ALJ/MSW/eap Mailed 6/25/2007
Decision 07-06-029 June 21, 2007
BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
Order Instituting Rulemaking to Consider Refinements to and Further Development of the Commission's Resource Adequacy Requirements Program. |
Rulemaking 05-12-013 (Filed December 15, 2005) |
OPINION ON PHASE 2 - TRACK 1 ISSUES
TABLE OF CONTENTS
Title Page
OPINION ON PHASE 2 - TRACK 1 ISSUES 1
1. Summary 2
2. Background 3
3. Zonal Capacity Requirements 8
4. Local RA for 2008 and Beyond 19
4.1. 2008 LCR Study 19
4.2. Probabilistic Analysis in LCR Studies 29
4.3. Seasonal LCR Analysis 31
4.4. Load Migration 32
4.5. Local Area Aggregation 34
4.6. Waivers of Procurement Obligations 37
5. DR Issues 39
6. Load Forecasting and Compliance Year 42
7. Backstop Mechanism 44
8. AB 1969 46
9. Minor Implementation Issues 47
10. Standard Contract and Generator Obligations 49
11. Future RA Proceedings 52
12. Comments on Proposed Decision 52
13. Assignment of Proceeding 54
Findings of Fact 54
Conclusions of Law 57
ORDER 59
Appendix A - Resource Adequacy Program Schedule for 2007-08
OPINION ON PHASE 2 - TRACK 1 ISSUES
Taking another step towards full implementation of the Commission's resource adequacy (RA) program, this decision adopts local procurement obligations for 2008 that are applicable to Commission-jurisdictional electric load-serving entities (LSEs). These local procurement obligations are based on a study of local capacity requirements (LCRs) for 2008 that was performed by the California Independent System Operator (CAISO) with stakeholder input. Other key determinations made herein include the following:
· The CAISO's stated need for access to adequate generation within certain defined transmission-constrained zones, particularly in Southern California, is addressed by adopting a jointly proposed "Path 26 Counting Constraint." This approach is approved in lieu of the addition of a separate and explicit Zonal RA Requirement to the RA program.
· Addressing concerns regarding the LCR study process administered by the CAISO, the Commission provides for a workshop that would address scheduling issues and ideas for greater transparency.
· The Commission reiterates support for the inclusion of probabilistic analysis in the LCR study in order to assure economically efficient decisions regarding the local area procurement requirements.
· Interruptible and emergency demand response (DR) resources will continue to qualify towards meeting LSE procurement obligations pending review of the means of coordinating the CAISO's operational needs and the DR and RA programs in Rulemaking (R.) 07-01-041, the current DR proceeding.
· The Commission adopts an Energy Division proposal to coordinate the Local RA program for 2008 and the CAISO's backstep procurement process.
· The Commission adopts Energy Division proposals for rounding resource procurement obligations and for counting the value of new wind resources.
· The Commission addresses a proposal to establish a workshop process to develop a standard contract and associated generator obligations.
2. Background
2.1. Context for this Decision
Through a series of decisions summarized in the table below, the Commission has established RA policies and regulations to ensure that there is adequate, cost-effective investment in electric generation capacity for Californians served by investor-owned utilities (IOUs) and that such capacity is made available to the CAISO when and where it is needed for reliable transmission grid operations.
