4. RA Program Refinements
As previously noted, the Phase 1 Scoping Memo identified seven RA program refinement topics for possible consideration in this decision provided that such consideration does not interfere with timely issuance of the decision on local procurement obligations for 2009. Upon reviewing the comments, we determine that more time is needed before two of these topics can be decided, that is the topics of revised NQC counting rules for intermittent resources and monthly true-ups of local procurement obligations for load migration impacts. We therefore defer these topics to Phase 2. We also decline to resolve herein issues that do not fall within the scope of Phase 1.
4.1. Outage Counting Rules
D.06-07-031 adopted a protocol for determining how the NQC of resources with scheduled outages should be counted. PG&E is concerned that the protocol results in scheduled outages being counted twice in assessing the RA value of certain resources, such as QFs, that utilize historic performance as the basis for setting their NQC. PG&E explains that the initial NQC calculation for these resources reflects their reduced generation during scheduled outages taken in the three-year historic averaging period. The scheduled outages of these units are applied a second time to reduce their RA counting value under the protocol.
To resolve this issue, PG&E asks that we clarify that the counting protocol for scheduled outages adopted in D.06-07-031 applies only to resources with the scheduled outage (or "SO") designation in the NQC counting rule, as specified in Sections 5 and 5.3 of the 2004 Workshop Report. SCE, SDG&E and TURN support adoption of this clarification, while the CAISO urges its rejection.
The CAISO agrees that there is a double counting problem under the current rules, but it believes that PG&E's proposed solution is inappropriate. According to the CAISO, under PG&E's approach resources known in advance to be unavailable to meet system needs would nevertheless count in full towards an LSE's RA obligation. The CAISO believes that the double counting problem should be resolved by adjusting the calculation of historic output.
While the double counting of outages for these resources should be corrected to avoid unnecessary procurement, we are not ready to accept PG&E's proposed exemption from the scheduled outage counting protocol as the preferred solution. Before changing the protocol or granting an exemption for a particular class of resource, we need a more comprehensive analysis of the extent of the double counting problem and whether it is better resolved by modifying NQC counting methodologies as recommended by the CAISO.
If it is confirmed that the scope of the problem is not of major significance, it may be more appropriate to adopt PG&E's approach since it appears to be more efficient administratively. Because any double counting of outages should be mitigated or eliminated, this topic should be resolved in Phase 2.
4.2. New Resources
Several proposals for clarifying or revising existing rules that govern how new resources are counted were offered. First, the CAISO proposes that the rule for determining a resource's eligibility should focus only on the term "commercial operation." Second, SDG&E proposes a waiver from local procurement obligations equivalent to a new resource's capacity in the early months of the year, before the resource is commercially operational. Several parties offer clarifications or minor modifications to the current rules and/or the SDG&E approach. In comments on the Proposed Decision, PG&E offered an alternative approach, described below.
The current rule for counting new resources, adopted by D.05-10-042, relies on the concepts of "commercial operation date" and "operational status." The CAISO proposes a simplification that focuses on the former term. Specifically, any generating resource that achieves commercial operation by the date of the relevant RA compliance showing should be eligible to count.2 The result of this proposal is that resources known to the CAISO and the Commission to have achieved commercial operation can be counted.
Since resources that have not achieved commercial operation status may be subject to delays in testing or other necessary steps before being fully available to the CAISO for reliability purposes, it is reasonable that only those resources which have achieved commercial operation status on or before the date of the LSE's compliance showing can be counted for an RA compliance period. For example, if the month-ahead system RA showing for June, 2011 is due on April 30, 2011, a unit that achieved commercial operation on or before April 30, 2011 would be eligible to count for June.
In the case of year-ahead showings for local RA, the same logic applies: only resources that achieve commercial operation status on or before the date of the compliance showing would be eligible for NQC. For example, if the 2012 year-ahead showing is due on October 31, 2011, only resources that have achieved commercial operation status by October 31, 2011 should be counted. Resources that come online after that date could be counted in month-ahead filings during 2012 for all filings due on or after the date of commercial operation.
In the case of year-ahead system filings, the month-ahead filings serve as the true-up mechanism. Therefore, resources that have not reached commercial operation status by the date of the year-ahead filing can continue to be counted for system RA under the same procedure as used for compliance year 2008 (i.e., by listing on the "under construction" page of the template).
We find the CAISO proposal to focus on a resource's commercial operation status to be a reasonable simplification of the current rule and therefore adopt it. Other alternatives, such as IEP's proposal to evaluate when a unit achieves a percentage of its output, could be administratively burdensome.
PG&E raised a concern that a new unit that has reached commercial operation status but has not yet been included on the CAISO's posted NQC list might not count for RA purposes. We clarify that the Energy Division is authorized to approve the counting of such units.
