6. CAC Petition for Modification

On June 21, 2011, CAC filed a Petition for Modification of D.10-06-036, the Commission's Order adopting local procurement obligations for 2011 and further refining the RA program. The Petition contends that D.10-06-036 inadvertently causes load-serving entities to use ratepayer funds to procure redundant and unneeded RA capacity. It further contends that a faulty definition of "system peak demand" results in an undervaluation of the RA capacity from combined heat and power facilities, which, in turn, causes this unnecessary and expensive procurement burden for ratepayers.

The Petition seeks a modification to the system peak demand definition to exclude weekends and holidays from the hours used to calculate the qualifying capacity of combined heat and power resources. CAC claims this revision will strike a better balance between reliability and cost, more closely aligning
D.10-06-036, with the principles of the RA program, and maintain consistency between the definition of "system peak demand" in the qualifying capacity counting methodology and the definition of peak hours used in federal and state settings, including a settlement among combined heat and power generators and LSEs recently approved in D.10-12-035.

In a Ruling issued on September 7, 2011, this issue was deferred to this proceeding for consideration and further study. At the January 27, 2012 workshop, Energy Division proposed not to make the changes advocated by CAC in their Petition. Energy Division believes thatthere is no significant benefit to the RA program in modifying the definition of system peak demand. As CAC notes in its comments, the ISO stated at the workshop that system peak can occur during a weekend as well on weekdays (although CAC claims this is a remote possibility). The hours included in calculating the Net Qualifying Capacity of resources are set relative to peak load and system stress, and not on the production output of generators. Therefore, modifying this definition to account for the specific characteristics of generators, based on their technology and commercial interests and not on a uniform system peak, would create a less accurate account of generation output and have an adverse impact on system reliability. It would also be unfair to other intermittent resources like wind. A wind generator could similarly demand that the system peak demand exclude hours when it is unable to generate power.

CAC'scomments filed June 11 claim that the CAISO is not concerned with peak load occurring on weekdays, as evidenced by the hours set in CAISO Business Practices Manual for the Standard Capacity Product (SCP) included hours. The CAISO pointed out in their reply comments that CAC's commentson the SCP "confuse the methodology used to determine the capacity of a resource qualified to count toward meeting the monthly resource adequacy obligation of a load serving entity, which runs 24/7 throughout the month, with the calculation of availability under the SCP which is a financial incentive measure." We agree.

We do not believe that CAC's Petition would improve the RA program. We will not make the changes recommended by CAC, and we therefore deny the Petition for Modification.