Navigating California’s New 33% RPS Law: Key California PUC decision on qualifying RPS portfolio content categories, compliance, and retroactivity

On December 15, 2011, the California Public Utilities Commission (CPUC) unanimously approved a decision implementing key provisions of California’s new 33% Renewable Portfolio Standards (RPS) law. That law added § 399.16 to the California Public Utilities Code, establishing three new portfolio content categories (described as “buckets” in the statute) for California RPS procurement. The new law makes major changes in California’s RPS program and will have a profound impact on future RPS procurement and investment. While the new decision provides critical guidance, the actual implementation will require complex judgments in the ever-changing world of power purchase agreements (PPAs), related agreements dealing with resale of energy and ancillary services, contract amendments, and CPUC regulatory approval, to name but a few areas dramatically affected by the new law and CPUC decision.

The new decision provides practical guidance to retail sellers—investor-owned utilities (IOUs), electric service providers (ESPs), and community choice aggregators (CCAs)—on the criteria for inclusion in each of the new RPS portfolio content categories that apply to RPS procurement associated with contracts and ownership agreements executed after June 1, 2010. This decision requires all retail sellers to provide sufficient information about their RPS procurement for Commission staff to make a compliance determination that the retail seller’s RPS procurement actually meets the requirements of the portfolio content category for which it is claimed. In addition, IOUs are required to provide specific information to the Commission in their advice letters seeking approval of RPS procurement contracts that will allow Commission staff to evaluate the categorization of the planned procurement and the value and risk of procurement in those categories to IOU ratepayers. Going forward, there will be substantially greater complexity in the type of information submitted for both approval of RPS procurement contacts and for retail seller compliance determinations. This new decision will also affect contract amendments and contracts executed prior to June 1, 2010.

This decision also confirms a previous ruling, which states that small and multi-jurisdictional California utilities are not required to comply with the statutory limitations on procurement in each of the new portfolio content categories.