III. Planning for 2006 Long-Term Procurement
Planning Rulemaking
All procurement policy will continue to be coordinated and integrated, even as this proceeding is closed and successor proceedings are initiated. As mentioned above, the Commission will initiate two new rulemakings related to procurement. First, the Commission will initiate an Order Instituting Rulemaking (OIR) on resource adequacy, probably in December 2005, as the forum to consider future RA issues, including implementation matters related to existing RA requirements, as well as the extension of RA mandates to local area and multi-year requirements. Since a new rulemaking is imminent, it is not necessary to elaborate further here on the goals of a new RA proceeding.
Second, the Commission will initiate a successor procurement OIR, slated for late January or February 2006, to handle the biennial long-term procurement planning cycle and other procurement issues. While the objectives of the next procurement rulemaking cycle will be established in the new OIR, an overview of initial thoughts about the goals of the upcoming proceeding is warranted here. Parties are invited to comment on the ACR so that feedback can be used to further refine the rulemaking prior to its inception.
The future procurement proceeding will be the forum to consider a wide range of LTPP issues. As with the existing procurement rulemaking, the Commission will use its new LTPP rulemaking to handle procurement policy issues that do not warrant a separate rulemaking and/or issues which need to be considered in the context of our comprehensive procurement regulatory framework. Our future rulemaking will continue to serve as a place to coordinate all of our efforts ongoing in the other procurement related dockets, including:
1. Community Choice Aggregation, R.03-10-003;
2. Demand Response program plans (A.05-06-006 et al.);
3. Critical Peak Pricing (A.05-01-016 et al.);
4. Distributed Generation, R.04-03-017;
5. Energy Efficiency, R.01-08-028;
6. Avoided Cost and Qualifying Facility (QF) Pricing, R.04-04-025;
7. Renewable Portfolio Standards, R.04-04-026;
8. Transmission OII, I.00-11-001; and Renewable Energy Transmission, I.05-09-005;
9. Confidentiality, R.05-06-040; and
10. Resource Adequacy (rulemaking to be issued shortly).
Among the procurement planning issues that are not covered in any of the procurement related dockets above that need to be addressed in a future procurement rulemaking are the following:
1. A review of the need for new generation in California, including consideration of temporary 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;
2. A review of long-term resource plans, including an integrated resource planning process for all IOU planning areas;
3. Updates to IOU procurement policies and practices; including review and approval of new 10-year procurement plans; and
4. Any procurement policy issues not handled in R.04-04-003 or other procurement related dockets.
With respect to integrated resource planning, in the next procurement proceeding, respondents will be asked to generate integrated resource plans. These integrated 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 will 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. Once adopted, procurement plans will become the basis for numerous future infrastructure Applications.
We will use the recently adopted Energy Action Plan II (EAP II) as our guidepost in the future procurement proceeding.3 Under the EAP II, the State's energy agencies have jointly developed a set of priorities for energy policy. Many of these priorities are directly relevant to the procurement rulemaking, and we will consider the EAP II priorities as we establish the priorities for the rulemaking. In addition, the California Energy Commission's (CEC) 2005 Integrated Energy Policy Report, has made numerous procurement-related recommendations which will be considered during the rulemaking.4
In the current procurement proceeding, Energy Service Providers (ESPs) have been respondents only to the resource adequacy portion of the proceeding, but not to the long-term planning portion of the proceeding. According to Assembly Bill (AB) 380, the Commission should establish resource adequacy requirements that: (1) facilitate the development of new generation capacity and (2) equitably allocate the cost of generating capacity.5 Based on our review of the information necessary in order to accomplish the goals of our next LTPP proceeding, I expect that the Commission will name all load-serving entities (LSEs) as respondents to the long-term procurement planning proceeding,6 although probably not to all portions of the proceeding. To meet the RA requirements of AB 380 while at the same time recognizing that LSEs include not just IOUs, but also ESPs and Community Choice Aggregators, the Commission will need the participation of all LSEs in the Commission's LTPP process.
Parties are invited to submit comments to this ACR. Filings may include comments on whether the procurement proceeding should include all of the items discussed above (or more), in what order, to what degree, and how the Commission should prioritize or order the work in this proceeding.7 Parties are encouraged not to argue the merits of various issues, but focus exclusively on the upcoming process, content, and timing. The Commission's staff has developed a proposal that offers a draft proceeding work plan, see Appendix A. The proposal attempts to structure the proceeding to cover all of the issues identified above. Any record that is established in this proceeding may become the basis for a new long-term procurement planning proceeding, and if necessary, the record will be transferred to the new proceeding.
3 Energy Action Plan 2 was adopted in October 2005. See http://www.cpuc.ca.gov/PUBLISHED/REPORT/50480.htm.
4 CEC's Integrated Energy Policy Report 2005 is available at http://www.energy.ca.gov/2005publications/CEC-100-2005-007/CEC-100-2005-007-CMF.PDF
5 See Pub. Util. Code § 380(b)(1) and (2).
6 D.05-11-025 has determined that Energy Service Providers, Community Choice Aggregators, and Small/Multi-jurisdictional utilities are required to comply with the fundamental aspects of the RPS program, including procuring 20% of their retail sales from renewable energy sources by 2010. The extent to which they are to comply is to be determined in R.04-04-026.
7 Parties may include previous filings from earlier proceedings or earlier phases of this proceeding that cover the same issues.
