ADVICE LETTER (AL) SUSPENSION NOTICE ENERGY DIVISION

Transcription

1 ADVICE LETTER (AL) SUSPENSION NOTICE ENERGY DIVISION Utility Name: SCE Utility Number/Type: ID U 338-E Advice Letter Number(s): 3701-E Date AL(s) Filed: 20 November, 2017 Utility Contact Person: Darrah Morgan Utility Phone No.: (626) Date Utility Notified: March 27, 2018 [X] ed to: AdviceTariffManager@sce.com ED Staff Contact: David Matusiak ED Staff david.matusiak@cpuc.ca.gov ED Staff Phone No.: [X] INITIAL SUSPENSION (up to 120 DAYS from the expiration of the initial review period) This is to notify that the above-indicated AL is suspended for up to 120 days beginning November 27, 2017 for the following reason(s) below. If the AL requires a Commission resolution and the Commission s deliberation on the resolution prepared by Energy Division extends beyond the expiration of the initial suspension period, the advice letter will be automatically suspended for up to 180 days beyond the initial suspension period. [] A Commission Resolution is Required to Dispose of the Advice Letter [] Advice Letter Requests a Commission Order [] Advice Letter Requires Staff Review The expected duration of initial suspension period is 120 days [X] FURTHER SUSPENSION (up to 180 DAYS beyond initial suspension period) The AL requires a Commission resolution and the Commission s deliberation on the resolution prepared by Energy Division has extended beyond the expiration of the initial suspension period. The advice letter is suspended for up to 180 days beyond the initial suspension period. If you have any questions regarding this matter, please contact David Matusiak at David.Matusiak@cpuc.ca.gov cc: EDTariffUnit * Note: reference Decision D , dated February 21, 2002, and Rule 7.5 in appendix A of D.O

2 ADVICE LETTER (AL) SUSPENSION NOTICE ENERGY DIVISION Utility Name: SCE Utility Number/Type: ID U 338-E Advice Letter Number(s): 3701-E Date AL(s) Filed: 20 November, 2017 Utility Contact Person: Darrah Morgan Utility Phone No.: (626) Date Utility Notified: 27 November, 2017 [X] ed to: AdviceTariffManager@sce.com ED Staff Contact: David Matusiak ED Staff david.matusiak@cpuc.ca.gov ED Staff Phone No.: [X] INITIAL SUSPENSION (up to 120 DAYS from the expiration of the initial review period) This is to notify that the above-indicated AL is suspended for up to 120 days beginning November 27, 2017 for the following reason(s) below. If the AL requires a Commission resolution and the Commission s deliberation on the resolution prepared by Energy Division extends beyond the expiration of the initial suspension period, the advice letter will be automatically suspended for up to 180 days beyond the initial suspension period. [X] A Commission Resolution is Required to Dispose of the Advice Letter [] Advice Letter Requests a Commission Order [] Advice Letter Requires Staff Review The expected duration of initial suspension period is 120 days [ ] FURTHER SUSPENSION (up to 180 DAYS beyond initial suspension period) The AL requires a Commission resolution and the Commission s deliberation on the resolution prepared by Energy Division has extended beyond the expiration of the initial suspension period. The advice letter is suspended for up to 180 days beyond the initial suspension period. If you have any questions regarding this matter, please contact David Matusiak at David.Matusiak@cpuc.ca.gov cc: EDTariffUnit * Note: reference Decision D , dated February 21, 2002, and Rule 7.5 in appendix A of D.O

3 Russell G. Worden Managing Director, State Regulatory Operations November 20, 2017 ADVICE 3701-E (U 338-E) PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA ENERGY DIVISION SUBJECT: Submission of Agreement Between Southern California Edison Company and VIAS Energies, Inc. PURPOSE The purpose of this advice letter is to seek California Public Utilities Commission ( Commission or CPUC ) approval of an agreement for the purchase of energy, capacity, and all related products between Southern California Edison Company ( SCE ) and VIAS Energies, Inc. (the Agreement ) 1 from the Victorville Energy Center. The agreement was executed as part of SCE s fifth Combined Heat and Power ( CHP ) Request for Offers ( RFO ) ( CHP RFO 5 ). BACKGROUND A. Combined Heat and Power Settlement In 2008, diverse parties with divergent interests, including the three investor-owned utilities ( IOUs ), 2 representatives of Qualifying Facilities ( QF ), 3 and customer 1 The Agreement refers to a collective of three agreements that SCE entered into with VIAS Energies, Inc.: a Master Power Purchase and Sale Agreement, a Master Power Purchase and Sale Agreement Confirmation Letter for Resource Adequacy Capacity, and a Master Power Purchase and Sale Agreement Confirmation Letter for Energy Only Unit Contingent Tolling. 2 The three IOUs are SCE, Pacific Gas and Electric Company ( PG&E ), and San Diego Gas & Electric Company ( SDG&E ). 3 The Public Utility Regulatory Policies Act of 1978 ( PURPA ) established a class of generating facilities known as QFs, which, in the furtherance of a variety of energy policy goals, receive special rate and regulatory treatment. QFs fall into two categories: (1) qualifying small power production facilities and (2) qualifying cogeneration facilities. For the purpose of this Advice Letter, QFs are defined as: An electric energy generating facility that complies with the qualifying facility definition established by PURPA and any FERC rules... implementing PURPA and has filed with FERC (i) an application for FERC certification,... which FERC has granted, or (ii) a notice of self-certification.... CHP P.O. Box Rush Street Rosemead, California (626) Fax (626)

