3. Least-Coach Dispatch

SCE's least cost dispatch obligations were explained in D.02-10-062 (Conclusion of Law 11), where the Commission stated that in conducting the daily economic dispatch of energy, utilities must comply with SOC 4 as follows:

The utilities shall prudently administer all contracts and generation resources and dispatch the energy in a least-cost manner. Our definitions of prudent contract administration and least-cost dispatch are the same as our existing standard.

The Commission elaborated on this standard in D.02-12-074, where it placed the following explanation of SOC 4 in the utilities' approved procurement plans:

Prudent contract administration includes administration of all contracts within the terms and conditions of those contracts, to include dispatching dispatchable contracts when it is most economical to do so. In administering contracts, the utilities have the responsibility to dispose of economic long power and to purchase economic short power in a manner that minimizes ratepayer costs. Least-cost dispatch refers to a situation in which the most cost-effective mix of total resources is used, thereby minimizing the cost of delivering electric services. The utility bears the burden of proving compliance with the standard set forth in its plan.1

Once this definition of SOC 4 was placed in the utilities' procurement plans, it became the "upfront standard" under Assembly Bill (AB) 57 regarding prudent contract administration and the daily dispatch of energy. The question to be addressed in the ERRA proceeding regarding least-cost dispatch is whether the utility has complied with this standard -- that is, (1) whether the utility has dispatched the dispatchable contracts under its control "when it is most economical to do so," (2) whether it has "disposed of economic long power and purchased economic short power in a manner that minimizes ratepayer costs," and (3) whether it has used "the most cost-effective mix of its total resources, thereby minimizing the cost of delivering electrical services." In its testimony, SCE addresses these questions in detailing how it complied with SOC 4 during the Record Period.

The California Independent System Operator (CAISO) implemented its Market Redesign and Technology Upgrade (MRTU) on April 1, 2009. According to SCE, the CAISO's MRTU implementation changed the LCD landscape in two important ways: 1) it shifted more responsibility for making economic dispatch decisions away from the utility to the CAISO; and 2) it reduced the need for SCE to manage a large share of its near-term CAISO electrical energy positions via over-the-counter trading activity. SCE provides a summary of the procurement-related differences in the CAISO market as a result of MRTU implementation in its testimony. The main differences are in the following areas:

Before April 1, 2009, SCE's least-cost dispatch process was specifically designed to economically optimize the selection of its resources. In doing so, SCE compared the forecast variable operating cost of each dispatchable resource with the relevant forecast market price of power at the time of dispatch. SCE then submitted schedules to the CAISO for all dispatchable resources whose variable costs were below the market price of power. Overall, SCE utilized a number of processes and software tools to help ensure that its decisions resulted in the most cost-effective mix of total resources, thereby minimizing the cost of delivering electric services.

After MRTU implementation in April 2009, the CAISO's scheduling process was superceded by a requirement to submit demand bids to acquire energy from the grid to serve customer load, and supply bids to make energy available from SCE's resource portfolio to the grid. SCE describes in detail the strategies and processes it used after April 1, 2009 to implement the supply and demand bids.

SCE submits that the record shows that its scheduling and bidding processes and actions enabled the CAISO to dispatch SCE's dispatchable resources in an economic manner throughout the Record Period. SCE claims that it consistently followed prudent procurement processes and practices in order to satisfy SOC 4.

DRA does not indicate that it takes issue with SCE's least-cost dispatch record in this proceeding.

Based on the testimony of SCE and our review of the record, we conclude that all dispatch-related activities SCE performed during the Record Period complied with Commission orders and SCE's procurement plan.

1 D.02-12-074, Ordering Paragraph (OP) 24b. The ellipsis indicates language deleted by D.03-06-076, at 27 and OP 16.

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