July 20, 2018 Advice Letter 3681-E/3681-E-A

Transcription

1 STATE OF CALIFORNIA Edmund G. Brown Jr., Governor PUBLIC UTILITIES COMMISSION 505 VAN NESS AVENUE SAN FRANCISCO, CA July 20, 2018 Advice Letter 3681-E/3681-E-A Russell G. Worden Director, State Regulatory Operations Southern California Edison Company 8631 Rush Street Rosemead, CA SUBJECT: Submission of Request for Greenhouse Gas Credits Associated with the Termination & Shut-Down Agreement Between Southern California Edison Company and Carson Cogeneration Company, LLC. Dear Mr. Worden: Advice Letter 3681-E and supplemental 3681-E-A are effective as of June 21, 2018 per Resolution E-4925 per Ordering Paragraph. Sincerely, Edward Randolph Director, Energy Division

2 Gary Stern Managing Director, State Regulatory Operations February 28, 2018 ADVICE 3681-E-A PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA ENERGY DIVISION SUBJECT: Supplemental Filing to Advice 3681-E, Submission of Request for Greenhouse Gas Credits associated with the Termination & Shut-Down Agreement Between Southern California Edison Company and Carson Cogeneration Company, LLC PURPOSE The purpose of this advice filing is to make changes to Advice ( AL ) 3681-E, filed on October 25, These changes are made in accordance with General Order ( GO ) 96-B, General Rules 7.5.1, which authorizes utilities to make additional changes to an advice letter through the filing of a supplemental advice letter. In its initial advice filing, Southern California Edison Company ( SCE ) sought approval to claim greenhouse gas ( GHG ) reduction credits towards its Combined Heat and Power ( CHP ) program abatement targets. Such GHG reduction credits are calculated to have resulted from the Termination & Shut-Down Agreement (the Termination Agreement ) between SCE and Carson Cogeneration Company, LLC ( Carson ), dated as of June 1, 2017, which (1) terminates an existing power purchase agreement for the purchase of energy, capacity and related products between SCE and Carson, and (2) permanently shuts down and decommissions the combined cycle generating facility owned by Carson, thus eliminating the exhaust of GHG emissions resulting from the combustion of natural gas for electricity generation. However, in the course of reviewing its workpapers, SCE realized that it needed to revise the GHG emissions reductions resulting from the Termination Agreement. The updated GHG emissions reductions are being revised from 1,682 metric tonnes ( MT ) to 1,488 MT. SCE is updating AL 3681-E to include the updated GHG emissions reductions and resulting corrections to its calculations. AL 3681-E originally had the following Appendices: P.O. Box Rush Street Rosemead, California (626) Fax (626)

3 ADVICE 3681-E-A February 28, 2018 Confidential Appendix A Confidential Appendix B Confidential Appendix C Public Appendix D Public Appendix E Workpapers Termination Agreement Termination Agreement Summary Confidentiality Declaration Proposed Non-Disclosure Agreement Confidential Appendix B and Public Appendices D and E to AL 3681-E do not require revisions and are not attached to this update to AL 3681-E, but fully apply to this update to AL 3681-E. The attachments to this filing include redlined and clean versions of Revised AL 3681-E and Revised Confidential Appendices A and C as follows: Public Attachment A Redline of Revised AL 3681-E Public Attachment B Clean Version of Revised AL 3681-E Confidential Attachment C Confidential Attachment D Confidential Attachment E Confidential Attachment F Redline of Revised Confidential Appendix A Clean Version of Revised Confidential Appendix A Redline of Revised Confidential Appendix C Clean Version of Revised Confidential Appendix C This advice filing supplements in part and will not change the substance of the original AL 3681-E. CONFIDENTIALITY SCE requests confidential treatment of Confidential Attachments C through F to this supplemental advice letter. The Confidentiality Declaration (Public Appendix D to AL 3681-E) and Proposed Non-Disclosure Agreement (Public Appendix E to AL 3681-E) specified what material is confidential, the justification for such a designation, and the duration of such treatment. That declaration and Proposed Non-Disclosure Agreement is equally applicable to this supplemental filing. Appropriate parties can obtain the confidential version of this advice letter upon execution of the required Non-Disclosure Agreement. Parties wishing to obtain access to the confidential version of this advice letter may contact Carol Schmid-Frazee in SCE s Law Department at Carol.SchmidFrazee@sce.com or (626) to obtain a non-disclosure agreement.

4 ADVICE 3681-E-A February 28, 2018 This information is entitled to confidentiality protection pursuant to D (as provided in the investor-owned utility ( IOU ) Matrix) and D Public Appendix D to AL 3681-E) also provides the specific provisions of the IOU Matrix that apply to the confidential information in this advice letter. Except as noted above, this filing will not increase any rate or charge, conflict with any other schedule or rule, or cause the withdrawal of service. TIER DESIGNATION Pursuant to GO 96-B, Energy Industry Rule 5.2, this advice letter is submitted with a Tier 2 designation, which is the same Tier designation as the original filing, AL 3681-E. EFFECTIVE DATE This supplemental advice filing will become effective on the same day as the original filing, AL 3681-E, which is November 24, 2017, unless suspended by the Energy Division. PROTESTS SCE asks that the Commission, pursuant to GO 96-B, General Rules 7.5.1, maintain the original protest and comment period designated in AL 3681-E and not reopen the protest period. The modifications included in this supplemental advice filing do not make substantive changes that would affect the overall evaluation of the filing. NOTICE In accordance with General Rule 4 of GO 96-B, SCE is serving copies of this advice filing to the interested parties shown on the attached GO 96-B, R , and A et al service lists. Address change requests to the GO 96-B service list should be directed by electronic mail to AdviceTariffManager@sce.com or at (626) For changes to all other service lists, please contact the Commission s Process Office at (415) or by electronic mail at Process_Office@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 filing at SCE s corporate headquarters. To view other SCE advice letters filed with the Commission, log on to SCE s web site at