4 ADVICE 3701-E (U 338-E) November 20, 2017 advocacy groups, 4 engaged in settlement negotiations, which were mediated by staff of the Commission, to, among other things, resolve numerous disputes between the IOUs and QF representatives before the Commission and state court. After a year and a half of negotiations, the settling parties reached an agreement that, among other things, developed a state CHP program, which includes megawatt ( MW ) and greenhouse gas ( GHG ) emissions reduction targets, and settled all outstanding CHP/QF litigation issues. The settling parties then filed a joint motion for Commission approval of the QF and CHP Settlement Agreement, Settlement Term Sheet and attached Exhibits ( Settlement ). 5 Rule 12.1(d) of the Commission s Rules of Practice and Procedure provides that [t]he Commission will not approve settlements, whether contested or uncontested, unless the settlement is reasonable in light of the whole record, consistent with law, and the public interest. To assess reasonableness, the Commission considers, among other things, whether the settlement negotiations were at arms-length and whether the parties were adequately represented. 6 After considering the Settlement as a whole, its individual elements, as well as the interests at stake, the Commission approved the Settlement, finding it to be (1) reasonable; (2) the product of protracted, arms-length negotiations between sophisticated and well-represented parties with divergent interests, all of whom were required to compromise on some things, and none of whom received everything they wanted; 7 and (3) in furtherance of the state policy objectives embodied in California Public Utilities Code Section 372(a), Assembly Bill 32, and the Energy Action Plan II. 8 In particular, Section of the Settlement Term Sheet directs the IOUs to conduct RFOs exclusively for CHP resources as a means of achieving the MW and GHG emissions reduction targets set forth in the Settlement. 9 Section of the Settlement Term Sheet requires the IOUs to conduct three RFOs during the Initial Program Settlement Agreement, Term Sheet ( Settlement Term Sheet ), 17, Glossary of Defined Terms, at p. 73. The QFs involved include the Energy Producers and Users Coalition, the Cogeneration Association of California, the California Cogeneration Council, and IEP. 4 Customer advocacy groups include the Office of Ratepayer Advocates and The Utility Reform Network. 5 Any capitalized term used in this Advice Letter but not defined herein have the meaning set forth in the SettlementTerm Sheet. 6 Decision (D.) , 30 CPUC 2d 189, 89 (approving Pacific Gas and Electric Co. s Diablo Canyon settlement as in the public interest.) 7 D at pp. 28, 35, Conclusion of Law No Id. at pp. 35, 37, 38, Conclusion of Law No See Settlement Term Sheet

5 ADVICE 3701-E (U 338-E) November 20, 2017 Period 10 under the Settlement. 11 Pursuant to the Settlement, SCE held three RFOs during the Initial Program Period. On June 11, 2015, the Commission approved D , which revised the overall GHG emissions reduction target ( GHG Target ) 12 and directed SCE and SDG&E to hold up to four CHP RFOs in the Second Program Period 13 to achieve their respective IOU-specific GHG Target. 14 SCE s CHP RFO 4 is the fourth RFO held during the Settlement period and the first of up to four RFOs that SCE will conduct during the Second Program Period. In accordance with D , SCE received approval to launch CHP RFO 5 from its Finance and Risk Management ( FRM ) Working Group Committee ( WG ) on February 3, 2017 and consulted with the Cost Allocation Mechanism ( CAM ) Group on February 9, SCE launched the RFO on February 28, Interested CHP parties submitted their binding offers on April 13, SCE evaluated the offers and created a short-list of bidders using the valuation and selection methodology approved by the FRM WG with input from the CAM. The short-listed offers were approved by SCE s FRM on May 26, 2017 and SCE consulted with the CAM Group on May 30, SCE notified short-listed bidders on June 1, 2017 and then began negotiations of contracts with those short-listed bidders. After negotiations concluded, SCE gained approval to execute the contracts from SCE s FRM WG on September 15, 2017 and consulted with the CAM Group on September 19, SCE awarded contracts to those short-listed bidders with whom SCE was sucessful in negotiating acceptable terms, including Atlantic Midway Ventures LLC and VIAS Energies, Inc. SCE entered into the Agreement with VIAS Energies, Inc. on September 29, 2017 ( effective date ). DESCRIPTION OF THE VICTORVILLE ENERGY CENTER FACILITY AND AGREEMENT General Project Summary 10 The Initial Program Period is defined as the period commencing on the Settlement Effective Date and concluding forty-eight (48) months thereafter. See Settlement Term Sheet See Settlement Term Sheet See D at Ordering Paragraph ( OP ) 1 establishes the overall GHG Target as 2.72 million metric tonnes ( MMT ), PG&E s GHG Target as 1.22 MMT, SCE s GHG Target as 1.22 MMT, and SDG&E s GHG Target as 0.28 MMT. Subsequent to D , parties to the Settlement met to meet and confer on the status of Existing CHP Facilities pursuant to Settlement Term Sheet As a result of this process and subject to verification from the Commission, SCE s new GHG Target is 1.23 MMT, PG&E s new GHG Target is 1.23 MMT, and SDG&E s new GHG Target is MMT. 13 The Second Program Period runs from November 24, 2015 to December 31, See Settlement Term Sheet See D at OP 7. Note that OP 3 exempts PG&E from the requirement to hold solicitations during the Second Program Period.

6 ADVICE 3701-E (U 338-E) November 20, 2017 Under the Agreement, SCE is purchasing up to 19.0 MW of capacity, and all related products from the Victorville Energy Center. The Victorville Energy Center will be a bottoming cycle cogeneration power plant located at the Black Mountain Quarry cement plant (the Cement Plant ) in Victorville, California. A general summary of the project is provided in Table 1 below: Table 1: General Project Summary Project Name Victorville Energy Center Owner/Developer VIAS Energies, Inc. Technology Bottoming Cycle Cogeneration Nameplate Capacity (MW) 19.0 Delivery Pattern (e.g. As-available, Firm, See chart below Utility Prescheduled Facility) Delivery/Contract Term (months) 144 Vintage (New / Existing / New Repower/Expanded/Utility Prescheduled Facility) Location (city and state) Victorville, CA Source of Agreement (e.g., RFO or CHP RFO 5 Bilateral Negotiations) Under the contract, VIAS Energies, Inc. will deliver energy as follows: Month Monthly Firm Contract Capacity (kw) As-Available Contract Capacity (kw) Net Contract Capacity (kw) January N/A N/A N/A February N/A N/A N/A March N/A N/A N/A April N/A N/A N/A May N/A N/A N/A June 11,000 2,000 13,000 July 11,000 2,000 13,000 August 11,000 2,500 13,500 September 12,000 2,500 14,500 October N/A N/A N/A November N/A N/A N/A December N/A N/A N/A The Agreement is attached as Confidential Appendix B (B-1 and B-2). A summary of the Agreement is attached as Confidential Appendix C. A comparison of the Agreement with the Master Power Purchase and Sale Agreement is attached as Confidential Appendix D. The confidential appendices are omitted from the public version of this advice filing.

