Akbar Jazayeri Vice President, Regulatory Operations Southern California Edison Company P O Box 800 Rosemead, CA 91770

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1 STATE OF CALIFORNIA PUBLIC UTILITIES COMMISSION SAN FRANCISCO, CA Edmund G. Brown Jr. Governor June 5, 2012 Advice Letter 2684-E Akbar Jazayeri Vice President, Regulatory Operations Southern California Edison Company P O Box 800 Rosemead, CA Subject: Amendment to Power Purchase and Sale Agreement with Terra-Gen Power for Renewable Wind Energy from Alta Wind XI Dear Mr. Jazayeri: Advice Letter 2684-E is effective March 22, Sincerely, Edward F. Randolph, Director Energy Division

2 Akbar Jazayeri Vice President of Regulatory Operations December 29, 2011 ADVICE 2684-E (U 338-E) PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA ENERGY DIVISION SUBJECT: Amendment to Power Purchase and Sale Agreement with Terra-Gen Power for Renewable Wind Energy from Alta Wind XI I. INTRODUCTION A. Purpose of the Advice Letter Southern California Edison Company ( SCE ) hereby submits for filing this advice letter seeking approval by the California Public Utilities Commission ( Commission or CPUC ) of Amendment No. 2 ( Alta Wind XI Amendment ) to the Generating Facility Power Purchase and Sale Agreement ( Alta Wind XI PPSA ) between SCE and Alta Wind XI, LLC ( Alta Wind XI ). Alta Wind XI, LLC is a subsidiariy of Terra-Gen Power ( Developer ). SCE executed Alta Wind XI PPSA with Alta Wind XI on the effective date and with the expected initial operation date as defined below and submitted it via business letter to the Director of the Energy Division 1 under the approved Master Power Purchase and Wind Project Development Agreement ( Master Agreement ) between SCE and Alta Windpower Development, LLC, a subsidiary of the Developer, which the Commission approved in Decision ( D. ) Under the Alta Wind XI PPSA, Seller will sell to SCE and SCE will purchase from Seller electric energy, associated environmental attributes, capacity attributes, resource adequacy benefits or other attributes arising 1 The business letter for Alta Wind XI, which also included Alta Wind X, was submitted April 5, In the Matter of the Application of Southern California Edison Company (U 338-E) for Approval of Renewables Portfolio Standard Power Purchase and Wind Project Development Agreement with Alta Windpower Development, LLC and for Authority to Recover the Costs of Such Power Purchase and Wind Project Development Agreement in Rates, Application filed July 6, 2007, amended January 31, 2008, D , dated May 16, P.O. Box Walnut Grove Ave. Rosemead, California (626) Fax (626)

3 ADVICE 2684-E (U 338-E) December 29, 2011 from the generating facility and offered for sale under the applicable contract (the Product ) with Seller upon commencement of the term of the Common Alta PPSAs and the Alta Wind XI PPSA. A summary of the amended PPSA is included in the table below, entitled Summary of the Amended Alta Wind XI PPSA. A second advice letter 2684-E is being filed simultaneously to address amendment of Alta Wind VII, IX, X, and XI, which modify some common contract provisions, as well as amendment of the Alta Wind X PPSA, which is largely identical to the Alta Wind XI amendment in that it also defers the start date and allows for the purchase of additional energy from the project without expanding contract capacity. Summary of the Amended Alta Wind XI PPSA: Seller Technology PPSA Effective Date Size Alta Wind XI, LLC Expected Initial Operation Date Wind March 31, MW January 1, 2015 (if amended) The Alta Wind XI Amendment defers the online date of the Alta Wind XI PPSA by two years and allows for the purchase of additional energy from the project while maintaining the contract capacity at 90 MW. SCE requests that the Commission issue a resolution containing findings in the form requested in this Advice Letter as soon as possible, but no later than March 31, As more fully explained in subsequent sections of this advice filing and in the Confidential Appendices, SCE s customers will obtain material value through the Alta Wind XI Amendment. In accordance with General Order ( GO ) 96-B, the confidentiality of information included in this Advice Letter is described below. This Advice Letter contains both confidential and public appendices as listed below. Confidential Appendix A: Confidential Appendix B: Confidential Appendix C: Consistency with Commission Decisions and Rules and Project Development Status 2011 Solicitation Overview Contract Summary Confidential Appendix D: Alta Wind XI Amendment No. 2 Confidential Appendix E: Confidential/Public Appendix F: Confidential Appendix G: Contribution Toward RPS Goals SCE s Written Description of RPS Proposal Evaluation and Selection Process and Criteria AMF Calculators

