advice 3287-e, submission of the tule wind contract for

STATE OF CALIFORNIA Edmund G. Brown Jr., Governor

PUBLIC UTILITIES COMMISSION 505 VAN NESS AVENUE

SAN FRANCISCO, CA 94102-3298

May 25, 2016

Advice Letters 3287-E and 3287-E-A

Russell G. Worden

Director, State Regulatory Operations

Southern California Edison Company

8631 Rush Street

Rosemead, CA 91770

SUBJECT: Submission of the Tule Wind Contract for Procurement of Renewable

Energy from SCEs 2014 Renewables Portfolio Standard Solicitation

Dear Mr. Worden:

Advice Letters 3287-E and 3287-E-A are effective as of April 21, 2016, per Resolution

E-4746 Ordering Paragraphs.

Sincerely,

Edward Randolph

Director, Energy Division

P.O. Box 800 8631 Rush Street Rosemead, California 91770 (626) 302-4177 Fax (626) 302-4829

Russell G. Worden Managing Director, State Regulatory Operations

October 7, 2015

ADVICE 3287-E (U 338-E)

PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA ENERGY DIVISION

SUBJECT: Submission of the Tule Wind Contract for Procurement of Renewable Energy From SCE’s 2014 Renewables Portfolio Standard Solicitation

I. INTRODUCTION

A. Purpose of the Advice Letter

Southern California Edison Company (“SCE”) submits this Advice Letter pursuant to California Public Utilities Code Section 399.11 et seq. (the “RPS Legislation”) seeking approval of a Renewables Portfolio Standard (“RPS”) power purchase agreement between SCE and Tule Wind LLC (“Tule Wind”) (the “Tule Wind Contract”).

The following table summarizes the Tule Wind Contract:

Seller Generation Type

Size (MW)

Estimated Average Energy

(GWh/Yr)

Forecasted Commercial

Operation Date

Term of Agreement

(Years)

Tule Wind LLC

Wind 132 381 September 1, 2017 15

SCE requests that the California Public Utilities Commission (“Commission” or “CPUC”) issue a resolution containing findings in the form requested in this Advice Letter within nine months (July 7, 2016).

In accordance with General Order (“GO”) 96-B, the confidentiality of information included in this Advice Letter is described below. This Advice Letter contains both confidential and public appendices as listed below.

ADVICE 3287-E (U 338-E) - 2 - October 7, 2015

Confidential Appendix A: Consistency with Commission Decisions and Rules and Project Development Status

Confidential Appendix B: 2014 Solicitation Overview

Confidential/Public Appendix C: Independent Evaluator Report

Confidential Appendix D: Contract Summary

Confidential Appendix E: Comparison of the Tule Wind Contract with SCE’s 2014 Pro Forma Renewable Power Purchase and Sale Agreement

Confidential Appendix F: Tule Wind Contract

Confidential/Public Appendix G: Renewable Net Short Calculations

Appendix H: Confidentiality Declaration

Appendix I: Proposed Protective Order

B. Subject of the Advice Letter

The project that is contemplated by the Tule Wind Contract (the “Tule Wind Project”) is a proposed 132 MW wind facility. The Tule Wind Project is to be located in San Diego County, California approximately sixty miles east of the city of San Diego (the “Site”), and will interconnect to San Diego Gas & Electric Company’s (“SDG&E”) 138 kV Boulevard Substation, adjacent to SDG&E’s Sunrise Powerlink. The interconnection point, the 138 kV Boulevard Substation, is part of the California Independent System Operator (“CAISO”) balancing authority area.

The seller under the Tule Wind Contract is Tule Wind LLC, (“Seller” or “Tule Wind”), an Oregon limited Liability Company. The parent company of Tule Wind is Iberdrola Renewables, LLC (“Iberdrola”), an Oregon limited liability company. Iberdrola will serve as the developer, operator, and the operations and maintenance (“O&M”) service provider for the Tule Wind Project. The Tule Wind Contract is a new contract that originated from SCE’s 2014 RPS solicitation.


C. General Project Description

Project Name Tule Wind Project

Technology Wind

Capacity (MW)1 132

Capacity Factor (Term Year 1) 32.94%

Expected Generation (GWh/Year) 381

Initial Commercial Operation Date September 1, 2017

Date Contract Delivery Term Begins September 1, 2017

Delivery Term (Years) 15

Vintage (New / Existing / Repower) New

Location (City and State) San Diego County, CA

Control Area (e.g., California Independent System Operator (“CAISO”), Bonneville Power Administration (“BPA”))

CAISO

Nearest Competitive Renewable Energy Zone (“CREZ”) as identified by the Renewable Energy Transmission Initiative (“RETI”)

CREZ 27 – San Diego South

Type of cooling, if applicable N/A

D. Project Location

The Tule Wind Project is to be located in San Diego County, California, approximately sixty miles east of the city of San Diego on undeveloped land. The area is dominated by chaparral vegetation characterized by rolling uplands with granite outcroppings and collections of very large boulders. To the east, the vegetation changes to desert transition as the Peninsular Ranges drop off into steep canyon gorges with very little vegetation. These slopes terminate in the Colorado Desert plain surrounding the Salton Sea.

1 See Appendix D, Section D under “Capacity” for further details on the Tule Wind

Project’s capacity.


E. General Deal Structure

The Tule Wind Contract is based on SCE’s 2014 Pro Forma Renewable Power Purchase and Sale Agreement, which was accepted by the Commission in Decision (“D.”) 14-11-042 on November 20, 2014.2

SCE is purchasing all electric energy produced by the Tule Wind Project throughout the contract term, net of station use (if any), and all green attributes,

2 D.14-11-042 at 124 (Ordering Paragraph 1).


capacity attributes, and Resource Adequacy benefits generated by, associated with, or attributable to the Tule Wind Project.

The point of delivery is located at the 138 kV Boulevard Substation located within SDG&E’s transmission service territory. The Tule Wind Project was studied for Full Capacity Deliverability Status under the CAISO’s generator interconnection process. A Standard Large Generator Interconnection Agreement (“LGIA”), dated March 23, 2011, has been executed among Tule Wind, SDG&E, and the CAISO (Tule Wind Project: Q32).

The Tule Wind Project met the eligibility requirements and is consistent with the preferred project characteristics for SCE’s 2014 Request for Proposals (“RFP”), which are described in further detail in Sections II.A.2 and II.A.3. The Tule Wind Project is expected to deliver a portfolio content category 1 (“Category 1”)3 product, and has a first point of interconnection within a California Balancing Authority; i.e., the CAISO. Additional information regarding the Tule Wind Contract is provided in Appendix D.

F. RPS Statutory Goals and Requirements

By providing renewable energy from an eligible renewable energy resource (“ERR”) as defined in the RPS Legislation, the Tule Wind Contract is consistent with, and contributes to, the RPS program’s statutory goals.

Pursuant to Public Utilities Code Section 399.11(b), the Legislature determined that procurement of electricity products from ERRs, such as the Tule Wind Project, provides unique benefits to California including, among other things, displacing fossil fuel consumption within the state, reducing air pollution in the state, meeting the state’s climate change goals by reducing emissions of greenhouse gases associated with electrical generation, and meeting the state’s need for a diversified and balanced energy generation portfolio.

Based on SCE’s analysis of its renewable net short (“RNS”) position prior to executing 2014 RPS solicitation contracts, SCE projected a long-term renewable procurement need in the third compliance period and beyond. Consistent with that need, the Tule Wind Contract is expected to provide long-term RPS Category 1-eligible energy over a 15-year term starting in 2017. SCE’s RNS calculations are included in Appendix G.

G. Confidentiality

SCE is requesting confidential treatment of Appendices A, B, D through F, and the confidential versions of Appendices C and G, to this Advice Letter.

3 As defined in Public Utilities Code Section 399.16(b)(1) and D.11-12-052.


The information for which SCE is seeking confidential treatment is identified in the Confidentiality Declaration attached as Appendix H. The confidential version of this Advice Letter will be made available to appropriate parties (in accordance with SCE’s Proposed Protective Order, as discussed below) upon execution of the required non-disclosure agreement. Parties wishing to obtain access to the confidential version of this Advice Letter may contact Tristan Reyes Close in SCE’s Law Department at [email protected] or 626-302-2883 to obtain a non-disclosure agreement. In accordance with GO 96-B, a copy of SCE’s Proposed Protective Order is attached as Appendix I. It is appropriate to accord confidential treatment to the information for which SCE requests confidential treatment in the first instance in the advice letter process because such information is entitled to confidentiality protection pursuant to D.06-06-066,4 and is required to be filed by advice letter as part of the process for obtaining Commission approval of RPS power purchase and sale agreements. SCE would object if the information were disclosed in an aggregated format.

The information in this Advice Letter for which SCE requests confidential treatment, the pages on which the information appears, and the length of time for which the information should remain confidential are provided in Appendix H. This information is entitled to confidentiality protection pursuant to D.06-06-066 (as provided in the Investor-Owned Utility (“IOU”) Matrix).5 The specific provisions of the IOU Matrix that apply to the confidential information in this Advice Letter are identified in Appendix H.

II. CONSISTENCY WITH COMMISSION DECISIONS

A. SCE’s 2014 RPS Procurement Plan

1. SCE’s 2014 RPS Procurement Plan Was Approved by the Commission and SCE Adhered to Commission Guidelines for Filing and Revisions

SCE filed its 2014 RPS Procurement Plan on June 4, 2014. On August 20, 2014, SCE filed an amended 2014 RPS Procurement Plan.

In D.14-11-042, the Commission conditionally accepted SCE’s 2014 RPS Procurement Plan, including the solicitation materials for SCE’s 2014 RPS solicitation.6 The Commission also ordered SCE to make certain changes to its 2014 RPS Procurement Plan and to file a final plan by December 8, 2014. On December 8, 2014, SCE filed its final 2014 RPS Procurement Plan.

4 D.06-06-066 at 80 (Ordering Paragraphs 1 and 2). 5 Id., Appendix 1. 6 D.14-11-042 at 124 (Ordering Paragraph 1).


Consistent with the schedule set forth in D.14-11-042, SCE issued its 2014 RFP on December 18, 2014.

2. Summary of SCE’s Assessment of Portfolio Needs and Preferred Project Characteristics

As explained in SCE’s 2014 RPS Procurement Plan, SCE had a long-term need for renewable energy in the third compliance period and beyond. Since the filing of its final 2014 RPS Procurement Plan, SCE updated its forecasted RNS with more current information to provide a more accurate depiction of need, and weigh that need against current market trends when formulating its approach for the 2014 RPS solicitation.

In the 2014 RPS Procurement Plan, SCE received approval to conduct a targeted solicitation to meet its need for renewable resources. In its 2014 RPS RFP, SCE accepted proposals for projects with commercial operation dates of January 1, 2016 or later, and limited its procurement to Category 1 products and long-term portfolio content category 3 (“Category 3”)7 unbundled renewable energy credit (“REC”) products. SCE stated that prior to the start of the term of the contract with SCE, sellers may, at their discretion, deliver energy, capacity or other attributes of the project: (1) through the CAISO market, (2) to a balancing authority, or (3) to a third-party off-taker. SCE also stated that it may, but is not obligated to, purchase any Resource Adequacy benefits attributed to a project while it is delivering energy prior to the commencement of the term of the contract with SCE.

SCE required that projects have either a Phase II Interconnection Study or equivalent, a signed interconnection agreement, or an equivalent or better interconnection study, agreement, process, or exemption in order to submit a proposal. Additionally, if the California Environmental Quality Act (“CEQA”) or the National Environmental Policy Act (“NEPA”) applies to the project and a lead agency has been designated under the applicable law, then SCE considered proposals from such projects only if the project had achieved, at a minimum, an “application deemed complete” (or equivalent) status under the land use entitlement process by the agency designated by CEQA or NEPA as the lead agency.

Projects with a contract capacity of 500 kW or greater were eligible to participate in SCE’s 2014 RPS RFP. SCE indicated that it continued to solicit ERR generating facilities in the Western Los Angeles sub-area of the Los Angeles basin local reliability area to meet local capacity requirements and, specifically, resources that are interconnected to SCE’s distribution system in the Johanna and Santiago sub-station area to meet SCE’s Preferred Resources Pilot goals. 7 As defined in Public Utilities Code Section 399.16(b)(3) and D.11-12-052.


