11. Assignment of Proceeding
Michael R. Peevey is the Assigned Commissioner. Mark S. Wetzell is the assigned ALJ for the resource adequacy portion of this proceeding.
1. Through RAR, the Commission intends to promote investment in the resources needed to reliably serve demand for electricity and ensure that those resources are available to the CAISO, while effectively and fairly allocating procurement and reliability responsibilities among market participants and oversight agencies.
2. Achieving reliability through infrastructure development requires consideration of revenue adequacy for suppliers of resources.
3. The Commission seeks to promote the LSEs' procurement responsibility and reduce reliance on CAISO procurement.
4. Substantial and immediate progress toward the achievement of RAR goals is imperative to the development of the infrastructure needed for reliability.
5. The obligation of suppliers to be available and perform is established through their contracts with LSEs.
6. It is necessary that RA resources be available to the CAISO when and where needed. It is consistent with that determination that all RA resources have an obligation to make themselves available to the CAISO in real time to the extent they are physically capable.
7. A coordinated CPUC/CAISO RAR program that includes CAISO-enforced generator obligations would enhance achievement of RAR goals.
8. If LSEs were not required to replace the capacity that becomes unavailable due to a derating determination by the CAISO, they would in effect socialize the costs of the derated capacity.
9. Eliminating the MOO and the associated waiver process before the CAISO's MRTU program is implemented could jeopardize day-ahead commitment process of RA resources to the CAISO.
10. It is neither necessary nor desirable to require that specific language be adopted as a mandatory component of qualifying contracts.
11. TURN's petition for modification seeking to vacate adoption of the best estimate approach does not refer to particular impacts on LSE load forecasts or point to specific new facts or arguments, and is therefore procedurally deficient.
12. The historic approach to coincidence analysis eliminates the problem of "forecast noise" and would permit the coincident adjustment factor to be identified earlier.
13. The working group proposal in Appendix C of the Phase 2 workshop report regarding the allocation of EE and DR impacts is reasonable and should be adopted.
14. There is a need for improved M&E efforts to support the quantification of the EE/DR impacts.
15. There is a need for the three IOUs to prepare and document the hourly impacts of EE, DR and DG programs within their service areas and to provide these impacts to the CEC for use in the adjustment of LSE load forecasts.
16. It is reasonable to calculate losses using hourly DLFs and an upward adjustment of three percentage points applicable in all hours for both transmission losses and UFE.
17. The TD method recognizes that many of the qualifying resources will not be available in all hours of the month.
18. Under the TD approach resources are available to the CAISO by rule.
19. The TD approach is likely to be more effective than the BU method in terms of ensuring that resources are available to the CAISO.
20. Moving toward a rational pricing approach for capacity, where the true market value of capacity is revealed, should provide the appropriate incentives for needed investment to occur.
21. To the extent that use of a resource duration curve to define RA obligations promotes the development of differentiated capacity products, the BU approach may hinder development of a capacity market.
22. To the extent that the TD approach entails greater costs than the BU approach, it is likely because the TD approach provides a mechanism for fixed costs being paid to suppliers providing needed capacity.
23. Both the TD and the BU methods have to address the fact that not all resources are available 100% of the time.
24. It is appropriate to plan to use dispatchable DR programs up to the limits now established for each such programs.
25. CAISO's May 2005 deliverability analysis found that (1) historical imports were deliverable and (2) while certain generation within generation pockets is not deliverable, that deficiency can likely be mitigated with transmission upgrades.
26. The third option for allocating to LSEs the CAISO-determined level of import capacity, which uses each LSE's share of CAISO system peak load and includes an evergreen (grandfather) priority, is reasonable and should be adopted.
27. Basing the allocation of the import capability of the DWR contracts on historic usage of the paths to deliver such supplies is consistent with grandfathering non-DWR contracts as well as our prior determination that DWR contracts should be subject to deliverability screens.
28. It is reasonable to count all the generation as deliverable assuming that the transmission upgrades will be completed by the PTOs.
29. LD contracts could undermine the integrity of the RAR program because they are not subject to deliverability screens and they allow the possibility of double-counting resources that are nominated by LSEs in fulfillment of their RA obligations.
30. LD contracts cannot meet the needs of local RAR due to their inherent deliverability and dispatchability constraints.
31. Terminating the eligibility of LD contracts to count for RAR showings too rapidly would be unnecessarily disruptive and costly to LSEs.
32. The declining share of RAR portfolio approach proposed by PG&E gives consideration to the LSEs' need for time to rebalance their RAR portfolios away from LD contracts.
33. Firm import LD contracts do not raise issues of double counting and deliverability, and should be exempted from the sunset/phase-out provisions applicable to other LD contracts.
34. It is not reasonable to craft remedies for possible cost shifting related to the DA CRS and the CTC in this proceeding because only a portion of the cost shifting issue is reviewed.
35. A three-year rolling average of performance history is appropriate to assess the qualifying capacity of wind and solar resources.
36. Using the SO1 summer peak hours of noon to 6:00 p.m. on a year-round basis is a reasonable compromise for defining peak hours for wind and solar resources.
37. For 2006, SCE's proposal for a 3% adder for newer wind technologies is appropriate to give effect to the principle that the use of renewables should not be disadvantaged in or by the RAR program.
38. Load shapes are less peaked in the non-summer months, with the result that the number of hours with loads in excess of 90% of the peak could be as much as 300 hours in some months.
39. The CAISO/CEC proposal for determining and reporting the CODs for resources nominated for RAR is reasonable and should be adopted.