4 ADVICE 2684-E (U 338-E) December 29, 2011 Appendix H: Appendix I: Confidentiality Declaration Proposed Protective Order B. Subject of the Advice Letter The Alta Wind XI Amendment specifically amends the contract terms of the Alta Wind XI PPSA. The Alta Wind XI Project is a 90 MW wind facility located in the Tehachapi Wind Resource Area near Mojave, California. The Developer is a privately held company with renewable generation projects in California, Nevada, Colorado, Texas, and Minnesota. The California projects include multiple projects that total approximately 1,020 MW of wind power capacity in the Tehachapi Wind Resource Area, which are currently operating or being commissioned. These projects sell Product to SCE under long-term PPSAs. 3 C. General Project Description Project Name Alta Wind XI, LLC / Alta Wind XI Additional Energy Technology Capacity (MW) Capacity Factor Expected Generation (GWh/Year) Wind 90 MW 36% (Expected) / 7.5% additional 280 GWh / 59 GWh additional Initial Commercial Operation Date January 1, 2015 (if amended) /January 1, 2015 Date Contract Delivery Term Begins Delivery Term (Years) 23 Vintage (New/Existing/Repower) Location (City and State) Control Area (e.g., CAISO, BPA) Nearest Competitive Renewable Energy Zone (CREZ) as identified by the Renewable Energy Transmission Initiative (RETI) Type of Cooling, if Applicable Price Relative to MPR (i.e., above/below) January 1, 2015 (if amended) /January 1, 2015 New Mojave, Kern County, California CAISO Tehachapi Wind Resource Area N/A Below 3 All of these projects were executed under the Master Agreement, approved in D

5 ADVICE 2684-E (U 338-E) December 29, 2011 D. General Deal Structure As discussed above, the Alta Wind XI Amendment defers by two years the contract start date, from January 1, 2013 to January 1, 2015, which better fits the needs of SCE s renewable portfolio. The deferral does not shorten the contract Delivery Term, which remains 23 years. In addition, the Alta Wind XI Amendment increases the expected annual generation from the Alta Wind XI without changing the nameplate contract capacity. Details regarding the estimated value of the deferral and the additional energy purchases are provided in Confidential Appendices A and C. The Alta Wind XI Amendment is attached as Confidential Appendix D. E. RPS Statutory Goals By providing renewable energy from an eligible renewable energy resource ( ERR ) as defined under the RPS Legislation, the Alta Wind XI Amendment is consistent with, and contributes toward, the RPS program s statutory goals, including cost containment. In addition, the deferral of the start date better aligns the deliveries from the Project with SCE s RPS goals and needs. Among other things, the amended Alta Wind XI PPSA helps to ensure stable electricity prices, protect public health, improve environmental quality, stimulate economic development, and create new employment opportunities. F. Confidentiality SCE is requesting confidential treatment of Appendices A through G to this Advice Letter. A public version of Confidential Appendix F is included. The information for which SCE is seeking confidential treatment is identified in the Confidentiality Declaration attached as Appendix H. The confidential version of this Advice Letter will be made available to appropriate parties (in accordance with SCE s Proposed Protective Order, as discussed below) upon execution of the required non-disclosure agreement. Parties wishing to obtain access to the confidential version of this Advice Letter may contact Annette Gilliam in SCE s Law Department at Annette.Gilliam@sce.com or (626) to obtain a non-disclosure agreement. In accordance with GO 96-B, a copy of SCE s Proposed Protective Order is attached hereto as Appendix I. It is appropriate to accord confidential treatment to the information for which SCE requests confidential treatment in the first instance in the advice letter process because such information is entitled to confidentiality protection pursuant to D , and is required to be filed by advice letter as part of the process for obtaining Commission approval of RPS PPAs. SCE would object to disclosure of the information in an aggregated format. The information in this advice filing for which SCE requests confidential treatment, the pages on which the information appears, and the length of time for which the information should remain confidential, are provided in Appendix H. This information is

6 ADVICE 2684-E (U 338-E) December 29, 2011 entitled to confidentiality protection pursuant to D (as provided in the Investor-Owned Utility ( IOU ) Matrix). The specific provisions of the IOU Matrix that apply to the confidential information in this Advice Letter are identified in Appendix H. II. CONSISTENCY WITH COMMISSION DECISIONS A. SCE s 2011 RPS Procurement Plan 1. SCE s 2011 RPS Procurement Plan Was Approved by the Commission and SCE Adhered to Commission Guidelines for Filing and Revisions In D , the Commission conditionally approved SCE s 2011 RPS Procurement Plan, including the solicitation materials for SCE s 2011 RPS solicitation. The Commission also ordered SCE to make certain changes to its 2011 RPS Procurement Plan and to file the amended documents with the Director of the Energy Division, and serve such documents on the service list, by May 4, On May 4, 2011, SCE filed and served its 2011 RPS Procurement Plan, including its 2011 solicitation materials. On May 13, 2011, SCE filed and served its Amended 2011 RPS Procurement Plan, including its amended 2011 solicitation materials. Consistent with the schedule set forth in D , SCE issued its 2011 Request for Proposals ( RFP ) on May 13, Summary of SCE s 2011 RPS Procurement Plan s Assessment of Portfolio Needs In accordance with SCE s 2011 RPS Procurement Plan, SCE s planned procurement activities are designed to seek resources to augment those already under contract to the extent necessary to ensure that SCE continues to meet the State s overall renewable energy goals. SCE considers Base Case and High Need Case procurement scenarios. SCE s Base Case and High Need Case both assume a 33% renewable energy goal as set forth in Senate Bill ( SB ) 2 (1x). Under both scenarios, SCE assumes a 20% goal for 2011 through 2013, a straight-line to a 25% goal in 2016, and a straight-line to a 33% goal in 2020 and beyond. The Base Case uses the current expected on-line dates for all projects and assumes 100% delivered energy from contracts that are executed but not yet on-line. The High Need Case uses the current expected on-line dates for all projects and assumes 60% delivered energy from contracts that are executed and not yet on-line to represent project development success rates as well as any contingency that would make meeting the State s renewable energy goals less likely. SCE is procuring renewable resources based on the High Need Case. Additionally, for SCE s 2011 RFP, SCE indicated that it has both a near-term and a long-term need for renewable products, and that SCE s evaluation criteria consider the benefit of projects located near approved transmission infrastructure and projects with generating facilities whose first point of interconnection with the Western Electricity Coordinating Council ( WECC ) is with the California Independent System Operator

