ALJ/MSW/jt2 Mailed 7/21/2006

Decision 06-07-031 July 20, 2006

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Order Instituting Rulemaking to Consider Refinements to and Further Development of the Commission's Resource Adequacy Requirements Program.

Rulemaking 05-12-013
(Filed December 15, 2005)

OPINION ON REMAINING PHASE 1 ISSUES

Table of contents

Title Page

OPINION ON REMAINING PHASE 1 ISSUES 1 1

1. Summary 2 2

2. Background 3 3

3. RAR Capacity Product (Staff Report II.) 4 4

3.1. Impacts of Outages on Qualifying Capacity (Staff Report II.A.1.) 6 6

3.2. Capacity Derates (Staff Report II.A.2.) 11 11

3.3. Penalties for Non-Performance (Staff Report II.A.3.) 12 12

3.4. Maintenance and Repair Obligations (Staff Report II.A.4.) 14 14

3.5. Bulletin Board and Centralized Title Clearing (Staff Report II.A.5.) 15 15

3.6. Import Requirements (Staff Report II.A.6.) 17 17

3.7. Creditworthiness (Staff Report II.A.7.) 19 19

3.8. Intermediaries (Staff Report II.A.8.) 20 20

3.9. Pooling Of Assets and Substitution (Staff Report II.A.9.) 21 21

3.10. Regulatory Uncertainty (Staff Report II.A.10.) 23 23

3.11. Required Elements of Standardized, Tradable Capacity Products 24 24

4. Implementation Issues (Staff Report III.) 35 35

4.1. Filing Guide and Templates (Staff Report III.A.; V.) 35 35

4.2. Maximum Cumulative Capacity (Staff Report III.B.) 37 37

4.3. Accounting for Transmission Losses (Staff Report III.C.) 38 38

4.4. Process for Resolving Discrepancies (Staff Report III.D.) 39 39

5. Comments on Draft Decision 39 39

6. Assignment of Proceeding 40 40

Findings of Fact 40 40

Conclusions of Law 43 43

ORDER 44 44

OPINION ON REMAINING PHASE 1 ISSUES

1. Summary

In this decision, we address proposals for refinements to and clarification of the Commission's resource adequacy requirements (RAR) program. In particular, we address topics for which such clarification or refinement would establish clearer expectations among market participants regarding how contracts for resources will count towards fulfilling the procurement obligations that load-serving entities (LSEs) must meet. We refine our definition of the essential elements of a resource adequacy capacity product, which in turn could lead to the development, by and among industry participants, of a standardized capacity product that can be readily traded. Availability of such a capacity product should promote the achievement of RAR program goals and reduce RAR compliance costs incurred by LSEs.

This decision also addresses certain program issues that have arisen during the initial implementation stages of the RAR program adopted by the Commission in Decision (D.) 05-10-042. We review the compliance filing guides and templates that were developed by the Energy Division in consultation with the California Independent System Operator (CAISO) and the California Energy Commission (CEC), and we authorize the Energy Division to make revisions to the filing guides and templates that are consistent with our RAR decisions and necessary to give full effect to those decisions. We also clarify certain resource counting rules and address the treatment of transmission losses in the RAR program.

This decision concludes Phase 1 of this Rulemaking. The proceeding remains open for consideration of issues described in the Order Instituting this Rulemaking, as set forth in detail in the Assigned Commissioner's Scoping Memo dated March 1, 2006 (Scoping Memo).