For in-state8 generating facilities that are, or will be, interconnected to the CAISO, SCE required the delivery point to be the point where the generating facility connects to the CAISO-controlled grid. For in-state generating facilities that are, or will be, interconnected to a California Balancing Authority other than the CAISO, SCE required the delivery point to be the intertie point where the seller’s transmission provider ties to the CAISO.

For out-of-state9 generating facilities, sellers had to reasonably demonstrate to SCE that the output of the proposed generating facility can in fact be scheduled on an hourly or sub-hourly basis into a California Balancing Authority, without substituting electricity from another source, or dynamically transferred into a California Balancing Authority.

SCE decided on the total projected contract energy it signed based on several factors, including projected long- and short-term needs, the impact of reducing federal tax credits, variation in the performance of SCE’s existing portfolio, technology resource risk, risk of delay of new projects, risk of new projects not performing as expected, and variation in bundled retail sales, among other factors.

3. The Tule Wind Contract Is Consistent with SCE’s 2014 RPS Procurement Plan, Portfolio Needs, and Preferred Project Characteristics

The Tule Wind Contract aligns with the portfolio needs identified in SCE’s 2014 RPS Procurement Plan. Specifically, the Tule Wind Contract will provide renewable energy from a new 132 MW wind facility starting in 2017 for a 15-year term, consistent with SCE’s long-term renewable procurement need in the third compliance period and beyond.

The Tule Wind Project also met the eligibility requirements and is consistent with the preferred project characteristics for SCE’s 2014 RFP. The Tule Wind Project’s first point of interconnection will be with the CAISO, and thus the Tule Wind Contract is expected to provide a Category 1 product. Additionally, the

8 A generating facility was considered “in-state” if such generating facility’s first point of

interconnection is, or will be, to the transmission or distribution system of a California Balancing Authority, and the generating facility delivers Category 1 or Category 3 product.

9 A generating facility was considered “out-of-state” if such generating facility’s first point of interconnection is not, or will not be, to the transmission or distribution system of a California Balancing Authority but the generating facility is delivering Category 1 or Category 3 product. Sellers are required comply with all requirements pertaining to “Out-of-State Facilities” as set forth in the California Energy Commission (“CEC”) RPS Eligibility Guidebook.


Tule Wind Project’s 132 MW contract capacity is consistent with SCE’s 500 kW minimum size requirement. The Tule Wind Project met the requirement to have a Phase II Interconnection Study or the equivalent or better, as the project already has a fully executed LGIA. Furthermore, the Tule Wind Project will satisfy the delivery requirements for SCE’s 2014 RFP because the project’s delivery point will be the point where the project connects to the CAISO-controlled grid. Additional information is included in Appendix A.

4. The Tule Wind Contract is Consistent with SCE’s Portfolio Optimization Strategy

As described in detail in SCE’s 2014 RPS Procurement Plan, the objective of SCE’s renewables portfolio optimization strategy is to minimize costs to its customers while ensuring that RPS procurement goals are met or exceeded. SCE determines the procurement target for each RPS solicitation based in part on its assessment of SCE’s renewable procurement position and need, i.e., SCE’s RNS. This includes a calculation of SCE’s net short or long renewables position and SCE’s bank. SCE carefully evaluates its renewable procurement need by assessing bundled retail sales, the performance and variability of existing generation, the likelihood of new generation achieving commercial operation, expected commercial on-line dates, technology mix, expected curtailment, and the impact of pre-approved procurement programs, among other factors.

The Tule Wind Contract meets the primary objectives of SCE’s portfolio optimization strategy. Tule Wind is expected to start deliveries in September 2017, which will help meet SCE’s renewable procurement need in the third compliance period and beyond. Additional information is included in Appendix A.

B. Least-Cost Best-Fit (“LCBF”) Methodology and Evaluation

SCE evaluates and ranks proposals based on LCBF principles that comply with criteria set forth by the Commission in D.03-06-071 and D.04-07-029 (the “LCBF Decisions”).10 The goal of SCE’s evaluation and selection criteria and processes is to provide decision metrics so that SCE can procure renewable energy economically, while providing the most value to its customers. The LCBF analysis evaluates both quantitative and qualitative aspects of each proposal to estimate its value to SCE’s customers and its relative value in comparison to other proposals.

Although assumptions and methodologies have evolved slightly over time, the basic components of SCE’s evaluation and selection criteria and process for

10 The Commission has also made rulings on various evaluation criteria in its decisions

on the IOUs’ RPS Procurement Plans.


RPS contracts were established by the Commission’s LCBF Decisions. Consistent with those LCBF Decisions, the three main steps undertaken by SCE in its evaluation and selection process were: (1) initial data gathering and validation, (2) a quantitative assessment of proposals, and (3) adjustments to selections based on proposals’ qualitative attributes. SCE applied these criteria to the proposals received in its 2014 RPS RFP in order to establish a shortlist of proposals from sellers with whom SCE would engage in contract negotiations.

Prior to receiving proposals, SCE finalized the shortlist selection criteria with the Independent Evaluator (“IE”). SCE then finalized the major assumptions and methodologies that underlie SCE’s valuation, including power price forecast, SCE’s existing and forecast resource portfolio, capacity value forecast, renewable integration cost adder (“RICA”) methodology, and capacity limits at interties. SCE also finalized and published congestion adders for sellers to use in preparing their proposals.

Once proposals were received, SCE began an initial review of proposals for completeness and conformity with the solicitation protocol. The review included an initial screen for required submission criteria such as a Phase II interconnection study or equivalent, evidence of “application deemed complete” land use entitlement process status as required by the Commission, Geographic Information Systems files as required by the Commission, all SCE required attestations, and other items necessary to deem a proposal complete and conforming. Sellers lacking any of these items were allowed a reasonable cure period to remedy any deficiencies. Following this check for conformity, SCE conducted an additional review to determine the reasonableness of proposal parameters such as generation profiles and capacity factors. SCE worked directly with sellers to resolve any issues and ensure the data was ready for evaluation.

After these reviews, SCE calculated the Renewable Premium and the Net Market Value (“NMV”)11 for each complete and conforming proposal and ranked the proposals based on this quantitative assessment of costs and benefits. Benefits were composed of separate capacity, energy, curtailment (if applicable), and congestion components (congestion reduction if applicable). Costs included the contract payments, debt equivalents, congestion cost, RICA, and transmission cost. SCE discounted the annual benefit and cost streams to a common base year. The result of the quantitative analysis was a merit order ranking of all complete and conforming proposals by NMV that helped define the shortlist. 11 Renewable Premium is calculated by subtracting benefits from costs. NMV is

calculated by subtracting costs from benefits. The corresponding ranking results are identical, with numerical values only different by sign (positive or negative). SCE generally refers to the NMV throughout the remainder of this Advice Letter.


Following the quantitative analysis, SCE conducted an initial assessment of the qualitative attributes of the top proposals with a competitive NMV. This analysis utilized the Project Viability Calculator to assess certain factors, including the company/development team, technology, and development milestones. Additional attributes such as portfolio fit of commercial operation date, contract term, significant transmission network upgrade costs for projects outside of the CAISO but within California, seller concentration, and resource diversity were also considered in the qualitative analysis. These qualitative attributes were then considered to either eliminate proposals or add projects to the shortlist of proposals, or to break ties, if any.

Following its analysis, SCE consulted with its Procurement Review Group (“PRG”) regarding SCE’s proposed final shortlist and specific evaluation criteria. SCE then negotiated with the shortlisted sellers. At the end of the contract negotiation period, SCE sought to execute contracts with the shortlisted sellers with which SCE successfully completed negotiations.

SCE’s 2014 RPS Shortlist Report was submitted to the Commission on April 23, 2015 in Advice 3209-E. SCE filed a supplement to Advice 3209-E to correct the locations of two projects on May 28, 2015. On July 14, 2015, the Commission issued Draft Resolution E-4726 approving SCE’s 2014 RPS solicitation shortlist with modifications. On September 3, 2015, SCE filed a second supplemental advice filing to Advice 3209-E to correct its valuation analysis and results. On September 17, 2015, the Commission adopted Resolution E-4725 with no substantive changes to the earlier version. As ordered by Resolution E-4726, SCE filed a Tier 1 Advice Letter on September 28, 2015 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 and Imperial Irrigation District Open Access Transmission Tariffs were considered.12

Using SCE’s LCBF methodology, the Tule Wind Project compared favorably to other proposals received in the 2014 RPS RFP, as well as other procurement options available to SCE. Additional information is included in Appendix A.

C. Compliance With Standard Terms and Conditions

In D.04-06-014, the Commission established a number of “modifiable” and “non-modifiable” standard terms and conditions to be used by retail sellers when contracting for RPS-eligible resources.13 In D.07-11-025, the Commission reduced the number of non-modifiable terms to the following four terms: (1) “CPUC Approval;” (2) “RECs and Green Attributes;” (3) “Eligibility;” and

12 See Advice 3278-E. 13 D.04-06-014 at 20 (Ordering Paragraph 1), Appendix A.


(4) “Applicable Law.”14 The remaining non-modifiable terms were converted to modifiable terms.15 In D.10-03-021, as modified by D.11-01-025, the Commission added two new non-modifiable standard terms and conditions for both bundled contracts and REC-only contracts: (1) “Transfer of Renewable Energy Credits;” and (2) “Tracking of RECs in WREGIS.”16 The Commission also added a new version of the non-modifiable “CPUC Approval” standard term and condition for REC-only contracts, and held that the non-modifiable “Applicable Law” standard term and condition also applies to REC-only contracts.17 In D.13-11-024, the Commission updated the non-modifiable “RECs and Green Attributes” term to a modifiable “Bioenergy Transactions” term.18

The Tule Wind Contract includes all non-modifiable standard terms and conditions for bundled contracts without change as indicated in the table below.

NON-MODIFIABLE TERM

CONTRACT SECTION

NUMBER CONTRACT PAGE

NUMBER

STC 1: CPUC Approval Exhibit A (See also Section 2.01(a))

Exhibit A, Page 5 (Section 2.01(a) is on page 6)

STC 6: Eligibility 10.02(b) 55

STC 17: Applicable Law 10.07 60

STC REC 1: Transfer of RECs 10.02(c) 55

STC REC 2: WREGIS Tracking of RECs

10.02(e) 55

A comparison of the Tule Wind Contract against SCE’s 2014 Pro Forma Renewable Power Purchase and Sale Agreement is included as Appendix E.

D. Portfolio Content Category Claim and Upfront Showing

In D.11-12-052, the Commission found that “[a] retail seller claiming that procurement for compliance with the California renewables portfolio standard

14 D.07-11-025 at 33 (Ordering Paragraph 1.a). 15 Id. at 34 (Ordering Paragraph 1.b). Subsequently, in D.08-04-009, the Commission

compiled the standard terms and conditions in one document and deleted the modifiable standard term and condition on supplemental energy payments.

16 D.11-01-025 at 46 (Ordering Paragraph 4.P). 17 Id. at 47-48 (Ordering Paragraph 4.Q). 18 D.13-11-024 at 24-25, 70 (Ordering Paragraph 6).


from a procurement contract or ownership agreement signed . . . on or after June 1, 2010 counts in the portfolio content category described in Pub. Util. Code § 399.16(b)(1), must provide information to the Director of Energy Division sufficient to demonstrate that the generation facility from which the electricity is procured is certified as eligible for the California renewables portfolio standard.”19 Additionally, retail sellers claiming procurement counts as a Category 1 product must provide information to the Energy Division Director sufficient to demonstrate that the generating facility from which the electricity is procured meets the statutory definition of Category 1 products set forth in Public Utilities Code Section 399.16(b)(1).20 One way to make this demonstration is to show that the facility “has its first point of interconnection to the Western Electricity Coordinating Council transmission grid within the metered boundaries of a California balancing authority area.”21 Another way is to show “the generation from that facility is scheduled into a California balancing authority pursuant to a dynamic transfer agreement between the balancing authority where the generation facility is located and the California balancing authority into which the generation is scheduled.”22 “The retail seller must also demonstrate that the renewable energy credits originally associated with the electricity have not been unbundled and transferred to another owner, and that all other requirements for procurement for compliance with the California renewables portfolio standard are met by the procurement.”23

Furthermore, D.11-12-052 provides that the utilities, in seeking approval of contracts for procurement, should enable the Commission to evaluate the following: “the claimed portfolio content category of the proposed procurement; the risks that the procurement will not ultimately be classified in the claimed portfolio content category; the value to ratepayers of the procurement as proposed and the value to ratepayers if the procurement is not ultimately classified in the claimed portfolio content category.”24

Pursuant to the provisions in the Tule Wind Contract, SCE will procure energy, capacity and associated renewable energy attributes generated from an eligible renewable resource with a first point of interconnection within the CAISO. In addition, per the contract, the Tule Wind Project must obtain and keep current CEC certification as an ERR,25 as well as perform all actions necessary to effectuate the transfer of RECs to SCE in the Western Renewable Energy

19 D.11-12-052 at 75-76 (Ordering Paragraph 1). 20 Id. 21 Id. at 76 (Ordering Paragraph 1). 22 Id. 23 Id. 24 Id. at 80 (Ordering Paragraph 9). 25 The project must qualify and be certified by the CEC as an ERR as such term is

defined in Public Utilities Code Section 399.12(e).


