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On Dec. 15, the California Public Utilities Commission passed a highly technical and complex decision implementing portfolio content categories for the Renewables Portfolio Standard (“RPS”) program (“Final RPS Decision”). With a few exceptions, the Final RPS Decision closely mirrors the Proposed Decision which was issued on Oct. 7, 2011 and reported on in detail in an earlier advisory. Our earlier advisory also provides a good primer on the portfolio content categories for those who have not been following the RPS rulemaking (R.11-05-005).

This advisory describes the differences between the Proposed Decision and the Final RPS Decision, and discusses where the RPS rulemaking goes from here and how that might impact the energy industry.

Differences between the Proposed Decision and the Final RPS Decision

A number of parties argued that Senate Bill 2 (1x) was intended to allow Renewable Energy Credits (“RECs”) associated with at least certain types of distributed generation/self-generation to qualify within the highest RPS priority, so-called Bucket 1 — but the Commission adopted the more restrictive view that to qualify for Bucket 1 the generation must be sold in a fully bundled manner (i.e., an integrated transaction involving both physical power and RECs). Thus, by definition, no RECs associated with distributed generation or self-generation (i.e., the RPS generator consumes the power and thus can only sell the associated REC in a separate transaction) could possibly qualify as Bucket 1. The Final RPS Decision clarifies that all unbundled RECs, even those associated with in-state distributed generation/self-generation, are relegated to the residual Bucket 3 category.