5 ADVICE 3681-E-A February 28, 2018 For questions, please contact Raffi Minasian at (626) or by electronic mail at raffi.minasian@sce.com Southern California Edison Company GS:dmb/jk:jm Enclosures /s/ Gary Stern Gary Stern

6 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 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) #: 3681-E-A Tier Designation: 2 Subject of AL: Supplemental Filing to Advice 3681-E, Submission of Request for Greenhouse Gas Credits associated with the Termination & Shut-Down Agreement Between Southern California Edison Company and Carson Cogeneration Company, LLC Keywords (choose from CPUC listing): Agreements, 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 See Appendix D and Appendix E of Advice 3681-E If yes, specification of confidential information: 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: Carol Schmid-Frazee, Law Department, (626) or Carol.SchmidFrazee@sce.com Resolution Required? Yes No Requested effective date: 11/24/17 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: N/A Service affected and changes proposed 1 : Pending advice letters that revise the same tariff sheets: None 1 Discuss in AL if more space is needed.

7 All correspondence regarding this AL filing shall be sent to: CPUC, Energy Division Attention: Tariff Unit 505 Van Ness Avenue San Francisco, California Gary Stern Managing Director, State Regulatory Operations Southern California Edison Company 8631 Rush Street Rosemead, California Telephone: (626) Facsimile: (626) Laura Genao Managing 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: Carol Schmid-Frazee, Senior Attorney Southern California Edison Company 2244 Walnut Grove Avenue, 3 rd Floor Rosemead, CA Facsimile: (626) Carol.SchmidFrazee@sce.com

8 PUBLIC Attachment A Redline of Revised AL 3681-E

9 Russell G. Worden Managing Director, State Regulatory Operations October 25, 2017 ADVICE 3681-E PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA ENERGY DIVISION SUBJECT: Submission of Request for Greenhouse Gas Credits associated with the Termination & Shut-Down Agreement Between Southern California Edison Company and Carson Cogeneration Company, LLC PURPOSE This advice letter seeks approval for Southern California Edison Company ( SCE ) to claim greenhouse gas ( GHG ) reduction credits towards its Combined Heat and Power ( CHP ) program abatement targets. Such GHG reduction credits are calculated to have resulted from the Termination & Shut-Down Agreement (the Termination Agreement ) between SCE and Carson Cogeneration Company, LLC ( Carson ), dated as of June 1, 2017, which (1) terminates an existing power purchase agreement for the purchase of energy, capacity and related products between SCE and Carson, and (2) permanently shuts down and decommissions the combined cycle generating facility owned by Carson, thus eliminating the exhaust of GHG emissions resulting from the combustion of natural gas for electricity generation. BACKGROUND A. Combined Heat and Power Settlement In 2008, diverse parties with divergent interests, including the three investor-owned utilities ( IOUs ), representatives of Qualifying Facilities ( QFs ), 1 customer advocacy 1 The Public Utility Regulatory Policies Act of 1978 ( PURPA ) established a class of generating facilities known as QFs, which, in the furtherance of a variety of energy policy goals, receive special rate and regulatory treatment. QFs fall into two categories: (1) qualifying small power production facilities and (2) qualifying cogeneration facilities. For the purpose of this advice letter, QFs are defined as: An electric energy generating facility that complies with the qualifying facility definition established by PURPA and any FERC rules P.O. Box Rush Street Rosemead, California (626) Fax (626)