7 ADVICE 3701-E (U 338-E) November 20, 2017 A. General Project Description The Victorville Energy Center will be a new facility located at the Cement Plant. CEMEX Construction Materials Pacific, Inc. ( CEMEX ) owns and operates the Cement Plant which produces clinker which is mixed with other raw materials to produce cement at CEMEX s River Plant which is 17 miles away from the Quarry Plant. The River Plant and Cement Plant are considered a single source under the Title V operating permit program and are collectively known as CEMEX Victorville. The designed cement production of the plants is 3.3 million tons annually and makes CEMEX Victorville the largest cement manufacturer in California and the second largest plant in the United States. The Victorville Energy Center will begin delivering energy to SCE on June 1, 2020 and is expected to produce 60,967 metric tons of GHG savings. Deliveries will take place only during the months of June through September. For the remainder of the year, the energy produced at the plant will go to serve load at the Cement Plant. The new Victorville Energy Center consists of a heat recovery system which harvests heat from the Cement Plant s kilns to operate an Organic Rankin Cycle ( ORC ) generator. The ORC generator will produce, carbon-free, electric power and will reduce GHG emissions. Specifically, waste heat from the calciner will be used as the thermal input into the ORC generator. The heat is produced by a variety of fossil fuels, for example, agricultural waste, pet coke, coal, natural gas, and other waste, to produce clinker, but a large amount goes up the chimney and is lost. B. Safety Pursuant to D , 15 SCE required VIAS Energies, Inc. to provide: (a) a description of its written safety plan; (b) a report from an independent, Californialicensed professional engineer certifying that VIAS Energies has a feasible written plan that obligates Seller to operate the Victorville Energy Center in accordance with existing applicable state and federal standards and in compliance with Accepted Electrical Practices; and (c) an attestation that certifies that the Victorville Energy Center will abide by its safety plan and applicable state and federal laws throughout the term of the Agreement. The Victorville Energy Center will be a newly constructed facility with 15 D , OP 10, at p. 60, requires SCE and SDG&E to: require all final Combined Heat and Power (CHP) offerers (sic) to provide a report from an independent, Californialicensed professional engineer (acceptable to both investor-owned utilities (IOUs) and counterparty) (Report) certifying that counterparty has a feasible written plan for the safe construction and operation of the generating facility in accordance with existing applicable state or federal standards and in compliance with Prudent Electrical Practices (as defined in the CHP Power Purchase Agreement (PPA)) (Safety Plan); a copy of the Safety Plan; and an attestation that the counterparty will abide with the Safety Plan and applicable state and federal laws throughout the term of the PPA (Attestation). IOUs shall verify receipt of the Report, Safety Plan, and Attestation; verify that the Safety Plan covers construction (if appropriate) and operation of the facility; and submit these documents to the Commission as part of the Advice Letter for approval of the PPA.

8 ADVICE 3701-E (U 338-E) November 20, 2017 construction not scheduled to begin for at least a year or more. Therefore, a safety plan is not yet in place as final design and other details regarding the construction of the facility have not been completed. However, VIAS Energies. Inc. has provided a general safety plan, an attestation and certification that they will develop and operate the facility in accordance with prudent electrical practices, the requirements of the power purchase agreement and the requirements of their interconnection agreement. Copies of these documents are attached as Confidential Appendix E. In addition, the standard terms in all of SCE s power purchase agreements ( PPAs ) attempt to secure energy, capacity and/or related products that are produced in a safe and reliable manner by requiring the generator the entity with legal and physical control over onsite decisions to warrant that it will conform to certain safety requirements, including, but not limited to, operating and maintaining the generating facility in accordance with Prudent Electrical Practices. 16 SETTLEMENT ACCOUNTING FOR CHP PROCUREMENT AND GHG EMISSIONS REDUCTION TARGET Set forth in Table 2 below are the Settlement s GHG Targets and the amount procured through the Agreement that should be counted toward the GHG target. Target GHG Emissions Reduction Target Table 2: Settlement Accounting SCE s Portion of Statewide Target 17 Quantities Procured from Victorville Energy Center Toward SCE s Settlement Target 1.23 MMT MMT 16 See Sections 3.07(c)(i), 3.07(h), 3.14 and Exhibit A of the Power Purchase and Sale Agreement between SCE and VIAS Energies, Inc. (attached as Confidential Appendix B-1). Prudent Electrical Practices are defined as: Those practices, methods, applicable codes, and acts engaged in or approved by a significant portion of the electric power industry during the relevant time period, or any of the practices, methods, and acts which, in exercise of reasonable judgment in light of the facts known at the time a decision is made, could have been expected to accomplish a desired result at reasonable cost consistent with good business practices, reliability, safety, and expedition. Accepted Electrical Practices are not intended to be limited to the optimum practices, methods, or acts to the exclusion of others, but rather to those practices, methods, and acts generally accepted, or approved by a significant portion of the electric power industry in the relevant region, during the relevant time period, as described in the immediately preceding sentence. 17 The MW Target must be achieved by the end of the Initial Program Period, November 23, The GHG Target must be met by the end of the Second Program Period, December 31, See Settlement Term Sheet 2.2.2, , respectively. 18 MT = metric tonne. See supra note 12 and accompanying text.

