2. Background

Public Utilities Code Section 380 (as amended by Stats. 2008, ch. 558, Sec. 13, effective January 1, 2009) requires that "the Commission, in consultation with the [CAISO], shall establish resource adequacy requirements for all load-serving entities." The statute establishes a number of objectives for the Commission to achieve with the program, including development of new generating capacity and retention of existing generating capacity, equitable allocation of the cost of generating capacity, and minimization of enforcement requirements and costs. Section 380(j) defines "load-serving entities" for purposes of this section as "an electrical corporation, electric service provider, or community choice aggregator."

Based on the statutory language, the Commission's Resource Adequacy (RA) program and requirements apply to all load-serving entities (LSEs) under our jurisdiction. Certain small or multi-jurisdictional LSEs are subject to different RA requirements which are more appropriate to their situations than those described in this order. A current list of LSEs subject to the requirements of this decision is found in Appendix A.

This proceeding has been divided into two phases. Phase 1 considered local capacity procurement obligations for 2011 applicable to Commission-jurisdictional electric LSEs and several proposed RA program refinements. See D.10-06-036. That decision deferred issues related to local true-up provisions for RA, which were decided in D.10-12-038.

An Assigned Commissioner's Ruling and Scoping Memo (Scoping Memo), issued on November 3, 2010, identified the issues to be considered in Phase 2 of this proceeding as well as the procedure and schedule for their consideration. Two broad categories of issues were established. The first category, local RA issues, pertains to the California Independent System Operator's (CAISO) 2012 local capacity requirements (LCR) study as well as this Commission's establishment of local procurement obligations for 2012 based on the LCR study. The second category, program refinement issues, pertains to various proposals to modify the RA program.

In response to further comments and motions, the Scoping Ruling was revised on February 3, 2011 to allow the following issues identified by parties in their comments and Motions into the scope of the proceeding:

· How should the Commission determine the RA counting treatment of new generation resources that come online mid-year?

· A review of the Path 26 counting constraint allocation methodology;

· Whether to use of Southern California Edison Company's (SCE's) Planned Outage Adder instead of generator based replacement obligation proposed by the CAISO;

· Revisions to the Coincident Adjustment Factor;

· Modification of the citation program to provide for a specific cure period for RA showings found to be deficient;

· Whether Pacific Gas and Electric Company's (PG&E's) peak day pricing programs should receive credit for RA;

· The level of the waiver trigger for Local RA capacity;

· Refinement of the Standard Capacity Product;

· The role of multi-year RA contracts; and

· The interaction between the RA proceeding and the Commission's long-term procurement process proceeding.

In addition, the CAISO proposed to add to the scope of Phase 2 the following issue:

Review the plan for a non-generic capacity procurement requirement process to add resource operational characteristics such as regulation and ramping "load following" capabilities into the RA procurement requirements. CAISO will provide an annual cycle of studies and reports to inform load serving entities' RA procurement. In addition, CAISO proposes that the Commission expand the five month year-ahead showing to a full years showing for the year-ahead procurement to support the evaluations and assessments of needed non-generic capacity.

In the revised Scoping Memo, this issue was deferred to a future phase of this proceeding.

The Commission's Energy Division facilitated workshops on RA program refinement issues on January 18 and 25, 2011. Comments on the Phase 2 issues discussed in the workshops were filed on February 8, 2011 by Alliance for Retail Energy Markets (AReM); Calpine Corporation (Calpine); the CAISO; California Large Energy Consumers Association (CLECA), Cogeneration Association of California (CAC); Division of Ratepayer Advocates (DRA); Dynegy Morro Bay, LLC, Dynegy Moss Landing, LLC, Dynegy Oakland, LLC and Dynegy South Bay, LLC (Dynegy); GenOnCalifornia North LLC and GenOn Delta LLC (GenOn); EnerNOC, Inc. (EnerNOC); PG&E; SCE; San Diego Gas & Electric Company (SDG&E); and The Utility Reform Network (TURN). The CAISO; DRA; Dynegy; Independent Energy Producers Association (IEP); PG&E; SCE; SDG&E; and TURN filed replies on February 22, 2011.

Following a stakeholder process that began in 2008, on April 29, 2011, the CAISO posted its "2012 Local Capacity Technical Analysis Final Report and Study Results" (2012 LCR Study) on its website, served notice of the report's availability, and filed it with the Commission on May 2, 2011. To accommodate the CAISO's LCR study schedule and associated stakeholder review process, the Scoping Memo deferred the dates for comments and reply comments on local RA issues to May 6, 2011 respectively.