4.2.1.1. Avoided Generation Capacity Costs

The avoided generation capacity costs are determined by the Avoided Cost Calculator discussed in Sections 3.3.1., 3.3.2., and 3.3.3. above. This model uses publicly available data from sources such as the CAISO Market Issues and Performance Annual Reports as inputs to model the costs of a new Combustion Turbine. The model estimates the hourly marginal costs of avoided new generation capacity for each hour of the year. The avoided generation capacity cost is then modified for each individual demand response program with three adjustment factors (called the A, B, and C factors), which are determined by each LSE for each demand response program. The A factor adjusts the avoided generation capacity cost for an individual demand response program, based on the probability that the program will be available when needed. The B factor takes into account the varying notification times associated with different demand response programs. Because programs with shorter notification times are more valuable, the B factor is used to reduce the value of programs with longer notification times. The C factor determines the relative value of programs with different triggers, de-rating those with less flexible triggers to reflect their lower value.