ALJ/MSW/sid DRAFT Agenda ID #4967
Ratesetting
Decision DRAFT DECISION OF ALJ WETZELL (Mailed 9/27/2005)
BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
Order Instituting Rulemaking to Promote Policy and Program Coordination and Integration in Electric Utility Resource Planning. |
Rulemaking 04-04-003 (Filed April 1, 2004) |
OPINION ON RESOURCE ADEQUACY REQUIREMENTS
TABLE OF CONTENTS
Title Page
OPINION ON RESOURCE ADEQUACY REQUIREMENTS 2
1. Summary 2
2. Background 3
3. The RAR Policy Framework 6
3.1. Introduction 6
3.2. The Adopted RAR Policy Framework 6
3.3. Revenue Adequacy 8
3.4. Resource Planning vs. Operational Requirements 10
3.5. LSE-Based Procurement 11
3.6. A New Paradigm for LSEs and Their Suppliers 11
3.7. Current Objectives for RAR 12
4. Nature of the RA Obligation 14
4.1. Generator Obligations 14
4.2. Treatment of De-Rated Resources 17
4.3. The Must-Offer Obligation (MOO) 19
4.4. SVLG's Standard Contract Proposal 23
5. Interagency Coordination 26
5.1. Introduction 26
5.2. Load Forecasts 27
5.3. CAISO Enforcement 31
5.4. Resource Listing and Testing 31
6. Load Forecasting Issues 32
6.1. Best Estimate vs. Current Customers Approach 32
6.2. Coincidence Adjustment Methodology 34
6.3. Allocating Demand Side Impacts 35
6.4. Measurement and Evaluation 37
6.5. Responsibility To Quantify EE, DR, and DG Effects 38
6.6. DG Impacts 39
6.7. Total Losses Methodology 40
7. Resource Issues 41
7.1. Monthly Peak Method vs. Load Shape Method 41
7.2. Dispatchable Demand Response (DR) Programs 49
7.3. Deliverability Issues 52
7.4. Liquidated Damages Contracts 57
7.5. Imports 64
7.6. Allocation of Capacity to Non-IOU LSEs 66
7.7. Wind and Solar Resources 68
7.8. Energy-Limited Resources 71
7.9. Commercial On-Line Dates 73
7.10. Local RAR 74
8. Reporting, Review, and Sanctions 80
8.1. Preliminary Load Forecast Reporting 80
8.2. Preliminary Load Forecast Review 83
8.3. Year-Ahead Compliance Filings 85
8.4. Review of Year-Ahead Compliance Filings 87
8.5. Month-Ahead Reporting 88
8.6. Compliance Issues 91
8.7. After-The Fact Review 93
8.8. Timing Issues: The First RAR Cycle 93
9. Next Steps 94
10. Comments on Draft Decision 95
11. Assignment of Proceeding 95
Findings of Fact 95
Conclusions of Law 100
ORDER 102
OPINION ON RESOURCE ADEQUACY REQUIREMENTS
1. Summary
Reaffirming and clarifying the policy framework that it established in Decision (D.) 04-01-050 and D.04-10-035, the Commission implements a program of resource adequacy requirements (RAR) applicable throughout the service territories of California's three largest investor-owned electric utilities (IOUs). The IOUs as well as electric service providers (ESPs) and community choice aggregators (CCAs) (collectively, load-serving entities or LSEs) are required to demonstrate that they have acquired the capacity needed to serve their forecast retail customer load and a 15-17% reserve margin beginning in June 2006. The Commission takes this action to promote investment in the resources needed to reliably serve California's growing demand for electricity and ensure that those resources are available to the California Independent System Operator (CAISO), all while effectively and fairly allocating procurement and reliability responsibilities among market participants and oversight agencies. We are adopting RAR in order to spur infrastructure development and assure that capacity is available to the CAISO for dispatch. In so doing, we are rejecting business as usual and instead favoring more robust LSE procurement practices.
Key RAR program determinations made herein include the following:
· We adopt a monthly system peak approach to defining the resource adequacy (RA) obligation instead of a resource duration curve approach.
· We require that supply contracts that count for RAR purposes identify the specific resources that provide the qualifying capacity. In recognition of current industry practice, we provide for phased implementation of this requirement to avoid unduly impairing existing business arrangements.
· We affirm the need for a localized capacity requirement but defer its implementation until it can be fully considered.
· We affirm that sanctions for LSE non-compliance are required.
While we believe that this decision is a significant forward step, it does not represent the final word for resource adequacy in California. More work needs to be done. We have deferred action on certain RAR program elements that have been proposed because, despite their promise of more effectively promoting achievement of RAR program goals, they require further consideration before they can be implemented. Further consideration of RAR issues before this Commission will take place in a new, more focused proceeding. While the RA portion of this rulemaking proceeding is concluded by this decision, R.04-04-003 remains open for consideration of other pending issues.