9 ADVICE 3701-E (U 338-E) November 20, 2017 C. GHG Emissions Reduction Target D , OP 12, instructs the IOUs to consider bottoming-cycle CHP facilities as new facilities for greenhouse gas accounting purposes. In addition, the Victorville Energy Center has yet to be constructed and will be a new facility. As a result, section of the CHP Program Settlement Agreement Term Sheet applies to the Agreement: New CHP Facilities: Efficient New CHP Facilities as compared to the Double Benchmark will count as a GHG Credit toward the contracting IOU's GHG Emissions Reduction Target regardless of where the CHP Facility is located. Measurement is based on the Double Benchmark in place at the time of PPA execution compared to the anticipated operations reflected in the PPA. Victorville Energy Center anticipates an annual electric generation value of 238,090 MWh, and no useful thermal output. Since the only GHG emissions associated with electricity from a bottoming-cycle facility are attributed to any supplementing firing used, there will be no fuel used by the Victorville Energy Center for purposes of this calculation. EMISSIONS PERFORMANCE STANDARD There will be zero emissions from this facility as there will be no combustion of natural gas or other fuels. CAM GROUP PARTICIPATION The Settlement authorizes the utilities to enter into contracts for CHP resources and to recover the net costs of the resources from all bundled service customers, direct access ( DA ) customers, community choice aggregation ( CCA ) customers, and others. 19 SCE s CAM Group includes representatives from certain non-market participants, including the Commission s Energy and Legal Divisions, the Office of Ratepayer Advocates, The Utility Reform Network, California Utility Employees, the Union of Concerned Scientists, the California Department of Water Resources, and the Sierra Club, as well as certain other non-wholesale market participant representatives of bundled service, DA, and CCA customers. SCE consulted with its CAM Group regarding SCE s CHP RFO 5 on three conference calls: On February 9, 2017, SCE presented its CHP RFO 5 Launch and Short List Selection Process. On May 30, 2017, SCE presented its Short-List Selection. 19 See Settlement Term Sheet 6.3.

10 ADVICE 3701-E (U 338-E) November 20, 2017 On September 19, 2017, SCE presented its Approval to Execute. During each of these teleconference calls, SCE updated CAM Group participants on the progress of SCE s CHP RFO 5 and consulted about the valuation results and merits of the individual projects. SCE properly responded to all comments and questions, and provided additional data as requested. INDEPENDENT EVALUATOR ( IE ) PARTICIPATION As required by D and D , SCE engages an IE to monitor and ensure the integrity of its competitive solicitations, including valuation, selection, and contracting for resources with a delivery term of two years or more. Section of the Settlement Term Sheet states that the IOUs shall use an Independent Evaluator and that the independent evaluator shall review the entire CHP RFO process. 20 SCE engaged Accion Group, Inc. ( Accion ) to act as the IE for its CHP RFO 5 and related QF/CHP Program procurement activities. Accion reviewed the design and protocols of SCE s CHP RFO 5 prior to launch and reviewed the evaluation criteria prior to the submission of offers. The IE participated at the opening of indicative offers, received a copy of all offer materials, and performed an independent review of the evaluation of the offers. In addition, the IE monitored all communications between the parties and had access to negotiating sessions between the parties. The IE participated in SCE s internal meetings and discussions regarding its CHP RFO 5. Finally, the IE was invited to every CAM Group meeting related to SCE s CHP RFO 5. Accion s IE report is found in Public Appendix F-1 (public version) and Confidential Appendix F-2 (confidential version). CONFIDENTIALITY In accordance with D , D , D , D and General Order (GO) 96-B, SCE requests confidential treatment of the material in the confidential appendices as set forth below. Confidential Appendix A: Confidential Appendix B (B-1, B-2): Confidential Appendix C: Confidential Appendix D: Confidential Appendix E (E-1, E-2, E-3): Offer Evaluation Methodology Agreement Agreement Summary Comparison of Agreement with SCE s CHP Pro Forma PPA Seller-Submitted Safety Documentation 20 See Settlement Term Sheet

11 ADVICE 3701-E (U 338-E) November 20, 2017 Public Appendix F-1/ Confidential Appendix F-2: Public Appendix G: Public Appendix H: Independent Evaluator Report Confidentiality Declaration Proposed Non-Disclosure Agreement The confidential material in this Advice Letter will be made available to non-market participants in accordance with and upon execution of SCE s Proposed Non-Disclosure Agreement. Parties wishing to obtain access to the confidential material of this Advice Letter may contact Vivian Le in SCE s Law Department at Vivian.Le@sce.com to obtain a non-disclosure agreement. The information in this Advice Letter for which SCE requests confidential treatment, and the length of time it should remain confidential, are provided in Public Appendix G. This information is entitled to confidentiality protection, as provided in the IOU Matrix, pursuant to D The specific provisions of the IOU Matrix that apply to the confidential information in this Advice Letter are identified in Public Appendix G. REQUEST FOR COMMISSION APPROVAL Commission approval is a condition precedent of the Agreement. SCE therefore requests that the Commission issue a final and non-appealable resolution containing: 1. Approval of the Agreement in its entirety; 2. A finding that the Agreement, and SCE s entry into the Agreement, is reasonable and prudent for all purposes, subject only to further review with respect to the reasonableness of SCE s administration of the Agreement; 3. A finding that the MMT of GHG emissions reductions associated with the Agreement applies toward SCE s GHG Target; 4. A finding that the Agreement is in compliance with the EPS; 5. A finding that SCE s costs under the Agreement shall be recovered through SCE s CAM; 6. Any other relief the Commission finds just and reasonable. SCE asks the Commission to approve the Agreement by November 1, 2018, to meet the requirements of the contract. TIER DESIGNATION Pursuant to Section of the Settlement Term Sheet, which provides that IOUs will utilize a Tier 3 Advice Letter for all other PPAs (new, repowering, or existing PPAs that