10 ADVICE 3681-E October 25, 2017 groups, and the California Public Utilities Commission ( Commission or CPUC ), engaged in settlement negotiations to, among other things, resolve numerous disputes between the IOUs and QFs before the Commission and state court. After a year and a half of negotiations, the participating parties reached an agreement that, among other things, developed a state CHP program, which includes megawatt ( MW ) and GHG emissions reduction targets, and settled all outstanding CHP/QF litigation issues. The parties then filed a joint motion for Commission approval of the QF and CHP Settlement Agreement, Term Sheet and attached Exhibits ( Settlement ). 2 Rule 12.1(d) of the Commission s Rules of Practice and Procedure provides that [t]he Commission will not approve settlements, whether contested or uncontested, unless the settlement is reasonable in light of the whole record, consistent with law, and the public interest. To assess reasonableness, the Commission considers, among other things, whether the settlement negotiations were at arms-length and whether the parties were adequately represented. 3 After considering the Settlement as a whole, its individual elements, as well as the interests at stake, the Commission approved the Settlement, finding it to be (1) reasonable, (2) the product of protracted, arms-length negotiations between sophisticated and well-represented parties with divergent interests, all of whom were required to compromise on some things, and none of whom received everything they wanted, 4 and (3) in furtherance of the state policy objectives embodied in California Public Utilities Code Section 372(a), Assembly Bill 32, and the Energy Action Plan II. 5 Of relevance to this advice letter, under the Settlement, [b]ilaterally negotiated and executed agreements are one of the procurement options in this CHP Program. The Settlement also provides that the pricing, terms, and conditions for those agreements will be according to the executed and approved agreements. 6 In addition, in furtherance of the State s policies, the Settlement sets forth GHG emissions reduction targets, to which the Termination Agreement contributes implementing PURPA and has filed with FERC (i) an application for FERC certification,... which FERC has granted, or (ii) a notice of self - certification..... CHP Settlement Agreement, Term Sheet, Glossary of Defined Terms, at p Any capitalized terms used in this advice letter but not defined herein have the meaning set forth in the Term Sheet. 3 Decision (D.) , 30 CPUC 2d 189, 89 (approving Pacific Gas and Electric Co. s Diablo Canyon settlement as in the public interest). 4 D at pp. 28, 35, Conclusion of Law No Id. at pp. 35, 37, 38, Conclusion of Law No Term Sheet 4.3.1, Term Sheet ,

11 ADVICE 3681-E October 25, 2017 DESCRIPTION OF THE CARSON COGENERATION FACILITY AND TERMINATION AGREEMENT A. Existing Project and Contract Background SCE and Carson executed a Power Purchase Agreement (the Legacy Contract ) on June 10, 1985 for the procurement of energy and capacity from Carson for a 30-year term. The CHP Settlement required that SCE offer its CHP contracts the option to negotiate the terms of the pro forma Power Purchase Agreement or amend an existing Legacy Contract. Carson elected to enter into an amended and restated agreement, which was composed of an Edison Energy Institute ( EEI ) Master Agreement, to govern the terms of the transaction (the Master Agreement ); a resource adequacy ( RA ) confirm, for the procurement of RA benefits (the RA Confirm ); and an energyonly tolling confirm, for the procurement of energy and ancillary services which SCE would have the right to dispatch into the CAISO markets (the Tolling Confirm, and collectively with the Master Agreement and the RA Confirm, the Agreement ). The Carson power plant was a natural gas-fired CHP generating facility with a nameplate capacity of 48 MW, and is located in an Environmental Justice ( EJ ) area in Carson, California (the Facility ). Under the Legacy Contract, the Facility was required to serve the steam and electricity needs of a host entity in order to satisfy the PURPA QF CHP efficiency requirements. Pursuant to the amending of the terms of the Legacy Contract to the new terms under the Agreement, Carson was no longer obligated to maintain its steam host, and thus gave up its CHP capabilities, making it a combined cycle gas turbine generating facility. In line with this transition, the Facility was expected to significantly reduce its emissions associated with the combustion of natural gas as a result of transitioning from baseload generation to dispatchable (i.e. economic) generation in the CAISO markets. SCE claimed 32,563.6 metric tonnes ( MT ) of GHG credits towards its CHP GHG reduction targets resulting from this expected reduction in GHG emissions. 8 Table 1: General Legacy Contract Summary Project Name Carson Cogeneration Company, LLC Owner/Developer Energy Operations Group, LLC Technology Combined cycle gas turbine Nameplate Capacity (MW) 48 Contract Capacity (MW) 48 Location (city and state) Carson, California Source of Agreement (e.g., RFO or Bilateral Negotiations) Bilateral, QF Executed on June 10, See SCE s Energy Resource Recovery Account ( ERRA ) Review of Operations, 2012, Chapters IX-XVI at pp

12 ADVICE 3681-E October 25, 2017 B. Overview of the Termination Agreement SCE and Carson executed the Termination Agreement on June 1, The Termination Agreement terminates the Contract approximately thirty-two months before the end of its original term and provides for the permanent cessation of GHG emissions at the Facility. Per the Termination Agreement, Carson was to permanently shut down the Facility as of June 1, 2017, and commence decommissioning the Facility in exchange for a termination payment. 9 SCE intends to file for approval of the Termination Agreement through the annual ERRA filing, as the actions taken to issue the termination payment in exchange for the termination of the Contract were in the economic best interests of its customers, even without accounting for any GHG reduction benefits, and thus the Termination Agreement meets the reasonableness standards required by the ERRA filing. Under this advice letter, SCE is solely requesting Commission approval to allow SCE to claim the GHG credits associated with the incremental reduction in emissions caused by permanently shutting down the dispatchable tolling resource which has no thermal host. The Termination Agreement is attached as Confidential Appendix B. A summary of the Termination Agreement is attached as Confidential Appendix C. C. Reasonableness of Request for GHG Reduction Credits Towards CHP Targets The ability to claim GHG reductions resulting from this Termination Agreement towards SCE s CHP GHG reduction targets is reasonable because it will result in customer savings by avoiding further CHP procurement to achieve GHG reductions and avoids environmental degradation from the combustion of natural gas, particularly in a statedesignated disadvantaged community, while still achieving the Commission s goals of reducing GHG emissions. The Agreement is in the best interest of SCE s customers and supports the State and Commission environmental goals. The Termination Agreement also has the additional benefit of reducing air pollutant emissions in Carson, CA. Carson contains multiple disadvantaged communities, as identified by CalEnviroScreen 3.0; some of the census tracts have pollution burdens in the 99 th percentile. One of the State s policy objectives is to achieve policy climate and air quality goals in a way that [minimizes] localized air pollutants and other greenhouse gas emissions, with early priority on disadvantaged communities. 10 Thus, the 9 See Confidential Appendix C for termination payment details. 10 Public Utilities Code Section , as amended by Senate Bill 350, directs the commission to develop an Integrated Resource Plan ( IRP ). One of the goals of the IRP is to ensure that load-serving entities... minimize localized air pollutants and other greenhouse gas emissions, with early priority on disadvantaged communities.

