7. Assignment of Proceeding
Michael R. Peevey is the Assigned Commissioner. Mark S. Wetzell, Meg Gottstein, and Carol Brown are the assigned Administrative Law Judges and Principal Hearing Officers in this proceeding.
1. The CAISO is responsible for ensuring efficient use and reliable operation of the transmission grid consistent with achievement of planning and operating reserve criteria.
2. Satisfaction of CAISO's location-specific operating requirements affects its ability to operate the grid reliably.
3. In recent months, CAISO has had to increasingly 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, especially in areas generally defined as South of Path 26, South of Lugo, and North of Miguel.
4. Transmission congestion arises in these areas due, in part, to scheduling of resources that are not deliverable to load.
5. These scheduling practices pose operational difficulties for the CAISO, and concerns about reliability, particularly for summer months when the system is stressed.
6. While the CAISO has the responsibility to ensure and maintain reliable grid operations, it is the LSEs responsibility to have sufficient and appropriate resources both system-wide and locally to make that reasonably possible.
7. The Commission has unambiguously established procurement guidelines recognizing both reliability and least cost objectives, while noting that these objectives are interrelated and that reliability comes with a cost.
8. The Commission has emphasized the importance of taking reliability into account in procurement and scheduling of resources.
9. Each utility has a duty to provide safe and reliable electricity at a reasonable cost.
10. Reasonable cost means least cost taking into account all relevant factors (e.g., short run, long run, cash flow, total cost, safety, reliability, environmental sensitivity).
11. Minimizing total cost and taking reliability into account means incorporating all known and reasonably anticipated CAISO-related costs (including congestion, re-dispatch costs and must-offer costs) when evaluating scheduling and procurement options.
12. The Commission intends that utilities minimize the use of RMR contracts, and include local reliability in their long-term procurement plans for the purpose of reducing the need for RMR contracts.
13. Reasonable relaxation of restrictions on negotiated bilateral contracts, by authorizing utilities to engage in bilateral negotiated contracts for capacity and energy from power plants, will allow utilities to take appropriate actions to reduce overall costs and increase local area reliability.
14. Reasonable clarification of guidance on reliance on spot market transactions provides greater flexibility to utilities in taking actions to enhance local areas reliability without encouraging over reliance on spot market transactions.
15. Comments have revealed a need to monitor the implementation of this order to assure that it has the desired effect on reducing CAISO real-time operations and associated CAISO-related costs, and to determine whether or not the beneficial consequences sought from today's order in fact materialize.
16. The clarifications and modifications adopted herein are exempt from CEQA since they pertain to the operation at existing electric power generating facilities and new facilities which will themselves be subject to CEQA.
17. Any delay in implementing the clarifications and modifications adopted in this order will cause significant harm to public health and welfare by unreasonably and unnecessarily compromising system reliability.
1. Each utility is responsible for scheduling and procuring sufficient and appropriate resources (both system-wide and locally within its service area) to meet its customers' needs, and to permit the CAISO to maintain reliable grid operations.
2. A utility scheduling practice or procurement plan that focuses solely on least cost energy, without regard to deliverability of the procured energy to load or to local reliability, is not in compliance with our prior decisions, approved short-term procurement plans, and AB 57.
3. When making scheduling and procurement decisions, each utility should incorporate all CAISO-related forward commitment costs that result from the utility's decisions, including all known or reasonably anticipated CAISO-related costs, such as congestion, re-dispatch, and must-offer costs.
4. Utilities should use a comprehensive approach to scheduling and procuring resources that reasonably minimizes the need for RMR contracts.
5. The restrictions on negotiated bilateral contracts should be relaxed so that the utilities may take appropriate actions to reduce overall costs and increase local area reliability by contracting for capacity and energy from power plants when the purpose is to enhance local area reliability; utilities should be allowed to include such transactions in their quarterly compliance filings, for approval if there are no objections.