7 ADVICE 2684-E (U 338-E) December 29, 2011 ( CAISO ), Los Angeles Department of Water & Power, Sacramento Municipal Utility District, Imperial Irrigation District, or Turlock Irrigation District (each a California Balancing Authority ). SCE s 2011 RFP solicited proposals to supply renewable products, including Bundled Energy Product, Renewable Energy Credit ( REC )-Only Bundled Energy Product, and REC Product, from ERRs. SCE stated that it would consider all timely proposals from any seller that proposes to sell product to SCE from a new, existing, or repowered ERR generating facility. 3. The Alta Wind XI Amendment is Consistent With SCE s 2011 RPS Procurement Plan The Alta Wind XI Amendment is consistent with SCE s 2011 RPS Procurement Plan and SCE s Portfolio Needs as it: (a) better aligns deliveries from the Project with SCE s RPS goals, thereby providing SCE s customers with material cost savings in 2013 and 2014; (b) provides an increase in RPS energy production by approximately 59 GWh per year over the 23-year term of the Alta Wind XI PPSA; and (c) is highly viable, based on the Developer s track record of success in the Tehachapi Wind Resource Area as evidenced by the currently operating and commissioned Alta Wind projects (Alta Wind I- VI, VIII). Moreover, the Project s first point of interconnection is within the CAISO. 4. The Alta Wind XI Amendment Meets the Project Characteristics for SCE s 2011 RPS Solicitation SCE s 2011 RFP requested proposals based on generating facilities with a minimum contract capacity of 1.5 MW. Although SCE considered and evaluated proposals with out-of-state generating facilities, as previously explained, SCE gave preference to proposals with in-state generating facilities (i.e., where the generating facility s first point of interconnection is or will be to the transmission system of a California Balancing Authority). In particular, SCE strongly preferred proposals with generating facilities that are or will be interconnected to the CAISO s Balancing Authority Area. For out-of-state generating facilities, SCE required that the seller be in compliance with all requirements pertaining to Out-of-State Facilities as set forth in the California Energy Commission ( CEC ) RPS Eligibility Guidebook. For Bundled Energy Products, SCE required in-state generating facilities that will interconnect to the CAISO s Balancing Authority Area to have a delivery point where the generating facility connects to the CAISO Controlled Grid. In-state generating facilities that will interconnect to a California Balancing Authority other than the CAISO were required to have a delivery point at the intertie point where seller s transmission provider ties to the CAISO s Balancing Authority Area ( CAISO Intertie ). In order to be considered as an out-of-state Bundled Energy Product by SCE, the proposal had to be for a generating facility with output the Commission deems to be a

8 ADVICE 2684-E (U 338-E) December 29, 2011 bundled transaction by, in part, being able to dynamically transfer the generating facility s output into a California Balancing Authority s Area. The generating facility s output is required to be dynamically transferred to SCE from the generating facility via a CAISO Intertie (e.g., ELDORADO500). Seller must reasonably demonstrate to SCE as part of its submitted proposal package that the full output of the proposed out-of-state generating facility can in fact be dynamically transferred. Moreover, seller will be required to have firm transmission rights to the delivery point within the CAISO s Balancing Authority Area or to the respective CAISO Intertie for the duration of the term of the agreement. For REC-Only Bundled Energy Products, the generating facility must be interconnected directly to the WECC transmission system. The delivery point must be either: (1) a liquid power trading hub (e.g., Four Corners), or (2) a CAISO Intertie; and seller must have firm transmission rights to a liquid power trading hub or a CAISO Intertie point for the duration of the term of the agreement that is acceptable to SCE. In addition, if seller s generating facility is an intermittent resource, then seller, at its own expense, must firm and shape the product to the delivery point. SCE s preference is that seller firms and shapes the energy on a day-ahead or later basis. Although the Alta Wind XI Amendment was not executed as part of SCE s 2011 RFP, the Alta Wind XI Amendment meets all project characteristics for SCE s 2011 RFP. Additionally, the Alta Wind XI Amendment better aligns the delivery start date of the Project with SCE s RPS goals and energy needs. B. Least-Cost/Best-Fit ( LCBF ) Methodology and Evaluation SCE evaluates and ranks proposals based on LCBF principles that comply with criteria set forth by the Commission in D and D (the LCBF Decisions ). 4 The goal of SCE s evaluation and selection criteria and processes is to provide decision metrics so that SCE can procure renewable energy economically, while providing the most value to its customers. The LCBF analysis evaluates both quantitative and qualitative aspects of each proposal to estimate its value to SCE s customers and its relative value in comparison to other proposals. While assumptions and methodologies have evolved slightly over time, the basic components of SCE s evaluation and selection criteria and process for RPS contracts were established by the Commission s LCBF Decisions. Consistent with those LCBF Decisions, the three main steps undertaken by SCE were: (i) initial data gathering and validation; (ii) a quantitative assessment of proposals; and (iii) adjustments to selection 4 The Commission has also made rulings on various evaluation criteria in its decisions on the IOUs RPS procurement plans.