13 ADVICE 3681-E October 25, 2017 Termination Agreement supports the State s environmental goals in Environmental Justice communities by reducing pollution created by the combustion of natural gas. Confidential Appendix A details GHG emissions reductions that result from the Termination Agreement. GHG emissions reductions for Settlement accounting purposes are shown in Table 2, below, and discussed in Section E. SETTLEMENT ACCOUNTING FOR CHP PROCUREMENT AND GHG EMISSIONS REDUCTION TARGET Set forth in Table 2 below are the Settlement s MW and Emission Reduction Targets and the amount procured through the Termination Agreement that should be counted toward those targets. Target Table 2: Settlement Accounting SCE s Portion of Statewide Target 11 Quantities Procured from Carson Toward SCE s Settlement Target MW 1,402 MW 0 MW GHG Emissions Reduction Target D. CHP MW Target 1,220,000 MT 12 1,6821,488 MT Pursuant to the Term Sheet, SCE has a procurement target of 1,402 MW (MW Target) of CHP through the CHP Procurement Processes by the end of the Initial Program Period. SCE has met its CHP MW Target, and is not seeking to count the Termination Agreement toward SCE s MW Target. E. GHG Emissions Reduction Target Section 6 of the Term Sheet sets forth the GHG Emissions Reduction Targets against which each IOU s CHP PPAs are measured. SCE calculated the Agreement s GHG credit pursuant to Section of the Term Sheet, which states: For Existing CHP Facilities that shut down during the Initial Program Period, the GHG reductions will be calculated against the previous two calendar years of data compared to the Double Benchmark. 11 The MW Target was to be achieved by the end of the Initial Program Period, November 22, The GHG Target must be met by the end of the Second Program Period, December 31, Target revised from 2,170,000 MT to 1,220,000 MT per Commission Decision

14 ADVICE 3681-E October 25, 2017 Although Carson had given up its thermal need in 2013, and had been operating solely as a dispatchable combined cycle gas-fired generating facility, Carson was originally a QF CHP resource. Upon converting from baseload CHP operation to dispatchable operation, Carson became an inefficient CHP facility. Appendix A demonstrates the calculations showing that Carson was an inefficient resource, as measured against the Double Benchmark. Section of the Settlement Agreement explains that for projects, like Carson, whose thermal need no longer continues after project shut-down, the measurement is based on the Baseline year emissions minus the projected PPA emissions and emissions associated with replacing one hundred percent (100%) of the decreased electric generation at a time differentiated Heat Rate. The baseline year emissions are the average of the previous two (2) calendar years of operational data. Section states that the Effective Date for accounting GHG benefits shall be the time of execution, which is June 1, After performing this calculation, SCE determined that the Termination Agreement contributes 1,6821,488 MT of GHG Credit towards SCE s GHG Emissions Reduction Target under the Settlement. 13 This countable GHG reduction results from decreased statewide emissions as this gas-fired plant shuts down and will permanently cease operations. While SCE had already previously counted 32,563.6 MT of GHG towards the GHG Emissions Reduction Target, these reductions stemmed from changing Carson s expected output from baseload dispatch (i.e. operating 24x7 at maximum output) to reducing output to a dispatchable contract, which would be dependent upon the CAISO s economic dispatch of the Carson resource, and would thus significantly reduce the amount of GHG emissions. The Termination Agreement effectively functions as an incremental step in reducing GHG emissions by terminating the dispatchable contract and permanently shutting the Carson resource down. Section of the CHP Settlement Agreement also specifies that the IOU shall demonstrate the thermal need no longer exists. Upon transitioning from a baseload, CHP resource to a dispatchable resource in 2013, Carson gave up its steam host. Carson has continued to operate without a steam host during that entire period of time, and thus there is no thermal need that exists currently, and therefore the thermal need does not continue to exist following the effective date of the Termination Agreement. By counting these incremental GHG emissions reductions towards the GHG Emissions Reduction Target, SCE will reduce its procurement targets through the CHP Program that would otherwise need to be procured through new contracts via the CHP RFO process. SCE has calculated that by realizing a reduction in GHG emissions at no 13 This calculation is discussed in greater detail in Confidential Appendix A.