Principal Resource Adequacy Decisions
Decision/ Proceeding |
Summary |
Decision (D.) 04-01-050/ Rulemaking (R.) 01-10-024 |
In conjunction with the adoption of a long-term procurement regulatory framework for the three major California IOUs, the Commission adopted a policy of establishing near-term forward procurement obligations applicable to all LSEs, including electric service providers (ESPs) and community choice aggregators (CCAs). This LSE-based forward procurement policy was premised on a planning reserve margin (PRM) requirement targeted to be phased in and fully effective by January 2008. The PRM, which had been preliminarily set at 15% (see D.02-10-062 and D.02-12-074), was modified to a 15%-17% requirement to reflect "lumpiness" in resource procurement. The primary procurement obligation is that LSEs must demonstrate acquisition of 90% of the capacity needed to meet their forecast peak load, plus the PRM, on a "year-ahead" basis for the following May through September. |
D.04-07-028/ R.04-04-003 |
Responding to the CAISO's increasing need to manage congestion and address reliability issues in Southern California, and in particular the operational difficulties for the CAISO and reliability concerns for the summer of 2004, the Commission modified prior orders to make clear that reliability is not only the CAISO's job. It is also a utility responsibility to procure resources necessary to meet its load system-wide and locally. |
D.04-10-035/ R.04-04-003 |
Concurring with concerns raised by Governor Arnold Schwarzenegger regarding grid reliability in the near term, the Commission accelerated implementation of the 15-17% PRM requirement from January 2008 to June 2006. It also provided definition and clarification regarding the RA policy framework. Key elements of the decision included load forecasting protocols, resource counting conventions, month-ahead compliance showings by LSEs in addition to year-ahead showings, and a policy that resources that qualify for RA compliance purposes should be obligated to bid into the CAISO's day-ahead market if not scheduled by the LSE. |
D.05-10-042/ R.04-04-003 |
The Commission ordered the implementation of what has come to be known as the "system" RA program beginning in June 2006 and stated its intention to establish Local RA procurement obligations beginning in 2007. It also addressed several RA program implementation issues, including the nature of the RA obligation (monthly system peak), the role of the California Energy Commission (CEC) in reviewing and adjusting LSE load forecasts, coordination of the RA program and CAISO operations, load forecasting and resource counting issues not resolved in earlier decisions, standard RA contract elements, the phase-out of the ability to count non-unit specific contracts for RA showings, the "must-offer obligation" (MOO) of RA resources to be available to the CAISO, and penalties for an LSE's failure to meet RA procurement obligations. |
D.06-02-007/ R.04-04-003 |
In response to a petition for modification of D.05-10-042, the Commission removed a prohibition on reselling and re-trading import capacity rights. |
D.06-04-040/ R.04-04-003 |
In response to applications for rehearing of D.05-10-042, the Commission modified D.05-10-042 to emphasize that the RA program in place for 2006-2008 is transitional and to clarify that the MOO provision to be included in RA contracts is an independent, RA-based requirement that does not attempt to change or alter the current Federal Energy Regulatory Commission (FERC)-imposed MOO. Rehearing of D.05-10-042, as modified, was denied. |
D.06-06-064/ R.05-12-013 |
The Commission established local procurement obligations for 2007 based on a 2007 LCR study by the CAISO, and set the stage for establishing local procurement obligations in future years. The decision addressed various local RA policy and implementation issues including LCR study methodology, allocation of LCRs to Commission-jurisdictional LSEs, aggregation of local areas for compliance purposes, the compliance filing process, coordination with the CAISO's Reliability Must Run (RMR) designations, market power, waivers, and penalties for non-compliance. |
D.06-07-031/ R.05-12-013 |
This decision addressed certain RA policy issues to establish clearer expectations among market participants regarding how contracts for RA resources will count towards meeting LSEs' procurement obligations. Among other things it adopted protocols for forced and scheduled outages and it refined the Commission's definition of the essential elements of an RA capacity product that can be readily traded. |
Resolution No. E-4017 |
Approved a citation program under the administration of the Energy Division for enforcing compliance with certain RA filing requirements. |
D.06-12-037 R.04-04-003 |
In response to various petitions for modification of D.05-10-042, the Commission modified D.05-10-042 to (1) require that RA-qualified firm liquidated damages import contracts specify a delivery point at an interconnection with the CAISO control area or a CAISO scheduling point, (2) exempt certain import contracts from the general requirement that RA resources be available to the CAISO in real time, and (3) make minor clarifying wording changes. |
Today's decision completes Track 1, the first of three procedural tracks that were designated for Phase 2 of this proceeding.1 It represents another step in the series of orders listed above that, collectively, constitute the evolving RA program. In a future decision in this proceeding we will address major policy questions regarding the long-term RA program as well as proposals to extend the RA program to all Commission-jurisdictional LSEs.
2.2. The Track 1 Record
Pursuant to the schedule and procedure established by the Phase 2 Scoping Memo, 15 parties or party coalitions filed proposals for Track 1 issues on January 26, 2007. The Commission's Energy Division facilitated workshops on these topics on February 8, February 20, February 21, and March 8, 2007. At the request of the Energy Division staff, five parties or party coalitions submitted post-workshop refinements to their proposals on March 22, 2007.
