The Renewable Market Adjusting Tariff (ReMAT) program at the California Public Utilities Commission (CPUC) is again front and center after Staff working on the Renewables Portfolio Standard (RPS) have issued a Proposal to ensure that procurement under the ReMAT program, which was suspended in 2017, can resume promptly.
The Staff Proposal eliminates the adjusting pricing mechanism, the bimonthly program periods and program period caps that a federal court determined violated PURPA. Instead, the Staff Proposal adopts administratively determined prices by product category with a time-of-delivery (TOD) adjustment. It additionally proposes that the CPUC annually update the prices by resolution to account for the most recent pricing information so that prices reflect market prices.
We provide more background and additional detail below, but comments on the Staff Proposal's proposed modifications are due on July 21, 2020, and reply comments are due on July 28, 2020.
The CPUC adopted the ReMAT program in 2012 as a new pricing mechanism for the CPUC's Feed-in Tariff Program. Public Utilities Code § 399.20 requires the CPUC to adopt a standard tariff for electricity purchased from a small renewable electric generation facility. The CPUC has authority to establish prices for the ReMAT Program pursuant to the federal Public Utility Regulatory Policies Act (PURPA).
New procurement under the ReMAT program was suspended in 2017 when a federal district court issued an injunction after finding that the CPUC's ReMAT program did not comply with PURPA because of the program cap on procurement, and because the prices calculated under the ReMAT program were not permissible under PURPA (Winding Creek Order). In accordance with the Winding Creek Order, the CPUC's Executive Director suspended the ReMAT program in December 2017.
The Winding Creek Order found that neither the ReMAT program nor the CPUC's Standard Contract for qualifying facilities (QFs) 20 MW or less provided QFs the option to choose energy rates determined either at the time of contract execution or at the time of product delivery. In order to provide QFs with the options required by PURPA's federal regulations, the CPUC adopted a New QF Standard Offer Contract for QFs of 20 MW or less (New QF SOC) in Decision 20-05-006. The New QF SOC provides QFs a contracting opportunity without any cap on overall megawatts of procurement.
Staff Proposal on Modifications to ReMAT Program
The Staff Proposal recommends changes necessary to bring the CPUC's ReMAT program into compliance with the Winding Creek Order. The Proposal states that the proposed modification to the ReMAT program is intended to facilitate the investor-owned utilities' (IOUs) fulfilling of their statutory procurement mandate under Public Utilities Code § 399.20 and actually procure their proportional share of the statewide 750 MW procurement requirement.
Specifically, the Proposal establishes:
- Administratively Set Price by Product Category Using Avoided Costs – Staff proposes that the price for ReMAT procurement would be calculated based on RPS prices in long-term contracts recently executed by the CPUC-regulated IOUs. Staff calculated the average contract price weighted by generator capacity for RPS resources to establish the product category prices (Table 1). The Staff Proposal includes two other tables which provide a summary of the RPS contracts' characteristics used to inform the fixed-prices by product category and list the IOUs' executed RPS contracts.
Table 1: Weighted Average RPS Contract Prices Executed 2013-2019 Product Category Weighted Average Price ($/MWh) As-Available Non-Peaking $57.54 As-Available Peaking $50.23 Baseload $79.72 Table 4: Fixed Prices by Product Category for IOU's ReMAT Standard Contracts ReMAT Product Category Weighted Average RPS Contract Price ($/MWh) As-Available Non-Peaking $57.54 As-Available Peaking $50.23 Baseload $79.72
- Price Adjustments – Staff proposes that the ReMAT price be periodically adjusted to ensure that the offered price reflects updated market prices and the IOUs' avoided costs as required by Public Utilities Code § 399.20 and PURPA. The fixed-prices to be offered by product category would be updated annually by Energy Division by draft Resolution beginning May 2021. Energy Division would use the prior seven years of IOU RPS contracts to calculate the updated ReMAT prices for each Product Category (e.g., in May 2021, Energy Division would update the prices based on the IOUs' RPS contracts in the years 2014 through 2020). In cases where confidential price data of recent contracts could be determined by "calculating out" the public prices from the weighted average, the prices in the Product Category at issue would not change from the prior year, and Energy Division would not update the price in the Product Category in its draft Resolution.
- Elimination of Program Periods and Period Caps – Staff proposes the CPUC eliminate the bi-monthly program periods and program period procurement caps adopted in Decision 12-05-035 and instead adopt fixed prices by product category, until each of the IOUs reach their allocated share of the 750 MW statewide procurement mandate.
- Program Queues – Staff proposes that IOUs retain the existing queue methodology as established by Decision 12-05-035.
- Changes to the ReMAT Standard Contract – Staff proposes that each IOU be directed to update the new ReMAT standard contracts to reflect its most recently CPUC-approved TOD periods and payment allocation factors.