SUBJECT: Submission of Contract for Procurement of Renewable Energy from SCE's 2013 Renewables Portfolio Standard Solicitation

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1 STATE OF CALIFORNIA Edmund G. Brown Jr., Governor PUBLIC UTILITIES COMMISSION 505 VAN NESS AVENUE SAN FRANCISCO, CA April 28, 2015 Advice Letter 3119-E Russell G. Worden Director, State Regulatory Operations Southern California Edison Company 8631 Rush Street Rosemead, CA SUBJECT: Submission of Contract for Procurement of Renewable Energy from SCE's 2013 Renewables Portfolio Standard Solicitation Dear Mr. Worden: Advice Letter 3119-E is effective as of March 12, 2015, per Resolution E-4707 approved on March 12, Sincerely, Edward Randolph Director, Energy Division

2 Megan Scott-Kakures Vice President, Regulatory Operations ` October 27, 2014 ADVICE 3119-E (U 338-E) PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA ENERGY DIVISION SUBJECT: Submission of Contract for Procurement of Renewable Energy From SCE s 2013 Renewables Portfolio Standard Solicitation I. INTRODUCTION A. Purpose of the Advice Letter Southern California Edison Company ( SCE ) submits this Advice Letter in compliance with California Public Utilities Code Section et seq. (the RPS Legislation ) seeking approval of a Renewables Portfolio Standard ( RPS ) power purchase agreement (the Panoche Valley Contract ) between SCE and Panoche Valley Solar, LLC ( Seller or Panoche Valley ), a Delaware limited liability company. The following table summarizes the Panoche Valley Contract: Seller Panoche Valley Generation Type Solar photovoltaic ( PV ) single axis tracking Size (MW) Estimated Average Energy (GWh/Yr) Forecasted Commercial Operation Date Term of Agreement (Years) 666 January 1, SCE requests that the California Public Utilities Commission ( Commission or CPUC ) issue a resolution containing findings in the form requested in this Advice Letter within six months (April 27, 2015). P.O. Box Rush Street Rosemead, California (626) Fax (626)

3 ADVICE 3119-E (U 338-E) October 27, 2014 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: Consistency with Commission Decisions and Rules and Project Development Status 2013 Solicitation Overview Confidential/Public Appendix C: Independent Evaluator Report Confidential Appendix D: Confidential Appendix E: Confidential Appendix F: Contract Summary Comparison of the Panoche Valley Contract with SCE s 2013 Pro Forma Renewable Power Purchase and Sale Agreement Panoche Valley Contract Confidential/Public Appendix G: Renewable Net Short Calculations Appendix H: Appendix I: Confidentiality Declaration Proposed Protective Order B. Subject of the Advice Letter The project ( Panoche Valley Project ) that is contemplated by the Panoche Valley Contract is a proposed MW solar PV facility. The project is to be located at 721 Little Panoche Road, Paicines, California (the Site ). The project will interconnect at the Q kV Switching Station located approximately 15 miles west of the existing Panoche substation. The Seller under the Panoche Valley Contract is Panoche Valley, a limited liability company. The Panoche Valley Contract is a new contract that originated from SCE s 2013 RPS solicitation.

4 ADVICE 3119-E (U 338-E) October 27, 2014 C. General Project Description Project Name Panoche Valley Project Technology Solar PV Capacity (MW) Capacity Factor (Term Year 1) 32.3% Expected Generation (GWh/Year) Initial Commercial Operation Date January 1, 2019 Date contract Delivery Term begins January 1, 2019 Delivery Term (Years) 20 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 ) 3 Type of cooling, if applicable New Paicines, CA CAISO CREZ 55 Westlands N/A D. Project Location The Site is located in San Benito County, California, which is approximately 43 miles southeast of Hollister, California. The Site is currently used as graze land for cattle. Refer to Appendix A, Section C.3 for information on relevant permits. Refer to Appendix F, Exhibit B for a map of the Panoche Valley Project s location. 1 See Appendix D, Section D under Capacity for further details on the Panoche Valley Project s capacity. 2 This expected generation represents the annual average of degraded generation that SCE expects to make payments on over the contract term. 3 Information about RETI is available at:

