D0604040 Order Modifying D.05-10-042 & Denying Rehearing of Decision, As Modified

2. State Law Claims

Calpine asserts that the must offer requirements adopted in the Decision conflict with section 380 and previous Commission decisions. This claim is based, in turn, on Calpine's view that because the RA-MOO provides "inadequate compensation," its continued use runs contrary to the goal of encouraging the construction of new facilities by compensating generators sufficiently to encourage new construction. (Calpine's Rehearing Application, p. 8.)

This appears to be a policy argument. The application refers to portions of the Decision that attempt to balance the goal of fostering new generation with the other goals of RAR. Since the purpose of the Decision is to balance a number of competing policy considerations, referring to only one of these competing considerations does not show error. The Decision states in its introduction, "we will, all other things being equal, give preference to those [policies] that promote appropriate investment...." (D.05-10-042, p. 9.) The requirements of section 380 must be considered in light of the Commission's discretion, discussed above. Moreover section 380 only requires the Commission to encourage new generation, it does not contain any requirements relating to generator compensation. As a result, there is no contradiction in the decision to adopt a MOO as part of the RA framework. That decision simply represents an appropriate balancing of competing policy interests. The Decision considers both how generator compensation effects investment in new capacity, and how to make resources available to the CAISO when needed. At page 15, the Decision points out that, "a key purpose of our RAR is to ensure that resources are made available to the CAISO when and where they are needed . . .RA resources must be made available to the CAISO on a real-time basis to the extent they are able to perform." It is not error to balance this concern with concerns about generator compensation.

In addition, Calpine fails to establish that the RA-MOO will have the negative compensation effects the application claims. The Decision does not specify what compensation should be provided for generators that agree to RA contracts including RA-MOO provisions. Because compensation issues will be dealt with as part of the contracting process, they can be assumed to be fair to generators.