the wall and let?s see what sticks,? said Steven Kelly, Independent Energy Producers policy director. A big concern of his was how transparent utilities? bid ranking would be, as well as what criteria were applied to the prioritization. Utilities want to protect their confidential data, which will be viewed only by a select committee: the Procurement Review Group. The CPUC has delayed ruling on the solicitation terms for eight months, and the associated complexity does not help matters. Plus, more complexity creates more gaming opportunities. At the same time, the CPUC is trying to avoid leaving gaping holes or going to the other extreme and being overly prescriptive. On top of the CPUC delay, some are unhappy with the decision to separate the market referent price from the renewables standard contract terms. ?It is complicated, but [a rulemaking] can be done rationally,? said Nancy Rader, director of the California Wind Energy Association. The CPUC?s delay and now current rush to judgment, however, will likely result in a lot of ?black box issues and a disjointed decision,? she added. The first green power solicitations are expected in July?to be followed by considerable cleanup processes. Kelly predicts the process will turn out like the Biennial Resource Planning Update (BRPU), which vanished after huge amounts of time and energy were expended on hashing out the criteria. After the state?s RPS law passed two years ago, Kelly warned it would get bogged down at the regulatory level.

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