5 ADVICE 3119-E (U 338-E) October 27, 2014 E. General Deal Structure The Panoche Valley Contract is based on SCE s 2013 Pro Forma Renewable Power Purchase and Sale Agreement, which was accepted by the Commission in Decision ( D. ) on November 14, SCE is purchasing all electric energy produced by the Panoche Valley Project through the contract term, net of station use (if any), and all green attributes, capacity attributes, and resource adequacy benefits generated by, associated with, or attributable to the Panoche Valley Project. The delivery point is at the Q kV Switching Station located within Pacific Gas and Electric Company s ( PG&E ) transmission service territory. Additional information regarding the deal structure of the Panoche Valley Contract is provided in Appendix D. The Panoche Valley Project also met all of the eligibility requirements and preferred project characteristics for SCE s 2013 Request for Proposals ( RFP ), which is described in further detail in Section 3. The Panoche Valley Project is expected to deliver a portfolio content category 1 ( Category 1 ) 5 product, and has a first point of interconnection within a California Balancing Authority. F. RPS Statutory Goals and Requirements By providing renewable energy from an eligible renewable energy resource ( ERR ), as defined in the RPS Legislation, the Panoche Valley Project is consistent with, and contributes to, the RPS program s statutory goals. Pursuant to Public Utilities Code Section (b), the Legislature determined that procurement of electricity products from ERRs, such as the Panoche Valley Project, provides unique benefits to California, including among other things, displacing fossil fuel consumption within the state, reducing air pollution in the state, meeting the state s climate change goals by reducing emissions of greenhouse gases associated with electrical generation, and meeting the state s need for a diversified and balanced energy generation portfolio. Based on SCE s analysis of its renewable net short ( RNS ) position, SCE projects a long-term renewable procurement need in the third compliance period and beyond. Consistent with this need, the Panoche Valley Contract will provide long-term RPS and portfolio category 1-eligible energy over a twenty-year term starting in SCE s RNS calculations are included in Appendix G. 4 D at 69 (Ordering Paragraph 1). 5 As defined in Public Utilities Code Section (b)(1) and D

6 ADVICE 3119-E (U 338-E) October 27, 2014 G. Confidentiality SCE is requesting confidential treatment of Appendices A, B, and D through F, and the confidential versions of Appendices C and G to this Advice Letter. 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 Tristan Reyes Close in SCE s Law Department at Tristan.ReyesClose@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 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 , 6 and is required to be filed by advice letter as part of the process for obtaining Commission approval of RPS power purchase and sale agreements. SCE would object if the information were disclosed in an aggregated format. The information in this Advice Letter 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 entitled to confidentiality protection pursuant to D (as provided in the Investor-Owned Utility ( IOU ) Matrix). 7 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 2013 RPS Procurement Plan 1. SCE s 2013 RPS Procurement Plan Was Approved by the Commission and SCE Adhered to Commission Guidelines for Filing and Revisions SCE filed its 2013 RPS Procurement Plan on June 28, On August 28, 2013, SCE filed a motion to amend its 2013 RPS Procurement Plan, which included an amended 2013 RPS Procurement Plan as an attachment. 6 D at 80 (Ordering Paragraphs 1 and 2). 7 Id., Appendix 1.

7 ADVICE 3119-E (U 338-E) October 27, 2014 In D , the Commission conditionally accepted SCE s 2013 RPS Procurement Plan, including the solicitation materials for SCE s 2013 RPS solicitation. 8 The Commission also ordered SCE to make certain changes to its 2013 RPS Procurement Plan and to file a final plan by December 4, On December 4, 2013, SCE filed and served its final 2013 RPS Procurement Plan. On December 13, 2013, SCE re-filed and served its final 2013 RPS Procurement Plan to make some minor corrections. Consistent with the schedule set forth in D , SCE issued its 2013 RFP on January 6, Summary of SCE s Assessment of Portfolio Needs and Preferred Project Characteristics As explained in SCE s 2013 RPS Procurement Plan and shown in SCE s RNS calculations, SCE has a long-term need for renewable energy in the third compliance period and beyond. In the 2013 RPS Procurement Plan, SCE received approval to conduct a targeted solicitation to meet SCE s need for renewable resources. In its 2013 RPS RFP, SCE accepted proposals for projects with commercial operation dates of January 1, 2016 or later, and limited its procurement to Category 1 products. SCE also required that projects have either a Phase II Interconnection Study or an equivalent or better process or exemption in order to submit a proposal. Projects with a contract capacity of 1.5 MW or greater were eligible to participate in SCE s 2013 RPS RFP. However, SCE indicated a strong preference for projects with contract capacities: (1) greater than 20 MW - for projects located within the service territories of SCE, PG&E, and San Diego Gas & Electric Company ( SDG&E ) and directly interconnected to the California Independent System Operator ( CAISO ) or the distribution systems of SCE, PG&E, or SDG&E; (2) 3 MW or greater - for projects located outside the service territories of SCE, PG&E, and SDG&E and directly interconnected to the transmission or distribution system of a California Balancing Authority; or (3) 1.5 MW or greater - for projects located within the Western Los Angeles sub-area of the Los Angeles basin local reliability area, or in the Moorpark sub-area of the Big Creek/Ventura local reliability area. Additionally, for in-state generating facilities that are, or will be, interconnected to the CAISO, SCE required that the delivery point be where the generating facility connects to the CAISO controlled grid. For in-state generating facilities that are, or will be interconnected to a California Balancing Authority other than the CAISO, SCE required the delivery point be the intertie point where the seller s transmission provider ties to the CAISO. 8 D at 69 (Ordering Paragraph 1).

