Common use of OTHER STRENGTHS AND WEAKNESSES Clause in Contracts

OTHER STRENGTHS AND WEAKNESSES. Evaluation of different technologies. PG&E’s protocol tends to avert selecting Offers for utility ownership for which the utility lacks particular core competencies, so there is a bias against purchasing projects that the company is less well-suited to own and operate. This seems reasonable and appropriate, since it is not in ratepayers’ interest for the utility to own generating facilities that require specific skills PG&E lacks. The Project Viability Calculator was designed to be technology-neutral as well. However, the Calculator will return a lower score for a project that relies on a technology that is not well-commercialized, or that the developer lacks prior experience developing, owning, operating, or financing, all else being equal. The methodology will tend to discount projects based on emerging technologies or on those that have not been implemented broadly at utility scale, and will tend to promote projects that rely on technologies with widespread market acceptance and many examples of operating 100+ MW installations. It became evident from debriefing Participants that some developers were unaware that the Calculator’s design tends to disfavor emerging technologies, and that other competitive venues than the IOUs’ RPS RFOs that do not require the use of the Calculator might be more appropriate for projects that employ poorly-commercialized technologies. PG&E’s protocol for RFO Goals includes a provision allowing the utility to consider the non-quantitative factor of resource diversity benefits in the selection process; this is stated in Attachment K and supported by regulatory decisions. This feature allows the utility to consider such things as its resource need for baseload vs. peaking or intermittent generation in selecting Offers. To the extent some technologies are operated as baseload in the California market and there is a resource need for baseload resources this may tilt Offer selection towards those projects over technologies that provide intermittent or peaking generation. Similarly, the RFO Goals criterion accommodates the non-quantitative factor of continuing to meet the goal stated by Executive Order S-06-06 for biomass-fueled renewable energy, which could tilt Offer selection towards biomass or biogas-fueled generation. Out-of-state projects. One issue regarding both value and viability concerns Offers for out-of-state projects that propose not to actually deliver power to the CAISO but instead intend to be managed through a pseudo-tie or dynamic scheduling. There are only a very few projects to date where these have been implemented by the CAISO. Because such approaches require the assent of both the CAISO and the foreign balancing area authority to which the project will interconnect (and PTOs in between), it is difficult for PG&E to judge the likelihood of whether such arrangements will actually be achieved. It was evident from reviewing out-of-state Offers that several Participants do not comprehend how their projects will be treated by the CPUC for RPS compliance purposes, with several assuming that their PPAs will be treated as bundled in-state delivery of power, despite failing to specify how they will obtain dynamic scheduling by the CAISO. One hopes that more experience with dynamic scheduling will make it clearer what can and cannot be achieved with these arrangements and that future solicitation protocols can clarify how PG&E will assess them. Similarly, Xxxxxx considers it risky for the utility to value out-of-state projects that assume that the import of their power at a CAISO intertie will provide full Resource Adequacy value to PG&E ratepayers. The process for allocation of RA import capability at intertie points does not currently accommodate long-term dedication of that capability to IOUs, putting at risk the delivery of RA value. Simply assuming that full RA benefits of the capacity of these out-of-state projects will be realized for the entire delivery term of a PPA may overstate the value of these projects. However, in the actual selection of projects Xxxxxx can identify at most one Offer whose selection or rejection might have differed if PG&E had taken a different approach in evaluating pseudo-ties or RA import capability. Participants’ viewpoints on strengths and weaknesses. Feedback from Participants provided some insight into other strengths of PG&E’s approach compared to other utilities’. • The bidders’ conference was cited as being “very helpful” by several Participants, in clarifying objectives, evaluation process, and requirements. The ability to ask questions and to obtain answers quickly and spontaneously was cited as useful. • The solicitation materials were regarded as clear, straightforward, and “user- friendly”, with the exception of the Attachment D offer form, with which some Participants had technical difficulties. (Others found the verification process built into this year’s Attachment D to be quite helpful and fully functional.) Participants who submitted less commonly pursued approaches (e.g. projects outside the CAISO or sites for development) tended to be more frustrated with their perception that the solicitation materials lacked clarity about their Offers would be evaluated. • While some Participants clearly did not understand how the scoring guidelines in the Project Viability Calculator were intended to be used and were frustrated that their early-stage projects were disfavored by the design of the Calculator, others expressed opinions that the Calculator was “fair and relevant” and straightforward. • While frustrated by PG&E’s policy of not disclosing detailed information about the nature of the short list, and the utility’s unwillingness to provide second chances to improve rejected Offers, Participants appreciated the opportunity to be debriefed about the reasons why their Offers were rejected because they could gather useful information on how to make their projects more competitive in future solicitations. Some Participants particularly appreciated that PG&E provided timely responses about whether their Offers were selected or rejected, in contrast to another IOU. • Some Participants felt disadvantaged compared to rivals who, they feared, could propose unreasonably low pricing, obtain a PPA, then sell the project. They suggested that PG&E erect higher barriers to participation by “non-serious” parties, such as higher offer deposits (as required in other jurisdictions). Xxxxxx views this theme as a form of confirmation that PG&E’s approach to outreach was successful in obtaining broad and robust competition from the developer community.