9 ADVICE 2684-E (U 338-E) December 29, 2011 based on proposals qualitative attributes. The same evaluation and selection process was used for both bundled and REC contracts. Before receiving proposals, SCE finalized criteria with the Independent Evaluator ( IE ) to determine which attributes could make proposals clear outliers. SCE then finalized the major assumptions and methodologies that drove valuation, including power and gas prices forecasts, existing and forecast resource portfolio, and firm capacity value forecast. SCE filed other assumptions, such as the Transmission Ranking Cost Report ( TRCR ), with the Commission for approval prior to the release of solicitation materials. Once SCE received proposals, SCE began an initial review for completeness and conformity with the solicitation protocol. The review included an initial screen for required submission criteria such as a conforming delivery point, minimum project size, and the submission of particular proposal package elements. SCE allowed Sellers lacking any of these items a reasonable cure period to remedy any deficiencies. Following this check for conformity, SCE determined which proposals were clear outliers. For proposals deemed clear outliers, SCE ceased any further review. For the remaining proposals, SCE conducted an additional review to determine the reasonableness of proposal parameters such as generation profiles and capacity factors. SCE worked directly with sellers to resolve any issues and ensure the data was ready for evaluation. After these reviews, SCE performed a quantitative assessment of each proposal individually and subsequently ranked them based on the proposal s benefit and cost relationship. Specifically, SCE used the total benefits and total costs to calculate the net levelized cost or Renewable Premium for each complete and conforming proposal. Benefits consisted of separate capacity and energy components, while costs included the contract payments, debt equivalence, congestion cost, and transmission cost. SCE discounted the annual benefit and cost streams to a common base year. The result of the quantitative analysis was a merit-order ranking of all complete and conforming proposals Renewable Premiums that helped define the preliminary short list. In parallel with the quantitative analysis, SCE conducted an in-depth assessment of the top proposals qualitative attributes. This analysis utilized the Project Viability Calculator to assess certain factors including the company/development team, technology, and development milestones. SCE also considered additional attributes, such as transmission area/cluster, generating facility location, seller concentration, portfolio fit of commercial on-line date, project size, and dispatchability, in the qualitative analysis. These qualitative attributes were then considered to either eliminate non-viable proposals or add projects with high viability to the final short list of proposals, or to determine tie-breakers, if any. Following its analysis, SCE consulted with its Procurement Review Group ( PRG ) regarding the final short list and specific evaluation criteria. Whether a proposal selected through this process results in an executed contract depends on the outcome of

10 ADVICE 2684-E (U 338-E) December 29, 2011 negotiations between SCE and sellers. Periodically, SCE updates the PRG regarding the progress of negotiations. SCE also consults with its PRG prior to the execution of any successfully negotiated contracts. Subsequently, SCE executes contracts and submits them to the Commission for approval via advice filings. A complete discussion of SCE s proposal evaluation and selection process and criteria is provided in Appendix F. C. Compliance With Standard Terms And Conditions In D , the Commission established a number of modifiable and nonmodifiable standard terms and conditions to be used by LSEs when contracting for RPS-eligible resources. In D , the Commission reduced the number of nonmodifiable terms to the following four terms: (1) CPUC Approval ; (2) RECs and Green Attributes ; 5 (3) Eligibility ; and (4) Applicable Law. The remaining nonmodifiable terms were converted to modifiable. 6 In D , as modified by D , the Commission added two new non-modifiable standard terms and conditions for both bundled contracts and contracts for RECs only: (1) Transfer of Renewable Energy Credits ; and (2) Tracking of RECs in WREGIS. The Commission also added a new version of the non-modifiable CPUC Approval standard term and condition for REC-only contracts, and held that the non-modifiable Applicable Law standard term and condition also applies to REC-only contracts. The Alta Wind XI Amendment does not modify any standard terms and conditions of the PPSA. The Amendment is compliant with the current Commission non-modifiable terms and conditions. D. Unbundled Renewable Energy Credit ( REC ) Transactions In D , as modified by D , the Commission held that the following types of transactions shall be treated as bundled transactions for purposes of compliance with the California RPS: (1) transactions in which energy is acquired from a generator certified as eligible for the California RPS and the generator has its first point of interconnection with the WECC interconnected transmission system with a California balancing authority; and (2) transactions in which energy is acquired from a generator certified as eligible for the California RPS and the energy from the transaction is dynamically transferred to a California balancing authority area. 7 The Commission also found that, as of the effective date of D , a transaction shall be considered a transaction that procures only RECs if the transaction either: (1) expressly transfers 5 In D , the Commission revised the non-modifiable RECs and Green Attributes standard term and condition. 6 In D , the Commission compiled the standard terms and conditions in one document and deleted the modifiable standard term and condition on supplemental energy payments. 7 SCE has filed Applications for Rehearing of both D and D which are currently pending before the Commission.