8 ADVICE 3119-E (U 338-E) October 27, 2014 SCE decided on the total projected contract energy it signed based on several factors laid out in the 2013 RPS Procurement Plan, including projected long- and short-term needs, the impact of reducing federal tax credits, and expected contract success rates. 3. The Panoche Valley Contract Is Consistent With SCE s 2013 RPS Procurement Plan, Portfolio Needs, and Preferred Project Characteristics The Panoche Valley Contract aligns with the portfolio needs identified in SCE s 2013 RPS Procurement Plan. Specifically, the Panoche Valley Contract will provide renewable energy from a new MW solar PV facility starting in 2019 for a 20-year term, consistent with SCE s long-term renewable procurement need in the third compliance period and beyond. The Panoche Valley Project also met all of the eligibility requirements and preferred project characteristics for SCE s 2013 RFP. The Panoche Valley Project s first point of interconnection will be with the CAISO, and thus the Panoche Valley Contract will provide Category 1 products. Additionally, the Panoche Valley Project s MW contract capacity is consistent with SCE s preference for projects with contract capacities of 20 MW or greater (for projects located within the service territories of SCE, PG&E, and SDG&E and directly interconnected to the CAISO or the distribution systems of SCE, PG&E, or SDG&E). The Panoche Valley Project will also satisfy the delivery requirements for SCE s 2013 RFP because the project s delivery point will be where the project connects to the CAISO controlled grid. 4. The Panoche Valley Contract Is Consistent With SCE s Portfolio Optimization Strategy As described in detail in SCE s 2013 RPS Procurement Plan, 9 the objective of SCE s renewables portfolio optimization strategy is to minimize costs to its customers while ensuring that RPS procurement goals are met or exceeded. SCE determines the procurement target for each RPS solicitation based in part on its assessment of SCE s renewable procurement position and need, i.e., SCE s RNS. This includes a calculation of SCE s net short or long renewables position and SCE s bank. SCE carefully evaluates its renewable procurement need by assessing bundled retail sales, the performance and variability of existing generation, the likelihood of new generation achieving commercial operation, expected commercial on-line dates, technology mix, expected 9 See Southern California Edison Company s (U 338-E) Final 2013 Renewables Portfolio Standard Procurement Plan, December 4, 2013 ( Final 2013 RPS Plan ), at

9 ADVICE 3119-E (U 338-E) October 27, 2014 curtailment, and the impact of pre-approved procurement programs, among other factors. The Panoche Valley Contract meets the primary objectives of SCE s portfolio optimization strategy. The Panoche Valley Contract is expected to start delivery in January 2019, which will help meet SCE s renewable procurement need in the third compliance period and beyond. Additional information is included in Appendix A, Section A.7. 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 ). 10 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 in its evaluation and selection process were: (i) initial data gathering and validation; (ii) a quantitative assessment of proposals; and (iii) adjustments to selections based on proposals qualitative attributes. SCE applied these criteria to the proposals received in its 2013 RPS RFP in order to establish a short list of proposals from sellers with whom SCE would engage in a final round of contract discussions. Prior to receiving proposals, SCE finalized the short list selection criteria with the Independent Evaluator ( IE ). SCE then finalized the major assumptions and methodologies that underlie SCE s valuation, including power and gas price forecasts, SCE s existing and forecast resource portfolio, and SCE s firm capacity value forecast. SCE also finalized and published congestion adders for sellers to use in preparing their proposals. Once proposals were received, SCE began an initial review of proposals for completeness and conformity with the solicitation protocol. The review included an initial screen for required submission criteria such as a conforming delivery point, commercial on-line date in 2016 or later, a valid interconnection study, 10 The Commission has also made rulings on various evaluation criteria in its decisions on the IOUs RPS procurement plans.