12 ADVICE 3701-E (U 338-E) November 20, 2017 contain any material modification of the PPAs approved in this Settlement), SCE submits this Advice Letter with a Tier 3 designation. EFFECTIVE DATE This Advice Letter will become effective upon Commission approval. NOTICE Anyone wishing to protest this advice filing may do so by letter via U.S. Mail, facsimile, or electronically, any of which must be received no later than 20 days after the date of this advice filing. Protests should be submitted to: California Public Utilities Commission, Energy Division Attention: Tariff Unit 505 Van Ness Avenue San Francisco, California edtariffunit@cpuc.ca.gov In addition, protests and all other correspondence regarding this advice letter should also be sent by letter and transmitted via facsimile or electronically to the attention of: Russell G. Worden Managing Director, State Regulatory Operations Southern California Edison Company 8631 Rush Street Rosemead, California Telephone: (626) Facsimile: (626) AdviceTariffManager@sce.com Laura Genao Managing Director, State Regulatory Affairs c/o Karyn Gansecki 601 Van Ness Avenue, Suite 2030 San Francisco, California Facsimile: (415) Karyn.Gansecki@sce.com With a copy to: Vivian Le Research Attorney 2244 Walnut Grove Avenue Rosemead, California 91770

13 ADVICE 3701-E (U 338-E) November 20, 2017 Facsimile: (626) Vivian.Le@sce.com There are no restrictions on who may file a protest, but the protest shall set forth specifically the grounds upon which it is based and must be received by the deadline shown above. In accordance with General Rule 4 of GO 96-B, SCE is serving copies of this advice filing to the interested parties shown on the attached GO 96-B, R , and A et al service lists. Address change requests to the GO 96-B service list should be directed by electronic mail to AdviceTariffManager@sce.com or at (626) For changes to all other service lists, please contact the Commission s Process Office at (415) or by electronic mail at Process_Office@cpuc.ca.gov. Further, in accordance with Public Utilities Code Section 491, notice to the public is hereby given by filing and keeping the advice filing at SCE s corporate headquarters. To view other SCE advice letters filed with the Commission, log on to SCE s web site at For questions, please contact Raffi Minasian at (626) or by electronic mail at Raffi.Minasian@sce.com. Southern California Edison Company /s/ Russell G. Worden Russell G. Worden RGW:rm:cm Enclosures

14 CALIFORNIA PUBLIC UTILITIES COMMISSION ADVICE LETTER FILING SUMMARY ENERGY UTILITY MUST BE COMPLETED BY UTILITY (Attach additional pages as needed) Company name/cpuc Utility No.: Southern California Edison Company (U 338-E) Utility type: Contact Person: Darrah Morgan ELC GAS Phone #: (626) PLC HEAT WATER Disposition Notice to: EXPLANATION OF UTILITY TYPE ELC = Electric GAS = Gas PLC = Pipeline HEAT = Heat WATER = Water (Date Filed/ Received Stamp by CPUC) Advice Letter (AL) #: 3701-E Tier Designation: 3 Subject of AL: Submission of Agreement Between Southern California Edison Company and VIAS Energies, Inc. Keywords (choose from CPUC listing): Procurement, Agreements AL filing type: Monthly Quarterly Annual One-Time Other If AL filed in compliance with a Commission order, indicate relevant Decision/Resolution #: Does AL replace a withdrawn or rejected AL? If so, identify the prior AL: Summarize differences between the AL and the prior withdrawn or rejected AL: Confidential treatment requested? Yes No See Appendix G If yes, specification of confidential information: Confidential information will be made available to appropriate parties who execute a nondisclosure agreement. Name and contact information to request nondisclosure agreement/access to confidential information: Vivian Le, Law Department, (626) or Vivian.Le@sce.com Resolution Required? Yes No Requested effective date: Upon Commission Approval Estimated system annual revenue effect: (%): Estimated system average rate effect (%): No. of tariff sheets: -0- When rates are affected by AL, include attachment in AL showing average rate effects on customer classes (residential, small commercial, large C/I, agricultural, lighting). Tariff schedules affected: N/A Service affected and changes proposed 1 : Pending advice letters that revise the same tariff sheets: None 1 Discuss in AL if more space is needed.

15 Protests and all other correspondence regarding this AL are due no later than 20 days after the date of this filing, unless otherwise authorized by the Commission, and shall be sent to: CPUC, Energy Division Attention: Tariff Unit 505 Van Ness Avenue San Francisco, California Russell G. Worden Managing Director, State Regulatory Operations Southern California Edison Company 8631 Rush Street Rosemead, California Telephone: (626) Facsimile: (626) Laura Genao Managing Director, State Regulatory Affairs c/o Karyn Gansecki Southern California Edison Company 601 Van Ness Avenue, Suite 2030 San Francisco, California Facsimile: (415) With a copy to: Vivian Le Research Attorney 2244 Walnut Grove Avenue Rosemead, California Facsimile: (626) Vivian.Le@sce.com

16 CONFIDENTIAL Appendix A Offer Evaluation Methodology Confidential Protected Materials Public Disclosure Prohibited

17 CONFIDENTIAL Appendix B (B-1, B-2) Agreement Confidential Protected Materials Public Disclosure Prohibited

18 CONFIDENTIAL Appendix C Agreement Summary Confidential Protected Materials Public Disclosure Prohibited

19 CONFIDENTIAL Appendix D Comparison of Agreement with SCE s CHP Pro Forma PPA Confidential Protected Materials Public Disclosure Prohibited

20 CONFIDENTIAL Appendix E (E-1, E-2, E-3) Seller-Submitted Safety Documentation Confidential Protected Materials Public Disclosure Prohibited

21 Public Appendix F-1 Independent Evaluator Report

22 REPORT TO THE CALIFORNIA PUBLIC UTILITIES COMMISSION REPORT OF THE INDEPENDENT EVALUATOR REGARDING SOUTHERN CALIFORNIA EDISON S 2017 COMBINED HEAT AND POWER REQUEST FOR OFFERS ("CHP RFO 5") November 14, 2017 Submitted By: ACCION GROUP, LLC 244 North Main Street Concord, New Hampshire advisors@acciongroup.com

