The California Public Utilities Commission (CPUC) is seeking comments on perhaps the most critical question regarding the State’s new Renewable Portfolio Standard (RPS) rules for renewable energy projects located outside California. Comments are due August 8, 2011.

By way of background, in April 2011, California Governor Edmund G. Brown Jr. signed into law Senate Bill 2 (1x) to make numerous changes to the State’s RPS program. In May 2011, the CPUC instituted a rulemaking proceeding to develop regulations to implement the legislative changes to the RPS program.

On July 12, 2011, the Administrative Law Judge presiding over the rulemaking proceeding issued an order requesting comments on how to implement the addition of “portfolio content categories” and quantitative rules for the use of transactions in each category for RPS compliance. More specifically, the new statute divides renewable energy-related products into three categories. A simplified description of the three categories is as follows:

  • Energy from RPS-eligible generation facilities located in California or certain RPS-eligible facilities located outside California in which the energy is scheduled into California without substituting electricity from another source
  • “Firmed and shaped” energy providing incremental energy and scheduled into California
  • Eligible renewable electricity products, or any fraction of the electricity generated, including unbundled renewable energy credits (RECs), that do not qualify under the first two categories

The question of which category the energy generated by an eligible project falls under is critical to determining compliance because, to have a “balanced” renewable portfolio, the statute limits the amount of energy (or RECs) a retail seller purchases from the second and third categories listed above. Therefore, retail sellers required to comply with the new statute will likely place a higher value on renewable energy that fits into the first category.

The Administrative Law Judge is seeking comments to help determine how it should distinguish these three categories. It appears the California Legislature intended to place a premium on renewable energy projects located inside or in proximity to California. In contrast, the Legislature may have intended the second category to encompass renewable energy accompanied by energy generated by another resource to compensate for delivery problems due to the intermittent nature of the renewable resource or inadequate transmission capacity. The bill, however, did not define these terms, raising several questions, including what it means for energy to be “firmed” and “shaped.”