4. Next Steps

Decisions on the topics described above have been necessary in order that the remainder of this process be launched down the right path. We recognize that while this interim opinion provides policy guidance, it does not create a complete package of resource adequacy requirement needed for LSEs to procure resources and submit compliance filings that demonstrate that they have satisfied our requirements.

Two forms of activities constitute "next steps" that we now must take. The most immediate is a series of workshops that will constitute the centerpiece of Phase 2 of the resource adequacy track of this rulemaking. The primary objectives for Phase 2 will be (1) establishing for various Phase 1 policies adopted today the implementation details that each LSE needs in order to proceed to acquire resources; and (2) establishing the reporting requirements, review processes, and compliance tools that will shape how LSEs satisfy us that they have acquired these resources. We anticipate that a tangible work product will be the creation of a new general order applicable to LSEs that assembles our RAR regulations into a single source document.

We believe that completion of Phase 2 by mid-2005 is of critical importance, and commend to the Assigned Commissioner and ALJ the establishment of procedures, including workshops, and a schedule to accomplish this objective. This is an ambitious schedule for consideration of many complex technical issues, and we therefore provide that the Assigned Commissioner or Administrative Law Judge may narrow the scope of Phase 2 with respect to individual topics if it appears that resolution of the issues associated with a topic will unduly delay completion of Phase 2.

4.1 Workshops and Other Processes for Phase 2

Broadly speaking, there are two categories of topics that are necessary for Summer 2005 compliance filings for Summer 2006 monthly obligations. The first of these is completion of various load forecasting protocols, resource counting conventions, and deliverability screens to permit implementation by all LSEs. The second is development of the actual reporting requirements, the process by which these filings will be reviewed, and any penalties or sanctions needed to induce full, accurate and timely compliance.

Implementation mechanics topics include, but are not necessarily limited to the following:

· Coincidence and EE/DR impact allocation adjustment methods for each LSE's load forecasts.

· An hourly loss methodology that incorporates distribution and transmission losses and unaccounted energy.

· Procedures for quantifying the hourly impacts of committed energy efficiency and demand response tariffs and programs.

· Methods for determining qualifying capacity of wind and solar without gas backup generators using a monthly, historic performance during the SO 1 on-peak period, methodology.

· Methods for estimating COD dates for generators of all sizes based upon appropriate modifications to existing CEC and CAISO tracking systems.

· Completion of a functional deliverability screening methodology based upon the proposals of the CAISO documented in the workshop report, and its Appendix B, and the specific decisions earlier in this decision. Local resource adequacy requirements, including identification of load pockets, generator performance in load pockets, transmission import capabilities, and various adjustments to the current LARS process that results in RMR contracts,

· Development of (1) standard contract language that will require a generator, if not scheduled by the LSE to serve its own load, to bid into the CAISO integrated Day-Ahead market, and if not accepted there to be subject to the residual unit commitment process (RUC), and (2) a reasonable understanding of the probability that a generator not scheduled by the LSE will actually be selected to operate in the RUC process.

· Alternative forms of contracts for capacity that can substitute for those with liquidated damage provisions and thus satisfy resource adequacy requirements.

Reporting, reviewing, and sanctions topics include, but are not necessarily limited to the following:

· Load forecasting filing requirements, including provision of historic load data, adjustment for coincidence, adjustment for energy efficiency and demand response activities, and appropriate documentation.

· Resource tabulations showing how load forecasts and planning reserve requirements are satisfied for the hours of each month with loads 90% or greater than peak of the month, tabulations of the qualifying capacity of each resource under contract or the control of the LSE that is deliverable to load for each of these hours, and appropriate documentation.

· A review process that assures that each LSE's load forecasts was prepared properly, that resources identified as satisfying each LSE's load and reserve requirements are eligible and deliverable, processes for providing feedback to LSES and opportunities to correct errors and mistakes, and an overall assessment that the collective loads and resources submitted by all LSEs comport with aggregate summer assessments prepared by the CEC and CAISO.

· A system of penalties and sanctions that would motivate LSEs to provide accurate load forecasts and sufficient levels of deliverable resources.

· The specific compliance reporting requirements, review process, and penalties for the Month-Ahead forward commitment obligations, as well as any changes in load forecasting protocols and resource counting conventions appropriate for the short lead time of this requirement.

4.2 Second Generation of Requirements

Beyond Phase 2, there are "second generation" topics that need to be revisited or added to our initial generation of resource adequacy requirements. We note that certain of these topics are necessarily on a slower track for the reasons described herein, and likely will not be completed before the first round of compliance filings are due. We intend that other related topics, particularly proposals related to capacity trading, be considered more expeditiously.

Additional RAR topics that we intend to address include but are not necessarily limited to the following:

· Unit-specific differential adjustments to average forced outage rates,

· Multi-year forward commitment concept, and

· The resource tagging and trading concept.