Generation Information System (“WREGIS”). The RECs associated with the electricity from the Tule Wind Project are yet to be delivered and therefore have not been unbundled or transferred to another owner. Such RECs will be transferred to SCE pursuant to the terms of the Tule Wind Contract. Accordingly, this is a Category 1 transaction pursuant to the Public Utilities Code Section 399.16(b)(1) and D.11-12-052.26 SCE has not identified a risk that the Tule Wind Project will fail to deliver Category 1 RECs.

26 D.11-12-052 at 75-76 (Ordering Paragraph 1).


P.O. Box 800 8631 Rush Street Rosemead, California 91770 (626) 302-4177 Fax (626) 302-4829

Forecast of Portfolio Balance Requirements27

Compliance Period 2

(2014-2016)GWh

Compliance Period 3

(2017-2020) GWh

PCC 1 Balance Requirement

CP 2 = 65% of RECs applied to procurement quantity requirement


Quantity of PCC 1 RECs28

(under contract, not including proposed contract)

9,414 50,416

Quantity of PCC 1 RECs from proposed contract

0 1,271

Quantity of PCC 2 RECs 0 0

Quantity of PCC 2 RECs from proposed contract (under contract, not including proposed contract)

0 0

PCC 3 Balance Limitation



Quantity of PCC 3 RECs (under contract, not including proposed contract)

0 0

Quantity of PCC 3 RECs from proposed contract

0 0

27 SCE’s forecast assumes a 100% success rate for projects in development that are

not yet online. 28 The “Quantity of PCC 1 RECs (under contract, not including proposed contract)”

represents the total forecasted energy deliveries for all executed RPS-eligible contracts, including 11 other executed contracts from SCE’s 2014 RPS RFP, minus the forecasted energy deliveries from the Tule Wind Contract.


E. Long-Term Contracting Requirement

In D.12-06-038, the Commission held that, “[i]n order to count procurement from contracts of less than 10 years duration signed after June 1, 2010 for compliance with the California renewables portfolio standard in a compliance period, a retail seller . . . must sign in the compliance period in which the short term contract is signed, contracts of at least 10 years in duration with expected generation equal to at least 0.25 percent of its retail sales for the immediately prior compliance period.”29 Since there was not a compliance period prior to the 2011-2013 compliance period, the requirement is 0.25 percent of 2010 retail sales for that compliance period.30

The Tule Wind Contract is a 15-year contract. Therefore, the long term contracting requirement does not apply.

F. Interim Emissions Performance Standard

The California Legislature passed Senate Bill (“SB”) 1368 on August 31, 2006, and Governor Schwarzenegger signed the bill into law on September 29, 2006. Section 2 of SB 1368 added Public Utilities Code Section 8341(a), which provides, “No load-serving entity or local publicly owned electric utility may enter into a long-term financial commitment unless any baseload generation supplied under the long-term financial commitment complies with the greenhouse gases emission performance standard established by the commission, pursuant to subdivision (d), for a load-serving entity. . . .”

In order to institute the provisions of SB 1368, the Commission instituted Rulemaking 06-04-009. That proceeding resulted in the establishment of a greenhouse gas (“GHG”) emissions performance standard (“EPS”) for carbon dioxide (“CO2”). In D.07-01-039, the Commission noted, “SB 1368 establishes a minimum performance requirement for any long-term financial commitment for baseload generation that will be supplying power to California ratepayers. The new law establishes that the GHG emissions rates for these facilities must be no higher than the GHG emissions rate of a combined-cycle gas turbine (‘CCGT’) powerplant.”31 The decision further explains:

SB 1368 describes what types of generation and financial commitments will be subject to the EPS (“covered procurements”). Under SB 1368, the EPS applies to “baseload generation,” but the requirement to comply with it is triggered only if there is a “long-

29 D.12-06-038 at 98 (Ordering Paragraph 15). 30 Id. at 98 (Ordering Paragraph 16). 31 D.07-01-039 at 2-3.


term financial commitment” by an LSE. The statute defines baseload generation as “electricity generation from a powerplant that is designed and intended to provide electricity at an annualized plant capacity factor of at least 60%.” … For baseload generation procured under contract, there is a long-term commitment when the LSE enters into “a new or renewed contract with a term of five or more years.”32

Pursuant to D.07-01-039, wind-powered generating facilities are deemed EPS-compliant.33 The Tule Wind Project is a wind facility and therefore meets this requirement.

G. PRG Participation

SCE’s PRG was formed on or around September 10, 2002. Participants include representatives from various divisions within the Commission, the Office of Ratepayer Advocates, The Utility Reform Network, California Utility Employees, the Union of Concerned Scientists, Sierra Club, and the California Department of Water Resources.

SCE consulted with its PRG during each milestone of the 2014 RPS solicitation process. Among other things, SCE informed the PRG of the initial results of its RFP, explained the evaluation process, and updated the PRG periodically concerning the status of contract formation. On March 11, 2015, SCE advised the PRG of its proposed shortlist of proposals for its 2014 RPS solicitation. On July 1, 2015, SCE briefed the PRG on the proposed execution of the Tule Wind Contract.

H. IE

The IE for the 2014 RPS solicitation was Merrimack Energy Group, Inc. The IE joined and contributed to a number of conference calls and negotiation sessions. In addition, the IE reviewed email traffic, the Tule Wind Contract, and other documents exchanged by the parties. The IE also participated in the PRG review. The IE Report is included as Appendix C.

32 Id. at 4. 33 Id. at 269 (Conclusion of Law 35).


III. PROJECT DEVELOPMENT STATUS34

A. Company/Development Team

The Tule Wind Project is expected to be designed, permitted, constructed, operated, and maintained by Iberdrola and/or its designated contractors and affiliates. Tule Wind is a wholly-owned subsidiary of Iberdrola. Iberdrola is a subsidiary of Iberdrola USA and the U.S. renewable energy division of parent company IBERDROLA, S.A., an energy pioneer with the largest renewable asset base of any company in the world. Iberdrola is headquartered in Portland, Oregon, and has more than $10 billion of operating assets totaling more than 6,000 MW of owned and controlled wind and solar generation in the U.S., with thousands of additional MW in development nationwide. Iberdrola is involved in all phases of wind development — metrological prospecting, wildlife and environmental assessments, permitting, forging agreements with communities and individual landowners, overseeing project construction, managing daily wind farm operations and marketing the power produced.

Iberdrola employs an experienced, mature team of professionals with decades of experience in the energy industry, including many who have extensive experience in the renewable energy industry. Additionally, the operations and maintenance team has successfully developed, operated and maintained multiple California power plants, including the following examples:

Technology Project Size

(MW)

Location Status

Wind Dillon Wind

Power Project 45

Palm

Springs and

Riverside

County, CA

Online

Wind Manzana 189 Rosamond,

CA Online

Wind Shiloh 150 Solano

County, CA Online

For a more exhaustive list of Iberdrola’s developed facilities, visit their website at http://iberdrolarenewables.us/featured-operations.html. Iberdrola is also currently

34 Some of the information in this section was provided by Tule Wind or Iberdrola and

was not independently verified by SCE.


building the 208 MW Amazon Wind Farm US East (in partnership with Amazon Web Services) in North Carolina, which it will own and operate.

B. Technology

1. Technology Type and Level of Technology Maturity

The Tule Wind Project expects to utilize readily available and proven wind turbine technology. While final turbine selection has not yet occurred, Iberdrola is currently conducting a solicitation for its turbine procurement. The variations of the machines being considered by the developer represent the next generation evolution of proven machines. Additional information is included in Appendix A.

2. Quality of Renewable Resource

SCE believes that the Tule Wind Project will be able to satisfy the terms of the Tule Wind Contract. Iberdrola has been collecting on-site wind data for over a decade. Fourteen meteorological towers have been located on the project site for on-site wind resource and energy assessment since 2004. Extensive interpretation of years of meteorological data from each tower installed, coupled with national historic wind data and advanced meteorological analytical programs, allow for a thorough site analysis and confidence in generation of expected energy output.

3. Other Resources Required

No additional fuel supply is required for the Tule Wind Project.

C. Development Milestones

1. Site Control

The Tule Wind Project will be located in San Diego County, California approximately sixty miles east of the city of San Diego. Iberdrola has secured 100 percent site control to support the Tule Wind Project, including full site, mitigation property and interconnection access, via direct ownership, as well as leases with public and private parties.

2. Equipment Procurement

As of the filing date of this Advice Letter, Iberdrola has not identified any equipment procurement issues that will affect the project’s ability to meet the commercial operation date.

With regard to major equipment such as transformers, circuit breakers, disconnect switches, and switchgear needed to construct the Tule Wind Project,


this will be procured after Iberdrola’s electrical engineer consultant creates the project specifications for the major materials purchase. The procurement process for this major equipment is scheduled to start in early December 2015.

The approximate lead times for major materials range from 25 weeks for underground medium voltage power cable to 62 weeks for substation power transformers. Iberdrola is confident all materials can be procured in time to enable the project to meet the expected commercial operation date under the Tule Wind Contract. As the second largest wind developer in the U.S., Iberdrola’s procurement department in Portland has extensive experience with sourcing, material procurement, and contract negotiations on wind projects. Iberdrola also partners with its sister companies, Iberdrola USA (New York) and Iberdrola SA (Madrid), on a worldwide basis to support their procurement process.

Additional information regarding wind turbine procurement is included in Appendix A.

3. Permitting/Certifications Status

Given that the CEC’s pre-certification process requires information pertaining to certain technical parameters of the electrical generation equipment (i.e., the wind turbines), Iberdrola will file for CEC pre-certification once it determines the specific turbine model for the Tule Wind Project. Iberdrola is currently in the process of conducting a solicitation seeking price and equipment proposals from turbine manufacturers. When that solicitation is complete, Iberdrola will file for CEC pre-certification.

The Tule Wind Project has received all of the major permits that are required in order for the project to achieve the term commencement date. There are some ministerial permits that are still outstanding. The table below includes permitting and certification status information regarding the Tule Wind Project.

Agency Permit/Approval Status

Federal Advisory Council on Historic Preservation

Section 106 Consultation (National Historic Preservation Act)

Complete/Approved

Federal Aviation Administration

Notice of Proposed Construction (Form 7460-1) Hazard Determination

Complete/Approved

U.S. Army Corps of Engineers

Section 404 Permit (Clean Water Act) Permit submitted August 11, 2011 Permit expected September 1, 2016

U.S. Department of the Interior - Bureau of Land Management (“BLM”)

• Record of Decision (decision by BLM

to approved the project)

• Right of Way Grant Application for

Transportation and Utility Systems

and Facilities on Federal Lands,

Complete/Approved



Standard Form 299

• National Historic Preservation Act

Compliance

U.S. Fish and Wildlife Service

Section 7 Consultation (Endangered Species Act)

Complete/Approved

Consultation (Migratory Bird Treaty Act (MBTA))

Complete/Approved

Consultation (Bald and Golden Eagle Protection Act)

Complete/Approved

State of California California Public Utilities Commission

Final Environmental Impact Report / Environmental Impact Statement (EIR/EIS)

Complete/Approved

California Department of Fish and Wildlife

Streambed Alteration Agreement Permit (Section 1602)

1602 Permit submitted August 11, 2011 Permit expected September 1, 2016

California Independent System Operator

Interconnection Approval Complete

California State Historic Preservation Office

Section 106 Consultation (National Historic Preservation Act)

Complete

State Water Resources Control Board

Section 401 Water Quality Certification (Clean Water Act). 401 Certification

401 Permit submitted August 11, 2011 Permit expected September 1, 2016

Section 402 National Pollutant Discharge Elimination System (NPDES) Storm Water Construction Permit (Clean Water Act)

402 Permit expected September 1, 2016

Stormwater Construction General Permit 99-08-DWQ

Permit expected September 1, 2016

Waste Discharge Requirements Permit Permit expected September 1, 2016

California Department of Transportation

Transportation Permits Permit expected September 1, 2016

Encroachment Permit Permit expected September 1, 2016

Air Pollution Control District

Air Quality Permit to Construct and Operate Batch Plant and Collector Substation.


