Common use of OVERALL FAIRNESS OF ADMINISTRATION Clause in Contracts

OVERALL FAIRNESS OF ADMINISTRATION. Despite a handful of disagreements, Xxxxxx Seco Consulting’s overall judgment is that PG&E’s decisions to select or reject Offers to arrive at a short list for the 2012 RPS RFO was reasonable and justifiable, overall. Most disagreements between Xxxxxx and the PG&E team fall into the category of choices that Xxxxxx would have not made if it were designing and administering the solicitation, but that Xxxxxx agrees are choices a reasonable person could make if that person had different priorities or emphases regarding the weights assigned to evaluation criteria. The choices with which Xxxxxx disagrees reflect (1) PG&E’s view of which utilities’ network upgrade costs should be counted in valuing Offers, (2) the relative priority PG&E assigns to some of the non-quantitative evaluation criteria (such as RFO Goals) vs. valuation, and (3) PG&E’s judgment about how much risk of project failure from viability issues to accept in making short list selections. Xxxxxx believes that in each case, PG&E’s preferences and its choices are within the realm of “reasonable business judgment” that the CPUC allows IOUs to exercise in energy procurement. Xxxxxx’x subjective judgment would differ from PG&E’s in making these choices, as might the judgment of some policymakers and other observers. Participants whose high-value Offers were rejected while lower-valued proposals were shortlisted might perceive PG&E’s choices as unfair, but the utility’s choices were in most cases rooted in evaluation criteria stated in the public solicitation protocol. Xxxxxx doubts however that an IOU should reject a high-valued Offer simply because the size of the proposed project is small, while selecting lower-valued Offers. While Xxxxxx believes that PG&E may be justified in its choice to omit transmission adders when valuing Offers for IID-interconnecting projects because those costs do not directly affect PG&E ratepayers, in Xxxxxx’x opinion the practice is not particularly fair. Also, nothing in PG&E’s public or non-public protocols suggests that the transmission network upgrade cost will not be applied for such projects, so this choice lacks transparency. On that basis, Xxxxxx’x opinion is that PG&E’s administration of its methodology was overall reasonable and justifiable but that the treatment of IID-interconnecting projects was less than fully fair.

