2. Background

Public Utilities Code Section 380 (as amended by Stats. 2008, ch. 558, Sec. 13, effective January 1, 2009) requires that "the Commission, in consultation with the California Independent System Operator (CAISO), shall establish resource adequacy requirements for all load-serving entities." The statute establishes a number of objectives for the Commission to achieve with the program, including development of new generating capacity and retention of existing generating capacity, equitable allocation of the cost of generating capacity, and minimization of enforcement requirements and costs. Section 380(j) defines "load-serving entities" for purposes of this section as "an electrical corporation, electric service provider, or community choice aggregator."

Based on the statutory language, the Commission's Resource Adequacy (RA) program and requirements apply to all load-serving entities (LSEs) under our jurisdiction. Certain small or multi-jurisdictional LSEs are subject to different RA requirements which are more appropriate to their situations than those described in this order.

This proceeding was divided into two phases. Phase 1 considered local capacity procurement obligations for 2011 applicable to Commission-jurisdictional electric LSEs and several proposed RA program refinements. (See Decision (D.) 10-06-036.) That decision deferred issues related to local true-up provisions for RA, which were decided in D.10-12-038.

An Assigned Commissioner's Ruling and Scoping Memo (Scoping Memo), issued on November 3, 2010, identified two broad categories of issues for Phase 2 of this proceeding. The first category, local RA issues, pertains to the CAISO's 2012 local capacity requirements (LCR) study as well as this Commission's establishment of local procurement obligations for 2012 based on the LCR study. The second category pertains to various proposals to modify the RA program.

The Scoping Ruling was revised on February 3, 2011. Among other things, the revised Scoping Memo deferred to a future phase of this proceeding a CAISO proposal to review a plan for a non-generic capacity procurement requirement process to add resource operational characteristics such as regulation and ramping "load following" capabilities into the RA procurement requirements. This issue is still pending.

The Commission's Energy Division facilitated workshops on RA program refinement issues on January 18 and 25, 2011. Comments on the Phase 2 issues discussed in the workshops were filed on February 8, 2011 by Alliance for Retail Energy Markets (AReM); Calpine Corporation (Calpine); the CAISO; California Large Energy Consumers Association (CLECA), Cogeneration Association of California (CAC); Division of Ratepayer Advocates (DRA); Dynegy Morro Bay, LLC, Dynegy Moss Landing, LLC, Dynegy Oakland, LLC and Dynegy South Bay, LLC (Dynegy); GenOnCalifornia North LLC and GenOn Delta LLC (GenOn); EnerNOC, Inc. (EnerNOC); Pacific Gas and Electric Company (PG&E); Southern California Edison Company (SCE); San Diego Gas & Electric Company (SDG&E); and The Utility Reform Network (TURN). The CAISO; DRA; Dynegy; Independent Energy Producers Association (IEP); PG&E; SCE; SDG&E; and TURN filed replies on February 22, 2011.

D.11-06-022 established local capacity procurement obligations for 2012 applicable to Commission-jurisdictional LSEs, based on an annual study of local capacity requirements performed by the CAISO for 2012. In addition, that decision adopted a number of RA program refinements, including the following demand response items:

1. The requirement that to qualify for RA requirements, a resource must be able to operate for a minimum of four hours per day for three consecutive days, now applies to all demand response resources in the RA program.

2. For 2012, demand response program totals allocated towards RA credit for the Base Interruptible Program, the Summer Discount Plan, and the Agricultural Pumping Interruptible Program, subject to the conditions of a Settlement in D.10-06-034.

3. For the 2012 RA program only, PG&E was granted an exemption from the RA program requirement that demand response programs must operate from 1:00 p.m. to 6:00 p.m.

4. The purpose of this decision is to address certain additional demand response issues related to RA, based on the record of this proceeding.