Independent Energy Producers (IEP) Steven Kelly, IEP Policy Director State of the State: California’s “boom/Bust” Procurement Practices undermine development and harm ratepayers Independent Energy Producers (IEP) 2018 Annual Meeting October 2, 2018 Presentation by Steven Kelly, IEP Policy Director

Interesting Facts Statewide Electricity Demand (GWh) forecast to increase annually by approximately 1% (low demand scenario) to 1.6% (high demand scenario) from 2016-2030. [CEC Energy Demand 2018-2030 Revised Forecast, February 2018] 10,000 MWs (+/-) Additional Renewables Forecast Needed by 2022 to help achieve GHG Reduction Goals (42 MMT REDUCTION). [Presentation, Proposed Reference System Plan, CPUC Energy Division, September 18, 2017] Since 2007, annual contract prices for renewable energy have dropped an average of 9.5% per year. Forecast decline in average annual RPS expenditures is 2% per year between 2018 and 2020. [“Costs and Cost Savings for the RPS Program,” 2018 Padilla Report, CPUC, May 1, 2018] For every 1,000 MWs of resources contracted at the 2019 Levelized Cost of Energy (LCOE) versus the 2022 LCOE, annual costs decrease by $54million per year for solar PV and $30 million per year for wind due to availability of existing, yet expiring, federal tax credits (PTC, ITC). Timeframe to develop, site, procure, and construct new renewables in California: likely 3-5 years. [MRW Analysis, based on 2016 RPS Calculator, on behalf of IEP, August 2017]

History setting rps mandates California Policy Embraces Expanded Renewable Development and Integration: April 2011: SB2 (1X) set 33% RPS by 2020 Oct 2015: SB 350 Set 40% RPS by 2024; 45% by 2027; and 50% by 2030 SB 350 Enacted Integrated Resource Planning to achieve GHG reduction Sept 2018: SB 100 Set 44% RPS by 2024; 52% by 2027; and 60% by 2030.

Status of Procurement at CPUC 2014 Last RPS Procurement (Utility-Scale) Small-scale Renewable Procurement (BioMAT, BioEnergy, ReMat, RAM, etc.) conducted periodically to meet state mandates. Tree Mortality Biomass Procurement (50 MWs) (CPUC Resolution E-4770, 2016) 2015 Last All-Source Solicitation (LTPP/IRP) Southern California Local Reliability/SONGS Replacement (1891 MWs) SCE Moorpark (328 MWs) 2018 PURPA (Renewables, CHP) Suspension for QFs sized 20 MWs or less 2010 QF Settlement Agreement Addressed QFs sized 20 MWs or greater: QFs CHP Solicitations thru 2015 to retain existing CHP capacity pending further direction in LTPP/IRP; QF Renewables shifted to RPS Solicitations Meanwhile… IOUs procuring Storage, with UOG option, to achieve 1825 MWs online by 2024. IOUs procuring EE $1b annually (with IOU Return on Investment). IOUs procuring DER (distribution grid expansion; DER resources) with ROR. Expansion of BTM NEM to be addressed in 2019.

Concerns/conclusions: IEP Concerns: Most Costly Resources Options, typically UOG, Moving Forward. Utility-scale Procurement, particularly IPP-owned, has stalled -- while RPS prices are low (due to federal tax credits, etc.) IRP Plans appear infeasible in aggregate RPS Plans (typically non-IOU) fail to address statutory obligations, including (a) long-term procurement obligation beginning January 2, 2012 and (b) power content categories. CPUC RA Framework to support renewable integration and ensure grid reliability is inadequate. IEP Conclusions: CPUC must exercise its authorities in the current RPS and/or IRP cycle to direct procurement and allocate costs/benefits to all beneficiaries; CPUC should not defer critical decisions to the next planning cycle (e.g. 2020-2021).