40. An adjustment that reconciles the LSEs' load forecasts to the State's official load forecasts provides an appropriate reality check on the integrity of the RAR program, and has the effect of better integrating the RAR program with the state's resource planning efforts.
41. The essence of an LSE's year-ahead compliance filing is a demonstration that it has acquired sufficient resources to satisfy the 90% forward commitment obligation for loads plus reserve requirements for each of the five summer months May - September.
42. With the corrections noted in the foregoing discussion, the resource tabulation template and instructions set forth in Appendix I to the Phase 2 Workshop is reasonable and should be adopted.
43. Requiring that LSEs' monthly compliance filings be due the last day of the second month prior to the compliance month is consistent with the objectives of the month-ahead requirement and should therefore be adopted.
44. It would be unreasonable to either require an LSE that has lost a significant portion of its customer base to procure capacity commitments for load it no longer has, or to allow an LSE that has gained substantial load from customer migration to acquire only the capacity needed for the load that it forecast a year ahead, before it acquired the new load.
1. The Commission intends that RAR should consist of a physical, capacity-based program whereby a significant portion of the capacity needed by the CAISO is committed at least a year ahead as defined in D.04-10-035.
2. The Commission should not delay the start of the RAR program until the details of all possible program elements are more fully vetted, and it should not implement program elements that have not been fully and fairly considered.
3. Because we are implementing a physical capacity-based RAR program, resources should only count to the extent that their capacity can be relied upon to perform.
4. This Commission should enforce the RAR requirements that are applicable to LSEs.
5. The CAISO is the appropriate entity to administer a program of performance standards for resources.
6. LSEs' preliminary load data should be submitted to this Commission's Energy Division, which will promptly transmit the data to the CEC for review and analysis.
7. LSE procurement obligations should be determined by CEC-determined adjustments to LSE forecasts, subject to dispute resolution administered by this Commission.
8. The confidentiality rules adopted by this Commission should govern the load forecast submission and review process.
9. LSEs should be held accountable for knowingly using false or unreasonable assumptions in load forecasts.
10. Generating units should not be considered qualifying resources for purposes of the RAR program unless the owner has submitted its qualified capacity value and supporting documentation to the CAISO.
11. Modification of D.04-10-035 to vacate the best estimate approach to load forecasting should be denied.
12. The IOUs should support the analysis of EE, DR, and DG impacts and provide timely data regarding these impacts to the CEC in accordance with the foregoing discussion.
13. LSEs should be required to acquire capacity to meet their peak day load for each month, measured in megawatts (MW), plus 15%, for all hours of the month.
14. The eligibility of in-area LD contracts to qualify for the LSEs' RAR showings should be phased out in a manner that fairly and effectively balances the needs of the RAR program and the interests of LSEs that rely on LD contracts.
15. LD contracts executed on or before the September 27, 2005 should count for RAR showings, provided, however, that (a) LD contracts should not count for purposes of RAR showings after December 31, 2008, and (b) the portfolio limiations set forth in the foregoing discussion should apply.
16. The Commission's determination in D.04-10-035 that to qualify for RAR, a resource must (1) be able to operate for a minimum of four hours per day for three consecutive days and (2) be able to run a minimum aggregate number of hours per month based on the number of hours that loads in the CAISO control area exceed 90% of peak demand in that month is affirmed as to the summer months; for the non-summer months, the second prong of that test is waived.
17. We reaffirm our intention to establish a local capacity component of our RAR program as we determined in D.04-10-035, and intend to implement this program component beginning with year-ahead compliance filings made in 2006 for compliance year 2007.
18. LSEs should be required to submit documented hourly load forecasts for all 12 months of the year as part of the year-ahead preliminary load forecasts they submit each spring and to make year-ahead and month-ahead compliance filings as set forth in the foregoing discussion.
19. The CEC should make load forecast adjustments if the sum of the adjusted LSE load forecasts is 99% or less, or 101% or more, of the reference case forecast as described in the foregoing discussion.
20. In their month-ahead filings, LSEs should be required to incorporate adjustments to their year-ahead load forecasts to account for customer migration.
21. A penalty equal to three times the monthly cost for new capacity is an appropriate sanction for an LSE's failure to acquire the capacity needed to meet its RA obligation; for 2006 only, a penalty of one-half that amount is reasonable.
IT IS ORDERED that:
1. The resource adequacy requirements (RAR) policy framework adopted in Decision (D.) 04-01-050 and D.04-10-035 shall be implemented in accordance with the foregoing discussion, findings of fact, and conclusions of law.
2. The following load-serving entities are subject to the requirements of the RAR program adopted herein and shall comply with all decisions, rulings, and directives pertaining to the program:
a. Pacific Gas and Electric Company (PG&E), San Diego Gas & Electric Company (SDG&E), and Southern California Edison Company (SCE) (collectively, investor-owned utilities or IOUS); and
b. Electric service providers (ESPs) and community choice aggregators (CCAs) that serve retail customers within the service territory of one or more of the IOUs through direct access or CCA transactions.
3. The March 10, 2005 petition of The Utility Reform Network for modification of Decision 04-10-035 is denied.
4. The Executive Director shall ensure that Commission staff undertake the activities identified for staff in the foregoing discussion, findings, and conclusions.
5. This proceeding remains open; however, the RAR portion of this proceeding is concluded.
This order is effective today.
Dated October 27, 2005, at San Francisco, California.
MICHAEL R. PEEVEY
President
GEOFFREY F. BROWN
SUSAN P. KENNEDY
DIAN M. GRUENEICH
JOHN A. BOHN
Commissioners