10 ADVICE 3119-E (U 338-E) October 27, 2014 minimum project size, and the submission of particular proposal package elements. Sellers lacking any of these items were allowed a reasonable cure period to remedy any deficiencies. Following this check for conformity, 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, energy and congestion components, while costs included the contract payments, debt equivalence, congestion cost, and transmission cost. SCE discounted the monthly benefit and cost streams to a common base date. 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 qualitative attributes of the top proposals with a competitive renewable premium. This analysis utilized the Project Viability Calculator 11 to assess certain factors, including the company/development team, technology, and development milestones. Additional attributes such as transmission area, facility interconnection process progress, portfolio fit of commercial operation date, resource diversity, and counterparty concentration 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 or other beneficial qualitative attributes to the final short list of proposals, or to break ties, if any. Following both its quantitative and qualitative analysis, SCE consulted with its Procurement Review Group ( PRG ) regarding the final short list and specific evaluation criteria. SCE then negotiated with the shortlisted sellers for a 90 day period. At the end of the contract negotiation period, all sellers that completed negotiations had a one-time opportunity to submit new pricing. SCE then made final selections based on the new pricing and consulted with its IE and the PRG prior to the execution of the successfully negotiated contracts. SCE s 2013 RPS Short List Report was submitted to the Commission on April 21, 2014 in Advice 3029-E. SCE filed a supplement to Advice 3029-E to identify two projects that withdrew from the short list on June 26, The Energy Division 11 The results of the Project Viability Calculator are included in Appendix A.

11 ADVICE 3119-E (U 338-E) October 27, 2014 approved SCE s 2013 RPS Short List Report effective as of July 8, Using SCE s LCBF methodology, the Panoche Valley Project compared favorably to other proposals received in the 2013 RPS RFP as well as other procurement options available to SCE. 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 retail sellers when contracting for RPS-eligible resources. 12 In D , the Commission reduced the number of non-modifiable terms to the following four terms: (1) CPUC Approval; (2) RECs and Green Attributes; 13 (3) Eligibility; and (4) Applicable Law. 14 The remaining non-modifiable terms were converted to modifiable terms. 15 In D , as modified by D , the Commission added two new non-modifiable standard terms and conditions for both bundled contracts and contracts for renewable energy credits ( RECs ) only: (1) Transfer of Renewable Energy Credits; and (2) Tracking of RECs in WREGIS. 16 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. In D , the Commission updated the non-modifiable RECs and Green Attributes term to a modifiable Bioenergy Transactions term. 17 The Panoche Valley Contract includes all non-modifiable standard terms and conditions for bundled contracts without change as indicated in the table below. 12 D at 20 (Ordering Paragraph 1) and Appendix A. 13 In D , Appendix B, the Commission revised the non-modifiable RECs and Green Attributes standard term and condition. 14 D at 33 (Ordering Paragraph 1.a). 15 Id. at 34 (Ordering Paragraph 1.b). Subsequently, 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. 16 D at 46 (Ordering Paragraph 3.P). 17 D at 24-25, 70 (Ordering Paragraph 6).

12 ADVICE 3119-E (U 338-E) October 27, 2014 NON-MODIFIABLE TERM STC 1: CPUC Approval CONTRACT SECTION NUMBER Exhibit A, #56 (See also Section 2.01(a)) CONTRACT PAGE NUMBER Page 5 of Exhibit A (See also page 9 of the contract) STC 6: Eligibility 10.02(b) 57 STC 17: Applicable Law STC REC 1: Transfer of RECs 10.02(c) 57 STC REC 2: Tracking of RECs in WREGIS 10.02(e) 57 A comparison of the Panoche Valley Contract against SCE s 2013 Pro Forma Renewable Power Purchase and Sale Agreement is included as Appendix E. D. Portfolio Content Category Claim and Upfront Showing In D , the Commission found that [a] retail seller claiming that procurement for compliance with the California renewables portfolio standard from a procurement contract or ownership agreement signed... on or after June 1, 2010 counts in the portfolio content category described in Pub. Util. Code (b)(1), must provide information to the Director of Energy Division sufficient to demonstrate that the generation facility from which the electricity is procured is certified as eligible for the California renewables portfolio standard. 18 Additionally, retail sellers claiming procurement counts as a Category 1 product must provide information to the Energy Division Director sufficient to demonstrate that the generating facility from which the electricity is procured meets the statutory definition of Category 1 products set forth in Public Utilities Code Section (b)(1). 19 One way to make this demonstration is to show that the facility has its first point of interconnection to the Western Electricity Coordinating Council transmission grid within the metered boundaries of a California balancing authority area. 20 The retail seller must also demonstrate that the renewable energy credits originally associated with the electricity have not been unbundled and transferred to another owner, and that all other 18 D at (Ordering Paragraph 1). 19 See id. 20 Id.

