10. Standard Contract and Generator Obligations

D.06-07-031 was issued to provide guidance on the required elements of a standardized tradable capacity product that would facilitate transactions in furtherance of LSE procurement obligations. Several parties have expressed the need to develop a more standardized RA contract and more specific generator obligations in the RA program, and the issue was raised by Calpine in the workshops. While noting that this is not a Track 1 issue, the Energy Division requested Calpine to further explore developing a proposal with interested parties on this issue and to submit a proposal to be used for future Commission consideration.

Calpine et al. submitted such a proposal on March 22, 2007. It was developed through informal stakeholder discussions convened after the February 2007 workshops. The intent of the proposal is to implement the Commission's policy, expressed in D.06-07-031, of encouraging in the near term a standardized capacity product that is readily tradable, ensures availability of resources to the CAISO at times and places needed for reliability, and comports with RA Program requirements.

Calpine et al. state that the key to creating a readily tradable RA capacity product is making suppliers responsible directly to the CAISO, through explicit requirements in the CAISO tariffs. In addition, they seek to develop a standardized RA capacity contract with a standardized confirmation letter. To accomplish these steps, they ask that the Commission immediately initiate workshops to develop, for subsequent Commission approval, a pro forma standardized RA capacity contract. They also ask the Commission to co-host with the CAISO workshops to develop proposed tariff amendments that would define supplier obligations for submittal to the FERC.

The post-workshop comments strongly indicate that additional action is required if the objectives of D.06-07-031 are to be met. The comments also indicate that most if not all parties are ready to expand the RA procedural agenda at a time when several procedural tracks of the RA proceeding are already occupying the attention of the Commission and the parties. Because a readily available capacity product has significant potential benefits for the success of the RA program, we are willing to consider an expansion of the RA procedural agenda as necessary to consider this proposal. At the same time, we must consider the time and resource constraints that the Commission faces. We also are concerned that proponents may have underestimated the scope and depth of issues, and the ease with which they can be resolved.

Based on such concerns, the proposed decision would have directed the Assigned Commissioner and the ALJ, in consultation with the Energy Division and the CAISO, to determine the extent to which to expand Track 2 of Phase 2 of this proceeding to consider this topic. Commenting on the proposed decision, Calpine, et al., also joined by APS Energy Services, IEP, SDG&E, SCE, and TURN, believe that it is not necessary to expand Track 2 to consider their March 22 proposal. The parties believe that the additional work that is necessary to refine their proposal can be achieved in industry-sponsored workshops. They propose that we set a deadline of Fall 2007 for the parties to jointly report to the Commission on the results of their efforts and their procedural recommendations. We accept and endorse this procedural proposal. The parties should jointly report to the Commission on or before November 16, 2007 and provide the results of the industry-led process as well as their procedural recommendations (including a proposed schedule) for any Commission process that may be necessary to implement the proposal. To the extent their resource and time constraints permit, we encourage the Energy Division and the CAISO to participate in the industry process.