SDG&E proposed that resources expected to achieve commercial operation by April 1 should be eligible for year-ahead local RA filing. As noted above, resources that have not reached commercial operation may not achieve that status by a projected future date. For this reason, a mechanism would be needed to true up the local capacity as possible delays become known. Unlike the system RA approach, at present no such mechanism exists. Moreover, there is not an adequate record in this proceeding to support creating a true-up for local RA after the year-ahead filing. Therefore, this proposal should not be implemented at this time.
PG&E notes that its Gateway Generating Station is expected to be commercially operational in early 2009. Under existing counting rules that would be continued in effect under the Proposed Decision, the unit would not count for local RA for 2009. PG&E would have to contract with an existing local resource for the full year to meet local requirements rather than just contract with such resource for a few months to bridge the period until the Gateway unit comes on line. PG&E states this could cost as much as $24 million, and asserts that such an outcome conflicts with the policy of retiring older resources.
In comments on the Proposed Decision, PG&E offered an alternative interim proposal for counting new resources. PG&E proposes that new resources may be counted toward local RA obligations in the year-ahead demonstration if the LSE also demonstrates local procurement sufficient to cover the obligation in the months preceding the expected commercial operational status of the new resource. PG&E suggests including a stipulation that any LSE relying on a new resource for local RA needs would be responsible for replacing local capacity if for some reason the new resource's commercial operational date is delayed. The Joint Parties urge adoption of this approach, and the CAISO also supports it, noting that "the flexibility of PG&E's proposal outweighs the risk of significant CAISO backstop capacity procurement resulting from its adoption." (CAISO reply comments, p. 3.)
We adopt PG&E's proposal for 2009 only, with the following limitation. An LSE that relies on a new resource that has not become commercially operational as of the date of its final annual local RA compliance showing shall, in such showing, (1) claim the entire new resource and (2) show a single local unit that it will show on every monthly filing to make up the capacity until the new unit has reached commercial operational status.
4.3. QF Resources
Prior to the workshops, SCE raised the issue of whether and how QF resources whose contracts are extended pursuant to D.07-09-040 should count for RA compliance showings. TURN notes that consensus was reached during the workshops that deliveries from these contract extensions should count for RA. There is no opposition to this proposal, and we affirm that such contracts should count.
SCE also proposed that the NQC for dispatchable QF resources should be calculated as it is for non-QF thermal units rather than by using a historical average. No party opposes this proposal on its merits, although AReM proposes that consideration be deferred to Phase 2, when the Commission would also address whether to allocate QF RA credits to all LSEs.
A dispatchable QF resource has the ability to provide greater grid reliability benefits than would be reflected by an NQC determination that is based solely on the unit's historical performance. We concur with SCE that we should not delay realization of this benefit until the issue of which LSEs can claim RA credits associated with the QF unit is resolved. Accordingly, SCE's proposal for counting these resources in the same manner as non-QF units of similar fuel type and technology is approved.
4.4. RA Compliance Reporting
Decision 05-10-042 adopted a compliance reporting procedure based on the Commission's advice letter process. The Energy Division has developed a proposed replacement system that relies on a new reporting template and electronic submission of compliance showings to the Energy Division using the Commission's File Transfer Protocol (FTP) computer application.3
The Energy Division reports that staff and LSEs have encountered two types of complexities and difficulties with the current RA process. First, the Energy Division sends allocations of Demand Response (DR), CAM,4 and RMR capacity credits to the LSEs by computer files. LSEs are required to manually input these allocations into the compliance template. LSEs are also required to manually check other information against an NQC database published by the CAISO. This creates the possibility for incorrect copying. Second, Energy Division finds that the current procedure of filing by Advice Letter does not accommodate electronic filing well, nor does it provide an easy means for tracking arrival and inputting values from the filings or submission of revisions. Although review of the filings by Energy Division has become significantly more streamlined, there is still some inefficiency that can be eliminated.
To address these concerns, the Energy Division redesigned the template and proposed a reevaluation of the filing procedures to ease the administrative obligation on LSEs and staff. The broad outline of Energy Division's proposed revisions is summarized below:
Addition of the NQC list to the template, which enables creation of a dropdown list for Scheduling Resource IDs. With this dropdown list, the LSE is no longer required to fill in the Local/Zonal Designation in Column D, as that is filled in automatically.
LSE specific allocations of DR, RMR, and CAM are inserted into the template, and each LSE receives a spreadsheet individually password protected and sent via Secure FTP. This enables the allocations as issued by Energy Division to automatically populate the formulas in the spreadsheet. As CAM capacity is currently allocated quarterly, the templates will arrive to each LSE quarterly.
Each LSE will receive on a quarterly basis a template pre-populated with their allocations, and will select only the month of the filing on the summary page. The rest of the summary page is now automated.
Unit-Specific Department of Water Resources (DWR) contracts are to be entered into the Physical Resource page and Import DWR contracts are to be entered into the Import page, both to facilitate agency review.