13 ADVICE 3119-E (U 338-E) October 27, 2014 requirements for procurement for compliance with the California renewables portfolio standard are met by the procurement. 21 Furthermore, D provides that the utilities, in seeking approval of contracts for procurement, should enable the Commission to evaluate the following: the claimed portfolio content category of the proposed procurement; the risks that the procurement will not ultimately be classified in the claimed portfolio content category; the value to ratepayers of the procurement as proposed and the value to ratepayers if the procurement is not ultimately classified in the claimed portfolio content category. 22 Pursuant to the provisions in the Panoche Valley Contract, SCE will procure energy, capacity and associated renewable energy attributes generated from a California-based eligible renewable resource with a first point of interconnection within the CAISO. In addition, per the contract, the Panoche Valley Project must obtain and keep current California Energy Commission ( CEC ) certification as an ERR, 23 as well as perform all actions necessary to effectuate the transfer of RECs to SCE in the Western Renewable Energy Generation Information System ( WREGIS ). The RECs associated with the electricity from the Panoche Valley Project are yet to be delivered and therefore have not been unbundled or transferred to another owner. Such RECs will be transferred to SCE pursuant to the terms of the Panoche Valley Contract. Accordingly, this is a Category 1 transaction pursuant to the Public Utilities Code Section (b)(1) and D A risk that the Panoche Valley Project will fail to deliver Category 1 RECs has not been identified. 21 Id. at 76 (Ordering Paragraph 1). 22 Id. at 80 (Ordering Paragraph 9). 23 The Project must qualify and be certified by the CEC as an ERR as such term is defined in Public Utilities Code Section (e). 24 D at (Ordering Paragraph 14).

14 ADVICE 3119-E (U 338-E) October 27, 2014 Forecast of Portfolio Balance Requirements 25 PCC 1 Balance Requirement Compliance Period 2 ( ) GWh CP 2 = 65% of RECs applied to procurement quantity requirement CP 3 = 75% of RECs applied to procurement quantity requirement Quantity of PCC 1 RECs 26 (under contract, not including proposed contract) Quantity of PCC 1 RECs from proposed contract Quantity of PCC 2 RECs (under contract, not including proposed contract) Quantity of PCC 2 RECs from proposed contract PCC 3 Balance Limitation Compliance Period 3 ( ) GWh 8,622 33, , CP 2 = 15% of RECs applied to procurement quantity requirement CP 3 = 10% of RECs applied to procurement quantity requirement Quantity of PCC 3 RECs (under contract, not including proposed contract) Quantity of PCC 3 RECs from proposed contract SCE s forecast assumes a 100% success rate for projects in development that are not yet online. 26 The Quantity of PCC 1 RECs (under contract, not including proposed contract) represents the total forecasted energy deliveries for all executed RPS-eligible contracts, including the 2013 RPS RFP contracts, minus the forecasted energy deliveries from the Panoche Valley Contract.

15 ADVICE 3119-E (U 338-E) October 27, 2014 E. Long-Term Contracting Requirement In D , the Commission held that, [i]n order to count procurement from contracts of less than 10 years duration signed after June 1, 2010 for compliance with the California renewables portfolio standard in a compliance period, a retail seller... must sign in the compliance period in which the short term contract is signed, contracts of at least 10 years in duration with expected generation equal to at least 0.25 percent of its retail sales for the immediately prior compliance period. 27 Since there was not a compliance period prior to the compliance period, the requirement is 0.25 percent of 2010 retail sales for that compliance period. 28 The Panoche Valley Contract is a 20-year contract. Therefore, the long term contracting requirement does not apply. F. 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, 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), for a load-serving entity In order to institute 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 D , 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. 30 The decision 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 27 D at 98 (Ordering Paragraph 15). 28 See id. at 98 (Ordering Paragraph 16). 29 Cal. Pub. Util. Code 8341(a). 30 D at 2-3.

16 ADVICE 3119-E (U 338-E) October 27, 2014 to comply with it is triggered only if there is a longterm 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. 31 The Panoche Valley Contract is exempt from EPS regulations because it has an expected annualized capacity factor well below the threshold baseload capacity factor of 60%, above which the EPS rules would apply. 32 G. PRG Participation SCE s PRG was formed on or around September 10, Participants include representatives from various divisions within the Commission, the Office of Ratepayer Advocates, The Utility Reform Network, California Utility Employees, the Union of Concerned Scientists, and the California Department of Water Resources. SCE consulted with its PRG during each milestone of the 2013 RPS solicitation process. Among other things, SCE informed the PRG of the initial results of its RFP, explained the evaluation process, and updated the PRG periodically concerning the status of contract formation. On March 19, 2014, SCE advised the PRG of its proposed short list of bids for its 2013 RPS solicitation. On July 16, 2014, SCE briefed the PRG on the proposed execution of the Panoche Valley Contract. H. Independent Evaluator ( IE ) The IE for the 2013 RPS solicitation was Merrimack Energy Group, Inc. The IE joined and contributed to a number of conference calls and negotiation sessions. In addition, the IE reviewed traffic, the Panoche Valley Contract, and other documents exchanged by the parties. The IE also participated in the PRG review. The IE Report is included as Appendix C. 31 Id. at See id., Attachment 7 at 1.