11 ADVICE 2684-E (U 338-E) December 29, 2011 only RECs and not energy from the seller to the buyer; or (2) transfers both RECs and energy from the seller to the buyer but does meet the Commission s criteria for considering a procurement transaction a bundled transaction for purposes of compliance with the California RPS as discussed previously. Under the Alta Wind XI Amendment, SCE is purchasing both RPS-eligible energy and RECs by purchasing the Additional Energy. Moreover, Alta Wind XI will have its first point of interconnection with the CAISO. Accordingly, the Alta Wind XI Amendment is a bundled transaction pursuant to D , as modified by D E. Minimum Quantity In D , the Commission held that, beginning in 2007, each LSE obligated under the RPS program must enter into long-term contracts 8 or short-term contracts with new facilities 9 for energy deliveries equivalent to 0.25 percent of that LSE s prior year s retail sales, in order to be able to count for RPS compliance energy deliveries from short-term contracts with existing facilities. The Commission also ruled that RPSobligated LSEs may carry forward contracted energy in long-term contracts and shortterm contracts with new facilities that is in excess of the 0.25 percent requirement in the year such contracts are signed, to be used for compliance for the minimum quantity requirement in future years. The Alta Wind XI Amendment is an amendment to the Alta Wind XI PPSA, which has a 23 year Term. The Alta Wind XI Amendment is a long-term contract for the entire Term of the PPSA. Therefore, the minimum quantity requirement does not apply as it pertains to Alta Wind XI. F. MPR and Above-Market Funds ( AMFs ) As discussed in more detail in Appendix C, the energy price for the Additional Energy purchase from the Alta Wind XI Amendment to the Alta Wind XI PPSA is well below the 2009 MPR. The AMF calculator for the Alta Wind XI Amendment can be found in Confidential Appendix G. G. Interim Emissions Performance Standard The California Legislature passed Senate Bill ( SB ) 1368 on August 31, 2006, and Governor Schwarzenegger signed the bill into law on September 29, Section 2 of SB 1368 adds Public Utilities Code Section 8341(a), which provides: 8 Long-term contracts are contracts of at least 10 years duration. See Cal. Pub. Util. Code New facilities are facilities that commenced commercial operation on or after January 1, See Cal. Pub. Util. Code

12 ADVICE 2684-E (U 338-E) December 29, 2011 No load-serving entity or local publicly owned electric utility may enter into a long-term financial commitment unless any baseload generation supplied under the long-term financial commitment complies with the greenhouse gases emission performance standard established by the commission, pursuant to subdivision (d). 10 In order to implement the provisions of SB 1368, the Commission instituted Rulemaking That proceeding resulted in the establishment of a greenhouse gas ( GHG ) emissions performance standard ( EPS ), for carbon dioxide ( CO 2 ). In the final decision implementing the GHG EPS, the Commission noted, SB 1368 establishes a minimum performance requirement for any long-term financial commitment for baseload generation that will be supplying power to California ratepayers. The new law establishes that the GHG emissions rates for these facilities must be no higher than the GHG emissions rate of a combined-cycle gas turbine (CCGT) powerplant. 11 In D , the Commission further explains: SB 1368 describes what types of generation and financial commitments will be subject to the EPS ( covered procurements ). Under SB 1368, the EPS applies to baseload generation, but the requirement to comply with it is triggered only if there is a long-term financial commitment by an LSE. The statute defines baseload generation as electricity generation from a powerplant that is designed and intended to provide electricity at an annualized plant capacity factor of at least 60%.... For baseload generation procured under contract, there is a long-term commitment when the LSE enters into a new or renewed contract with a term of five or more years. 12 In D , the Commission found that it would be redundant and costly to require LSEs to demonstrate EPS compliance for each new ownership investment, new contract or renewed contract with baseload renewable resources if the record clearly demonstrated that these resources comply with the EPS on a net emissions basis. 13 The Commission found that the net GHG emissions from the following renewable resources/technologies meet the interim EPS: (1) solar thermal electric (with up to 25 percent gas heat input); (2) wind; (3) geothermal, with or without reinjection; and (4) generating facilities using biomass (e.g., agricultural and wood waste, landfill gas) that would otherwise be disposed of utilizing open burning (uncontrolled, gas collection with 10 Cal. Pub. Util. Code 8341(a). 11 D at pp Id. at p Id. at pp , Finding of Fact No. 117.

13 ADVICE 2684-E (U 338-E) December 29, 2011 flare, gas collection with engine), forest accumulation, landfill, spreading, or composting. 14 The Alta Wind XI PPSA and the Alta Wind XI Amendment are exempt from EPS regulations because the Project has an expected annualized capacity factor of 43.5 percent, which is well below the threshold baseload capacity factor of 60 percent, above which the EPS rules would apply. H. Procurement Review Group ( PRG ) Participation SCE s PRG was formed on or around September 10, Participants include representatives from the Commission s Energy and Legal Divisions, the Division of Ratepayer Advocates, The Utility Reform Network, California Utility Employees, the Union of Concerned Scientists, and the California Department of Water Resources. In a conference call held on November 8, 2011, SCE advised the PRG of the proposed Alta Wind XI Amendment. There were no action items stemming from this call. I. Independent Evaluator ( IE ) The IE for this transaction was Sedway Consulting, Inc. The IE reviewed traffic, several versions of the proposed contract, and other documents exchanged by the parties. The IE also participated in the PRG review of the Amendment. Because these are Amendments to existing and approved PPSAs, an IE Report is not required and is not included. III. PROJECT DEVELOPMENT STATUS A. Company/Development Team The Developer has multiple projects totaling approximately 1,020 MW of wind power capacity in the Tehachapi, California region that are either operating or in commissioning. These projects sell Product to SCE under long-term PPSAs. Currently, Alta Wind I V are built and operating under the PPSAs. Alta Wind VI and VIII are built and are currently in commissioning. Alta Wind VII, IX, X, and XI have executed PPSAs, and each has an Expected Initial Operation Date of January 1, 2013 under their original PPSAs. The Developer is well-known in the renewable energy industry in California and elsewhere, and it has an accomplished history as a developer, owner, and operator of renewable energy projects. 14 Id. at p. 246, Finding of Fact No. 118; and at pp , Conclusion of Law No. 35.