The template now includes both the Year-Ahead and Month-Ahead Summary pages, and they are linked and automated so that the LSE submits both each month. This alleviates confusion related to which template the LSE ought to be using. Staff will use whichever one is appropriate for compliance.
The template includes the Local RA Template that will enable monthly adjustments made to Local RA obligations. This is for demonstration, to ensure that should a mechanism like this be adopted, there has been beta testing on the template to ensure that it works. There is also a column for Local RA procured in the Physical Resource Worksheet to represent that for any given month the RA capacity procured might be different from the August NQC value that is to be used for Local RA compliance.
The LSE no longer will submit the filing via Advice Letter, but instead simply create a Secure FTP account with the Commission as detailed in the attached document and submit the files directly to a secured mailbox to be created for this purpose. This enables the Commission to better track submission and arrival of the Filings, and hopefully cut costs and administrative obligations on the part of the LSEs.
The templates sent to the LSEs quarterly will be based on the most recent RA Filings filed by LSEs to the Energy Division, and Energy Division will insert a revised allocations page and new NQC spreadsheet should that be revised as well. The LSE will ideally not have to reenter the resources listed in the resource worksheets, as Energy Division will make no changes to those sheets.
Energy Division staff demonstrated the proposed template in the Phase 1 workshops, and it subsequently provided parties with a tutorial regarding the FTP as well as the draft compliance template for parties to begin beta testing. Energy Division also plans to hold an informational workshop on this process this summer.
The comments indicate broad support for the Energy Division's initiative. We join the parties in expressing appreciation to the Energy Division for developing a more efficient and effective compliance filing process that should benefit the LSEs and reviewing staff alike. We approve the adoption of the new procedure, and the cessation of RA compliance showings by the current advice letter process, upon confirmation by the Energy Division that the new system has been tested and is fully operational.5 We adopt the proposal by SCE to require that LSEs submit a cover letter that cross-references the LSE's separate FTP submission to the Energy Division and requests approval of the LSE's compliant status for the applicable period. We intend that the confidentiality policies and procedures adopted in R.05-06-040, insofar as they apply to advice letter filings, shall apply in like fashion to compliance filings made under this new procedure.
4.5. Allocation of CAM-Related RA Credits
Decision 06-07-029 provided that IOU procurement of new generation would generally be done through long-term power purchase agreements (PPAs), and that the advantages and costs of the new generation are to be shared by all benefiting customers in the IOU's service territory. The capacity and energy from the PPA are unbundled, and rights to the capacity are allocated among all the LSEs in the IOU's service territory according to each LSE's share of the coincident peak. LSEs can apply this allocated CAM-related capacity towards their RA procurement obligations. A subsequent implementation decision (D.07-09-044) addressed concerns about the timing of reallocations of capacity subject to the CAM, and provided that:
The Commission is mindful of Settling Parties concerns [that reallocations accurately reflect capacity changes] and will see that a means for ensuring fair and equitable implementation of the CAM for RA purposes is discussed in a workshop in the RA proceeding, R.05-12-013 or its successor proceeding. (D.07-09-044, p. 6.)
AReM seeks to change the quarterly allocation of CAM-related RA credits that was ordered by D.07-09-044 to a monthly allocation. During the Phase 1 workshops, most parties agreed that the existence of just one CAM contract in force today did not justify the administrative costs of a move to monthly allocations. The workshop discussions then centered on defining the threshold for determining when the change from quarterly to monthly allocations would be justified. In its post-workshop comments, AReM proposed that the trigger for changing to monthly allocations of RA credits be defined as the date that one additional CAM contract becomes operational.
Although AReM has offered a straightforward proposal that is not contested, Energy Division advises that there may be unresolved workload issues associated with the proposed shift to monthly allocations. Since no new CAM contracts are anticipated for 2009, the matter is not urgent. We will defer resolution of AReM's proposal to Phase 2. Energy Division should present a proposal in Phase 2 that addresses the workload issues and any related concerns.
2 Under the CAISO Tariff, commercial operation, is "[t]he status of a Generating Unit at a Generating Facility that has commenced generating electricity for sale, excluding electricity generated during a Trial Operation."
3 While reference is commonly made to electronic "filing" of RA compliance showings, we emphasize that these submissions are made to the Energy Division. They are not formal documents filed with the Commission's Docket Office.
4 This is capacity that is allocated to LSEs in accordance with the cost allocation methodology (CAM) adopted in D.06-07-029.
5 Pursuant to the delegation of authority for ministerial matters that was approved by D.06-07-031, Energy Division may determine when the new compliance filing system is ready for implementation. Similarly, Energy Division is authorized to implement the rounding convention described in the Energy Division's "Staff Implementation Proposal #1," served on April 18, 2008. Energy Division should evaluate the changes to the template that were discussed in comments on the proposed decision, and implement those changes it deems necessary or appropriate.
