8. Compliance with Procurement and Resource Planning Rules
SB 695 requires the Commission to ensure that other providers of electricity in California are subject to the same procurement-related requirements that apply to the IOUs, including resource adequacy requirements, renewables portfolio standards, and greenhouse gas emission reductions.
Pursuant to SB 695, once the Commission has authorized additional DA transactions, it is required to ensure that other providers are subject to the same requirements that apply to the three largest California electric utilities under:
1. Commission-adopted programs to implement the resource adequacy provisions of Public Utilities Code Section 380;
2. Renewable portfolio standards of the Public Utilities Code, Article 16; and
3. Electricity sector requirements adopted by the California Air Resources Board pursuant to the California Global Warming Solutions Act of 2006.
8.1. Parties' Positions
Various parties affirm the importance of enforcing uniform procurement and resource planning rules on all load serving entities (LSEs). SCE, in its comments, identified a number of issues that remain to be addressed by the Commission to ensure that these requirements are imposed in a uniform manner among all LSEs. As noted in the Assigned Commissioner's Ruling dated November 18, 2009, specific additional procurement-related requirements will be considered in the appropriate proceedings. SCE asks that in the final decision in this sub-phase we order the immediate opening of a separate sub-phase here, or in other existing proceedings, to address any and all remaining issues regarding procurement-related obligations of ESPs under SB 695.
TURN identifies the potential problem with the allocation of RA resources in this regard. Under current rules, a customer's new ESP is not required to obtain its proportionate share of Local RA resources until the 2011 RA compliance year, because Local RA is subject to only an annual compliance obligation, with no monthly true-up. At the same time, the IOU that loses the load will have no market for the Local RA resources that it had previously procured to serve that load. TURN argues that while a longer-term solution to this problem may be developed in Rulemaking (R.) 09-10-032, the new RA OIR, that proceeding cannot be expected to produce a resolution of the issue by April 11, 2010. As a result, TURN expresses concern that bundled service customers may be left with a disproportionate share of Local RA obligations and costs for the remainder of 2010, including the critical summer peak period when RA is particularly valuable and costly.
TURN initially proposed as an interim solution - pending longer-term resolution of the issue in R.09-10-032 - that ESPs obtaining additional load as a result of the DA reopening in April 2010 be required to purchase the proportional amount of Local RA capacity from the host IOU at an RA "waiver trigger" price of $40 per kW-year, pro rated as appropriate for the remainder of the current year. TURN argued that this interim measure will help to prevent inappropriate gaming and avoid creating a perverse incentive for customers to switch providers simply to avoid their fair share of Local RA costs.
TURN argues that new ESPs entering the market should not be treated any differently from existing ESPs or IOUs with respect to RPS requirements. TURN notes that the rules require all LSEs to procure 20% of their energy from eligible renewable projects by 2010, subject to the applicable flexible compliance rules.
PG&E also recommends that resolution is needed on how DA customers and ESPs could make IOUs whole for the local RA that has already been procured in 2010, thereby effectuating the transfer of local RA from the IOUs to ESPs at a price certain. PG&E believes that TURN's January 11, 2010 filing in R.09-10-012 is simple and can be adapted for this purpose. PG&E states that this approach would not have precedence on the long-term proceeding under R.09-10-012, or the RA proceeding R. 09-10-032, but would only apply for 2010.
A proposal for an interim solution to Local RA obligations was further developed in the comments of the Joint Parties. As noted by the Joint Parties, the reopening of DA in April 2010 comes in the middle of the RA program compliance year, which is administered on a calendar year basis. While system RA obligations are adjusted on a monthly basis to reflect migration of customers between LSEs under current procedures, no similar adjustment exists for Local RA. Proposals to adopt a formal Local RA load migration adjustment are under consideration in R.09-10-032 for compliance year 2011. In view of the increase in load migration that may occur as early as April 2010, however, a more immediate temporary solution to deal with this issue is needed. This interim solution is described in Appendix 3 hereto.
The proposed temporary solution, as set forth in the Joint Parties' comments, provides a means of establishing a value for a "Customer Local RA Obligation" when a customer seeks to migrate between LSEs after the effective date of DA reopening. This value will be based upon the customers' actual 2009 Coincident Peak Demand multiplied by a "Local-to-Peak Ratio" that will be calculated for each IOU service territory, as set forth in Appendix 3. The resulting figure (expressed in MW) will constitute the Local RA Obligation of that customer. The LSE gaining the additional load will have the option to obtain an allocation of RA "credits" from the LSE losing the load without the need for an actual sale of physical capacity to occur between the two LSEs. The LSE gaining the load would make a payment to the LSE losing the load equal to the customer's Local RA Obligation multiplied by a default transfer price of $24 per kW-year. This payment would be deemed to satisfy the acquiring LSE's Local RA Obligation for the remainder of the 2010 compliance year.
8.2. Discussion
We recognize the need for timely action on resolving any remaining issues relating to procurement-related obligations of ESPs under SB 695. We conclude, however, that as a general matter, the adoption of a specific timetable and the scope of the relevant issues is best addressed in the separate proceedings where the relevant specialized expertise already exists. As an exception to this general approach, however, we conclude that the one specific issue relating to RA obligations, as discussed in the Joint Parties' comments, requires an interim resolution in this proceeding. We agree that the Joint Proposal offers a reasonable short-term solution to deal with the issue of Local RA Obligations and we adopt it on that basis. The proposed temporary solution is set forth in Appendix 3 of this decision, based upon the Joint Proposal. This interim solution is adopted for implementation as part of the initial phase-in of new DA load in order to allow DA transactions to proceed in a timely manner while accounting for the impacts on RA obligations.
The adopted solution will provide an expedient means of establishing a value for a Customer Local RA Obligation for use when a customer transfers from one LSE to another during the initial DA open enrollment period. The temporary solution will avoid the potential for cost shifting or undue competitive advantage associated with the Local RA Obligation. After 2010, this temporary solution would be superseded as a result of whatever solution (if any) is adopted in R.09-10-032 for the 2010 compliance year.
This temporary solution shall explicitly apply only for calendar year 2010, and shall either continue or be replaced as a result of whatever solution (if any) is adopted in R.09-01-032 for the 2011 RA compliance year. To facilitate a smoother synchronization between the phased increase in DA load and the annual RA schedule, the next step in the DA phase-in schedule would occur on January 1, 2011, rather than on April 11, 2011. The use of the January date would allow LSEs' year-ahead Local RA showings for 2011 to reflect any load migration that is expected to occur at the start of the next DA reopening phase-in. The ESPs will remain subject to the previously adopted RA showing process which starts in July 2010 for 2011 showings.
We make certain revisions to Appendix 3 based upon comments on the proposed decision. For example, we revise the previous references in the proposed decision to Local RA obligations being "aggregated by NP-26 and SP-26," and instead specify the local areas for which LSEs must procure Local RA. We also incorporate Joint Parties' proposed modifications to the formulas for calculating the Local-to-Peak ratio and the Customer Local RA obligation, as set forth in Appendix 3.
The Joint Parties propose that all LSEs that intend to serve load during 2011 refile load forecasts for the 2011 RA compliance year on July 15, 2010
We shall adopt the due date of May 26, 2010 (instead of July 15, 2010), for LSEs to provide Energy Division with revised load forecasts for the 2011 RA compliance year. Based on the timing for the IOUs to respond to NOIs, a suitable compromise is to have forecasts due from LSEs on May 26, 2010. This will be the only forecast due for 2011 year-ahead compliance.
