3. Need for Energy
Bear Valley asserts that it developed an integrated resource plan (plan) for the period 2007 - 2012. (Ex. BV-5, p. 2, ff.) This included determining an optimum resource mix; compliance with the Commission's Energy Action Plan II; and addressing resource adequacy requirements and greenhouse gas emission limits. Finally, Bear Valley believed it had to ensure its plan would be consistent with the California Independent System Operator's proposed Market Redesign and Technology Upgrade. The plan is attached to Ex. BV-5.4 Therefore, Bear Valley determined its forecasts and available resources for: (a) annual base load requirement, which it proposes to be met with Shell agreement Product 1; (b) peak season base load requirement, to be met with Shell agreement Product 2; (c) peaking capacity, which Bear Valley hopes to be able to meet with either its existing seven-unit 8.4 MW internal combustion facility5 or from the Independent System Operator's markets, as discussed below; (d) intermediate requirements to be met with Shell agreement Product 3; (e) resource adequacy requirements to be met with Shell agreement Product 4; and (f) renewable resource requirements for which Bear Valley issued a request for proposals, but so far has not signed an agreement.
3.1. Peaking Capacity
Bear Valley does not propose a new energy contract product to meet its resource planning needs for peaking capacity. Bear Valley proposes to compare the costs of its existing power plant with the cost of peak power from the Independent System Operator's markets. Bear Valley would submit bids for dispatching the unit and, if power prices are less than the Bear Valley's incremental cost, the unit would not be dispatched; or if the locational marginal price (i.e., the appropriate market's price at the Independent System Operator) is greater, then the unit would be dispatched. Bear Valley believes there are no voltage support or reliability issues that affect operation of the unit.
Bear Valley believes it will be able to maximize the value of the existing power plant without acquiring additional capacity resources. Bear Valley also believes this strategy will "cap" its peaking costs at the power plant's incremental cost, while generally allowing Bear Valley to purchase less expensive energy from the Independent System Operator's markets. (Ex. BV-5, pp. 9 - 10.)
4 November 28, 2008, Volume 4 Unredacted Prepared Testimony: Resource Plan, Procurement Process, Proposed Power Purchase Agreements and Related Energy Prices. (Although labeled "Volume 4," we assign it Ex. BV-5 in sequence following the four energy product exhibits BV-1 through BV-4.)
5 The Bear Valley Power Plant was granted a certificate of public convenience and necessity in Decision (D.) 03-07-005 and began commercial operations on January 1, 2005. (Ex. BV-5, p. 2.)