6. To the extent that utilities see the need to engage in spot-market transactions to enhance local area reliability or reduce costs (whether on their own accord or in response to information provided by the CAISO) they should do so, whether or not those transactions raise the total percentage above the 5% of total monthly need guideline; utilities should be allowed to include any transactions above the 5% guideline in their quarterly compliance filings, for approval if there is no objection.
7. Today's decision should apply to the area in Southern California wherein the problem has arisen; to areas where the same facts are causing the same problems; and statewide to the extent utilities should include minimizing total cost in their evaluation of resource scheduling and procurement options, taking reliability into account, and incorporating all known and reasonably anticipated CAISO-related costs (including congestion, re-dispatch and must-offer costs).
8. CAISO and SCE should meet and confer to resolve any outstanding informational issues between them, and then report to the Energy Division Director consistent with the preceding discussion in this decision.
9. Utility actions taken in furtherance of the directives in this order should be deemed consistent with the utilities' already approved short-term procurement plans, and thereby subsumed with the protection provided by AB 57.
10. An environmental impact report is not required since today's order is categorically exempt from CEQA.
11. This order should be effective today to prevent significant harm to public health and welfare, and secure electrical system reliability without delay.
IT IS ORDERED that:
1. Utilities shall follow the principles stated in the body of this order when they make resource scheduling and procurement decisions including:
a. Each utility is responsible for scheduling and procuring sufficient and appropriate resources (both system-wide and locally within its service area) to meet its customers' needs, and to permit the California Independent System Operator (CAISO) to maintain reliable grid operations.
b. A utility resource scheduling practice or procurement plan that focuses solely on least cost energy, without regard to deliverability of the procured energy to load or to local reliability, is not in compliance with our prior decisions and approved short-term procurement plans pursuant to Assembly Bill (AB) 57.
c. When making resource scheduling and procurement decisions, each utility shall incorporate all CAISO-related forward commitment costs that result from the utility's decisions, including all known or reasonably anticipated CAISO-related costs, such as congestion, re-dispatch, and must-offer costs.
d. Each utility shall use a comprehensive approach to scheduling and procuring resources that reasonably minimizes the need for reliability must-run contracts.
e. Restrictions on negotiated bilateral contracts are relaxed so that a utility may take appropriate actions to reduce overall costs and increase local area reliability by contracting for capacity and energy from power plants when the purpose is to enhance local area reliability. Utilities may include such transactions in their quarterly compliance filings, for approval if there is no objection.
f. A utility may exceed the 5% monthly guideline for spot-market transactions to enhance local area reliability or reduce costs, and may include transactions above the 5% guideline in their quarterly compliance filings, for approval if there is no objection.
2. Today's decision applies to the areas in Southern California generally defined as (a) South of Path 26, South of Lugo and North of Miguel, and (b) South of Path 15. It also applies to areas where the same facts cause the same problems. Moreover, it applies statewide to the extent utilities shall include minimizing total cost in their evaluation of resource scheduling and procurement options, taking reliability into account, and incorporating all known and reasonably anticipated CAISO-related costs (including congestion, re-dispatch and must-offer costs).
3. Utilities shall, and CAISO is requested to, provide data to the Commission, when and as requested by the Energy Division Director, to monitor the effect of today's order.
4. Utility action taken in furtherance of the directives in this order shall be deemed consistent with the utilities' already approved short-term procurement plans.
5. This order shall remain in effect through the end of 2005, or the issuance of a superseding order or orders addressing the same issues in this proceeding, whichever occurs earlier.
6. This proceeding remains open.
This order is effective today.
Dated July 8, 2004, at San Francisco, California.
MICHAEL R. PEEVEY
President
CARL W. WOOD
GEOFFREY F. BROWN
SUSAN P. KENNEDY
Commissioners
I reserve the right to file a concurrence.
/s/ CARL W. WOOD
Commissioner
I reserve the right to join
Commissioner Wood's concurrence.
/s/ MICHAEL R. PEEVEY
President
I reserve the right to file a dissent.
/s/ LORETTA M. LYNCH
Commissioner