17 ADVICE 3119-E (U 338-E) October 27, 2014 III. PROJECT DEVELOPMENT STATUS 33 A. Company/Development Team The Panoche Valley Project is owned by Panoche Valley Solar, LLC, a Delaware limited liability company. The project s sponsors and investors have a robust team with a strong emphasis on large scale PV solar power plants. The team has a strong background and significant experience in development, permitting, financing, construction and operation of power facilities, including SDG&E s Sunrise Powerlink project, East County Substation Project, the South Bay Substation relocation Project, and the Sempra Energy Copper Mountain III 250 MWac solar PV plant in Boulder City, Nevada. Additional information is included in Appendix A. B. Technology 1. Technology Type and Level of Technology Maturity The Panoche Valley Project will use solar PV panels with proven deployment on utility-scale generation projects. The project will not deploy early stage or unproven technologies. All technologies will be designed for utility-scale operation with a proven operating history. Additional information is included in Appendix A. 2. Quality of Renewable Resource SCE believes that the Panoche Valley Contract will be able to meet the terms of the contract given the quality of the renewable resource, which is substantiated by the project's location. 3. Other Resources Required No additional fuel supply is required for the Panoche Valley Project. The water supply is anticipated to cover the project s anticipated need. Pending permits are listed in the table found in Section 2 of Appendix A. 33 Some of the information in this section was provided by Panoche Valley and not independently verified by SCE.

18 ADVICE 3119-E (U 338-E) October 27, 2014 C. Development Milestones 1. Site Control The Panoche Valley Project will be located at 721 Little Panoche Road, Paicines, California Panoche Valley has secured site control to support the Panoche Valley Project. Additional information regarding site control is included in Appendix A. 2. Equipment Procurement As of the filing date of this Advice Letter, Panoche Valley has not identified any equipment procurement issues that will affect the project s ability to meet the Commercial Operation dates. Additional information is included in Appendix A. 3. Permitting/Certifications Status Information regarding permitting/certifications status is included in Appendix A. 4. Production Tax Credits ( PTCs ) / Investment Tax Credits ( ITCs ) Information regarding PTCs and ITCs is provided in Appendix A. 5. Transmission Information regarding transmission is provided in Appendix A. D. Financing plan Information regarding financing is provided in Appendix A. IV. CONTINGENCIES AND MILESTONES The Panoche Valley Project is expected to begin commercial operation on January 1, Specific information regarding performance criteria and guaranteed milestones is provided in Appendices A and D through F.

19 ADVICE 3119-E (U 338-E) October 27, 2014 V. SAFETY CONSIDERATIONS SCE is strongly committed to safety in all aspects of its business. Renewable sellers are responsible for the safe construction and operation of their generating facilities and compliance with all applicable safety regulations. SCE has taken several steps to address those issues over which it has the most visibility and control the delivery of renewable electricity products to SCE in a reliable, safe, and operationally sound manner. SCE s 2013 Pro Forma Renewable Power Purchase and Sale Agreement already provided that the seller must operate the generating facility in accordance with Prudent Electrical Practices. 34 Consistent with SCE s focus on safety, SCE added a provision to its 2013 Pro Forma Renewable Power Purchase and Sale Agreement providing that, prior to commencement of any construction activities on the project site, the seller must provide to SCE a report from an independent engineer certifying that the seller has a written plan for the safe construction and operation of the generating facility in accordance with Prudent Electrical Practices. 35 See Appendix D for more details. 34 See Final 2013 RPS Plan, Appendix G.1 at Section 3.12(a), Exhibit A, Section 215. Prudent Electrical Practices means those practices, methods and acts that would be implemented and followed by prudent operators of electric generating facilities in the Western United States, similar to the Generating Facility, during the relevant time period, which practices, methods and acts, in the exercise of prudent and responsible professional judgment in the light of the facts known at the time a decision was made, could reasonably have been expected to accomplish the desired result consistent with good business practices, reliability and safety. Prudent Electrical Practices includes, at a minimum, those professionally responsible practices, methods and acts described in the preceding sentence that comply with the manufacturer s warranties, restrictions in this Agreement, and the requirement of Governmental Authorities, WECC standards, the CAISO and Applicable Laws See id., Appendix G.1, Section 3.11(e).

