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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)

Table of contents

OPINION ON REMAINING PHASE 1 ISSUES 11

1. Summary 22

2. Background 33

3. RAR Capacity Product (Staff Report II.) 44

4. Implementation Issues (Staff Report III.) 3535

5. Comments on Draft Decision 3939

6. Assignment of Proceeding 4040

Findings of Fact 4040

Conclusions of Law 4343

ORDER 4444

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).

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