California Department of Forestry and Fire Protection (CALFIRE)

Approval of Construction Fire Protection Plan

Complete/Approved

Local County of San Diego

Major Use Permit - Operation of Wind Turbines

Complete/Approved

Grading Permit Permit expected July 1, 2016

General Plan Amendment (GPA) Complete/Approved

Building Permit Permit expected September 1, 2016

Road/Highway Encroachment /Crossing Permit


Well and Septic Permit Permit expected September 1, 2016

San Diego County Environmental Health

Fire District Approval of Fire Protection Plan Fire Service Agreement

Complete/Approved



Services

4. Production Tax Credits/Investment Tax Credits

Information regarding production tax credits and investment tax credits is included in Appendix A.

5. Transmission

All transmission studies pertaining to the Tule Wind Project are complete, and the LGIA was fully executed on March 23, 2011.

There are no critical path issues to achieving the interconnection and network upgrades. Further, the major upgrade (the build-out of the East County Substation by SDG&E) is now complete, and while there are still some upgrades required, such remaining upgrades are much more minor in scope.

Transmission-related construction and upgrades include the following:

• Rebuild of the Boulevard Substation, which is the point of interconnection between the Tule Wind Project and the CAISO grid; this includes a new 138/69/12kV substation adjacent to the existing substation to accommodate the Tule Wind Project, as well as future interconnections (complete);

• A new 500/230/138kV substation (the “East County Substation”) between the existing Miguel and Imperial Valley Substations (complete);

• Installation of a new 13.5 mile 138kV transmission line connecting the rebuilt Boulevard Substation to the new East County Substation (complete);

• Loop-in of the existing 500kV Southwest Powerline transmission line into the new County Substation, which will include one tower removal and installation of three lattice tower transmission structures (complete); and

• Modification of the existing Special Protection System at Imperial Valley and Miguel Substations to include the Tule Wind Project (scheduled completion date of June 1, 2017).

D. Financing Plan

Information regarding financing is included in Appendix A.


IV. CONTINGENCIES AND MILESTONES

The Tule Wind Project is expected to begin operation on September 1, 2017. Specific information regarding performance criteria and guaranteed milestones is provided in Appendices D through F.

V. SAFETY CONSIDERATIONS

SCE is strongly committed to safety in all aspects of its business. Renewable sellers are responsible for the safe construction and operation of their generating facilities and compliance with all applicable safety regulations. SCE has taken several steps to address those issues over which it has the most visibility and control – the delivery of renewable electricity products to SCE in a reliable, safe, and operationally sound manner. SCE’s 2014 Pro Forma Renewable Power Purchase and Sale Agreement provides that the seller must operate the generating facility in accordance with “Prudent Electrical Practices.”35

Further, these provisions specifically require that all sellers take reasonable steps to ensure that:

(a) Equipment, materials, resources, and supplies, including spare parts inventories, are available to meet the Generating Facility’s needs;

(b) Sufficient Operating personnel are available at all times and are adequately experienced and trained and licensed as necessary to Operate the Generating Facility properly and efficiently, and are capable of responding to reasonably foreseeable emergency conditions at the Generating Facility and Emergencies whether caused by events on or off the Site;

35 Section 3.12(a) of SCE’s 2014 Pro Forma Renewable Power Purchase and Sale

Agreement. See also Exhibit A for the definition of “Prudent Electrical Practices.” Prudent Electrical Practices means “those practices, methods and acts that would be implemented and followed by prudent operators of electric generating facilities in the Western United States, similar to the Generating Facility, during the relevant time period, which practices, methods and acts, in the exercise of prudent and responsible professional judgment in the light of the facts known at the time a decision was made, could reasonably have been expected to accomplish the desired result consistent with good business practices, reliability and safety.” Prudent Electrical Practices includes, “at a minimum, those professionally responsible practices, methods and acts described in the preceding sentence that comply with the manufacturer’s warranties, restrictions in this Agreement, and the requirement of Governmental Authorities, WECC standards, the CAISO and Applicable Laws....”


(c) Preventive, routine, and non-routine maintenance and repairs are performed on a basis that ensures reliable, long term and safe Operation of the Generating Facility, and are performed by knowledgeable, trained, and experienced personnel utilizing proper equipment and tools;

(d) Appropriate monitoring and testing are performed to ensure equipment is functioning as designed;

(e) Equipment is not Operated in a reckless manner, in violation of manufacturer’s guidelines or in a manner unsafe to workers, the general public, or the Transmission Provider’s electric system or contrary to environmental laws, permits or regulations or without regard to defined limitations such as, flood conditions, safety inspection requirements, operating voltage, current, volt ampere reactive (“VAR”) loading, frequency, rotational speed, polarity, synchronization, and control system limits; and

(f) Equipment and components are designed and manufactured to meet or exceed the standard of durability that is generally used for electric energy generating facilities operating in the Western United States and will function properly over the full range of ambient temperature and weather conditions reasonably expected to occur at the Site and under both normal and emergency conditions.36

Consistent with SCE’s focus on safety, SCE’s 2014 Pro Forma Renewable Power Purchase and Sale Agreement also includes a provision providing that, prior to commencement of any construction activities on the project site, the seller must provide to SCE a report from an independent engineer certifying that the seller has a written plan for the safe construction and operation of the generating facility in accordance with Prudent Electrical Practices.37

The Tule Wind Contract includes all of these provisions, which are in the same location (i.e., sections and exhibits) as they are in SCE’s 2014 Pro Forma Renewable Power Purchase and Sale Agreement.

36 Definition of “Prudent Electrical Practices” in Exhibit A of SCE’s 2014 Pro Forma

Renewable Power Purchase and Sale Agreement. 37 Section 3.11(e) of SCE’s 2014 Pro Forma Renewable Power Purchase and Sale

Agreement.


VI. REQUEST FOR COMMISSION APPROVAL

The terms of the Tule Wind Contract are conditioned on the occurrence of final “CPUC Approval,” as it is described in the Tule Wind Contract. In order to satisfy that condition with respect to the Tule Wind Contract, SCE requests that the Commission issue a resolution no later than July 7, 2016 containing:

1. Approval of the Tule Wind Contract in its entirety;

2. A finding that the Tule Wind Contract is consistent with SCE’s 2014 RPS Procurement Plan;

3. A finding that the Tule Wind Contract is compliant with the Emissions Performance Standard;

4. A finding that any procurement pursuant to the Tule Wind Contract is procurement from an eligible renewable energy resource for purposes of determining SCE’s compliance with any obligation that it may have to procure eligible renewable energy resources pursuant to the California Renewables Portfolio Standard (Public Utilities Code Section 399.11 et seq.), Decision 03-06-071, or other applicable law;

5. A finding that the Tule Wind Contract, and SCE’s entry into it, is reasonable and prudent for all purposes, including, but not limited to, recovery in rates of payments made pursuant to the Tule Wind Contract and administrative costs associated with the Tule Wind Contract, subject only to further review with respect to the reasonableness of SCE’s administration of the Tule Wind Contract; and

6. Any other and further relief as the Commission finds just and reasonable.

VII. TIER DESIGNATION

Pursuant to GO 96-B, Energy Industry Rule 5.3, SCE submits this Advice Letter with a Tier 3 designation (effective after Commission approval).

VIII. EFFECTIVE DATE

This Advice Letter will become effective upon Commission approval.

IX. NOTICE

Anyone wishing to protest this Advice Letter may do so by letter via U.S. Mail, facsimile, or electronically, any of which must be received by the Energy Division and SCE no later than 20 days after the date of this advice letter. Protests should be submitted to:


CPUC, Energy Division Attention: Tariff Unit 505 Van Ness Avenue San Francisco, California 94102 E-mail: [email protected]

Copies should also be mailed to the attention of the Director, Energy Division, Room 4004 (same address as above).

In addition, protests and other correspondence regarding this advice letter should also be sent by letter and transmitted via facsimile or electronically to the attention of:

Russell G. Worden Managing Director, State Regulatory Operations

Southern California Edison Company 8631 Rush Street Rosemead, California 91770 Facsimile: (626) 302-4829 E-mail: [email protected]

Michael R. Hoover

Director, State Regulatory Affairs Southern California Edison Company c/o Karyn Gansecki

601 Van Ness Avenue, Suite 2030 San Francisco, California 94102 Facsimile: (415) 929-5544 E-mail: [email protected]

With a copy to:

Tristan Reyes Close Attorney Southern California Edison Company 2244 Walnut Grove Avenue, 3rd Floor Rosemead, CA 91770 Facsimile: 626-302-3990 E-mail: [email protected] There are no restrictions on who may file a protest, but the protest shall set forth specifically the grounds upon which it is based and must be received by the deadline shown above.


In accordance with General Rule of GO 96-B, SCE is furnishing copies of this 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 [email protected] or (626) 302-4039. For changes to any other service list, please contact the Commission’s Process Office at (415) 703-2021 or [email protected].

Further, in accordance with Public Utilities Code Section 491, notice to the public is hereby given by filing and keeping the Advice Letter at SCE’s corporate headquarters. To view other SCE advice letters filed with the Commission, log on to SCE’s web site at https://www.sce.com/wps/portal/home/regulatory/advice-letters.

All questions concerning this Advice Letter should be directed to Katie Sloan at (626) 302-6842 or by electronic mail at [email protected].


/s/ Russell G. Worden Russell G. Worden

RGW:ks:jm

Enclosures

CALIFORNIA PUBLIC UTILITIES COMMISSION

ADVICE LETTER FILING SUMMARY ENERGY UTILITY

MUST BE COMPLETED BY UTILITY (Attach additional pages as needed)

Company name/CPUC Utility No.: Southern California Edison Company (U 338-E)

Utility type: Contact Person: Darrah Morgan

ELC GAS Phone #: (626) 302-2086

PLC HEAT WATER E-mail: [email protected]

E-mail Disposition Notice to: [email protected]

EXPLANATION OF UTILITY TYPE

ELC = Electric GAS = Gas PLC = Pipeline HEAT = Heat WATER = Water

(Date Filed/ Received Stamp by CPUC)

Advice Letter (AL) #: 3287-E Tier Designation: 3

Subject of AL: Submission of the Tule Wind Contract 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

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:

Tristan Reyes Close, Law Department, (626) 302-2883 or [email protected]

Resolution Required? Yes No

Requested effective date: 7/7/16 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.

Protests and all other correspondence regarding this AL are due no later than 20 days after the date of

this filing, unless otherwise authorized by the Commission, and shall be sent to:

CPUC, Energy Division Attention: Tariff Unit 505 Van Ness Avenue San Francisco, California 94102

E-mail: [email protected]

Russell G. Worden Managing Director, State Regulatory Operations Southern California Edison Company 8631 Rush Street Rosemead, California 91770 Facsimile: (626) 302-4829 E-mail: [email protected] 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: [email protected] With a copy to:

Tristan Reyes Close Attorney Southern California Edison Company 2244 Walnut Grove Avenue, 3rd Floor Rosemead, CA 91770 Facsimile: (626) 302-3990 E-mail: [email protected]

CONFIDENTIAL Appendix A

Consistency with Commission Decisions & Rules and Project Development Status

Confidential Protected Materials – Public Disclosure Prohibited

CONFIDENTIAL Appendix B

2014 Solicitation Overview


CONFIDENTIAL Appendix C

Independent Evaluator Report


PUBLIC Appendix C

Independent Evaluator Report


2014 Renewable Resource Solicitation

Report of the Independent Evaluator

Review of Power Purchase Agreement with

Tule Wind LLC

September, 2015

Prepared by Merrimack Energy Group, Inc.

And

New Energy Opportunities, Inc.

