Item Number: 18
City Council / Board of Directors
Written Communications
Meeting of: November 19, 2024
Submitted By:
Brenda Hampton, Director of Electric Utility Services
Subject:
Updated VMUS Renewable Energy Resources Procurement Plan Recommendation:
That the Honorable City Council adopt Resolution No. 24-097 the Renewable Energy Resources Procurement Plan, Compliance Period 4 (2021-2024) (Attachment B) and authorizing certain other actions in connection therewith.
Fiscal Impact:
There is no fiscal impact associated with the adoption of resolution No. 24-097.
Resolution No. 11-051 established a limitation on the procurement expenditures for all Renewable Portfolio Standards (“RPS”) eligible resources used to comply with the RPS Enforcement Program. VMUS will apply the Cost Limitations and Delay of Timely Compliance, as described in Sections 9 and 10 of the RPS Procurement Plan and is not obligated to incur additional expenditures for Compliance Period 4 RPS procurement resources.
Strategic Plan Goal:
This item aligns with Strategic Plan Goal E – Invest in Infrastructure. VMUS must comply with the state’s mandate related to the procurement of renewable energy resources. The goal of the initiative is to support the reduction of greenhouse gas emissions, create a diverse energy supply, promote clean energy, ensure grid reliability and promote affordability.
Background:
California Public Utilities Code (PUC) § 399.30(a) requires all publicly owned electric utilities (POUs), to “adopt and implement a renewable energy resources procurement plan” that requires the POU to procure a minimum quantity of electricity and/or renewable energy credits (“RECs”) from eligible renewable energy resources, as a percentage of total retail sales.
3 8
6 6
As directed by PUC § 399.30(e), the City Council adopted the Renewable Energy Resources Enforcement Program (“RPS Enforcement Program”) on February 9, 2012.
Through the RPS Enforcement Program, the City Council established the initial compliance periods, adopted RPS-eligible procurement targets, and described the framework for how VMUS would implement its RPS program. Section 10 of the RPS Enforcement Program directed the City Manager to develop and present a Renewable Energy Resources Procurement Plan (“RPS Procurement Plan”) to the City Council.
Discussion:
Consistent with the RPS Enforcement Program and PUC § 399.30(a), the City Council adopted RPS Procurement Plan, Compliance Period 1 (2011-2013), Compliance Period 2 (2014-2016) and Compliance Period 3 (2017-2020) on November 18, 2013, October 6, 2015, and December 1, 2020, respectively. For each compliance period the RPS Procurement Plan described VMUS’ intended strategy to comply with the RPS requirements. The California Energy Commission deemed VMUS in compliance with the RPS procurement requirements for Compliance Periods 1, 2 and 3.
On October 7, 2015, Governor Brown signed SB 350 into law, adopting an RPS procurement target of 50 percent by 2030 and making various other changes to the RPS Program. On September 10, 2018, Governor Brown signed SB 100 into law, which increased the 2030 RPS target to 60 percent and set a statewide goal of meeting all electric load with carbon free resources by 2045. The specific RPS procurement targets set by SB 100 are the following: at least 44 percent by December 31, 2024, 52 percent by December 31, 2027, and 60 percent by December 31, 2030.
PUC Code § 399.30(d)(2)(B) and PUC § 399.30(d)(2)(A) gives the governing board of each publicly owned electric utility (POU) the authority to establish a cost limitation and Delay of Timely Compliance Rule, which serves as alternative mechanisms for complying with the RPS procurement requirements. Pursuant to this authority, the POU governing board can set a dollar amount limit on RPS procurement expenditures that is set at a level that prevents disproportionate rate impacts for the POU’s customers. For a POU that sets a cost limitation, once that POU has spent the amount of the cost limitation, the POU is in compliance with the RPS program.
The attached VMUS RPS Procurement Plan for compliance period 4 adopts procurement requirements consistent with SB 350 and SB 100, provides more recent forecast data, and updates the description of VMUS’ intended strategy to comply with the RPS Program requirements. This RPS Procurement Plan also provides a methodology for determining a cost limitation and specifies the dollar amount the VMUS’ cost limitation for the fourth compliance period.
VMUS’ largest renewable energy power purchase agreement was intended to cover a significant portion of the RPS requirements in Compliance Period 4. The project was scheduled to be completed by January 1, 2022. The current forecast for project completion is January 1, 2025, due to major permitting and materials delays related to COVID-19. Additional unanticipated interconnection issues delayed the project even 3 8
6 6
further. The continuous and unanticipated delays associated with this project were outside VMUS’ control, and VMUS was not able to meet the RPS plan requirements for compliance period 4 (2021-2024).
For Compliance Period 4, VMUS will apply the Cost Limitation Rule per PUC § 399.30(d)(2)(B), and consistent with Section 9 of the RPS Enforcement Program, and Delay of Timely Compliance Rules per PUC § 399.30(d)(2)(A) and consistent with Section 7 of the RPS Enforcement Program. To avoid disproportionate rate impacts during the fourth compliance period, during the annual budget approval process, VMUS will calculate the revenues less expenses and the cumulative operating deficit (before the incremental cost of procuring electricity products to satisfy the RPS requirements) and identify the funds available from such amount to concurrently satisfy the applicable RPS requirement and maintain prudent reserves (Cost Limitation Guideline). VMUS shall not be obligated to expend funds on RPS procurement greater than the Cost Limitation Guideline or RPS procurement targets. VMUS is forecasted to have a cumulative operating deficit through December 31, 2024, and the cost of procuring electricity products to satisfy RPS requirements is greater than zero, the cost limitation for Compliance Period 4 is determined to be $0. Once VMUS’ largest renewable energy power purchase agreement achieves commercial operation, VMUS will comply with future short-term and long-term RPS procurement requirements.
Staff remains available for any questions you may have.
Attachments: A. Resolution No. 24-097
B. VMUS Renewable Energy Resources Procurement Plan