15 ADVICE 3681-E October 25, 2017 incremental cost relative to the termination of the Agreement, SCE has earned savings in procurement costs 14 that would otherwise have been spent to meet the GHG Emissions Reduction Targets. CONFIDENTIALITY In accordance with D , D , D , D and General Order (GO) 96-B, SCE requests confidential treatment of the material in the confidential appendices as set forth below. Confidential Appendix A: Confidential Appendix B: Confidential Appendix C: Public Appendix D: Public Appendix E: Workpapers Termination Agreement Termination Agreement Summary Confidentiality Declaration Proposed Non-Disclosure Agreement The confidential material in this advice letter will be made available to non-market participants in accordance with and upon execution of SCE s Proposed Non-Disclosure Agreement. Parties wishing to obtain access to the confidential material of this advice letter may contact Carol Schmid-Frazee in SCE s Law Department at Carol.SchmidFrazee@sce.com to obtain a non-disclosure agreement. The information in this advice letter for which SCE requests confidential treatment, and the length of time it should remain confidential, are provided in Public Appendix D. This information is entitled to confidentiality protection, as provided in the IOU Matrix, pursuant to D The specific provisions of the IOU Matrix that apply to the confidential information in this advice letter are identified in Public Appendix D. REQUEST FOR COMMISSION APPROVAL Commission approval is required for SCE to count the Termination Agreement s GHG reductions towards its GHG Emissions Reduction Targets under the CHP Program. SCE therefore requests that the Commission issue a final and non-appealable resolution containing: 1. A finding that the 1,6821,488 MT reductions associated with the Agreement applies toward SCE s GHG Emissions Reduction Target; and 2. Any other relief the Commission finds just and reasonable. 14 See Confidential Appendix C for savings amount and assumptions on calculations of savings.

16 ADVICE 3681-E October 25, 2017 TIER DESIGNATION SCE submits this advice letter with a Tier 2 designation. EFFECTIVE DATE This advice letter will become effective on November 24, 2017, the 30 th calendar day after the date filed, unless suspended by the Energy Division. NOTICE Anyone wishing to protest this advice filing may do so by letter via U.S. Mail, facsimile, or electronically, any of which must be received no later than 20 days after the date of this advice filing. Protests should be submitted to: California Public Utilities Commission, Energy Division Attention: Tariff Unit 505 Van Ness Avenue San Francisco, California EdTariffunit@cpuc.ca.gov In addition, protests and all other correspondence regarding this advice letter should also be sent by letter and transmitted via facsimile or electronically to the attention of: Russell G. Worden Managing Director, State Regulatory Operations Southern California Edison Company 8631 Rush Street Rosemead, California Telephone: (626) Facsimile: (626) AdviceTariffManager@sce.com Laura Genao Managing Director, State Regulatory Affairs c/o Karyn Gansecki 601 Van Ness Avenue, Suite 2030 San Francisco, California Facsimile: (415) Karyn.Gansecki@sce.com

17 ADVICE 3681-E October 25, 2017 With a copy to: Carol Schmid-Frazee Senior Attorney 2244 Walnut Grove Avenue Rosemead, California Facsimile: (626) Carol.SchmidFrazee@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 must be received by the deadline shown above. In accordance with General Rule 4 of GO 96-B, SCE is serving copies of this advice filing to the interested parties shown on the attached GO 96-B, R , and A et al service lists. Address change requests to the GO 96-B service list should be directed by electronic mail to AdviceTariffManager@sce.com or at (626) For changes to all other service lists, please contact the Commission s Process Office at (415) or by electronic mail at Process_Office@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 filing at SCE s corporate headquarters. To view other SCE advice letters filed with the Commission, log on to SCE s web site at For questions, please contact Raffi Minasian at (626) or by electronic mail at Raffi.Minasian@sce.com. Southern California Edison Company RGW:rm/csf:cm Enclosures /s/ Russell G. Worden Russell G. Worden

18 PUBLIC Attachment B Clean Version of Revised AL 3681-E

19 Russell G. Worden Managing Director, State Regulatory Operations October 25, 2017 ADVICE 3681-E PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA ENERGY DIVISION SUBJECT: Submission of Request for Greenhouse Gas Credits associated with the Termination & Shut-Down Agreement Between Southern California Edison Company and Carson Cogeneration Company, LLC PURPOSE This advice letter seeks approval for Southern California Edison Company ( SCE ) to claim greenhouse gas ( GHG ) reduction credits towards its Combined Heat and Power ( CHP ) program abatement targets. Such GHG reduction credits are calculated to have resulted from the Termination & Shut-Down Agreement (the Termination Agreement ) between SCE and Carson Cogeneration Company, LLC ( Carson ), dated as of June 1, 2017, which (1) terminates an existing power purchase agreement for the purchase of energy, capacity and related products between SCE and Carson, and (2) permanently shuts down and decommissions the combined cycle generating facility owned by Carson, thus eliminating the exhaust of GHG emissions resulting from the combustion of natural gas for electricity generation. BACKGROUND A. Combined Heat and Power Settlement In 2008, diverse parties with divergent interests, including the three investor-owned utilities ( IOUs ), representatives of Qualifying Facilities ( QFs ), 1 customer advocacy 1 The Public Utility Regulatory Policies Act of 1978 ( PURPA ) established a class of generating facilities known as QFs, which, in the furtherance of a variety of energy policy goals, receive special rate and regulatory treatment. QFs fall into two categories: (1) qualifying small power production facilities and (2) qualifying cogeneration facilities. For the purpose of this advice letter, QFs are defined as: An electric energy generating facility that complies with the qualifying facility definition established by PURPA and any FERC rules P.O. Box Rush Street Rosemead, California (626) Fax (626)