23 1. Describe in detail the role of the IE throughout the solicitation and negotiation process. Accion Group, LLC ( Accion Group or Accion ) was selected by Southern California Edison Company ( SCE ) in conjunction with the California Public Utilities Commission ( CPUC or the Commission ) Energy Division ( ED ) and its respective Procurement Review Group ( PRG ), to serve as a member of SCE s pre-qualified pool of Independent Evaluators ( IE ). In accordance with the Qualifying Facility and Combined Heat and Power Settlement Agreement, SCE retained Accion as Independent Evaluator to: oversee the preparation and administration of the RFO and provide independent feedback to the Commission's Energy Division, and to participate in SCE's Cost Allocation Mechanism. Accion was selected as IE to work with SCE throughout the development and implementation of its Combined Heat and Power ( CHP ) Request for Offers 5 ( RFO 5 ) to solicit Offers ( Offers ) from owners and operators of CHP facilities and Utility Prescheduled Facilities ( UPF ) as defined in the Settlement Agreement 1. SCE will use the contracts awarded through this RFO to meet its Green House Gas ( GHG ) Emissions Reduction Targets as set forth in D , as modified by the Meet and Confer Guide discussed with stakeholders on August 26, Accion worked closely with SCE throughout the RFO process. Documents used in the RFO were developed with input from the IE, and all documents for this RFO were posted on SCE s Website, providing Offerors with equal access to all information at the same time. Offerors were instructed by SCE and the IE that they must copy the IE on all s and other correspondence sent to SCE at CHPRFO@sce.com. Accion monitored the entire solicitation and negotiation processes to ensure all potential counterparties were treated in a reasonable, fair and equitable manner. The IE participated in the Web Conference, and additionally monitored SCE s valuation methodologies and selection process to ensure reasonable, fair and equal treatment of all Offers. The IE had access to all offer data, and monitored negotiations by reviewing exchanges between SCE personnel and Offerors as well as participating on each teleconference. Accion participated in the selection and review of CHP offers with SCE s Finance and Risk Management committee and the Cost Allocation Mechanism ( CAM ) group. The IE reviewed all s provided by Offerors and SCE and is unaware of any information being withheld from the IE. 1 Qualifying Facility and Combined Heat and Power ( CHP ) Program Settlement Agreement and related documents (including the CHP Program Settlement Agreement Term Sheet, or Term Sheet ) approved by the California Public Utilities Commission ( CPUC ) on December 16, 2010 in Decision ( D. ) as amended by the CPUC on June 11, 2015 in D (collectively, the Settlement Agreement ). 244 North Main Street Concord, NH Phone: Fax: advisors@acciongroup.com 2

24 The IE believes the CHP 5 RFO was conducted fairly from the initial public announcement of the RFO on February 28, 2017, through evaluation and identification of the most attractive Offers. The IE had access to SCE personnel without restriction and all of our questions were answered to our satisfaction. The IE notes that SCE personnel dedicated considerable time and numerous persons to ensuring each Offer received due consideration, even when the Offeror needed guidance beyond the clear and detailed RFO documents. The IE accepts that all exchanges between SCE personnel and Offerors were shared with the IE. Our review of those exchanges found nothing suggesting bias towards or against any Offeror. This Final Report on the CHP 5 RFO, reviews the actions taken by SCE in the development and conduct of the 2017 CHP 5 RFO, through Offer receipt on April 13, 2017, and the subsequent evaluation process. 2. How did the IOU conduct outreach to Offers, and was the solicitation robust; and 3. Was the outreach sufficient and materials clear such that the bids received met the needs the solicitation was intending to fill? The IE believes there was sufficient outreach for this RFO, and additionally, that materials relating to the solicitation were available and clear, and the resulting Offers met a portion of the needs the RFO was intending to fill. a. Publicity Accion Group believes SCE s CHP RFO was well publicized. SCE generated the shown in Figure 1, entitled SCE Launches Its CHP RFO". This was distributed to 2,295 parties on SCE s distribution list. Figure 1 SCE is issuing its CHP RFO 5 in accordance with the Qualifying Facility and Combined Heat and Power Program Settlement Agreement and related documents (including the CHP Program Settlement Agreement Term Sheet) approved by the California Public Utilities Commission ( CPUC ) on December 16, 2010 in Decision and as modified on June 11, 2015 in Decision (collectively, the Settlement Agreement ). Participants interested in participating can find all documents and instructions at the following vanity URL: on.sce.com/chprfo Questions relating to this RFO should be addressed to SCE by at CHPRFO@sce.com (with copy to the Independent Evaluator at hjudd@acciongroup.com) or by telephone to Benny Wu at (626) or Justin Dillon at (626) Questions of a general nature will be posted on this website as appropriate. CHP RFO Team Energy Contracts Southern California Edison 2244 Walnut Grove Avenue Rosemead, California North Main Street Concord, NH Phone: Fax: advisors@acciongroup.com 3

25 In addition to the various announcements and notifications to interested parties, SCE updated its Company Website to include details of the CHP Program, and in particular, CHP RFO 5. b. Adequate Outreach to Offerors SCE and Accion collaborated to produce Announcements and RFO Documents in order to provide all registrants with up-to-date information. SCE s RFO Instructions and documents were accessible to the public on the SCE Website, and included topics that ranged from General Information about the RFO to: Eligibility and Qualifications of Offerors; Terms and Conditions of the Agreements; Instructions for the Offer Submittal Process; a description and Overview of the Evaluation of Offers received; and, a List of Attachments that Offerors would need to include in their Submittals. c. Offeror s Conference On March 16, 2017, SCE hosted an RFO Conference via WebEx to discuss the RFO process. Information on how to participate in the conference was made available on SCE s Website. The IE participated in the webinar and contributed information to the prepared presentation. The IE reviewed the information SCE provided prior to the WebEx and noted all questions that were posed by potential Offerors. Both the WebEx and all RFO Conference materials were posted on SCE s Website. SCE answered all questions asked during the SCE Conference, and additionally, a recording of the entire Conference was included on the Company Website. This allowed persons who did not participate in the Offerors Conference to have access to all information delivered during the Conference, assuring that all Offerors had access to the same information. The IE participated in the RFO Conference via WebEx. Both SCE and Accion were available to answer questions and further explain the RFO process. The IE believes the CHP 5 RFO and participation protocols were described in detail, and that making the information available online provided all Offerors access to the same information. d. RFO Information was Accessible and Clear Questions from Offerors Offerors were instructed to address questions to SCE by or by telephone to the designated contacts at SCE. Specifically, Offerors were instructed to address all questions regarding this RFO to CHPRFO@sce.com, with copies to the Independent Evaluator as captured in Figure North Main Street Concord, NH Phone: Fax: advisors@acciongroup.com 4