OVERALL FAIRNESS OF ADMINISTRATION. Despite a handful variety of minor disagreements, Xxxxxx Seco Consulting’s overall judgment is that PG&E’s decisions to select or reject Offers administration of its protocols to arrive at a short list for the 2012 2011 RPS RFO was reasonable fair, unbiased, consistent, and justifiable, overallreasonable. Most disagreements between Xxxxxx and the PG&E team fall into the category of choices that Xxxxxx would have not made if it were designing and administering the solicitation, but that Xxxxxx agrees are choices a reasonable person could make if that person had different priorities or emphases regarding the weights assigned to evaluation criteria. The choices with which Xxxxxx disagrees reflect (1) PG&E’s view of which utilities’ network upgrade costs should be counted in valuing Offers, (2) the relative priority PG&E assigns to some of the non-quantitative evaluation criteria (such as RFO Goals) vs. valuation, and (3) PG&E’s judgment about how much risk of project failure from viability issues to accept in making short list selections. Xxxxxx believes that in each case, PG&E’s preferences and its choices are within the realm of “reasonable business judgment” that the CPUC allows IOUs to exercise in energy procurement. Xxxxxx’x subjective judgment would differ from 5. FA IRNESS O F P ROJEC T- S P ECI F IC NEGOTIAT IONS This chapter gives an independent review of whether PG&E’s negotiations with First Solar Inc. for contracts for delivery of renewable energy from the Xxxxxxxxx Solar, Cuyama Solar, and Lost Hills Solar projects were fair to ratepayers and competitors. Xxxxxx observed several negotiation sessions between PG&E's and First Solar’s representatives. Xxxxxx was also able to review draft term sheets and contracts in making these choicesorder to identify specific proposals and counterproposals the parties made regarding contract terms in the course of discussions. Based on this review, as Xxxxxx did not identify any situations in which PG&E provided First Solar with concessions in contract terms that the IE considered to be materially unfair to ratepayers. Nor did PG&E provide First Solar with specific information that might have unfairly advantaged the judgment of some policymakers and other observersseller compared to its competitors. Participants whose high-value Offers were rejected while lower-valued proposals were shortlisted might perceive The starting point for negotiations was PG&E’s choices as unfair, but 2011 RPS Form Agreement; PG&E requested updates to the 2012 Form Agreement when that became available in May 2012. Only a few variances to the utility’s choices standard form language were in most cases rooted in evaluation criteria stated in the public solicitation protocol. Xxxxxx doubts however that an IOU should reject a high-valued Offer simply because the size of the proposed project is small, while selecting lower-valued Offers. While Xxxxxx believes that PG&E may be justified in its choice to omit transmission adders when valuing Offers for IID-interconnecting projects because those costs do not directly affect PG&E ratepayers, in Xxxxxx’x opinion the practice is not particularly fair. Also, nothing in PG&E’s public or non-public protocols suggests that the transmission network upgrade cost will not be applied for such projects, so this choice lacks transparency. On that basis, requested by First Solar and accepted by PG&E. Xxxxxx’x opinion is that the negotiations between PG&E and First Solar for the Xxxxxxxxx Solar, Cuyama Solar, and Lost Hills Solar contracts were conducted in a manner that was fair to ratepayers. The resulting contract retains the ratepayer protections afforded by PG&E’s administration Form Agreement. However, PG&E provided specific contract terms to First Solar that would advantage two of its methodology was overall reasonable the three projects compared to their competitors in a specific scenario that Xxxxxx regards as not highly likely. When viewed in isolation, the disparate treatment that Xxxxxxxxx Solar and justifiable but that the treatment of IID-interconnecting projects was Lost Hills Solar receive in this scenario compared to a competitor appears to be less than fully fairfair to competitors; however there are mitigating circumstances that help explain the disparity.

OVERALL FAIRNESS OF ADMINISTRATION. Despite a handful of disagreements, Xxxxxx Seco Consulting’s overall judgment is that PG&E’s decisions to select or reject Offers to arrive at a short list for the 2012 RPS RFO was were reasonable and justifiable, overall. Most disagreements between Xxxxxx and the PG&E team fall into the category of choices that Xxxxxx would have not made if it were designing and administering the solicitation, but that Xxxxxx agrees are choices a reasonable person could make if that person had different priorities or emphases regarding the weights assigned to evaluation criteria. The choices with which Xxxxxx disagrees reflect (1) PG&E’s view of which utilities’ network upgrade costs should be counted in valuing Offers, (2) the relative priority PG&E assigns to some of the non-quantitative evaluation criteria (such as RFO Goals) vs. valuation, and (3) PG&E’s judgment about how much risk of project failure from viability issues to accept in making short list selections. Xxxxxx believes that in each case, PG&E’s preferences and its choices are within the realm of “reasonable business judgment” that the CPUC allows IOUs to exercise in energy procurement. Xxxxxx’x subjective judgment would differ from PG&E’s in making these choices, as might the judgment of some policymakers and other observers. Participants whose high-value Offers were rejected while lower-valued proposals were shortlisted might perceive PG&E’s choices as unfair, but the utility’s choices were in most cases rooted in evaluation criteria stated in the public solicitation protocol. Xxxxxx doubts however that an IOU should reject a high-valued Offer simply because the size of the proposed project is small, while selecting lower-valued Offers. While Xxxxxx believes that PG&E may be justified in its choice to omit transmission adders when valuing Offers for IID-interconnecting projects because those costs do not directly affect PG&E ratepayers, in Xxxxxx’x opinion the practice is not particularly fair. Also, nothing in PG&E’s public or non-public protocols suggests that the transmission network upgrade cost will not be applied for such projects, so this choice lacks transparency. On that basis, Xxxxxx’x opinion is that PG&E’s administration of its methodology was overall reasonable and justifiable but that the treatment of IID-interconnecting projects was less than fully fair.