14 ADVICE 2684-E (U 338-E) December 29, 2011 B. Technology 1. Technology Type and Level of Technology Maturity The Project expects to utilize readily available and proven wind turbine technology. The variations of the machines being considered by the Developer represent the next generation evolution of the proven machines. 2. Quality of Renewable Resource The Alta Wind XI Project is located in the Tehachapi Wind Resource Area, which is an area that is well-recognized for its robust wind resources as demonstrated by several sources of wind generation throughout the region. As SCE determined before executing the Alta Wind XI PPSA in 2011, SCE believes that the Alta Wind XI Project will be able to meet the terms of the Alta Wind XI PPSA and Alta Wind XI Amendment given SCE s independent understanding of the quality of the renewable resources. 3. Other Resources Required The Alta Wind XI Project may require water for use in ancillary road maintenance or blade cleaning. The water will be provided by local water providers. SCE expects that water used for the site roads will be absorbed into the ground and back into the natural underground aquifers, where it will be recycled naturally. C. Development Milestones 1. Site Control The Developer has secured 100% site control to support the Alta Wind XI project, including full site and substation access as demonstrated to SCE before executing the Alta Wind XI PPSA. The Alta Wind XI Amendment will not require the Developer to establish incremental site control. 2. Equipment Procurement The Developer has extensive experience in designing, building, financing, and operating wind energy plants. Its operational track record demonstrates that it is well qualified to ensure the successful procurement of equipment needed to build the Alta Wind XI Projects. The Amendment will not require Developer to engage in material, incremental procurement. A discussion of wind turbine procurement for Alta Wind XI is included in the Appendix C.

15 ADVICE 2684-E (U 338-E) December 29, Permitting/Certifications Status The Alta Wind XI Amendment does not require the Developer to modify or attain additional permits, nor does it affect the certification status of Alta Wind XI. 4. Production Tax Credits ( PTCs ) / Investment Tax Credits ( ITCs ) The Alta Wind XI Amendment does not affect the tax credit status of Alta Wind XI. 5. Transmission Because the nameplate rating of Alta Wind XI will not increase, additional infrastructure is not required to deliver the increase in energy production associated with the Alta Wind XI Amendment. D. Financing plan The Alta Wind XI Amendment to the PPSAs does not materially affect the Developer s financing plan for the Project. IV. CONTINGENCIES AND MILESTONES Because the nameplate rating of Alta Wind XI is not increasing under the Alta Wind XI Amendment, additional infrastructure is not required to deliver the increase in energy production. The contingencies and milestones associated with the Alta Wind XI are unaffected by the Alta Wind XI Amendment. V. REQUEST FOR COMMISSION APPROVAL SCE requests that the Commission issue a resolution no later than March 31, 2012, approving the Alta Wind XI Amendment, as well as the resulting amended Alta Wind XI PPSA, in their entirety and that the resolution include the following specific findings: 1. The Alta Wind XI Amendment, as well as the resulting amended Alta Wind XI PPSA, are reasonable and prudent for all purposes and are approved in their entirety; 2. The Alta Wind XI Amendment, as well as the resulting amended Alta Wind XI PPSA, are consistent with SCE s 2011 RPS Procurement Plan; 3. The Alta Wind XI Amendment, as well as the resulting amended Alta Wind XI PPSA, are compliant with the Emissions Performance Standard; 4. Any procurement pursuant to the Alta Wind XI Amendment, as well as the resulting amended Alta Wind XI PPSA, constitute procurement from an eligible renewable energy resource for purposes of determining SCE s

16 ADVICE 2684-E (U 338-E) December 29, 2011 compliance with any obligation that it may have to procure eligible renewable energy resources pursuant to the California Renewables Portfolio Standard (Public Utilities Code Section et seq.), Decision , or other applicable law; 5. SCE s entry into and the administrative costs of the Alta Wind XI Amendment, as well as the resulting amended Alta Wind XI PPSA, are reasonable and prudent for all purposes, including, but not limited to, recovery in rates of payments made pursuant to the Alta Wind XI Amendment, as well as the resulting amended Alta Wind XI PPSA, subject only to further review with respect to the reasonableness of SCE s administration thereof; and 6. Any other and further relief as the Commission finds just and reasonable. VI. TIER DESIGNATION Pursuant to D , Energy Industry Rule 5.3, SCE submits this Advice Letter with a Tier 3 designation (effective after Commission approval). VII. EFFECTIVE DATE This Advice Letter will become effective upon Commission approval, which SCE requests to occur on or before March 31, VIII. NOTICE Anyone wishing to protest this Advice Letter may do so by letter via U.S. Mail, facsimile, or electronically, any of which must be received by the Energy Division and SCE no later than 20 days after the date of this Advice Letter. Protests should be mailed to: Akbar Jazayeri Vice President of Regulatory Operations Southern California Edison Company 2244 Walnut Grove Avenue, Quad 3D Rosemead, California Facsimile: (626) AdviceTariffManager@sce.com