20 ADVICE 3681-E October 25, 2017 groups, and the California Public Utilities Commission ( Commission or CPUC ), engaged in settlement negotiations to, among other things, resolve numerous disputes between the IOUs and QFs before the Commission and state court. After a year and a half of negotiations, the participating parties reached an agreement that, among other things, developed a state CHP program, which includes megawatt ( MW ) and GHG emissions reduction targets, and settled all outstanding CHP/QF litigation issues. The parties then filed a joint motion for Commission approval of the QF and CHP Settlement Agreement, Term Sheet and attached Exhibits ( Settlement ). 2 Rule 12.1(d) of the Commission s Rules of Practice and Procedure provides that [t]he Commission will not approve settlements, whether contested or uncontested, unless the settlement is reasonable in light of the whole record, consistent with law, and the public interest. To assess reasonableness, the Commission considers, among other things, whether the settlement negotiations were at arms-length and whether the parties were adequately represented. 3 After considering the Settlement as a whole, its individual elements, as well as the interests at stake, the Commission approved the Settlement, finding it to be (1) reasonable, (2) the product of protracted, arms-length negotiations between sophisticated and well-represented parties with divergent interests, all of whom were required to compromise on some things, and none of whom received everything they wanted, 4 and (3) in furtherance of the state policy objectives embodied in California Public Utilities Code Section 372(a), Assembly Bill 32, and the Energy Action Plan II. 5 Of relevance to this advice letter, under the Settlement, [b]ilaterally negotiated and executed agreements are one of the procurement options in this CHP Program. The Settlement also provides that the pricing, terms, and conditions for those agreements will be according to the executed and approved agreements. 6 In addition, in furtherance of the State s policies, the Settlement sets forth GHG emissions reduction targets, to which the Termination Agreement contributes implementing PURPA and has filed with FERC (i) an application for FERC certification,... which FERC has granted, or (ii) a notice of self - certification..... CHP Settlement Agreement, Term Sheet, Glossary of Defined Terms, at p Any capitalized terms used in this advice letter but not defined herein have the meaning set forth in the Term Sheet. 3 Decision (D.) , 30 CPUC 2d 189, 89 (approving Pacific Gas and Electric Co. s Diablo Canyon settlement as in the public interest). 4 D at pp. 28, 35, Conclusion of Law No Id. at pp. 35, 37, 38, Conclusion of Law No Term Sheet 4.3.1, Term Sheet ,

21 ADVICE 3681-E October 25, 2017 DESCRIPTION OF THE CARSON COGENERATION FACILITY AND TERMINATION AGREEMENT A. Existing Project and Contract Background SCE and Carson executed a Power Purchase Agreement (the Legacy Contract ) on June 10, 1985 for the procurement of energy and capacity from Carson for a 30-year term. The CHP Settlement required that SCE offer its CHP contracts the option to negotiate the terms of the pro forma Power Purchase Agreement or amend an existing Legacy Contract. Carson elected to enter into an amended and restated agreement, which was composed of an Edison Energy Institute ( EEI ) Master Agreement, to govern the terms of the transaction (the Master Agreement ); a resource adequacy ( RA ) confirm, for the procurement of RA benefits (the RA Confirm ); and an energyonly tolling confirm, for the procurement of energy and ancillary services which SCE would have the right to dispatch into the CAISO markets (the Tolling Confirm, and collectively with the Master Agreement and the RA Confirm, the Agreement ). The Carson power plant was a natural gas-fired CHP generating facility with a nameplate capacity of 48 MW, and is located in an Environmental Justice ( EJ ) area in Carson, California (the Facility ). Under the Legacy Contract, the Facility was required to serve the steam and electricity needs of a host entity in order to satisfy the PURPA QF CHP efficiency requirements. Pursuant to the amending of the terms of the Legacy Contract to the new terms under the Agreement, Carson was no longer obligated to maintain its steam host, and thus gave up its CHP capabilities, making it a combined cycle gas turbine generating facility. In line with this transition, the Facility was expected to significantly reduce its emissions associated with the combustion of natural gas as a result of transitioning from baseload generation to dispatchable (i.e. economic) generation in the CAISO markets. SCE claimed 32,563.6 metric tonnes ( MT ) of GHG credits towards its CHP GHG reduction targets resulting from this expected reduction in GHG emissions. 8 Table 1: General Legacy Contract Summary Project Name Carson Cogeneration Company, LLC Owner/Developer Energy Operations Group, LLC Technology Combined cycle gas turbine Nameplate Capacity (MW) 48 Contract Capacity (MW) 48 Location (city and state) Carson, California Source of Agreement (e.g., RFO or Bilateral Negotiations) Bilateral, QF Executed on June 10, See SCE s Energy Resource Recovery Account ( ERRA ) Review of Operations, 2012, Chapters IX-XVI at pp

