3. Local True-Up Background
The RA program was first implemented with the 2006 compliance year for "system" RA requirements. "Local" RA procurement obligations were first implemented the following year.
D.06-06-064 adopted a framework for Local RA and established local procurement obligations for 2007 only. D.07-06-029, D.08-06-031 and D.09-06-028 established local procurement obligations for 2008, 2009 and 2010, respectively. As mentioned above, D.10-06-036 adopted local procurement obligations for 2011 as part of the Phase 1 decision in this docket.
The RA program developed by the Commission provides local RA obligations for load-serving entities (LSEs) for a 12-month compliance period. LSEs include both Investor-owned Utilities (IOUs) and other electric service providers under Commission jurisdiction. However, the program currently does not require LSEs to true-up their obligations within the compliance year. It is possible that true-ups could be required for changes in load within the compliance year for various reasons; in particular, the re-opening of Direct Access (DA) in 2010 (discussed below) makes it more likely that some LSEs will have significantly different levels of load at times throughout the compliance year. One concern of not having a local true-up mechanism is that the local RA product loses its premium value after the year-ahead showing, creating financial risks for LSEs which lose customers and a possible competitive edge for new entrants.
Under the current practice, each LSE is obligated to meet its Local Resource Adequacy Requirement (RAR) annually by procuring Local RA capacity based on its load ratio share. The load ratio share is the LSE's annual forecasted coincident peak load, adjusted by the California Energy Commission (CEC), divided by the total forecasted coincident peak load in the LSE's utility service territory. This method requires an LSE to procure the same amount of Local RA capacity for every month of the forecast year, based on the peak month (August) local requirement. Until recently, there has been no process for adjusting an LSE's Local RA obligation to account for or true-up load migration during the compliance period.
Adopting a local true-up mechanism into the RA program was discussed in Rulemaking (R.) 08-01-025, the predecessor to this Rulemaking. D.09-06-028 adopted a requirement for LSEs to document their load migration. However the Commission did not adopt a proposed local true-up mechanism but instead deferred implementation to the 2011 compliance year and this proceeding.
Pursuant to Senate Bill (SB) 695 (Stats. 2009, ch. 337), the Commission reopened DA in D.10-03-022. The decision states: "Effective April 11, 2010, all qualifying customers will be eligible to take DA service, up to the new maximum cap subject to the conditions as set forth herein. The increased DA allowances shall be phased in over a four-year period, subject to annual caps in the maximum DA increase allowed each year."1 Additionally, D.10-03-022 states: "SB 695 requires the Commission to ensure that other providers of electricity in California are subject to the same procurement-related requirements that apply to the IOUs, including RARs, renewables portfolio standards, and greenhouse gas emission reductions."2
With the reopening of DA, the expected load migration between LSEs throughout the year will have some effect on the local obligation of the participating LSEs. In order to track the local RA obligation and ensure that that all service providers are subject to the same RA treatment, a mechanism for local true-ups was established for 2010. D.10-03-022 adopted a local true-up mechanism for 2010, shown in Appendix 3 of that decision. D.10-06-036 at 11 stated: "As we just recently adopted the local RA true-up for 2010 and there is no compelling reason to change it at this time, we will continue the local RA true-up method adopted in D.10-03-022 for 2010 without revision."
For 2011 and beyond, parties proposed different local true-up methods. These were known as the "True-Up Approach" and the "Reallocation Method". These proposals were discussed in detail in D.10-06-036. The decision elected to not adopt either the True-Up Approach or the Reallocation Method at this time, but to take further comments.
1 D.10-03-022 at 2.
2 D.10-03-022 at 25.