MMMerrimack

Energy

Merrimack Energy Group, Inc. 1

Table of Contents Executive Summary …………………………………………………………………….. 2 I. 2014 Renewable RFP Overview……………….…………………….……….……..10 II. Role of the Independent Evaluator……………………..………………..………......16 III. Adequacy of Outreach to Potential Sellers…….. …………………………………..23 IV. Fairness and Appropriateness of RPS Bid Evaluation and Selection Methodology. 29 V. Administration of the Bid Evaluation Process ………………………………………50 VI. Reasonableness of the Evaluation, Selection and Contract Negotiation Process..… 62 VII. The Tule PPA and the Fairness of the Contract Negotiations……………………...67 VIII. Does the Tule PPA Merit Commission Approval?..................................................75 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


Executive Summary Effective July 15, 2015, Southern California Edison Company (“SCE”) executed a power purchase and sale agreement (“PPA”) with Tule Wind LLC (“Tule”) for the purchase of all the electric energy, capacity, Resource Adequacy (“RA”) Benefits, and Green Attributes produced by a proposed 132 MW wind energy generating facility to be constructed in San Diego County, California. The Delivery Point under the PPA with Tule (“Tule PPA”) is at the interconnection with the California Independent System Operator (“CAISO”)-controlled grid at the 138 kV Boulevard Substation. The PPA was 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 expects to execute a total of

including 132 MW of energy, capacity and Green Attributes purchased under the

PPA with Tule.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 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

1 Capitalized terms when used with reference to the Tule PPA and not otherwise defined herein are as defined in the Tule PPA. 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 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.


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 have been or are expected to be executed.

Tables ES-1: Contracts from 2014 Renewable Energy Solicitation

Seller Parent Company

Project Name

Type Vintage Forecasted Commercial Operation

Date

Term (Years)

ContractCapacity (MW)4

Annual Deliveries

(GWh)

Sempra U.S. Gas & Power

Mesquite Solar 2

Solar PV New 1/1/2017 20 100.815 283

NextEra Energy Resources5

Blythe Solar II

Solar PV New 11/1/2016 20 131.2 366

4 Contract Capacity amounts are as set forth in Section 1.01(h) of each PPA. 5


Recurrent Energy LLC7

RE Garland

Solar PV New 4/1/2017 15 186.966 555

Iberdrola S.A Tule Wind Project

Wind New 9/1/2017 15 132 381

NextEra Energy Resources

SEGS III Solar Thermal

Existing 3/1/2017 10 30 67


SEGS IV Solar Thermal

Existing 3/1/2017 10 30 69


SEGS V Solar Thermal

Existing 2/1/2018 10 30 68

Enel Green Power

TKO (South Bear

Creek)

Small Hydro Existing 1/15/2016 15 2.834 10

Calpine Corporation

Geysers Geothermal Existing 1/1/2018 10 50 438


The Tule project is a 132 MW wind energy project being developed approximately 60 miles east of the city of San Diego. The project is expected to deliver approximately 381 GWh/year to SCE over a 15-year delivery term. The forecasted date for commercial operation under the PPA is September 1, 2017,

. The owner of Tule, Iberdrola Renewables, LLC (“Iberdrola Renewables” or “Iberdrola”),

.

Prior to the launch of the RFP, SCE retained Merrimack Energy Group, Inc. (“Merrimack Energy”) as the Independent Evaluator (“IE”) for the 2014 Renewable RFP in accordance with regulatory requirements of the California Public Utilities Commission (“CPUC” or “Commission”).9 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.10 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 July 14, 2015, the Energy Division issued a draft resolution approving SCE’s shortlist report but directed SCE to re-evaluate IID-interconnected offers such that the differences between the CAISO tariff and the IID Open Access Transmission Tariff are considered. 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 Tule PPA, the price, economic ranking, and other attributes of the Tule PPA and project, and whether the Tule PPA merits 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

9 New Energy Opportunities, Inc. is serving as a subcontractor to Merrimack Energy in this engagement. 10 Advice Letter 3209-E, dated April 23, 2015. 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.


process from the IE Short List Report to final selection. Key findings are outlined in this executive summary. SCE’s outreach activities, which included contacting a large number of prospective Sellers, holding a 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


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.

complete and conforming offers by Net Market Value, which is the foundation upon which a series of alternative shortlist portfolios is established.

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


In terms of the short-list selection process, SCE exercised discretion, in several contexts,

1. 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.17 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. Recently, in Resolution E-4726, the Energy Division directed SCE to reassess its evaluation of IID-interconnected bid projects in this solicitation, specifically to

17 The Procurement Documents do not address this issue specifically.


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.18

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.

18 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. 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.


In the IE’s

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 Tule proposal. The Tule project had a high ranking in terms of project viability, the PPA was fairly negotiated, and, in the IE’s opinion, the Tule PPA merits 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 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 with a mutual-inclusive limitation. Seller must clearly identify the discount to the

20 Capitalized terms in this report are as defined in the Procurement Protocol, unless otherwise specified or where terms pertain to the Tule PPA (and are defined in the Tule PPA). 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.


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 mutual-exclusivity 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 Veteran-Owned 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;


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.


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:

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:

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;

22 D.14-11-042 (Nov. 24, 2014).


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.


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).


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 Merrimack Energy also served as IE for SCE’s 2013 RPS solicitation. 26 SCE did not receive any offers from affiliates.


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 non-discriminatory 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


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 short-

listed and which offers were awarded contracts?

6. With regard to the Tule PPA, (a) did SCE fairly and reasonably negotiate the contract, (b) did SCE fairly and reasonably evaluate and select Tule’s offer, and (c) does the Tule PPA 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;


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.

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.


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.


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 prepared and submitted an amendment to its IE shortlist report and an amended IE report in connection with the Mesquite PPA.

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

.32 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

32 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%.


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.33 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.34 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;

33 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. 34A 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.


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. 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 short-listed 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;

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 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. 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 All Proposals # of Proposals

Capacity (MW Total)

Unique Projects35

Biomass 43 520 14 Geothermal 16 321 7 Wind 43 2,356 27 Solar PV 105 2,909 25 Solar Thermal 9 450 8 Small Hydro 1 3.1 1 MSW 1 20 1 Total 218 6,579 83

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. 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,

35 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.


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?

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 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


37 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).


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.

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 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.39 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

39 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.


, 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 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,40 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. 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 Levelized Benefits Contract Payments – TOD-adjusted based on the proposed energy price,

Energy Benefits – Benefit received from expected payments from the day-ahead

40 For this solicitation, proposals were received via Accion Power’s website established specifically for this solicitation.


expected generation profile and contract term

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.

Transmission Costs – Cost adder to reflect the cost of building required network upgrades based on the latest Interconnection Study or Agreement

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).

Debt Equivalence Cost – Cost of mitigating contract commitments on SCE’s balance sheet

Congestion – Locational benefit resulting from certain resource locations.

Renewable Integration Cost Adder (Fixed) – Fixed cost component of the integration cost. This includes the costs for meeting new and existing flexible capacity requirements.

Curtailment Benefit – Benefit expected to be received as a result of not paying the counterparty for curtailed hours.

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.41

41 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.


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 3-month period. SCE’s overall LCBF methodology and approach is described in more detail in Appendix A to this report. 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).42 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.43

42 https://scerps.accionpower.com/_scerps_1401/documents.asp?strFolder=e. Bidders Conference Materials/&filedown=&HideFiles=True. 43 SCE applied locational congestion adders to all projects in California.


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 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.”44 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.

44 D 13-11-024, p. 52.


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 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 Solar Wind January 0.52 0.12 February 0.75 0.09 March 0.63 0.15 April 0.78 0.13 May 0.66 0.01 June 0.58 0.07 July 0.58 0.04 August 0.61 0.05 September 0.78 0.20 October 0.66 0.02 November 0.59 0.00 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 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. 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; 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). 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.45 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 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:

45 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.


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 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.46 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 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.47

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. 46 As SCE encouraged bidders to submit proposals with different contract term lengths, SCE could take the same approach with respect to initial delivery dates. 47 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.


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 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.48 The IE had access to all proposals and documents submitted to the website. The IE also had access to all questions and communications between SCE and the 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

48 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.


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; 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. 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.49 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

49 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.


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 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:


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.50 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

50 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.


and trend analysis beyond a certain date)51 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.

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 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.52 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 52 SCE’s Final 2014 RPS Procurement Plan (Dec. 8, 2014), Appendix I.1, SCE’s Least-Cost Best-Fit Methodology, pp. 9-10.


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.

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.53 The Energy Division recently issued a draft resolution, which, if finalized, would direct SCE to consider the differences in the reimbursement mechanisms used by the CAISO and IID in its evaluation of costs associated with network upgrades. Application of Transmission Cost Adder Methodology to Projects Inside CAISO SCE’s LCBF methodology provides that it will calculate transmission cost adders based on the estimated cost of reimbursable network upgrades attributable to individual projects based on the applicable completed interconnection study (Phase 2 or equivalent) or interconnection agreement. SCE applied these principles to a variety of projects with Phase 2 interconnection studies and interconnection agreements.

53 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.


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.

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.

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 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.

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?

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 SCEs 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 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


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.


VII. The Tule PPA and the Fairness of the Project-Specific Negotiations

A. The Tule Project and the Tule PPA

Commercial Terms of the Tule PPA SCE and Tule Wind LLC executed the Tule PPA effective July 15, 2015. The key commercial terms of the Tule PPA are summarized below.


Delivery Term (Section 1.05) 15 years following the Commercial

Operation Date Type of Facility (Section 1.01(f)) Wind Vintage (Recital A) New Location of Facility (Section 1.01(b), Exhibit B

San Diego County, as further described in Exhibit B

Contract Capacity (Section 1.01(g)) 132 MW

Products (Section 1.01(d)) All energy (net of station use), capacity, Green Attributes, and RA benefits produced by the Facility

Forecasted Commercial Operations Date (Section 1.03)

September 1, 2017

Expected Annual Net Energy Production for each Term Year (Section 1.01(h))

381 GWh, with an approximate 33% capacity factor

Interconnection Point (Section 1.01(e) 138 kV Boulevard Substation Delivery Point (Section 1.01(f)) Point of interconnection with the CAISO-

controlled grid at 138 kV Boulevard Substation


“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.

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 H lid

2:00 p.m. – 8:00 p.m. Weekends and Holidays.

8:00 p.m. – 10:00 p.m. Weekdays, Weekends and Holidays

Super-Off-Peak 10:00 p.m. -8:00 a.m. Weekdays, Weekends and Holidays

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

Winter

Oct 1st – May 31st

On-Peak 1.10

Off-Peak 0.96

Super-Off-Peak 0.95


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 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 Non-Disclosure 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.62

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.

62 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.


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--

—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”).

The remainder of this section defines the requirements for the Supplier if SCE finds the consolidation requirement to be applicable.

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 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

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.)

6. Any other relevant factors

The Tule project is a proposed 132 MW wind project proposed to be built approximately 60 miles east of the city of San Diego in San Diego County, with direct delivery to the CAISO-controlled grid at the 138 kV Boulevard Substation. The project developer, Iberdrola Renewables, is a highly experienced developer of wind projects


63 The Protect Our Communities Foundation et al. v. Jewell et al. Case No. 13CV575 JLS (S.D. CA, March 24, 2014), http://cleanenergylawreport.default.wp1.lexblog.com/files/2014/12/326blog.pdf. 64 http://www.windaction.org/posts/41308-tule-wind-eagle-permit-rejection#.Vct7zNHbKM8.


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 Tule PPA merits CPUC approval.

The Tule PPA provides a good portfolio fit due to its late 2017 forecasted COD and its expected contribution of approximately 1,255 GWh toward Compliance Period 3 RPS targets.

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, and the project itself is mature in terms of its development status and is being developed by a company with a strong track record. All in all, there are very strong reasons to support approving the Tule PPA.

C. Any other relevant information or observations


In the IE’s opinion, the Tule PPA merits CPUC approval for several reasons, including its economic ranking , relatively low levelized cost per MWh, its substantial contribution to the Compliance Period 3 targets due to its late 2017 forecasted COD, and its likelihood of being successfully executed based on the project viability assessment.


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


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 non-spin), SCE may use an internal forecast for ancillary service prices as a means of evaluating any incremental benefit. For Proposals with must-take energy, SCE calculates the energy benefits of a Proposal based on SCE’s internal forecast of the market value of energy. The hourly energy benefit for the Proposal is the resulting market price multiplied by the hourly 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


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:


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 Solar Wind January 0.52 0.12 February 0.75 0.09 March 0.63 0.15 April 0.78 0.13 May 0.66 0.01 June 0.58 0.07 July 0.58 0.04 August 0.61 0.05 September 0.78 0.20 October 0.66 0.02 November 0.59 0.00 December 0.63 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


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 tie-breakers, SCE’s preference is for those projects that have commercial operation dates that match periods of SCE’s need for renewable energy.


