6. Assignment of Proceeding

Michael R. Peevey is the assigned Commissioner and Mark S. Wetzell is the assigned ALJ in this proceeding.

Findings of Fact

1. The assumptions, processes, and criteria used for the 2009 LCR study were discussed and recommended in a CAISO stakeholder meeting, and they generally mirror those used in the 2007 and 2008 LCR studies.

2. The Option 1 (Category B) reliability level presented in the 2009 LCR study report implicitly relies on load interruption as the only means of meeting any Applicable Reliability Criteria beyond the loss of a single transmission element, whereas Option 2 (Category C) is the local capacity level that the CAISO needs to reliably operate the grid per NERC, WECC, and CAISO standards.

3. 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.

4. 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.

5. The current RA compliance filing process requires manual data processing, which can be costly and lead to data errors.

6. The current procedure of submitting compliance showings by advice letter does not accommodate electronic filing, and it does not provide an easy means for tracking arrival and inputting values from the submission and revisions to them.

Conclusions of Law

1. The CAISO's 2009 LCR study should be approved as the basis for establishing local procurement obligations for 2009 applicable to Commission-jurisdictional LSEs.

2. Application of the Option 2/Category C local area reliability standard approved for 2007 and 2008 should be continued for setting local procurement obligations for 2009.

3. The total local procurement obligation for the LA Basin local area should reflect the approximate 500 MW mitigation that results from the approved Santiago N-2 Special Protections System operating solution.

4. Because the current Local RA program establishes procurement obligations for the following year, LSEs should only be responsible for procurement in a local area to the level of resources that exist in the area.

5. Focusing on a new resource's commercial operation status is a reasonable and straightforward simplification of the current rule for counting new resources and should therefore be adopted.

6. QF resources whose contracts are extended pursuant to D.07-09-040 should count for RA compliance showings, and the NQC for dispatchable QF resources should be calculated as it is for non-QF units of similar fuel type and technology.

7. The Energy Division should be authorized and directed to implement the local RA program for 2009 and its proposed compliance reporting procedure in accordance with the adopted policies and principles.

ORDER

IT IS ORDERED that:

1. The local resource adequacy (RA) program and associated requirements adopted in Decision (D.) 06-06-064, and continued in effect by D.07-06-029, are continued in effect for 2009, subject to the modifications, refinements, and Local Capacity Requirements (LCRs) adopted by this decision.

2. The "Option 2/Category C" LCRs set forth in the California Independent System Operator's (CAISO) 2009 Local Capacity Technical Analysis, Final Report and Study Results, dated May 1, 2008, are adopted as the basis for establishing Local RA procurement obligations for load-serving entities (LSEs) subject to this Commission's RA program requirements.

3. The modifications for counting the Net Qualifying Capacity (NQC) of new resources and Qualifying Facilities resources are approved as set forth in the foregoing discussion, findings, and conclusions.

4. The Energy Division's proposed compliance reporting procedure shall replace the current advice letter process for compliance showings upon confirmation by the Energy Division that the new system has been tested and is fully operational.

5. Phase 1 is concluded, and this proceeding remains open for consideration of Phase 2 issues.

6. The assigned Commissioner or assigned Administrative Law Judge may extend any compliance dates set forth in this decision.

This order is effective today.

Dated June 26, 2008, at San Francisco, California.

Commissioners

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