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ALJ/MSW/sid Date of Issuance 6/22/2009

Decision 09-06-028 June 18, 2009

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Order Instituting Rulemaking to Consider Annual Revisions to Local Procurement Obligations and Refinements to the Resource Adequacy Program.

Rulemaking 08-01-025

(Filed January 31, 2008)

DECISION ADOPTING LOCAL PROCUREMENT OBLIGATIONS FOR 2010 AND FURTHER REFINING THE RESOURCE ADEQUACY PROGRAM

TABLE OF CONTENTS

Title Page

DECISION ADOPTING LOCAL PROCUREMENT OBLIGATIONS FOR 2010 AND FURTHER REFINING THE RESOURCE ADEQUACY PROGRAM........ 2

Findings of Fact 55

Conclusions of Law 57

ORDER 59

APPENDIX A - Excerpts from the Revised Monthly Local Capacity Proposal of Sempra Energy Solutions, LLC (SES)

APPENDIX B - Excerpts from the Joint Proposal of the CAISO, SCE, and SDG&E Regarding Calculation of QC for Wind and Solar Resources

APPENDIX C - Adopted Methodology for Counting Wind and Solar Resources

DECISION ADOPTING LOCAL PROCUREMENT OBLIGATIONS FOR 2010 AND FURTHER REFINING THE RESOURCE ADEQUACY PROGRAM

1. Summary

This decision establishes local capacity procurement obligations for 2010 applicable to Commission-jurisdictional electric load-serving entities. These procurement obligations are based on an annual study of local capacity requirements performed by the California Independent System Operator for 2010. For the second consecutive year, the total local capacity requirements determined by the California Independent System Operator for all local areas combined declined slightly from the prior year; the reduction is from 27,915 megawatts in 2009 to 27,727 megawatts in 2010.

In addition, this decision adopts several proposed resource adequacy program refinements. Most significantly, we revise the existing rule for counting the net qualifying capacity of intermittent wind and solar power generation. The current rule significantly overstates the dependable level of generation that is available during peak hours. To more accurately reflect the actual performance of those resources during peak load conditions, we adopt an "exceedance" method for calculating the net qualifying capacity of these resources that explicitly takes into account very large variances in output during peak periods. With the adopted exceedance factor of 70%, the qualifying capacity of a wind or solar resource would be equal to the minimum output achieved by the resource for at least 70% of the hours in the data set of historical generation for each month.

Notwithstanding our objective to increase the use of renewable resources such as wind and solar generation, as well as our objective to minimize the costs of the resource adequacy program to the extent consistent with reliable service, we find that this modification to the resource adequacy counting rule is necessary to insure against the risk of over-reliance on the ability of these resources to provide capacity during peak demand periods.

Other modifications to the resource adequacy program that we adopt today include the following:

· We specify the conditions under which new resources that are expected to become commercially operational during the following compliance year may be counted by load-serving entities in their compliance demonstrations for local resource adequacy procurement.

· The allocation of "Cost Allocation Methodology" capacity credits to load-serving entities that was ordered by the Commission in Decision 07-09-044 will be performed on a monthly basis under specified circumstances.

· Resource adequacy capacity credits associated with certain demand response programs will be allocated to load-serving entities using load impact protocols adopted in Decision 08-04-050. Also, we provide for greater transparency in how this allocation process is implemented.

· The rule for counting the net qualifying capacity of resources whose capacity value is calculated using a rolling average of historical performance is modified to account for scheduled outages during the averaging period.

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