20 ADVICE 3119-E (U 338-E) October 27, 2014 VI. REQUEST FOR COMMISSION APPROVAL The terms of the Panoche Valley Contract are conditioned on the occurrence of final CPUC Approval, as it is described in the Panoche Valley Contract. In order to satisfy that condition with respect to the Panoche Valley Contract, SCE requests that the Commission issue a resolution no later than April 27, 2015 containing: 1. Approval of the the Panoche Valley Contract in its entirety; 2. A finding that the Panoche Valley Contract is consistent with SCE s 2013 RPS Procurement Plan; 3. A finding that the Panoche Valley Contract is compliant with the Emissions Performance Standard; 4. A finding that any procurement pursuant to the Panoche Valley Contract is procurement from an eligible renewable energy resource for purposes of determining SCE s 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. A finding that the Panoche Valley Contract, and SCE s entry into it, is reasonable and prudent for all purposes, including, but not limited to, recovery in rates of payments made pursuant to the Panoche Valley Contract and administrative costs associated with the Panoche Valley Contract, subject only to further review with respect to the reasonableness of SCE s administration of the Panoche Valley Contract; and 6. Any other and further relief as the Commission finds just and reasonable.

21 ADVICE 3119-E (U 338-E) October 27, 2014 VII. TIER DESIGNATION Pursuant to GO 96-B, Energy Industry Rule 5.3, SCE submits this Advice Letter with a Tier 3 designation (effective after Commission approval). VIII. EFFECTIVE DATE This Advice Letter will become effective upon Commission approval. IX. 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: CPUC, Energy Division Attention: Tariff Unit 505 Van Ness Avenue San Francisco, California EDTariffUnit@cpuc.ca.gov Copies should also be mailed to the attention of the Director, Energy Division, Room 4004 (same address as above). In addition, protests and other correspondence regarding this advice letter should also be sent by letter and transmitted via facsimile or electronically to the attention of: Megan Scott-Kakures Vice President, Regulatory Operations Southern California Edison Company 8631 Rush Street Rosemead, California Facsimile: (626) AdviceTariffManager@sce.com

22 ADVICE 3119-E (U 338-E) October 27, 2014 Michael R. Hoover Director, State Regulatory Affairs Southern California Edison Company c/o Karyn Gansecki 601 Van Ness Avenue, Suite 2030 San Francisco, California Facsimile: (415) Karyn.Gansecki@sce.com With a copy to: Tristan Reyes Close Attorney Southern California Edison Company 2244 Walnut Grove Avenue, 3 rd Floor Rosemead, CA Facsimile: Tristan.ReyesClose@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 General Rule 4 of GO 96-B, SCE is furnishing copies of this Advice Letter to the interested parties shown on the attached 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 (626) For changes to any other service list, please contact the Commission s Process Office at (415) or 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

23 ADVICE 3119-E (U 338-E) October 27, 2014 All questions concerning this Advice Letter should be directed to Katie Sloan at (626) or by electronic mail at Katie.Sloan@sce.com Southern California Edison Company MSK:ks:jm Enclosures /s/ Megan Scott-Kakures Megan Scott-Kakures

24 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) #: 3119-E Tier Designation: 3 Subject of AL: Submission of Contract for Procurement of Renewable Energy From SCE s 2013 Renewables Portfolio Standard Solicitation Keywords (choose from CPUC listing): Compliance, Agreement, Procurement 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 If yes, specification of confidential information: See Appendix H 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: Tristan Reyes Close, Law Department, (626) or Tristan.Reyesclose@sce.com Resolution Required? Yes No Requested effective date: 4/27/15 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: None Service affected and changes proposed 1 : Pending advice letters that revise the same tariff sheets: N/A 1 Discuss in AL if more space is needed.

25 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 Megan Scott-Kakures Vice President, Regulatory Operations Southern California Edison Company 8631 Rush Street Rosemead, California Facsimile: (626) Michael R. Hoover 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: Tristan Reyes Close Attorney 2244 Walnut Grove Avenue, 3 rd Floor Rosemead, California Facsimile: (626) Tristan.Reyesclose@sce.com

26 Confidential Appendix A Consistency with Commission Decisions and Rules and Project Development Status

27 Confidential Appendix B 2013 Solicitation Overview

28 Confidential Appendix C Independent Evaluator Report

29 Public Appendix C Independent Evaluator Report

30 Southern California Edison Company 2013 Renewable Resource Solicitation Report of the Independent Evaluator Final Selection Process and Review of the Power Purchase Agreement with Panoche Valley Solar, LLC October 2014 Prepared by Merrimack Energy Group, Inc. Merrimack M Energy and New Energy Opportunities, Inc.