The CAISO posted its Local Capacity Technical Analysis for 2008 (2008 LCR Study) on its website on March 9, 2007 and served notice of the posting on March 13, 2007. On March 21, 2007, the CAISO convened a stakeholder meeting at its Folsom headquarters to address the 2008 LCR study. On April 4, 2007, the CAISO filed an update to the 2008 LCR Study.
On March 30, 2007, the Energy Division issued a report on Track 1 issues (Staff Report). The Staff Report was incorporated into the record by an Administrative Law Judge's (ALJ) ruling issued on April 6, 2007. This decision generally follows the outline of the Staff Report.
In addition to the filings described above, the Track 1 record includes post-workshop comments and replies filed April 6 and April 20, 2006, respectively. Track 1 was submitted for decision on the latter date.
The following table indicates the parties and party groups that filed proposals and/or comments in Track 1.
PARTIES FILING TRACK 1 PROPOSALS AND/OR COMMENTS
Filing Party or Parties |
Short Title for Party or Party Group |
Track 1 Proposals (1/26/07) |
Post- Workshop Proposals (3/22/07) |
Post-Workshop Comments (4/06/07)** |
Replies to 4/06/07 Comments (4/20/07) |
Aglet Consumer Alliance |
Aglet |
X |
X |
X | |
Alliance for Retail Energy Markets |
AReM |
X |
X |
X | |
California Independent System Operator |
CAISO |
X |
X |
X | |
California Large Energy Consumers Association and California Manufacturers & Technology Association |
CLECA/ CMTA |
X |
X |
||
California Municipal Utilities Association |
CMUA |
X |
X | ||
Calpine Corporation |
Calpine |
X |
X |
X | |
Capacity Market Advocacy Group (SDG&E, Edison Mission Energy, Mirant Corporation, SCE, Constellation Energy Commodities Group, FPL Energy, and NRG Energy, Inc.) |
CMAG |
X |
|||
Constellation Energy Commodities Group, Inc. and Constellation NewEnergy, Inc. (Constellation); Mirant California LLC, Mirant Delta LLC, Mirant Potrero LLC (Mirant); and Reliant Energy Inc. (Reliant). (Reliant did not join in the April 20, 2007 reply comments.) |
Constellation, et al |
X |
X |
X |
X |
Division of Ratepayer Advocates |
DRA |
X |
X |
X |
X |
Independent Energy Producers Association |
IEP |
X |
X |
||
NRG Energy, Inc. |
NRG |
X | |||
Pacific Gas and Electric Company |
PG&E |
X |
X |
X | |
Pilot Power Group, Inc. |
Pilot Power |
X |
|||
San Diego Gas & Electric Company |
SDG&E |
X |
X |
X | |
Sempra Energy Solutions LLC |
SES |
X |
|||
Sempra Global |
Sempra Global |
X |
X |
X | |
Southern California Edison Company |
SCE |
X |
X |
X | |
The Utility Reform Network |
TURN |
X |
X |
X | |
Western Power Trading Forum |
WPTF |
X |
|||
CAISO, PG&E, SDG&E, SCE, and TURN (Path 26 Counting Constraint) |
Joint Parties |
X |
X |
X | |
Calpine; Coral Power, LLC; Constellation; J. Aron & Company; PG&E; Strategic Energy, LLC; AReM; WPTF; and Mirant (Standard Contract and Associated Generator Obligations) |
Calpine, et al. |
X |
* Post-workshop proposals submitted by DRA, Joint Parties and Calpine, et al. were filed. Those submitted by Constellation et al. and SES were served but not filed.
** The California Department of Water Resources (CDWR) filed comments on May 10, 2007 pursuant to authorization by the ALJ.
1 See Assigned Commissioner's Ruling and Scoping Memo for Phase 2 (Phase 2 Scoping Memo), issued December 22, 2006. The Phase 2 Scoping Memo designated the following issues for consideration in Track 1: (a) local RA issues including LCR study methodology and implementation rules, (b) probabilistic LCR assessments, (c) zonal RA, (d) DR program impacts and dispatch, (e) coordination of the RA program with the CEC load forecasting process, (f) coordination of the RA program with applicable backstop mechanisms, (g) implementation of Assembly Bill (AB) 1969, and (h) minor implementation issues.
