5. Preliminary Scoping Memo
In this Preliminary Scoping Memo, we describe the issues to be considered in this proceeding and the timetable for resolving the proceeding. As they consider revising the scoping memo below, we expect the Assigned Commissioner and ALJ to consider fully the record developed in the December 2, 2005 ACR, the staff workshop on December 14, 2005, as well as pre- and post-workshop comments as they prepare a revised scoping memo. Not all details raised in the comments are appropriate for this OIR; rather, we leave some of the detailed decisions to later iterations of the scoping memo.
Our overall objective for this proceeding is to be the forum for review and adoption of the respondents' long-term procurement plans. It is also the forum for our review of the need for a policy to ensure adequate contracting for new resources. Although the IEPR Transmittal Report says "No regulatory barriers to long-term contracting currently exist,"12 we are concerned with the progress to date in the area of long-term contracting. Therefore we are prioritizing the review of policies needed to support the development of new generation as the first order of business in this proceeding.
In R.05-12-013, we clarified that the Commission intends the new resource adequacy proceeding to review next generation resource adequacy issues, including local resource adequacy requirements, system resource adequacy requirement compliance issues, multi-year requirements, capacity markets, and tradable capacity products. While these issues have significant overlap with the LTPP proceeding, we will coordinate the proceedings (as well as the outcomes) but keep these issues on parallel tracks. Several parties submitted comments on the December 2nd ACR asking for the Commission to consider capacity markets and related matters in the new LTPP proceeding; hopefully it is now clear that we intend to review these matters in the resource adequacy proceeding.
After careful consideration, the following additional issues are not anticipated to be in the scope of this proceeding: ordering a comprehensive review of the effectiveness of the hybrid market structure to meet the Commission's procurement objectives, a review of the slice of load proposal, and defining or reviewing the future structure of the retail market. While we recognize that these issues are related to procurement, we decline to order a comprehensive review of these policies in the scoping of this proceeding at this time.
Numerous parties raised the issue of allowing both existing and new generation bids in requests for offers (RFOs). This issue was discussed in
D.05-12-022, and in that decision the Commission said, "While we did not give any specific instructions in D.04-12-048 to the IOUs for including or excluding bidders from RFOs, we encourage the IOUs to be as inclusive as possible in their RFOs. We will refine the directives for RFOs, as needed, in the 2006 LTPP decision." We defer to the Assigned Commissioner and ALJ as to how to consider refinement of the procurement directive in this proceeding.
In D.05-09-022, the Commission granted limited rehearing of D.04-12-048 on SCE's evidentiary challenge regarding the 50/50 sharing provisions related to construction cost savings from the construction of new power plants. We expect that this issue will be incorporated into the scope of this proceeding, and we defer the details of that incorporation to the Assigned Commissioner and ALJ.
C. Review of the Need for Policies to Support New Generation
The first order of business for this proceeding will be to examine the need for additional policies that support new generation and long-term contracts in California, including consideration of transitional and/or permanent mechanisms (e.g., cost allocation and benefit sharing, or some other alternative) which can ensure construction of and investment in new generation in a timely fashion.13
In comments submitted in response to the Dec. 2nd ACR, parties generally agreed that reviewing the need for policies to ensure new generation gets built in California was an urgent and priority goal for the proceeding. Parties commented that the mechanisms to attract private investment in California generation are not meeting expectations. While independent power producers do not require the Commission's authority to build generation, the CPUC-authorized procurement processes, including the approval of long-term contracts with suppliers, can stimulate such investment.
For example in D.04-12-048, the Commission allowed utilities to recover uneconomic costs of long-term contracts from departing load. (See D.04-12-048, Findings of Fact 33-38, Conclusions of Law 13-15, and OP #10.) Since that decision, concerns have been raised about whether existing policies are sufficient to ensure adequate long-term contracting occurs.
In examining the need for new policies to encourage generation investment, the proceeding may be able to rely on existing need determinations. We defer to the Assigned Commissioner and the ALJ on the degree to which a review of need determinations should be examined in this portion of the proceeding. Several parties pointed out that the need for new generation may be already resolved and may not be an issue of fact; rather the need assessment conclusions of prior procurement proceedings and the IEPR have established that there is a need for new generation. In addition, the CEC recently prepared and presented a preliminary 5-year outlook for the Energy Action Plan meeting in December.14
We expect this portion of the proceeding to commence with proposals from parties on the additional policies to support new generation and long-term contracting, due on March 2nd, followed by a two-day staff workshop on or after March 6th. A ruling giving further guidance on the topics to be covered and the agenda for the workshop are forthcoming.
D. Review and Adoption of Long-Term Plans
This proceeding's centerpiece will be the review and adoption of long-term plans. We anticipate the plans will be filed sometime in the summer of 2006. Each IOU's LTPP will include both a 10-year resource plan, as well as details of the actions and policies that the IOU plans to take that will carry out the plan. We expect these plans will incorporate Commission's policies, including EAP II, as well as all Commission decisions in effect at the time of the filing. Decisions expected this spring/summer on local resource adequacy requirements, confidentiality, and avoided costs/qualifying facilities may all need to be incorporated into the LTPP filings.
With respect to resource planning, respondents will be asked to generate comprehensive 10 year resource plans. Parties' 10 year resource plans will be the primary forum for considering resource alternatives, and plans will be reviewed in the context of existing procurement policies (including policy targets and constraints), resource planning trade-offs, the loading order and the least cost/best fit criteria. Plans may include analysis of the tradeoffs between transmission and generation, as well as different resource types, bearing in mind policy, availability, the loading order, and least-cost best fit. We also expect that Greenhouse Gas (GHG) forecasts will be submitted as part of plans. Once adopted, procurement plans will become the basis for numerous future infrastructure applications.
As noted in the ACR on December 2nd, it may be useful to conduct more pre-filing work to ensure that the LTPP filings are useful to the Commission. Parties agreed on the need to hold workshops to determine the key planning assumptions and inputs to be used in the LTPP filings. We encourage this approach. We defer the design of the long-term plan filings, as well as the timing and review of the long-term plan submissions to the Assigned Commissioner and ALJ. It may be appropriate to review procurement plans and practices with respect to some or all of the following: implementation of Least Cost/Best Fit approaches, application of renewables as the rebuttable presumption in procurement, gas hedging practices, level playing field for all market participants, use of IEs, use of procurement review groups, use of all-source solicitations (or RFOs), portfolio risk policies, feedback from short term transaction audits, impact of resource adequacy on procurement practices, use of GHG adder , credit risk policies, RFO processes, etc.
Parties expressed concern over the concept of utilities' conducting integrated resource planning (IRP) in conjunction with their long-term plan filings. Some parties stated that integrated resource planning is a term that only refers to vertically integrated utilities and their internal tradeoffs between generation and transmission. We expect the Assigned Commissioner and ALJ to develop collaborative planning models that are appropriate to today's market and regulatory conditions. We expect that this planning approach, including application of the IEPR Transmittal Report and CAISO Transmission Study, will be developed publicly and fully vetted in workshops.
12 CEC's Transmittal Report is available at: h55p://www.energy.ca.gov/2005 publications/CEC-100-2005-008/CEC-100-2005-008-CTF.PDF. p.14.
13 Capacity Markets is currently slated to be considered in Phase 2 of R.05-12-013, and this LTPP proceeding will be carefully coordinated with that review.
14 See "Electricity Outlook for Summer 2006 and Beyond", presentation by Dave Ashuckian, Manager Electricity Office, California Energy Commission. Posted: December 12, 2005. Available at http://www.energy.ca.gov/energy_action_plan/meetings/index.html#121205.
