California’s Senate Bill 2 1X (SB 2 1X) recently adopted a 33% by 2020 Renewables Portfolio Standard (RPS), as discussed in our April 21, 2011, WSGR Alert, “California Adopts Aggressive Renewables Portfolio Standard.” In addition to some of SB 2 1X’s other alterations to the RPS, the California Public Utilities Commission has targeted revisions to the Public Utilities Code Section 399.20 program for implementation by the end of 2011. As described below, the 399.20 program requires California’s investor-owned utilities (IOUs) to offer a standard tariff for power purchases from renewable energy facilities generating 3 MW of energy or less. As part of this implementation, one of the Administrative Law Judges responsible for the implementation and administration of the RPS by the Commission issued a ruling setting forth a proposal and requesting stakeholder comments on how the term “market price,” as used in the 399.20 program, should be understood.

The 399.20 program initially was enacted by AB 1969, and it required the IOUs to offer a special tariff under which they would purchase electricity from electric generation facilities that were (a) not more than 1.5 MW in size and (b) owned and operated by a public water or wastewater agency; further, the IOUs were only required to enter into contracts under the tariff until they had obtained their “proportionate share” of a 250 MW overall procurement cap. Changes to the 399.20 program, including those in AB 32 (which mandated a greenhouse gas inventory and reduction program for California), SB 2 1X, and other laws have increased the project cap to 3 MW, removed the requirement that the tariff only be offered to water or wastewater agencies, and increased the overall procurement cap to 750 MW. The Commission is seeking interested party comments on how best to implement these changes and determine the “market price” that must be offered to facility owners and operators under the 399.20 program tariff.