Credit and Collateral Requirements In order to ensure comparable pricing for ranking, SCE requires sellers to bid conforming Proposals committing to posting SCE’s pro forma performance assurance amount. SCE accepts lesser performance assurance to be bid as long as a conforming Proposal is also submitted. Performance assurance is the collateral posted by the seller during the operating period. Project Viability SCE assesses the following attributes using the Project Viability Calculator:

Company/Development Team Project Development Experience Ownership/O&M Experience 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 tie-breakers, 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);


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.


APPENDIX B

Time of Delivery Periods and

Product Payment Allocation Factors

2014 RPS RFP



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

Super-Off-Peak 10:00 p.m. – 8:00 a.m. Weekdays, Weekends and Holidays


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

Winter


On-Peak 1.10

Off-Peak 0.96

Super-Off-Peak 0.95


2013 RPS SOLICITATION



TOD Period Summer

Jun 1st – Sep 30th

Winter


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. Weekdays except Holidays.

Off-Peak 11:00 p.m. – 8:00 a.m. 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

Super-Off-Peak Not Applicable. Midnight – 6:00 a.m. Weekdays, Weekends and Holidays


Season TOD Period Calculation Method

Energy-Only Deliverability Status

Product Payment Allocation Factor

Full Capacity Deliverability Status

Product Payment Allocation Factor

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

Winter 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

CONFIDENTIAL Appendix D

Contract Summary


CONFIDENTIAL Appendix E

Comparison of the Tule Wind Contract with SCE’s 2014 Pro Forma

Renewable Power Purchase and Sale Agreement


CONFIDENTIAL Appendix F

Tule Wind Contract


CONFIDENTIAL Appendix G

Renewable Net Short Calculations


PUBLIC Appendix G

Renewable Net Short Calculations

Physical Renewable Net Short Calculations Based on CPUC Assumptions

Variable Calculation Item

Deficit from RPS

prior to Reporting 2011

Actuals

2012

Actuals

2013

Actuals2011-2013

2014

Actual

2015

Forecast

2016

Forecast2014-2016

2017

Forecast

2018

Forecast

2019

Forecast

2020

Forecast2017-2020

2021

Forecast

2022

Forecast

2023

Forecast

2024

Forecast

2025

Forecast

2026

Forecast

2027

Forecast

2028

Forecast

2029

Forecast

2030

Forecast

2031

Forecast

2032

Forecast

2033

Forecast

Forecast Year CP1 1 2 CP2 3 4 5 6 CP3 7 8 9 10 11 12 13 14 15 16 18 19 20

Annual RPS Requirement

A Bundled Retail Sales Forecast (LTPP) 1 73,777 75,597 74,480 223,854 75,829 75,089 75,662 76,194 76,660 76,980 77,205 77,360 78,467 79,931 81,431 82,645 84,128

B RPS Procurement Quantity Requirement (%) 20.0% 20.0% 20.0% 21.7% 23.3% 25.0% 27.0% 29.0% 31.0% 33.0% 33.0% 33.0% 33.0% 33.0% 33.0% 33.0% 33.0% 33.0% 33.0% 33.0% 33.0% 33.0% 33.0%

C A*B Gross RPS Procurement Quantity Requirement (GWh) 14,755 15,119 14,896 44,771 16,455 23,277 24,968 25,144 25,298 25,404 25,478 25,529 25,894 26,377 26,872 27,273 27,762

D Voluntary Margin of Over-procurement - - - - - - - - - - - - - - - - - - - - - - -

E C+D Net RPS Procurement Need (GWh) 14,755 15,119 14,896 44,771 16,455 23,277 24,968 25,144 25,298 25,404 25,478 25,529 25,894 26,377 26,872 27,273 27,762

RPS-Eligible Procurement

Fa Risk-Adjusted RECs from Online Generation 15,654 15,821 16,535 48,010 17,731 18,095 18,055 53,882 17,255 17,436 17,780 16,933 69,405 16,279 16,182 16,167 16,066 16,000 15,774 14,325 12,962 12,778 11,500

Faa Forecast Failure Rate for Online Generation (%) 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Fb Risk-Adjusted RECs from RPS Facilities in Development - - - - - 188 1,602 1,790 3,630 3,913 4,905 5,923 18,371 6,005 5,982 5,958 5,948 5,910 5,873 5,837 5,827 5,791 5,768

Fbb Forecast Failure Rate for RPS Facilities in Development (%) N/A N/A 0.0% 0.0% 0.0% 12.0% 27.2% 19.7% 32.1% 32.1% 34.2% 37.7% 34.7% 38.0% 38.0% 38.0% 38.0% 38.0% 37.9% 37.9% 37.9% 37.9% 37.9%

Fc Pre-Approved Generic RECs - - - - - - - - 43 205 240 248 736 247 247 247 248 247 247 247 248 247 247

Fe Executed REC Sales 362 778 473 1,614 - - - - - - - - - - - - - - - - - - -

F Fa+Fb+Fc-Fe Total RPS Eligible Procurement (GWh) 2 15,291 15,043 16,062 46,396 17,731 18,283 19,658 55,672 20,928 21,554 22,925 23,104 88,511 22,532 22,411 22,373 22,262 22,158 21,895 20,409 19,037 18,816 17,516

F0 Category 0 RECs 3 15,239 14,912 15,822 45,973 16,510 15,442 15,178 47,130 13,347 12,223 12,066 11,217 48,853 10,586 10,499 10,496 10,399 10,367 10,181 10,011 9,990 9,828 8,561

F1 Category 1 RECs 3 52 131 240 423 1,222 2,841 4,479 8,542 7,538 9,126 10,619 11,639 38,923 11,699 11,665 11,630 11,615 11,543 11,467 10,150 8,799 8,741 8,707

F2 Category 2 RECs 3 - - - - - - - - - - - - - - - - - - - - - - -

F3 Category 3 RECs 3- - - - - - - - - - - - - - - - - - - - - - -

Gross RPS Position (Physical Net Short)

Ga F-E Annual Gross RPS Position (GWh) 536 (76) 1,166 1,625 1,277 (352) (1,864) (2,612) (2,887) (3,031) (3,216) (3,371) (3,999) (5,968) (7,836) (8,457) (10,247)

Gb F/A Annual Gross RPS Position (%) 20.7% 19.9% 21.6% 20.7% 23.4% 30.5% 30.5% 29.6% 29.2% 29.1% 28.8% 28.6% 27.9% 25.5% 23.4% 22.8% 20.8%

Application of Bank

Ha Existing Banked RECs above the PQR 0 536 451 0 1,586 2,861 1,586 4,997 4,997 4,997 4,997 4,997 4,997 4,997 4,997 4,997 4,997 4,997 4,997

Hb RECs above the PQR added to Bank 536 (85) 1,136 1,586 1,275 - - - - - - - - - - -

Hc Non-bankable RECs above the PQR - 9 30 39 - - - - - - - - - - -

H Ha+Hb Gross Balance of RECs above the PQR 536 451 1,586 1,586 2,861 4,997 4,997 4,997 4,997 4,997 4,997 4,997 4,997 4,997 4,997 4,997 4,997

Ia Planned Application of RECs above the PQR towards RPS Compliance - - - - - - - - - - - - - - - - - - - - - - -

Ib Planned Sales of RECs above the PQR 0 0 0 - 0 0 0 - 0 0 0 0 - 0 0 0 0 0 0 0 0 0 0

J H-Ia-Ib Net Balance of RECs above the PQR 536 451 1,586 1,586 2,861 4,997 4,997 4,997 4,997 4,997 4,997 4,997 4,997 4,997 4,997 4,997 4,997

J0 Category 0 RECs 3 1,164 - - 1,164 (0) - - - - - - - - - - -

J1 Category 1 RECs 3 52 131 240 423 1,222 - - - - - - - - - - -

J2 Category 2 RECs 3

- - - - - - - - - - - - - - -

Expiring Contracts

K RECs from Expiring RPS Contracts 1,059 1,334 1,858 4,251 2,033 2,250 3,225 7,508 3,902 4,328 5,472 6,352 20,055 6,945 7,259 7,357 7,507 7,506 7,753 9,118 9,988 10,101 10,672

Net RPS Position (Optimized Net Short)

La Ga+Ia-Ib-Hc Annual Net RPS Position after Bank Optimization (GWh) 536 (85) 1,136 1,586 1,275 (352) (1,864) (2,612) (2,887) (3,031) (3,216) (3,371) (3,999) (5,968) (7,836) (8,457) (10,247)

Lb (F+Ia-Ib-Hc)/A Annual Net RPS Position after Bank Optimization (%) 20.7% 19.9% 21.5% 20.7% 23.4% 30.5% 30.5% 29.6% 29.2% 29.1% 28.8% 28.6% 27.9% 25.5% 23.4% 22.8% 20.8%

Note: Fields in grey are potected as Confidential under CPUC Confidentiality Rules

Note: Values are shown in GWhs

Notes:

1 Bundled retail sales forecast for 2015‐2019 and 2025‐2030 is from SCE's bundled retail sales forecast; bundled retail sales forecast for 2020‐2024 is forecast used in 2014 LTPP

2 Includes 11 executed 2014 RPS solicitation contracts; new generation forecast based on individual project specific success rates for large near‐term projects and flat average success rate for remaining projects based on these projects' overall weighted average success rate

3 Forecast of deliveries by portfolio content categories is for executed contracts only; does not include program generics

C-1

Physical Renewable Net Short Calculations Based on SCE Assumptions

Variable Calculation Item

Deficit from RPS

prior to Reporting 2011

Actuals

2012

Actuals

2013

Actuals2011-2013

2014

Actual

2015

Forecast

2016

Forecast2014-2016

2017

Forecast

2018

Forecast

2019

Forecast

2020

Forecast2017-2020

2021

Forecast

2022

Forecast

2023

Forecast

2024

Forecast

2025

Forecast

2026

Forecast

2027

Forecast

2028

Forecast

2029

Forecast

2030

Forecast

2031

Forecast

2032

Forecast

2033

Forecast

Forecast Year CP1 1 2 CP2 3 4 5 6 CP3 7 8 9 10 11 12 13 14 15 16 18 19 20

Annual RPS Requirement

A SCE Bundled Sales Forecast 1 73,777 75,597 74,480 223,854 75,829 74,595 74,687 74,744 75,141 75,743 76,605 77,360 78,467 79,931 81,431 82,645 84,128

B RPS Procurement Quantity Requirement (%) 20.0% 20.0% 20.0% 21.7% 23.3% 25.0% 27.0% 29.0% 31.0% 33.0% 33.0% 33.0% 33.0% 33.0% 33.0% 33.0% 33.0% 33.0% 33.0% 33.0% 33.0% 33.0% 33.0%

C A*B Gross RPS Procurement Quantity Requirement (GWh) 14,755 15,119 14,896 44,771 16,455 23,125 24,647 24,665 24,796 24,995 25,280 25,529 25,894 26,377 26,872 27,273 27,762

D Voluntary Margin of Over-procurement - - - - - - - - - - - - - - - - - - - - - - -

E C+D Net RPS Procurement Need (GWh) 14,755 15,119 14,896 44,771 16,455 23,125 24,647 24,665 24,796 24,995 25,280 25,529 25,894 26,377 26,872 27,273 27,762

RPS-Eligible Procurement

Fa Risk-Adjusted RECs from Online Generation 15,654 15,821 16,535 48,010 17,731 18,095 18,055 53,882 17,255 17,436 17,780 16,933 69,405 16,279 16,182 16,167 16,066 16,000 15,774 14,325 12,962 12,778 11,500

Faa Forecast Failure Rate for Online Generation (%) 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Fb Risk-Adjusted RECs from RPS Facilities in Development - - - - - 188 1,602 1,790 3,630 3,913 4,905 5,923 18,371 6,005 5,982 5,958 5,948 5,910 5,873 5,837 5,827 5,791 5,768

Fbb Forecast Failure Rate for RPS Facilities in Development (%) N/A N/A 0.0% 0.0% 0.0% 12.0% 27.2% 19.7% 32.1% 32.1% 34.2% 37.7% 34.7% 38.0% 38.0% 38.0% 38.0% 38.0% 37.9% 37.9% 37.9% 37.9% 37.9%