17 ADVICE 2684-E (U 338-E) December 29, 2011 Leslie E. Starck Senior Vice President, Regulatory Affairs c/o Karyn Gansecki 601 Van Ness Avenue, Suite 2030 San Francisco, California Facsimile: (415) Karyn.Gansecki@sce.com Marc Ulrich Vice President of Renewable and Alternative Power Southern California Edison Company 2244 Walnut Grove Avenue, Quad 4D Rosemead, CA Facsimile: (626) Marc.Ulrich@sce.com With a copy to: Annette Gilliam Senior Attorney Southern California Edison Company 2244 Walnut Grove Avenue, 3 rd Floor Rosemead, CA Facsimile: (626) Annette.Gilliam@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 shall be submitted expeditiously. In accordance with Section 4 of GO 96-B, SCE is furnishing copies of this Advice Letter to the interested parties shown on the attached R , R , and GO 96-B service lists. Address change requests to the GO 96-B service list should be directed to AdviceTariffManager@sce.com or at (626) For changes to any other service list, please contact the Commission s Process Office at (415) or at ProcessOffice@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 Letter at SCE s corporate headquarters. To view other SCE advice letters filed with the Commission, log on to SCE s web site at

18 ADVICE 2684-E (U 338-E) December 29, 2011 All questions concerning this Advice Letter should be directed to Laura Genao at (626) ( Laura.Genao@sce.com). Southern California Edison Company Akbar Jazayeri AJ:lg:jm Enclosures

19 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: James Yee 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) #: 2684-E Tier Designation: 3 Subject of AL: Amendments to Power Purchase and Sale Agreements with Terra-Gen Power for Renewable Wind Energy from Alta Wind XI Keywords (choose from CPUC listing): Compliance 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 1 : Confidential treatment requested? Yes No See Appendix H 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: Resolution Required? Yes No Requested effective date: 3/31/12 No. of tariff sheets: -0- Estimated system annual revenue effect: (%): Estimated system average rate effect (%): 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: Service affected and changes proposed 1 : Pending advice letters that revise the same tariff sheets: 1 Discuss in AL if more space is needed.

20 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 Ave., San Francisco, CA and Akbar Jazayeri Vice President of Regulatory Operations Southern California Edison Company 2244 Walnut Grove Avenue Rosemead, California Facsimile: (626) Leslie E. Starck Senior Vice President, Regulatory Affairs c/o Karyn Gansecki Southern California Edison Company 601 Van Ness Avenue, Suite 2030 San Francisco, California Facsimile: (415) Marc Ulrich Vice President of Renewable and Alternative Power Southern California Edison Company 2244 Walnut Grove Avenue, Quad 4D Rosemead, CA Facsimile: (626) With a copy to: Annette Gilliam Senior Attorney Southern California Edison Company 2244 Walnut Grove Avenue, 3 rd Floor Rosemead, CA Facsimile: (626) Annette.Gilliam@sce.com

21 Confidential Appendix A Consistency with Commission Decisions and Rules and Project Development Status Confidential Protected Materials Public Disclosure Prohibited

22 Confidential Appendix B 2011 Solicitation Overview Confidential Protected Materials Public Disclosure Prohibited

23 Confidential Appendix C Contract Summary Confidential Protected Materials Public Disclosure Prohibited

24 Confidential Appendix D Alta Wind XI Amendment No. 2 Confidential Protected Materials Public Disclosure Prohibited

25 Confidential Appendix E Contribution Toward RPS Goals Confidential Protected Materials Public Disclosure Prohibited

26 Confidential Appendix F SCE s Written Description of RPS Proposal Evaluation and Selection Process and Criteria Confidential Protected Materials Public Disclosure Prohibited

27 Public Appendix F

28 Appendix F Southern California Edison Company s ( SCE ) Written Description of 2011 Renewables Portfolio Standard ( RPS ) Proposal Evaluation and Selection Process and Criteria I. Introduction A. Note relevant language in statute and CPUC decisions approving LCBF process and requiring LCBF Reports Under the direction of the California Public Utilities Commission (the Commission or CPUC ), SCE conducts annual solicitations for the purpose of procuring power from eligible renewable energy resources to meet California s RPS. SCE evaluates and ranks proposals based on least-cost best-fit ( LCBF ) principles that comply with criteria set forth by the Commission in Decision ( D. ) and D (the LCBF Decisions ). 1 See also Cal. Pub. Util. Code (a)(2)(B). 2 SCE and the other IOUs are required to file a 2011 RPS Short List Report including, among other things, a description of their evaluation criteria and selection processes pursuant to D B. Describe goals of IOU s bid evaluation and selection criteria and processes The goal of SCE s evaluation and selection criteria and processes is to provide decision metrics so that SCE can procure renewable energy economically, while providing the most value to its customers. The LCBF analysis evaluates both quantitative and qualitative aspects of each proposal to estimate its value to SCE s customers and its relative value in comparison to other proposals. 1. Describe how need was determined for this solicitation. Comment specifically on whether, and to what extent, you considered other procurement options (e.g. UOG, solar PV program, feed-in tariffs, RAM, etc.) to meet IOU s overall need stated in its Procurement Plan. In determining need, SCE examined the time period between 2011 and With respect to renewable energy goals, because the rules implementing SB 2 (1x) have not yet been established, SCE assumed the upper bounds of renewable energy goals under SB 2 (1x) with a 20% goal for , a straight-line to a 25% goal in 2016, and a straight-line to a 33% goal in 2020 and each year thereafter. Targets were based on SCE s October 2010 bundled sales forecast. These goals were measured against SCE s forecast of renewable generation. Projected renewable generation assumed 100% delivered energy from executed contracts that were already 1 The Commission has also made rulings on various evaluation criteria in its decisions on the investor-owned utilities ( IOUs ) RPS procurement plans. 2 With the enactment of Senate Bill ( SB ) 2 (1x), the statutory section on LCBF criteria has moved to Public Utilities Code Section (a)(4)(A). - I-1 -