22 ADVICE 3681-E October 25, 2017 B. Overview of the Termination Agreement SCE and Carson executed the Termination Agreement on June 1, The Termination Agreement terminates the Contract approximately thirty-two months before the end of its original term and provides for the permanent cessation of GHG emissions at the Facility. Per the Termination Agreement, Carson was to permanently shut down the Facility as of June 1, 2017, and commence decommissioning the Facility in exchange for a termination payment. 9 SCE intends to file for approval of the Termination Agreement through the annual ERRA filing, as the actions taken to issue the termination payment in exchange for the termination of the Contract were in the economic best interests of its customers, even without accounting for any GHG reduction benefits, and thus the Termination Agreement meets the reasonableness standards required by the ERRA filing. Under this advice letter, SCE is solely requesting Commission approval to allow SCE to claim the GHG credits associated with the incremental reduction in emissions caused by permanently shutting down the dispatchable tolling resource which has no thermal host. The Termination Agreement is attached as Confidential Appendix B. A summary of the Termination Agreement is attached as Confidential Appendix C. C. Reasonableness of Request for GHG Reduction Credits Towards CHP Targets The ability to claim GHG reductions resulting from this Termination Agreement towards SCE s CHP GHG reduction targets is reasonable because it will result in customer savings by avoiding further CHP procurement to achieve GHG reductions and avoids environmental degradation from the combustion of natural gas, particularly in a statedesignated disadvantaged community, while still achieving the Commission s goals of reducing GHG emissions. The Agreement is in the best interest of SCE s customers and supports the State and Commission environmental goals. The Termination Agreement also has the additional benefit of reducing air pollutant emissions in Carson, CA. Carson contains multiple disadvantaged communities, as identified by CalEnviroScreen 3.0; some of the census tracts have pollution burdens in the 99 th percentile. One of the State s policy objectives is to achieve policy climate and air quality goals in a way that [minimizes] localized air pollutants and other greenhouse gas emissions, with early priority on disadvantaged communities. 10 Thus, the 9 See Confidential Appendix C for termination payment details. 10 Public Utilities Code Section , as amended by Senate Bill 350, directs the commission to develop an Integrated Resource Plan ( IRP ). One of the goals of the IRP is to ensure that load-serving entities... minimize localized air pollutants and other greenhouse gas emissions, with early priority on disadvantaged communities.

23 ADVICE 3681-E October 25, 2017 Termination Agreement supports the State s environmental goals in Environmental Justice communities by reducing pollution created by the combustion of natural gas. Confidential Appendix A details GHG emissions reductions that result from the Termination Agreement. GHG emissions reductions for Settlement accounting purposes are shown in Table 2, below, and discussed in Section E. SETTLEMENT ACCOUNTING FOR CHP PROCUREMENT AND GHG EMISSIONS REDUCTION TARGET Set forth in Table 2 below are the Settlement s MW and Emission Reduction Targets and the amount procured through the Termination Agreement that should be counted toward those targets. Target Table 2: Settlement Accounting SCE s Portion of Statewide Target 11 Quantities Procured from Carson Toward SCE s Settlement Target MW 1,402 MW 0 MW GHG Emissions Reduction Target D. CHP MW Target 1,220,000 MT 12 1,488 MT Pursuant to the Term Sheet, SCE has a procurement target of 1,402 MW (MW Target) of CHP through the CHP Procurement Processes by the end of the Initial Program Period. SCE has met its CHP MW Target, and is not seeking to count the Termination Agreement toward SCE s MW Target. E. GHG Emissions Reduction Target Section 6 of the Term Sheet sets forth the GHG Emissions Reduction Targets against which each IOU s CHP PPAs are measured. SCE calculated the Agreement s GHG credit pursuant to Section of the Term Sheet, which states: For Existing CHP Facilities that shut down during the Initial Program Period, the GHG reductions will be calculated against the previous two calendar years of data compared to the Double Benchmark. 11 The MW Target was to be achieved by the end of the Initial Program Period, November 22, The GHG Target must be met by the end of the Second Program Period, December 31, Target revised from 2,170,000 MT to 1,220,000 MT per Commission Decision