Fc Pre-Approved Generic RECs - - - - - - - - 43 205 240 248 736 247 247 247 248 247 247 247 248 247 247

Fe Executed REC Sales 362 778 473 1,614 - - - - - - - - - - - - - - - - - - -

F Fa+Fb+Fc-Fe Total RPS Eligible Procurement (GWh) 2 15,291 15,043 16,062 46,396 17,731 18,283 19,658 55,672 20,928 21,554 22,925 23,104 88,511 22,532 22,411 22,373 22,262 22,158 21,895 20,409 19,037 18,816 17,516

F0 Category 0 RECs 3 15,239 14,912 15,822 45,973 16,510 15,442 15,178 47,130 13,347 12,223 12,066 11,217 48,853 10,586 10,499 10,496 10,399 10,367 10,181 10,011 9,990 9,828 8,561

F1 Category 1 RECs 3 52 131 240 423 1,222 2,841 4,479 8,542 7,538 9,126 10,619 11,639 38,923 11,699 11,665 11,630 11,615 11,543 11,467 10,150 8,799 8,741 8,707

F2 Category 2 RECs 3 - - - - - - - - - - - - - - - - - - - - - - -

F3 Category 3 RECs 3- - - - - - - - - - - - - - - - - - - - - - -

Gross RPS Position (Physical Net Short)

Ga F-E Annual Gross RPS Position (GWh) 536 (76) 1,166 1,625 1,277 (199) (1,543) (2,134) (2,385) (2,623) (3,018) (3,371) (3,999) (5,968) (7,836) (8,457) (10,247)

Gb F/A Annual Gross RPS Position (%) 20.7% 19.9% 21.6% 20.7% 23.4% 30.7% 30.9% 30.1% 29.8% 29.5% 29.1% 28.6% 27.9% 25.5% 23.4% 22.8% 20.8%

Application of Bank

Ha Existing Banked RECs above the PQR 0 536 451 0 1,586 2,861 1,586 4,997 4,997 4,997 4,997 4,997 4,997 4,997 4,997 4,997 4,997 4,997 4,997

Hb RECs above the PQR added to Bank 536 (85) 1,136 1,586 1,275 - - - - - - - - - - -

Hc Non-bankable RECs above the PQR - 9 30 39 - - - - - - - - - - -

H Ha+Hb Gross Balance of RECs above the PQR 536 451 1,586 1,586 2,861 4,997 4,997 4,997 4,997 4,997 4,997 4,997 4,997 4,997 4,997 4,997 4,997

Ia Planned Application of RECs above the PQR towards RPS Compliance - - - - - - - - - - - - - - - - - - - - - - -

Ib Planned Sales of RECs above the PQR 0 0 0 - 0 0 0 - 0 0 0 0 - 0 0 0 0 0 0 0 0 0 0

J H-Ia-Ib Net Balance of RECs above the PQR 536 451 1,586 1,586 2,861 4,997 4,997 4,997 4,997 4,997 4,997 4,997 4,997 4,997 4,997 4,997 4,997

J0 Category 0 RECs 3 1,164 - - 1,164 (0) - - - - - - - - - - -

J1 Category 1 RECs 3 52 131 240 423 1,222 - - - - - - - - - - -

J2 Category 2 RECs 3

- - - - - - - - - - - - - - -

Expiring Contracts

K RECs from Expiring RPS Contracts 1,059 1,334 1,858 4,251 2,033 2,250 3,225 7,508 3,902 4,328 5,472 6,352 20,055 6,945 7,259 7,357 7,507 7,506 7,753 9,118 9,988 10,101 10,672

Net RPS Position (Optimized Net Short)

La Ga+Ia-Ib-Hc Annual Net RPS Position after Bank Optimization (GWh) 536 (85) 1,136 1,586 1,275 (199) (1,543) (2,134) (2,385) (2,623) (3,018) (3,371) (3,999) (5,968) (7,836) (8,457) (10,247)

Lb (Ga+Ia-Ib-Hc)/A Annual Net RPS Position after Bank Optimization (%) 20.7% 19.9% 21.5% 20.7% 23.4% 30.7% 30.9% 30.1% 29.8% 29.5% 29.1% 28.6% 27.9% 25.5% 23.4% 22.8% 20.8%

Note: Fields in grey are potected as Confidential under CPUC Confidentiality Rules

Note: Values are shown in GWhs

Notes:

1 Based on SCE's May 2015 bundled retail sales forecast

2 Includes 11 executed 2014 RPS solicitation contracts; new generation forecast based on individual project specific success rates for large near‐term projects and flat average success rate for remaining projects based on these projects' overall weighted average success rate

3 Forecast of deliveries by portfolio content categories is for executed contracts only; does not include program generics

C-2

PUBLIC Appendix H

Confidentiality Declaration

PUBLIC Appendix I

Proposed Protective Order

1

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Submission of Tule Wind Contract for Procurement of Renewable Energy From SCE’s 2014 Renewables Portfolio Standard Solicitation

) ))

Advice 3287-E

PROPOSED PROTECTIVE ORDER

1. Scope. This Protective Order shall govern access to and the use of Protected

Materials, produced by, or on behalf of, any Disclosing Party (as defined in Paragraph 2 below)

in this proceeding.

2. Definitions.

In addition to the terms defined and capitalized in other sections of this Protective Order,

the following terms are defined for the purposes of this Protective Order:

A. For purposes of this Protective Order, the term “Protected Materials”

means: (i) trade secret, market sensitive, or other confidential and/or proprietary information as

determined by the Disclosing Party in accordance with the provisions of Decision (“D.”) 06-06-

066 and subsequent decisions, General Order 66-C, Public Utilities Code section 454.5(g), or

any other right of confidentiality provided by law; or (ii) any other materials that are made

subject to this Protective Order by the Assigned Administrative Law Judge (“Assigned ALJ”),

Law and Motion Administrative Law Judge (“Law and Motion ALJ”), Assigned Commissioner,

the California Public Utilities Commission (“Commission”), or any court or other body having

appropriate authority. Protected Materials also include memoranda, handwritten notes,

spreadsheets, computer files and reports, and any other form of information (including

information in electronic form) that copies, discloses, incorporates, includes or compiles other

Protected Materials or from which such materials may be derived (except that any derivative

2

materials must be separately shown to be confidential). Protected Materials do not include: (i)

any information or document contained in the public files of the Commission or any other state

or federal agency, or in any state or federal court; or (ii) any information that is public

knowledge, or which becomes public knowledge, other than through disclosure in violation of

this Protective Order or any other nondisclosure agreement or protective order.

B. The term “redacted” refers to situations in which Protected Material in a

document, whether the document is in paper or electronic form, have been covered, blocked out,

or removed.

C. The term “Disclosing Party” means a party who initially discloses any

specified Protected Material in this proceeding.

D. The term “Requesting Party” means any party that is requesting receipt of

Protected Material from a Disclosing Party.

E. The term “Party” refers to the Requesting Party or the Disclosing Party

and the term “Parties” refers to both the Requesting Party and the Disclosing Party.

F. The term “Market Participant” refers to a Requesting Party that is:

1) A person or entity, or an employee of an entity, that engages in the wholesale purchase, sale or marketing of energy or capacity, or the bidding on or purchasing of power plants, or bidding on utility procurement solicitations, or consulting on such matters, subject to the limitations in 3) below.

2) A trade association or similar organization, or an employee of such organization,

a) whose primary focus in proceedings at the Commission is to advocate for persons/entities that purchase, sell or market energy or capacity at wholesale; bid on, own, or purchase power plants; or bid on utility procurement solicitations; or

b) a majority of whose members purchase, sell or market energy or capacity at wholesale; bid on, own, or purchase power plants; or bid on utility procurement solicitations; or

3

c) formed for the purpose of obtaining Protected Materials; or

d) controlled or primarily funded by a person or entity whose primary purpose is to purchase, sell or market energy or capacity at wholesale; bid on, own, or purchase power plants; or bid on utility procurement solicitations.

3) A person or entity that meets the criteria of 1) above is not a Market Participant for purpose of access to Protected Materials unless the person/entity seeking access to Protected Materials has the potential to materially affect the price paid or received for electricity if in possession of such information. An entity will be considered not to have such potential if:

a) the person or entity’s participation in the California electricity market is de minimis in nature. In the resource adequacy proceeding (R.05-12-013) it was determined in D.06-06-064 § 3.3.2 that the resource adequacy requirement should be rounded to the nearest megawatt (MW), and load serving entities (LSEs) with local resource adequacy requirements less than 1 MW are not required to make a showing. Therefore, a de minimis amount of energy would be less than 1 MW of capacity per year, and/or an equivalent of energy; and/or

b) the person or entity has no ability to dictate the price of electricity it purchases or sells because such price is set by a process over which the person or entity has no control, i.e., where the prices for power put to the grid are completely overseen by the Commission, such as subject to a standard offer contract or tariff price. A person or entity that currently has no ability to dictate the price of electricity it purchases or sells under this section, but that will have such ability within one year because its contract is expiring or other circumstances are changing, does not meet this exception; and/or

c) the person or entity is a cogenerator that consumes all the power it generates in its own industrial and commercial processes, if it can establish a legitimate need for Protected Materials.

G. The term “Non-Market Participant” refers to a Requesting Party that does

not meet the definition of Market Participant.

H. “Reviewing Representatives” are limited to person(s) designated in

accordance with Paragraph 5 who meet the following criteria:

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1) Reviewing Representatives may not currently be engaged in: (a) a transaction for the purchase, sale, or marketing at wholesale of electrical energy or capacity or natural gas (or the direct supervision of any employee(s) engagement in such a transaction); (b) the bidding on or purchasing of power plants (or the direct supervision of any employee(s) engagement in such a transaction); or (c) knowingly providing electricity or gas marketing consulting or advisory services to others in connection with a transaction for the purchase, sale, or marketing at wholesale of electrical energy or capacity or natural gas or the bidding on or purchasing of power plants (or the direct supervision of any employee(s) engagement in such a transaction or consulting).

2) Reviewing Representatives may not be an employee of a Market Participant. If the Market Participant or Non-Market Participant chooses to retain outside attorneys, consultants, or experts in the same law firm or consulting firm to provide advice in connection with marketing activities, then the attorney, consultant, or expert serving as a Reviewing Representative must be separated by an ethics wall consistent with the ethics wall requirements in D.11-07-028, as that decision may be subsequently modified or changed by the Commission, from those in the firm who are involved in wholesale commercial dealings.

3) Reviewing Representatives shall use Protected Materials only for the purpose of participating in the Commission proceeding in which they received the information.

4) Reviewing Representatives are permitted to participate in regulatory proceedings on behalf of Market Participants and Non-Market Participants.

5) All Reviewing Representatives are required to execute the Nondisclosure Certificate attached to this Protective Order and are bound by the terms of this Protective Order.

I. The term “Authorized Reviewers” refers to: (1) a Requesting Party that is

a Non-Market Participant; or (2) a Reviewing Representative of a Requesting Party. A

Requesting Party that is a Market Participant is not an Authorized Reviewer but it may designate

a Reviewing Representative in accordance with Paragraph 5.

J. The term “Nondisclosure Certificate” refers to the Nondisclosure

Certificate attached as Appendix A.

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3. Designation, Filing, and Service of Protected Materials.

When filing or providing in discovery any documents or items containing Protected

Materials, a party shall physically mark such documents (or in the case of non-documentary

materials such as computer diskettes, on each item) as “PROTECTED MATERIALS SUBJECT

TO PROTECTIVE ORDER,” or with words of similar import as long as one or more of the

terms “Protected Materials” or “Protective Order” is included in the designation to indicate that

the materials in question are Protected Materials. All materials so designated shall be treated as

Protected Materials unless and until: (a) the designation is withdrawn pursuant to Paragraph 14

hereof; (b) an Assigned ALJ, Law and Motion ALJ, Assigned Commissioner, or the Commission

makes a determination that: (i) the document does not contain Protected Materials or does not

warrant confidential treatment or (ii) denies a motion to file the document under seal; or (c) the

document or information becomes public knowledge, other than through disclosure in violation

of this Protective Order or any other nondisclosure agreement or protective order.

