Today, the California Public Utilities Commission (CPUC) unanimously voted to offer a new program to promote community-scale renewable energy projects of 20 megawatts or less. The new program was created to bring California back into compliance with the Public Utility Regulatory Policies Act (PURPA), a federal law that promotes competition in the electricity industry.
“This historic decision will help California meet its 100% clean energy commitment by making clean resources more widely available,” said Ed Smeloff, Vote Solar’s Director of Grid Integration. “It balances the need to protect ratepayers through a market-based method for determining forward contract pricing while offering clean energy developers across the state a reasonable opportunity to develop community-scale renewable energy projects.”
The new program will require PG&E, Southern California Edison and San Diego Gas and Electric to enter into 12 year contracts for qualified renewable energy facilities at market-based prices that are determined at the time of the contract execution. The contract prices, which will be fixed for the 12 year term of the contract, will be determined using market prices for both the energy component and capacity component of the power that is delivered to the grid.
The energy payment for new renewable projects will be based on a rolling average of local wholesale energy prices for the previous 36 months. Wholesale prices in California are determined hourly through competitive bidding to the California Independent System Operator (CAISO) at hundreds of locations known as local pricing nodes. The averaged three year prices will be divided into three time periods - peak, partial peak and off-peak - which will be used in the contracts.
The capacity payment will average publicly available resource adequacy prices for a five-year period which will be converted to pricing on a kilowatt hour basis for the peak, partial peak and off-peak times periods using allocation factors previously adopted by the CPUC. The capacity payment will strongly reward projects that can deliver power during peak evening periods.
California has been out of compliance with PURPA since a 2017 Federal District Court decision in the Winding Creek Solar LLC v. Peevey case, which was later unanimously upheld by the Ninth Circuit Court of Appeals. Today’s decision brings California back into compliance with PURPA.
The three California investor-owned utilities will have thirty days to calculate the initial contract prices and file a report with the Public Utilities Commission.