24 ADVICE 3681-E October 25, 2017 Although Carson had given up its thermal need in 2013, and had been operating solely as a dispatchable combined cycle gas-fired generating facility, Carson was originally a QF CHP resource. Upon converting from baseload CHP operation to dispatchable operation, Carson became an inefficient CHP facility. Appendix A demonstrates the calculations showing that Carson was an inefficient resource, as measured against the Double Benchmark. Section of the Settlement Agreement explains that for projects, like Carson, whose thermal need no longer continues after project shut-down, the measurement is based on the Baseline year emissions minus the projected PPA emissions and emissions associated with replacing one hundred percent (100%) of the decreased electric generation at a time differentiated Heat Rate. The baseline year emissions are the average of the previous two (2) calendar years of operational data. Section states that the Effective Date for accounting GHG benefits shall be the time of execution, which is June 1, After performing this calculation, SCE determined that the Termination Agreement contributes 1,488 MT of GHG Credit towards SCE s GHG Emissions Reduction Target under the Settlement. 13 This countable GHG reduction results from decreased statewide emissions as this gas-fired plant shuts down and will permanently cease operations. While SCE had already previously counted 32,563.6 MT of GHG towards the GHG Emissions Reduction Target, these reductions stemmed from changing Carson s expected output from baseload dispatch (i.e. operating 24x7 at maximum output) to reducing output to a dispatchable contract, which would be dependent upon the CAISO s economic dispatch of the Carson resource, and would thus significantly reduce the amount of GHG emissions. The Termination Agreement effectively functions as an incremental step in reducing GHG emissions by terminating the dispatchable contract and permanently shutting the Carson resource down. Section of the CHP Settlement Agreement also specifies that the IOU shall demonstrate the thermal need no longer exists. Upon transitioning from a baseload, CHP resource to a dispatchable resource in 2013, Carson gave up its steam host. Carson has continued to operate without a steam host during that entire period of time, and thus there is no thermal need that exists currently, and therefore the thermal need does not continue to exist following the effective date of the Termination Agreement. By counting these incremental GHG emissions reductions towards the GHG Emissions Reduction Target, SCE will reduce its procurement targets through the CHP Program that would otherwise need to be procured through new contracts via the CHP RFO process. SCE has calculated that by realizing a reduction in GHG emissions at no 13 This calculation is discussed in greater detail in Confidential Appendix A.

25 ADVICE 3681-E October 25, 2017 incremental cost relative to the termination of the Agreement, SCE has earned savings in procurement costs 14 that would otherwise have been spent to meet the GHG Emissions Reduction Targets. CONFIDENTIALITY In accordance with D , D , D , D and General Order (GO) 96-B, SCE requests confidential treatment of the material in the confidential appendices as set forth below. Confidential Appendix A: Confidential Appendix B: Confidential Appendix C: Public Appendix D: Public Appendix E: Workpapers Termination Agreement Termination Agreement Summary Confidentiality Declaration Proposed Non-Disclosure Agreement The confidential material in this advice letter will be made available to non-market participants in accordance with and upon execution of SCE s Proposed Non-Disclosure Agreement. Parties wishing to obtain access to the confidential material of this advice letter may contact Carol Schmid-Frazee in SCE s Law Department at Carol.SchmidFrazee@sce.com to obtain a non-disclosure agreement. The information in this advice letter for which SCE requests confidential treatment, and the length of time it should remain confidential, are provided in Public Appendix D. This information is entitled to confidentiality protection, as provided in the IOU Matrix, pursuant to D The specific provisions of the IOU Matrix that apply to the confidential information in this advice letter are identified in Public Appendix D. REQUEST FOR COMMISSION APPROVAL Commission approval is required for SCE to count the Termination Agreement s GHG reductions towards its GHG Emissions Reduction Targets under the CHP Program. SCE therefore requests that the Commission issue a final and non-appealable resolution containing: 1. A finding that the 1,488 MT reductions associated with the Agreement applies toward SCE s GHG Emissions Reduction Target; and 2. Any other relief the Commission finds just and reasonable. 14 See Confidential Appendix C for savings amount and assumptions on calculations of savings.

26 ADVICE 3681-E October 25, 2017 TIER DESIGNATION SCE submits this advice letter with a Tier 2 designation. EFFECTIVE DATE This advice letter will become effective on November 24, 2017, the 30 th calendar day after the date filed, unless suspended by the Energy Division. NOTICE Anyone wishing to protest this advice filing may do so by letter via U.S. Mail, facsimile, or electronically, any of which must be received no later than 20 days after the date of this advice filing. Protests should be submitted to: California Public Utilities Commission, Energy Division Attention: Tariff Unit 505 Van Ness Avenue San Francisco, California EdTariffunit@cpuc.ca.gov In addition, protests and all other correspondence regarding this advice letter should also be sent by letter and transmitted via facsimile or electronically to the attention of: Russell G. Worden Managing Director, State Regulatory Operations Southern California Edison Company 8631 Rush Street Rosemead, California Telephone: (626) Facsimile: (626) AdviceTariffManager@sce.com Laura Genao Managing Director, State Regulatory Affairs c/o Karyn Gansecki 601 Van Ness Avenue, Suite 2030 San Francisco, California Facsimile: (415) Karyn.Gansecki@sce.com

27 ADVICE 3681-E October 25, 2017 With a copy to: Carol Schmid-Frazee Senior Attorney 2244 Walnut Grove Avenue Rosemead, California Facsimile: (626) Carol.SchmidFrazee@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 must be received by the deadline shown above. In accordance with General Rule 4 of GO 96-B, SCE is serving copies of this advice filing to the interested parties shown on the attached GO 96-B, R , and A et al service lists. Address change requests to the GO 96-B service list should be directed by electronic mail to AdviceTariffManager@sce.com or at (626) For changes to all other service lists, please contact the Commission s Process Office at (415) or by electronic mail at Process_Office@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 filing at SCE s corporate headquarters. To view other SCE advice letters filed with the Commission, log on to SCE s web site at For questions, please contact Raffi Minasian at (626) or by electronic mail at Raffi.Minasian@sce.com. Southern California Edison Company RGW:rm/csf:cm Enclosures /s/ Russell G. Worden Russell G. Worden

28 CONFIDENTIAL Attachment C Redline of Revised Confidential Appendix A Confidential Protected Materials Public Disclosure Prohibited