31 Table of Contents Executive Summary.. 2 I Renewable RFP Overview... 8 II. Role of the Independent Evaluator III. Adequacy of Outreach to Potential Sellers IV. Fairness and Appropriateness of RPS Bid Evaluation and Selection Methodology. 24 V. Administration of the Bid Evaluation Process 38 VI. Approval of Shortlist. 53 VII. Fairness of Project Specific Negotiations VIII. Does the Contract Merit CPUC Approval..65 Appendix A: SCE s Least Cost Best Fit Evaluation Methodology Appendix B: SCE 2013 RPS RFP Proposal List and Summary Appendix C: SCE Shortlisted Proposals 2013 RPS RFP Appendix D: Indicative and Final Pricing 2013 RPS RFP Appendix E: SCE Final Evaluation Results Merrimack Energy Group, Inc. 1

32 Executive Summary Effective July 31, 2014, Southern California Edison Company ( SCE ) executed a power purchase agreement ( PPA ) with Panoche Valley Solar, LLC 1 ( Panoche Valley Solar ) for the purchase of all the electric energy, capacity, Resource Adequacy ( RA ) benefits, and Green Attributes produced by the generating facility. Panoche Valley Solar proposes to construct and operate a MW (AC) solar photovoltaic ( PV ) generating facility (the Panoche Valley Solar Project ). The project is to be constructed 43 miles southeast of Hollister, California in San Benito County, pursuant to SCE s 2013 Request for Proposals from Eligible Renewable Energy Resource Suppliers for Renewable Products ( 2013 Renewable RFP ). SCE launched the 2013 Renewable RFP on January 6, 2014, received indicative bids on January 31, 2014, and received final offers on June 25, On July 29, 2014 and July 31, 2014, SCE signed a total of eight power purchase agreements for capacity, energy and other products from eight different projects representing a total of 1,550 MW, including MW of energy, capacity and Green Attributes purchased under the PPA with Panoche Valley Solar. 2 Through the 2013 Renewable RFP solicitation, SCE sought proposals for products qualifying as Portfolio Content Category 1 3 which includes all electric energy produced by an Eligible Renewable Energy Resource ( ERR or ERR Generating Facility ) as well as all attributes, including all Green Attributes, all Capacity Attributes, and all Resource Adequacy Benefits generated by, associated with or attributable to the output of the ERR Generating Facility. Pursuant to the 2013 Renewable RFP, SCE received a large number of proposals from renewable energy developers, reviewed and evaluated the proposals relative to the eligibility and conformance requirements listed in the Protocol Document, evaluated and ranked the proposals, and determined which of those offers to include on a short list for potential negotiations and contracting. 4 1 The proposals for Panoche Valley Solar were submitted by Duke Energy Renewables and its partner PV2 Energy, LLC. In 2012 Duke Energy Renewables and PV2 Energy formed a joint venture to continue the development and construction of the Panoche Valley Solar Project. The current ownership of Panoche Valley Solar, LLC, a Delaware limited liability company (PVS) has changed. The limited liability company interests in PVS are owned by PV2 Energy, LLC, a California limited liability company (PV2), DER Acquisitions, LLC, a Delaware limited liability company (DERA), and AMEC E&C Services, Inc., a Georgia Corporation (AMEC). PV2 and DERA are the project sponsors and each, through their respective representatives on the PVS Board of Managers, have equal 50% voting and control rights over decisions of PVS. PV2 and DERA also each have equal approximate 45% economic interests in PVS. DERA acquired 100% of Duke s interest in PVS. 2 Capitalized terms when used with reference to the Panoche Valley Solar PPA and not otherwise defined herein are as defined in the PPA. 3 The first portfolio content category ( Category 1 ) is delineated in the California Public Utilities Commission s Decision Implementing Portfolio Content Categories for the Renewables Portfolio Standard Program, D (2011). It consists of products from renewable energy generators: with a first point of interconnection to the Western Electric Coordinating Council transmission system within the boundaries of a California Balancing Authority Area ( CBA ); or with a first point of interconnection with an electricity distribution system used to serve end users within the boundaries of a CBA; or where the renewable generation is scheduled into a CBA without substituting electricity from another source; or where the generation from the renewable facility is dynamically transferred to a CBA. 4 SCE implemented a two-step evaluation process for this solicitation. The shortlist selection was the first step in the process. After shortlist selection, SCE initiated contract negotiations with shortlisted projects. At Merrimack Energy Group, Inc. 2