As a grassroots advocacy group, REAP will make the California Public Utilities Commission accountable to California consumers. This memo provides a brief overview of CPUC’s responsibilities as an administrative and enforcement agency overseeing the state's RPS program, and offers next steps that REAP members can take to bring transparency to CPUC’s regulatory mission.

Penalties

• Five cents per kWh, up to $25 million per year, are “penalties” that are part of CPUC regulations; and are not in the statute.



Compliance

Currently, the RPS requires IOUs, Electric Service Providers (ESPs) and Community Choice Aggregators (CCAs) to increase procurement from eligible renewable energy resources by at least 1% of their retail sales annually, until they reach 20% by 2010.

• Municipal utilities are not regulated by the PUC but are directed by SB 1078¹ and SB 107² . Therefore, requiring them to implement and enforce a RPS that “recognizes the intent of the Legislature to encourage renewable resources…”

           - Municipal utilities must also annually report to its customers concerning expenditures of Public               Goods Charge (PGC) funds for renewable energy resource development. Therefore, they must               explain how much of the PGC is being used and report the resource mix used for renewable               energy. For instance, SMUD 13% and LADWP 5.5%.

Flexible Compliance (Utility Loopholes)

• A Decision by the CPUC listed on October 19, 2006, D.06-10-050 adopted reporting and compliance methodology for the RPS program that also established flexible compliance rules through 2009.

           - Rules include allowances for banking excess renewable procurement and applying it to deficit               years. The surplus procurement may be banked and used to meet procurement targets in               past or future years.

           - IOUs may maintain a procurement deficit for up to three years following the year in which the               deficit is incurred; and may in some cases provide acceptable reasons for noncompliance.

               • If any one of the three large IOUs fails to meet the Annual Procurement Target (APT) for that                  year without providing an acceptable reason for noncompliance they may defer 100% of their                  Incremental Procurement Target (IPT) for the first year as long as they make it up within 3 years.
               • A Decision by the CPUC listed on October 5, 2006, D.06-10-019 CoL 2 and 12
                  allows Community Choice Aggregators and Electric Service Providers to do the same.

• Load Service Entities (LSEs)/IOUs are allowed to carry, for up to three years, procurement deficits greater than 25% of that year’s IPT (including deficits larger than 100%) without penalty if they have demonstrated to the CPUC an allowable reason for noncompliance.

           - Allowable reasons to avoid penalties decided by the CPUC include:

               1. Insufficient response to the RPS solicitation.
               2. Contracts already executed will provide future deliveries sufficient to satisfy current year                    deficits.
               3. Inadequate public goods funds to cover above-market renewable contract costs.
               4. Seller non-performance. (i.e. the renewable energy providers do not make available for                    purchase the expected renewable energy resources.)
               5. OR can provide their own reason.

           - They are also allowed to carry, for up to three years procurement deficits less than or equal to               25% of that year’s IPT, without CPUC approval.

• IOUs are allowed to use unbundled renewable energy certificates – energy that has not actually been scheduled or delivered into California – to fulfill their RPS.



Conclusion



• Flexible Compliance and lack of an enforced penalty structure are significant barriers to requiring Investor Owned Utilities to comply with the RPS laws.
• Flexible compliance will not motivate IOUs, POUs, or ESPs to achieve 20% renewable energy by 2010 or 33% renewable energy by 2020.
• REAP concludes that the CPUC must take a pro-active role in enforcing RPS requirements if the 2010 RPS goals are to be met.



In short, the IOUs must not get a free pass from the California Public Utilities Commission.

REAP INTENDS TO HOLD THE CPUC, THE IOUs, AND THE CEC ACCOUNTABLE IN THE FOLLOWING MANNER: REAP WILL SEND A LETTER ALONG WITH A QUESTIONNAIRE DIRECTED TO THE FIVE CPUC COMMISSIONERS.

The questionnaire will ask commissioners to commit to:

• Imposing fines
• Provide further examples of acceptable/unacceptable reasons for non-compliance
• Submit a timetable for penalty application
• Explain how the PUC will protect rate-payers from utilities passing on the costs of noncompliance
• Explain any prior relationships with utility companies.

The intention of the questionnaire is to alert the PUC commissioners that REAP is active and will be informing the public to make them accountable. The results of the questionnaires will allow REAP to educate and activate its members about the activity or inactivity of the PUC. The results will also allow REAP to begin its report card on the PUC commissioners, as a body and individually.