OTHER STRENGTHS AND WEAKNESSES. Evaluation of different technologies. PG&E’s protocol tends to avert selecting Offers for utility ownership for which the utility lacks particular core competencies, so there is a bias against purchasing projects that the company is less well-suited to own and operate. This seems reasonable and appropriate, since it is not in ratepayers’ interest for the utility to own generating facilities that require specific skills PG&E lacks. The Project Viability Calculator was designed to be technology-neutral as well. However, the Calculator will return a lower score for a project that relies on a technology that is not well-commercialized, or that the developer lacks prior experience developing, owning, operating, or financing, all else being equal. The methodology will tend to discount projects based on emerging technologies or on those that have not been implemented broadly at utility scale, and will tend to promote projects that rely on technologies with widespread market acceptance and many examples of operating 100+ MW installations. It became evident from debriefing Participants that some developers were unaware that the Calculator’s design tends to disfavor emerging technologies, and that other competitive venues than the IOUs’ RPS RFOs that do not require the use of the Calculator might be more appropriate for projects that employ poorly-commercialized technologies. PG&E’s protocol for RFO Goals includes a provision allowing the utility to consider the non-quantitative factor of resource diversity benefits in the selection process; this is stated in Attachment K and supported by regulatory decisions. This feature allows the utility to consider such things as its resource need for baseload vs. peaking or intermittent generation in selecting Offers. To the extent some technologies are operated as baseload in the California market and there is a resource need for baseload resources this may tilt Offer selection towards those projects over technologies that provide intermittent or peaking generation. Similarly, the RFO Goals criterion accommodates the non-quantitative factor of continuing to meet the goal stated by Executive Order S-06-06 for biomass-fueled renewable energy, which could tilt Offer selection towards biomass or biogas-fueled generation. Out-of-state projects. One issue regarding both value and viability concerns Offers for out-of-state projects that propose not to actually deliver power to the CAISO but instead intend to be managed through a pseudo-tie or dynamic scheduling. There are only a very few projects to date where these have been implemented by the CAISO. Because such approaches require the assent of both the CAISO and the foreign balancing area authority to which the project will interconnect (and PTOs in between), it is difficult for PG&E to judge the likelihood of whether such arrangements will actually be achieved. It was evident from reviewing out-of-state Offers that several Participants do not comprehend how their projects will be treated by the CPUC for RPS compliance purposes, with several assuming that their PPAs will be treated as bundled in-state delivery of power, despite failing to specify how they will obtain dynamic scheduling by the CAISO. One hopes that more experience with dynamic scheduling will make it clearer what can and cannot be achieved with these arrangements and that future solicitation protocols can clarify how PG&E will assess them. Similarly, Xxxxxx considers it risky for the utility to value out-of-state projects that assume that the import of their power at a CAISO intertie will provide full Resource Adequacy value to PG&E ratepayers. The process for allocation of RA import capability at intertie points does not currently accommodate long-term dedication of that capability to IOUs, putting at risk the delivery of RA value. Simply assuming that full RA benefits of the capacity of these out-of-state projects will be realized for the entire delivery term of a PPA may overstate the value of these projects. However, in the actual selection of projects Xxxxxx can identify at most one Offer whose selection or rejection might have differed if PG&E had taken a different approach in evaluating pseudo-ties or RA import capability. Participants’ viewpoints on strengths and weaknesses. Feedback from Participants provided some insight into other strengths of PG&E’s approach compared to other utilities’. •  The bidders’ conference was cited as being “very helpful” by several Participants, in clarifying objectives, evaluation process, and requirements. The ability to ask questions and to obtain answers quickly and spontaneously was cited as useful. •  The solicitation materials were regarded as clear, straightforward, and “user- friendly”, with the exception of the Attachment D offer form, with which some Participants had technical difficulties. (Others found the verification process built into this year’s Attachment D to be quite helpful and fully functional.) Participants who submitted less commonly pursued approaches (e.g. projects outside the CAISO or sites for development) tended to be more frustrated with their perception that the solicitation materials lacked clarity about their Offers would be evaluated. •  While some Participants clearly did not understand how the scoring guidelines in the Project Viability Calculator were intended to be used and were frustrated that their early-stage projects were disfavored by the design of the Calculator, others expressed opinions that the Calculator was “fair and relevant” and straightforward. •  While frustrated by PG&E’s policy of not disclosing detailed information about the nature of the short list, and the utility’s unwillingness to provide second chances to improve rejected Offers, Participants appreciated the opportunity to be debriefed about the reasons why their Offers were rejected because they could gather useful information on how to make their projects more competitive in future solicitations. Some Participants particularly appreciated that PG&E provided timely responses about whether their Offers were selected or rejected, in contrast to another IOU. •  Some Participants felt disadvantaged compared to rivals who, they feared, could propose unreasonably low pricing, obtain a PPA, then sell the project. They suggested that PG&E erect higher barriers to participation by “non-serious” parties, such as higher offer deposits (as required in other jurisdictions). Xxxxxx views this theme as a form of confirmation that PG&E’s approach to outreach was successful in obtaining broad and robust competition from the developer community.