All documents containing Protected Materials that are tendered for filing with the

Commission shall be placed in sealed envelopes or otherwise appropriately protected and shall

be tendered with a motion to file the document under seal pursuant to Rule 11.4 of the

Commission’s Rules of Practice and Procedure. All documents containing Protected Materials

that are served on parties in a proceeding shall be placed in sealed envelopes or otherwise

appropriately protected and shall be endorsed to the effect that they are served under seal

pursuant to this Protective Order. Such documents shall only be served upon Authorized

Reviewers and persons employed by or working on behalf of the Commission. Service upon

Authorized Reviewers and persons employed by or working on behalf of the Commission may

either be: (a) by electronic mail in accordance with the procedures adopted in this proceeding;

(b) by facsimile; or (c) by overnight mail or messenger service. Whenever service of a document

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containing Protected Materials is made by overnight mail or messenger service, the Assigned

ALJ shall be served with such document by the same means and at the same time.

4. Redaction of Documents. Whenever a Party files, serves or provides in discovery

a document that includes Protected Materials (including but not limited to briefs, testimony,

exhibits, and responses to data requests), such Party shall also prepare a redacted version of such

document. The redacted version shall enable persons familiar with this proceeding to determine

with reasonable certainty the nature of the data that has been redacted and where the redactions

occurred. The redacted version of a document to be filed shall be served on all persons on the

service list, and the redacted version of a discovery document shall be served on all persons

entitled thereto.

5. Designation of Reviewing Representatives. The Requesting Party shall provide

written notice identifying its proposed Reviewing Representative(s) to the Disclosing Party

before the Disclosing Party provides any Protected Materials to the Requesting Party’s

Authorized Reviewers. The written notice shall include the information identified in this

paragraph. If the Requesting Party decides to designate any additional Reviewing

Representative(s) after the Requesting Party’s Authorized Reviewers receive Protected

Materials, the Requesting Party shall identify the additional proposed Reviewing

Representative(s) to the Disclosing Party before the Requesting Party provides Protected

Materials to the additional Reviewing Representative(s). Within five (5) business days after

receiving written notice of the identity of any Reviewing Representative, the Disclosing Party

may provide the Requesting Party with a written objection to a specific Reviewing

Representative stating the grounds for the objection. Any dispute concerning whether an

identified person or entity is an appropriate Reviewing Representative shall be resolved through

the dispute resolution procedures in Paragraph 11 of this Protective Order. If a Disclosing Party

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objects to a specific Reviewing Representative within five (5) business days after the Reviewing

Representative is identified, the Parties shall not provide any Protected Materials to the disputed

Reviewing Representative until the Parties are able to resolve the dispute consistent with the

dispute resolution procedures in Paragraph 11. Failure by the Disclosing Party to object within

five (5) business days does not waive the Disclosing Party’s right to later object to the Reviewing

Representative, even if Protected Materials has already been disclosed. However, further

disclosure of Protected Materials would be stayed until the parties are able to resolve the dispute

consistent with the dispute resolution procedures in Paragraph 11.

Reviewing Representative(s) have a duty to disclose to the Disclosing Party any potential

conflict of interest that puts the Reviewing Representative in violation of D.06-12-030, as

modified by subsequent decisions of the Commission. A resume or curriculum vitae is

reasonable disclosure of such potential conflicts, and should be the default evidence provided in

most cases.

6. Nondisclosure Certificates. A Reviewing Representative shall not inspect,

participate in discussions regarding, or otherwise be granted access to, Protected Materials unless

and until he or she has first completed and executed a Nondisclosure Certificate, attached hereto

as Appendix A, and delivered the signed Nondisclosure Certificate to the Disclosing Party. The

Disclosing Party shall retain the executed Nondisclosure Certificates pertaining to the Protected

Materials it has disclosed and shall promptly provide copies of the Nondisclosure Certificates to

Commission Staff upon request.

7. Access to Protected Materials and Use of Protected Materials. Subject to the

terms of this Protective Order, Authorized Reviewers shall be entitled to access any Protected

Materials and may make copies of Protected Materials, but such copies become Protected

Materials. Authorized Reviewers may make notes of Protected Materials, which shall be treated

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as Protected Materials if such notes disclose any Protected Materials. Protected Materials

obtained by a Party in this proceeding may also be requested by that Party in a subsequent

Commission proceeding, subject to the terms of any nondisclosure agreement or protective order

governing that subsequent proceeding, without constituting a violation of this Protective Order.

8. Maintaining Confidentiality of Protected Materials. Each Authorized Reviewer

shall treat Protected Materials as confidential in accordance with this Protective Order and the

Nondisclosure Certificate. Protected Materials shall not be used except as necessary for

participation in this proceeding, and shall not be disclosed in any manner to any person except:

(i) Authorized Reviewers; (ii) an Authorized Reviewer’s employees and administrative

personnel, such as clerks, secretaries, and word processors, to the extent necessary to assist the

Authorized Reviewer, provided that they shall first ensure that such personnel are familiar with

the terms of this Protective Order and have signed a Nondisclosure Certificate; and (iii) persons

employed by or working on behalf of the Commission. Authorized Reviewers shall adopt

suitable measures to maintain the confidentiality of Protected Materials they have obtained

pursuant to this Protective Order, and shall treat such Protected Materials in the same manner as

they treat their own most highly confidential information.

Authorized Reviewers shall be liable for any unauthorized disclosure or use by

themselves and/or employees, paralegals, or administrative staff. In the event any Authorized

Reviewer is requested or required by applicable laws or regulations, or in the course of

administrative or judicial proceedings (in response to oral questions, interrogatories, requests for

information or documents, subpoena, civil investigative demand or similar process) to disclose

any of Protected Materials, the Authorized Reviewer shall immediately inform the Disclosing

Party of the request, and the Disclosing Party may, at its sole discretion and cost, direct any

challenge or defense against the disclosure requirement, and the Authorized Reviewer shall

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cooperate in good faith with such Party either to oppose the disclosure of the Protected Materials

consistent with applicable law, or to obtain confidential treatment of the Protected Materials by

the person or entity who wishes to receive them prior to any such disclosure. If there are

multiple requests for substantially similar Protected Materials in the same case or proceeding

where an Authorized Reviewer has been ordered to produce certain specific Protected Materials,

the Authorized Reviewer may, upon request for substantially similar materials by another person

or entity, respond in a manner consistent with that order to those substantially similar requests.

9. Return or Destruction of Protected Materials. Protected Materials shall remain

available to Authorized Reviewers until an order terminating this proceeding becomes no longer

subject to judicial review. If requested to do so in writing after that date, the Authorized

Reviewers shall, within fifteen days after such request, return the Protected Materials to the

Disclosing Party that produced such Protected Materials, or shall destroy the materials, except

that copies of filings, official transcripts and exhibits in this proceeding that contain Protected

Materials, and notes of Protected Materials may be retained, if such Protected Materials are

maintained in accordance with Paragraph 8. Within such time period each Authorized Reviewer,

if requested to do so, shall also submit to the Disclosing Party an affidavit stating that, to the best

of its knowledge, all Protected Materials have been returned or have been destroyed or will be

maintained in accordance with Paragraph 8. To the extent Protected Materials are not returned

or destroyed, they shall remain subject to this Protective Order.

In the event that a Reviewing Representative to whom Protected Materials are disclosed

ceases to be engaged to provide services in this proceeding, then access to such materials by that

person shall be terminated and the Reviewing Representative shall immediately return or destroy

all Protected Materials, or provide an affidavit stating that all Protected Materials and all notes of

Protected Materials will be maintained in accordance with Paragraph 8. Even if a Reviewing

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Representative is no longer engaged in this proceeding, every such person shall continue to be

bound by the provisions of this Protective Order and the Nondisclosure Certificate.

10. Access and Use by Governmental Entities.

A. In the event the Commission receives a request from the California Energy

Commission (“CEC”) for a copy of or access to any Party’s Protected Materials, the procedure

for handling such requests shall be as follows. Not less than five (5) business days after

delivering written notice to the Disclosing Party of the request, the Commission shall release

such Protected Materials to the CEC upon receipt from the CEC of an Interagency Information

Request and Confidentiality Agreement (“Interagency Confidentiality Agreement”). Such

Interagency Confidentiality Agreement shall: (i) provide that the CEC will treat the requested

Protected Materials as confidential in accordance with this Protective Order; (ii) include an

explanation of the purpose for the CEC’s request, as well as an explanation of how the request

relates to furtherance of the CEC’s functions; (iii) be signed by a person authorized to bind the

CEC contractually; and (iv) expressly state that furnishing of the requested Protected Materials

to employees or representatives of the CEC does not, by itself, make such Protected Materials

public. In addition, the Interagency Confidentiality Agreement shall include an express

acknowledgment of the Commission’s sole authority (subject to judicial review) to make the

determination whether the Protected Materials should remain confidential or be disclosed to the

public, notwithstanding any provision to the contrary in the statutes or regulations applicable to

the CEC.

B. In the event the Commission receives a request for a copy of or access to a

party’s Protected Materials from a state governmental agency other than the CEC that is

authorized to enter into a written agreement sufficient to satisfy the requirements for maintaining

confidentiality set forth in Government Code Section 6254.5(e), the Commission may, not less

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than five (5) business days after giving written notice to the Disclosing Party of the request,

release such Protected Materials to the requesting governmental agency, upon receiving from the

requesting agency an executed Interagency Confidentiality Agreement that contains the same

provisions described in Paragraph 10.A above.

C. The CEC may use Protected Materials when needed to fulfill its statutory

responsibilities or cooperative agreements with the Commission. Commission confidentiality

designations will be maintained by the CEC in making such assessments, and the CEC will not

publish any assessment that directly reveals the data or allows the data submitted by an

individual load serving entity to be “reverse engineered.”

11. Dispute Resolution. All disputes that arise under this Protective Order, including

but not limited to alleged violations of this Protective Order and disputes concerning whether

materials were properly designated as Protected Materials, shall first be addressed by the parties

through a meet and confer process in an attempt to resolve such disputes. If the meet and confer

process is unsuccessful, either party may present the dispute for resolution to the Assigned ALJ

or the Law and Motion ALJ.

12. Other Objections to Use or Disclosure. Nothing in this Protective Order shall be

construed as limiting the right of a Party, the Commission Staff, or a state governmental agency

covered by Paragraph 10 to object to the use or disclosure of Protected Materials on any legal

ground, including relevance or privilege.

13. Remedies. Any violation of this Protective Order shall constitute a violation of an

order of the Commission. Notwithstanding the foregoing, the parties and Commission Staff

reserve their rights to pursue any legal or equitable remedies that may be available in the event of

an actual or anticipated disclosure of Protected Materials.

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14. Withdrawal of Designation. A Disclosing Party may agree at any time to remove

the “Protected Materials” designation from any materials of such Party if, in its opinion,

confidentiality protection is no longer required. In such a case, the Disclosing Party will notify

all Requesting Parties that the Disclosing Party has agreed to withdraw its designation of

Protected Materials for specific documents or material.

15. Modification. This Protective Order shall remain in effect unless and until it is

modified or terminated by the Commission or the Assigned ALJ. The identity of the parties

submitting Protected Materials may differ from time to time. In light of this situation,

modifications to this Protective Order may become necessary. The Parties shall work

cooperatively to develop such modifications and, to the extent the Parties are able to agree to

modifications, shall file a motion with the Assigned ALJ or the Commission seeking approval of

the modifications. To the extent Parties are unable to agree on modifications after a good faith

effort, each party governed by this Protective Order has the right to seek modifications in it as

appropriate from the Assigned ALJ or the Commission.

16. Interpretation. Headings are for convenience only and may not be used to restrict

the scope of this Protective Order.

Entered: __________________________________

Administrative Law Judge

Date: __________________________________

APPENDIX A TO PROPOSED PROTECTIVE ORDER

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Submission of Tule Wind Contract for Procurement of Renewable Energy From SCE’s 2014 Renewables Portfolio Standard Solicitation

) ))

Advice 3287-E

NON-DISCLOSURE CERTIFICATE

I hereby certify my understanding that access to Protected Materials is provided to me

pursuant to the terms and restrictions of the Protective Order in this proceeding, that I have been

given a copy of and have read the Protective Order, and that I agree to be bound by it. I

understand that the contents of the Protected Materials, any notes or other memoranda, or any

other form of information that copies or discloses Protected Materials shall not be disclosed to

anyone other than in accordance with that Protective Order. I acknowledge that a violation of

this certificate constitutes a violation of an order of California Public Utilities Commission. Signed: _______________________ Name ________________________ Title: _________________________ Organization: __________________ Dated: ________________________