29 on-line and 60% delivered energy from executed contracts not yet on-line, recontracting of existing renewable projects less than or equal to 20 MW at a 100% success rate, and a forecast to meet goals for generic feed-in tariff programs (i.e., the Renewable Auction Mechanism ( RAM ) program, the Solar Photovoltaic Program ( SPVP ), and the California Renewable Energy Small Tariff ( CREST ) program). Projects currently under negotiation were not included in the forecast. Moreover, expiring renewable projects greater than 20MW had an assumed recontracting rate of 0%. SCE further assumed that all volumes in excess of renewable energy goals could be banked. Based on a comparison of the goals from 2011 to 2025 against forecasted renewable generation, SCE arrived at a final need number by determining how much renewable energy SCE would have to procure to close SCE s short position for that time period by procuring ratably from now until in In other words, SCE s need did not equal the amount of renewable energy needed to meet renewable energy goals through Instead, it was based on how much renewable energy SCE would have to procure to meet all of its goals through 2025 if it purchased the same amount every year until Explain any assumptions made regarding expiring projects, projects under contract but not online, projects still shortlisted from previous solicitations, bilaterals under negotiation, and distributed generation programs (e.g. RAM, solar PV program, etc.). Please see response to I.B.1. above. II. Bid Evaluation and Selection Criteria While assumptions and methodologies have evolved slightly over time, the basic components of SCE s evaluation and selection criteria and process for RPS contracts were established by the Commission s LCBF Decisions. Consistent with those LCBF Decisions, the three main steps undertaken by SCE were: (i) initial data gathering and validation, (ii) a quantitative assessment of proposals, and (iii) adjustments to selection based on proposals qualitative attributes. The same evaluation and selection process was used for both bundled and renewable energy credit ( REC ) contracts. Prior to receiving proposals, SCE finalized criteria with the Independent Evaluator ( IE ) to determine which attributes could make proposals clear outliers. SCE then finalized the major assumptions and methodologies that drove valuation, including power and gas prices forecasts, existing and forecast resource portfolio, and firm capacity value forecast. Other assumptions, such as the Transmission Ranking Cost Report ( TRCR ), were filed with the Commission for approval prior to the release of solicitation materials. Once proposals were received, SCE began an initial review for completeness and conformity with the solicitation protocol. The review included an initial screen for required submission criteria such as a conforming delivery point, minimum project size, and the submission of particular proposal package elements. Sellers lacking any of these items were - I-2 -

30 allowed a reasonable cure period to remedy any deficiencies. Following this check for conformity, SCE determined which proposals were clear outliers. For proposals deemed clear outliers, SCE concluded any further review. For the remaining proposals, SCE conducted an additional review to determine the reasonableness of proposal parameters such as generation profiles and capacity factors. SCE worked directly with sellers to resolve any issues and ensure the data was ready for evaluation. After these reviews, SCE performed a quantitative assessment of each proposal individually and subsequently ranked them based on the proposal s benefit and cost relationship. Specifically, the total benefits and total costs were used to calculate the net levelized cost or Renewable Premium per each complete and conforming proposal. Benefits were comprised of separate capacity and energy components, while costs included the contract payments, debt equivalence, congestion cost, and transmission cost. SCE discounted the annual benefit and cost streams to a common base year. The result of the quantitative analysis was a merit-order ranking of all complete and conforming proposals Renewable Premiums that helped define the preliminary short list. In parallel with the quantitative analysis, SCE conducted an in-depth assessment of the top proposals qualitative attributes. This analysis utilized the Project Viability Calculator to assess certain factors including the company/development team, technology, and development milestones. Additional attributes such as transmission area/cluster, generating facility location, seller concentration, portfolio fit of commercial on-line date, project size, and dispatchability were also considered in the qualitative analysis. These qualitative attributes were then considered to either eliminate non-viable proposals or add projects with high viability to the final short list of proposals, or to determine tie-breakers, if any. Following its analysis, SCE consulted with its Procurement Review Group ( PRG ) regarding the final short list and specific evaluation criteria. Whether a proposal selected through this process results in an executed contract depends on the outcome of negotiations between SCE and sellers. Periodically, SCE updates the PRG regarding the progress of negotiations. SCE also consults with its PRG prior to the execution of any successfully negotiated contracts. Subsequently, SCE executes contracts and submits them to the Commission for approval via advice letter filings. A. Description of Criteria 1. List and discuss the quantitative and qualitative criteria used to evaluate and select bids. This section should include a full discussion of the following: a. Market valuation SCE evaluated the quantifiable attributes of each proposal individually and subsequently ranked them based on the proposal s benefit and cost relationship, specifically the net levelized cost of the project or Renewable Premium. These individual quantitative components included - I-3 -