Common use of STREAMLINING THE PROCESS Clause in Contracts

STREAMLINING THE PROCESS. At least one other IOU has chosen to drop the requirement for hardcopies of the Offer package; to Xxxxxx this now seems an appropriate step for PG&E to take, going forward. Xxxxxx has some lingering concern about the Participants who fail to put all the information present in their hardcopy Offers into readable electronic form using the required format, but this may be dispelled if Offers are submitted entirely in electronic form. Xxxxxx agrees that it is still best to submit electronic Offer packages by flash drive rather than by e-mail. Some Participants have objected to the volume of information that PG&E requires for a complete Offer. Xxxxxx agrees that there are some opportunities to delete some required information that has little or no impact on a short-listing decision (such as project block diagrams and resumes of managers) in favor of seeking such information after short-listing. IMPROVING VALUATION INPUTS Xxxxxx has suggestions for improving the methodology for assessing the value of Offers: • Use a discount rate based on an estimate of the cost of capital for power developers, rather than PG&E’s authorized cost of capital. Xxxxxx believes that given the risks that face renewable project development (permitting, site control, interconnection, equipment procurement, financing, etc.) it is more appropriate to discount future benefits and costs of the projects using a higher discount rate representative of the riskier independent power industry, rather than that of a regulated monopoly. • Restudy the inputs to the model that set the basis for Resource Adequacy valuation. For example, it appears that PG&E’s current assumption for new entrant capital costs is materially higher than that embedded in the currently applicable Market Price Referent. Xxxxxx believes that current assumptions (including the use of a regulated utility’s cost of capital as discount rate) cause the PG&E team to overstate the value of RA capacity, and that this tends to create distortions and biases in project valuation rankings. • Clarify that the most recent CAISO or PTO interconnection study (or interconnection agreement if available) is required in the Offer package. Without this non-public information it is difficult to assess an appropriate transmission adder other than using TRCR information, and data from either a Phase I or Phase II study report is more specific to a given resource than TRCR proxy estimates. • Develop LMP multipliers for CAISO interconnection points at the periphery of the balancing authority area, such as Four Corners, Moenkopi, Xxxx, and the Hassayampa-North Gila line, so that energy from projects that propose such nodes as delivery points can be valued taking congestion into account. These are CAISO delivery points that are external to the body of the IOUs’ service territories and tend to record higher congestion differentials than points within the territories. • Discuss with the CAISO its plans and policies for establishing pseudo-ties or dynamic scheduling arrangements for new projects outside the balancing authority area, in order to establish a view about which projects realistically can expect to obtain such treatment and which not. For example, Xxxxxx perceives it as unlikely that the CAISO could or would set up dynamic scheduling arrangements with projects that interconnect in WECC balancing authority areas that would require wheeling through three service territories to get to a CAISO intertie. • Offers claiming that a project will be managed as a pseudo-tie should be required to state the specific CAISO intertie with which it will be permanently associated as required by CAISO rules; this would clarify how best to value the proposal. • Include in the LCBF valuation the costs of network upgrades for projects that interconnect within California but outside the CAISO grid. The practice of evaluating full costs for some projects but PPA costs only (omitting the impact on transmission rates) for other California projects seems inconsistent and less than fully fair to developers who choose to build their generation within the CAISO grid. It also seems less than fully fair to California customers in non-CAISO balancing authority areas who will bear the primary burden for those upgrades.

STREAMLINING THE PROCESS. At least one other IOU has chosen to drop the requirement for hardcopies of the Offer package; to Xxxxxx this now seems an appropriate step for PG&E to take, going forward. Xxxxxx has some lingering concern about the Participants who fail to put all the information present in their hardcopy Offers into readable electronic form using the required format, but this may be dispelled if Offers are submitted entirely in electronic form. Xxxxxx agrees that it is still best to submit electronic Offer packages by flash drive rather than by e-mail. Some Participants have objected to the volume of information that PG&E requires for a complete Offer. Xxxxxx agrees that there are some opportunities to delete some required information that has little or no impact on a short-listing decision (such as project block diagrams and resumes of managers) in favor of seeking such information after short-listing. IMPROVING VALUATION INPUTS Xxxxxx has suggestions for improving the methodology for assessing the value of Offers: •  Use a discount rate based on an estimate of the cost of capital for power developers, rather than PG&E’s authorized cost of capital. Xxxxxx believes that given the risks that face renewable project development (permitting, site control, interconnection, equipment procurement, financing, etc.) it is more appropriate to discount future benefits and costs of the projects using a higher discount rate representative of the riskier independent power industry, rather than that of a regulated monopoly. •  Restudy the inputs to the model that set the basis for Resource Adequacy valuation. For example, it appears that PG&E’s current assumption for new entrant capital costs is materially higher than that embedded in the currently applicable Market Price Referent. Xxxxxx believes that current assumptions (including the use of a regulated utility’s cost of capital as discount rate) cause the PG&E team to overstate the value of RA capacity, and that this tends to create distortions and biases in project valuation rankings. •  Clarify that the most recent CAISO or PTO interconnection study (or interconnection agreement if available) is required in the Offer package. Without this non-public information it is difficult to assess an appropriate transmission adder other than using TRCR information, and data from either a Phase I or Phase II study report is more specific to a given resource than TRCR proxy estimates. •  Develop LMP multipliers for CAISO interconnection points at the periphery of the balancing authority area, such as Four Corners, Moenkopi, Xxxx, and the Hassayampa-North Gila line, so that energy from projects that propose such nodes as delivery points can be valued taking congestion into account. These are CAISO delivery points that are external to the body of the IOUs’ service territories and tend to record higher congestion differentials than points within the territories. •  Discuss with the CAISO its plans and policies for establishing pseudo-ties or dynamic scheduling arrangements for new projects outside the balancing authority area, in order to establish a view about which projects realistically can expect to obtain such treatment and which not. For example, Xxxxxx perceives it as unlikely that the CAISO could or would set up dynamic scheduling arrangements with projects that interconnect in WECC balancing authority areas that would require wheeling through three service territories to get to a CAISO intertie. •  Offers claiming that a project will be managed as a pseudo-tie should be required to state the specific CAISO intertie with which it will be permanently associated as required by CAISO rules; this would clarify how best to value the proposal. •  Include in the LCBF valuation the costs of network upgrades for projects that interconnect within California but outside the CAISO grid. The practice of evaluating full costs for some projects but PPA costs only (omitting the impact on transmission rates) for other California projects seems inconsistent and less than fully fair to developers who choose to build their generation within the CAISO grid. It also seems less than fully fair to California customers in non-CAISO balancing authority areas who will bear the primary burden for those upgrades.