26 Figure 2 (From RFO Document) 9.03 Questions. Questions relating to this RFO should be addressed to SCE by at CHPRFO@sce.com (with copies to the Independent Evaluator) or by telephone to Benny Wu at (626) or Justin Dillon at (626) The RFO Instructions informed Offerors that at SCE's discretion, answers to non-project specific questions would be posted on the SCE s CHP RFO Website as appropriate. The IE accepts that copies of all s were provided to the IE, and that SCE memorialized each telephone conversation and provided a copy of all telephonic discussions. e. Communications Communication with Offerors consisted of the IE, Offerors and SCE exchanging s with copies provided to the IE. As appropriate, the IE also communicated via . RFO Instructions included the following direction regarding communication protocol: Figure 3 (From RFO Document) 9.02 Communications. Any exchange of material information concerning this RFO, including, without limitation, the submission of a Complete Offer Submittal Package as well as any exchange concerning the preparation or submission of Offers or other submissions to SCE related to this RFO, must be submitted to both SCE and the Independent Evaluator for the RFO in the form of an at the following addresses: (a) SCE: CHPRFO@sce.com; and (b) The Independent Evaluator at hjudd@acciongroup.com Note: The maximum size of any submitted to SCE is limited to 8 MB. The website address for the RFO is SCE may, in its sole discretion, decline to respond to any or other inquiry without liability or responsibility. From past experience with SCE, the IE has confidence that all communications were shared with the IE, and that in those instances where an Offeror failed to include the IE on the distribution list, SCE forwarded the to Accion Group. However, using s and logs is not fail-safe, so the IE is unable to verify that all communications were shared. The 244 North Main Street Concord, NH Phone: Fax: advisors@acciongroup.com 5

27 IE notes that nothing in the s provided to Accion Group indicated there were communications that had not been shared. f. Response to the Solicitation Notice of Intent to Participate in the 2017 CHP 5 RFO Potential Offerors were asked to complete and submit via , a non-binding Notice of Intent to Offer ( NOI ), by March 23, 2017 (Attachment A, RFO 2017 Combined Heat and Power Request for Offers). The following text is the preface included on the NOI Form, and explains SCE s preferred procedure: Figure 4 (From RFO Document) 2017 CHP RFO Non-Binding Notice of Intent to Offer (Attachment A) This Non-Binding Notice of Intent to Offer ( Notice ) serves as notice to Southern California Edison Company ( SCE ) that the company listed below ( Counterparty ) is interested in participating in SCE s Combined Heat and Power ( CHP ) Request for Offers ( RFO ) pursuant to the 2017 CHP RFO Instructions. SCE will accept receipt of the fully completed Notice on or before the deadline set forth in Section 3.01 of the CHP RFO Instructions. Please this Notice to SCE at CHPRFO@sce.com and to the independent evaluator s for RFO offers: hjudd@acciongroup.com As noted, it was not mandatory for Offerors to complete and submit a NOI in order to participate in the Offer process by the requested date of March 23, (Confidential information redacted and is included in Confidential Appendix A as REDACTION 1.) Submittal Process Offerors were required to submit their complete binding Offers to SCE and the IE by April 13, 2017, 5:00 PM PPT. As with the CHP 4 RFO, a required Offer Structure Letter, included as Exhibit A to the RFO Instructions, describing all submittal, projects and project options, was ed to SCE and the IE at the respective designated addresses. This was the only ed material in the Offer submittal process. Two (2) electronic copies of the Offer ( Offer e-binder ), containing all Offer information, were required to be physically mailed/delivered to SCE in the form of Physical Electronic Media. SCE only considered submissions that constituted a Complete Offer Submittal Package, i.e., an Offer submitted in compliance with the RFO Instructions, including all documents 244 North Main Street Concord, NH Phone: Fax: advisors@acciongroup.com 6

28 applicable to each Offer, by the Offer Due date. (Confidential information redacted and is included in Confidential Appendix A as REDACTION 2.) g. Offer Receipt Offer Packages were received on April 13, (Confidential information redacted, and is included in Confidential Appendix A as REDACTION 3.) During the evaluation period the IE and SCE were in agreement if clarification was required from an Offeror in order to complete the evaluation. In those instances when clarification was needed, the Offeror was sent a request via , and a response was received in the same manner. The clarification process did not provide an opportunity for Offerors to change any material component of an Offer. Reports on Submitted Offers The IE believes the established protocols maintained equity and transparency throughout the CHP RFO process. Accion found the RFO procedures to be comprehensive and clear, and they allowed all Offerors access to the same information at the same time. (Confidential information redacted and is included in Confidential Appendix A as REDACTION 4.) Participants were allowed to submit multiple pricing options from the same project which explains the higher number of Offers compared to facilities. (Confidential information redacted and is included in Confidential Appendix A as REDACTION 4.) The following Table 1 summarizes the conforming projects. (Confidential information redacted and is included in Confidential Appendix A as REDACTION 4.) Table 1 Company Facility Name Est COD Vintage/Type CHP MW Total MW 244 North Main Street Concord, NH Phone: Fax: advisors@acciongroup.com 7

