2. Background
In California's hybrid electricity sector, entities must individually and collectively take all appropriate and necessary steps to assure reasonable electric system reliability. Among these entities are generators, privately owned public utilities, municipal utilities, load serving entities (LSEs), the Commission, and the CAISO.
In particular, the CAISO is responsible for ensuring "efficient use and reliable operation of the transmission grid consistent with achievement of planning and operating reserve criteria..." (Pub. Util. Code § 345.1) In pursuit of these objectives, the CAISO must each day ensure that sufficient generating capacity is on-line and available to meet the forecast system load. This means not only a sufficient amount of on-line generating capacity to satisfy the total system load, but also whether that capacity is in the right place. The CAISO, for example, must have a minimum amount of on-line generation available in certain locations in order to address transmission constraints or other specific operating requirements, such as maintaining proper voltage and other system-stability related requirements. Absent satisfaction of the CAISO's location-specific operating requirements, the CAISO may be unable to operate the grid reliably.
By letter dated June 10, 2004, the CAISO informed Southern California Edison Company (SCE) and the Director of the Commission's Energy Division of certain reliability related concerns. The CAISO stated that in recent months it increasingly has had to manage congestion and otherwise address location-specific operating requirements in SCE's service area in real time, rather than in the day-ahead time frame. This has especially been the case in areas generally defined as South of Path 26, South of Lugo, and North of Miguel. Transmission congestion arises in these areas due, in part, to scheduling of resources that are not deliverable to load. These scheduling practices pose operational difficulties for the CAISO and concerns about reliability, particularly for summer months when the system is stressed.
2.1. Assigned Commissioner's Ruling
On June 10, 2004, the Assigned Commissioner issued an Assigned Commissioner's Ruling (ACR), suggesting that the reliability of the California electric system would be enhanced if utilities considered known and reasonably anticipated congestion on the transmission system when procuring and scheduling resources. Further, he stated that utilities should not only take into account their own direct costs, but also the total costs of their procurement and scheduling, including (to the extent discernable) the costs associated with both system and local area reliability within their service territories. Finally, he recommended that utilities schedule resources so as not to increase known or reasonably anticipated congestion on the transmission system, and to do so in a manner consistent with established and identified reliability requirements.
With these principles in mind, the Assigned Commissioner stated that he intended to propose modifications to several Commission decisions to clarify utility short-term procurement practices. Parties were invited to comment. On June 17, 2004, timely comments were filed and served by SCE, Pacific Gas and Electric Company (PG&E), San Diego Gas & Electric Company (SDG&E), The Utility Reform Network (TURN), Independent Energy Producers Association (IEP), Calpine Corporation (Calpine), Alliance for Retail Energy Markets (AReM), Northern California Power Agency (NCPA), and California Municipal Utilities Association (CMUA).
By Ruling dated June 17, 2004, reply comments were authorized, to be filed by June 21, 2004. Timely reply comments were filed and served by PG&E, SCE, TURN, IEP, CAISO, Office of Ratepayer Advocates (ORA), City and County of San Francisco (CCSF), and Termoelectrica de Mexicali S. de R.L. De C.V. (TDM). On June 22, 2004, the California Department of Water Resources (DWR) submitted a memorandum to assist the Commission in its deliberations.
2.2. Summary of Comments
All parties support taking reasonable steps to ensure system reliability, including local area reliability and transmission congestion. Parties differ in their views on how this is done, and who is responsible for doing so. Positions range from recommending Commission adoption of the proposals in the ACR to Commission rejection of those principles. Parties' views also differ on the extent to which CAISO can or should be expected to effectively manage the transmission system to achieve efficient use and reliable operation. Parties' positions are briefly summarized in Attachment A.