29 4. Please evaluate the fairness of the IOU s bidding and selection process. (i.e. quantitative and qualitative methodology used to evaluate bids, consistence of evaluation methods with criteria specified in bid documents, etc.) The IE worked closely with SCE prior to receiving Offers for the CHP 5 RFO to validate the quantitative and qualitative evaluation methodologies proposed and to ensure they were consistent with the RFO instructions posted on SCE'S website. The evaluation for CHP 5 was the same as CHP 4. To validate the model, a Mock Offer process where SCE evaluated seven of the previous Offers from prior RFOs was performed. These Offers consisted of CHP and UPF Offers. The evaluation of the Mock Offers provided a process to lock down the evaluation model and pricing assumptions prior to Offers being received. The IE ran the Mock Offers in parallel using its own tools and was able to duplicate SCE's results. For the quantitative analysis, the RFO instructions were clear in that the evaluation was based on the Net Present Value C ( NPV ) of each project including capacity benefits, energy benefits, credit benefit, contract payments, debt equivalence, GHG cost, congestion cost and transmission cost. The cost minus the benefit results in a premium to customers. Similar to CHP 4, because the MW target was previously met for this program, the cost per GHG reduction was used as the ranking metric. The RFO instructions regarding the qualitative factors were clear and provided the characteristics of the project that would be assessed in addition to the quantitative analysis. They included the following characteristics: Permitting and interconnection Environmental and permitting status Electrical interconnection Fuel interconnection and source Water interconnection and source Pre-development milestones Project financing status Project development experience Thermal host FERC and CA qualifying facility standards Emissions performance standards Development milestones Site control Large Equipment status Reasonableness of commercial operation date Transmission area 244 North Main Street Concord, NH Phone: Fax: advisors@acciongroup.com 8

30 Modifications to pro forma documents Fuel supply and transportation arrangements/options Cost effectiveness of GHG reductions Supplier diversity Congestion, negative prices, and curtailment considerations not captured in quantitative valuation Portfolio fit of energy, capacity and term Offeror concentration Dispatchability and curtail-ability Offer price in excess of public or independent data As part of the evaluation process, SCE allowed each Offeror time to cure deficiencies or inaccuracies in the original Offer information. The IE monitored this communication which was conducted through and met telephonically with SCE on a weekly basis to discuss updates. The IE monitored the communication via and believes that each Offeror was treated fairly in the Offer curing process. The IE reviewed each Offer and independently calculated the project NPV premium based on the cured Offer template for each project. Next, the GHG savings was calculated for each offer. These premiums were converted to $/GHG reduction values. Because UPF Offers are based on economic dispatch, the IE did not simulate those Offers because it did not have access to the SCE dispatch Model. However, the IE reviewed the dispatch results and confirmed the energy costs and revenues were reasonable. The IE compared its NPV premium calculations against SCE results and worked to reconcile any discrepancies with the evaluation team. Table A in the Confidential Appendix shows the evaluation results. (Confidential information redacted and is included in Confidential Appendix A as REDACTION 5.) After the short list was approved by SCE s FRM and the CAM group, the IE monitored the negotiation process which continued through October of (Confidential information redacted and is included in Confidential Appendix A as REDACTION 5.) SCE executed contracts with the two (2) remaining projects resulting in 90,104 MT of GHG reduction. 5. If applicable, describe safeguards and methodologies employed by the IOU to compare affiliate Bidders or UOG ownership proposals. If a utility selected a Bidder from an affiliate or a bid that would result in utility asset ownership, explain and analyze whether the IOU s selection of such bid(s) was appropriate. This is not applicable, as there were no affiliate Offers or ownership proposals in this CHP RFO. 244 North Main Street Concord, NH Phone: Fax: advisors@acciongroup.com 9

31 6. Based on the complete bid process, is (are) the IOU contract(s) the best overall bid(s) received by the IOU? Based on the complete Offer process including negotiations of the short-listed Offers, the IE agrees with SCE that the contracts represent the best overall Offers from the RFO. The Offers align with the requirements of the RFO and provided GHG savings pushing SCE closer to its target. Table B in the Confidential Appendix B summarizes the Offers with which SCE executed contracts 7. If the contract does not directly reflect a product solicited and bid in an RFO, is the contract superior to the bids received on the products solicited in the RFO? Explain. All contracts directly reflect the products solicited in the RFO including one new CHP project and one UPF project. 8. Is the contract a reasonable way of achieving the need identified in the RFO? The IE believes the contract is a reasonable way of achieving the GHG savings identified in the RFO. The final contract expected costs are consistent with the costs calculated in the evaluation and the premium per GHG savings are in line with projects selected in previous RFOs. (Confidential information redacted and is included in Confidential Appendix A as REDACTION 6.) 9. Based on your analysis of the RFO bids, the bid process, and the overall market, does the contract merit Commission approval? Explain. Based on the analysis of the RFO Offers, the Offer process, and the overall market, the IE believes the contracts merit Commission approval. (Confidential information redacted and is included in Confidential Appendix A as REDACTION 7.) SCE evaluated each conforming Offer and the evaluation process was fair for all Offerors. Information pertaining to the RFO was given to all Offerors at the same time and the evaluation was conducted fairly with no bias towards any Offeror. All Offerors were given an equal opportunity to cure deficiencies that existed in their initial Offer information. The executed contracts represents the least cost/best fit opportunity submitted in this RFO and the IE agrees with the final selection. (Confidential information redacted and is included in Confidential Appendix A as REDACTION 7.) 10. Based on the complete bid process, should some component(s) be changed to ensure future RFOs are fairer or provide a more efficient, lower cost option? As stated in CHP 4, it is the IE's opinion that having a central location for Offers to be submitted and cured, along with all communications with Offerors, would provide significant efficiency to the process and eliminate any question about what was communicated to individual 244 North Main Street Concord, NH Phone: Fax: advisors@acciongroup.com 10

32 Offerors. There would be benefit in hosting and organizing the data on a central site in the event regulatory review of exchanges is conducted. It is the opinion of the IE that SCE personnel are doing everything possible to successfully complete this program. (Confidential information redacted and is included in Confidential Appendix A as REDACTION 8). 244 North Main Street Concord, NH Phone: Fax: advisors@acciongroup.com 11

33 CONFIDENTIAL Appendix F-2 Independent Evaluator Report Confidential Protected Materials Public Disclosure Prohibited

34 Public Appendix G Confidentiality Declaration

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