2. Scope of Proceeding: Issues to be Considered

The preliminary scoping memo in the Order Instituting Rulemaking (OIR) identified the local RAR program element as the centerpiece and the first priority of this rulemaking. This involves consideration of the CAISO's LCR study as well as the local RAR proposals submitted by the Alliance for Retail Energy Markets (AReM); the Independent Energy Producers (IEP); and jointly by Pacific Gas and Electric Company, San Diego Gas & Electric Company, and Southern California Edison Company (Investor-Owned Utilities) (the IOUs). The OIR recognized that it could be necessary for the Assigned Commissioner and the Administrative Law Judge (ALJ) to establish phases of this proceeding, with LCR constituting the first phase and most, if not all, other issues constituting the second phase. As the ALJ determined at the February 3 PHC, Phase 1 is established to consider local RAR. Phase 1 will also include consideration of the other issues set forth in the first of the following two tables.

Phase 1 Topics

Topic

Remarks

Local RAR

Key LCR issues include reliability criteria, local area definitions, and other issues identified in the CAISO's February 22, 2006 report on the meet and confer on input assumptions. Among the key local RAR issues are allocation of LCR determinations to load serving entities (LSEs); the IOUs' transfer pricing proposal; operational responses to contingencies identified in the LCR study such as short-term equipment upgrades, reevaluation of line ratings, and demand response and load shedding options that should be counted towards the LCR obligation; market power definition and mitigation; CAISO backstop procurement; and local RAR waivers.

Tradable Capacity Product

This topic may be of critical importance to enable LSEs to efficiently acquire capacity to meet their local (LCR-based) procurement obligations and is therefore included in Phase 1. Focus is the definition of standard contract criteria and/or terms that would meet CAISO operational needs and facilitate capacity trading. Consideration should be coordinated with the proposed availability requirements of the CAISO's pre-MRTU RA tariff (see Feb. 9 workshop, transcript pp. 219-220).
Does not include development of a centralized capacity market regime.

Compliance Topics

D.05-10-042 adopted the broad policy that a penalty equal to 300% of the cost for new capacity (150% for 2006 only) is an appropriate sanction for an LSE's failure to acquire the capacity needed to meet its RAR obligation. The OIR provided that this proceeding will consider ways to give definition and clarity to this policy and address concerns that penalties might accrue to the General Fund of the State of California. Providing such definition and clarity, including how penalties and backstop procurement interact, may be particularly important in connection with local RAR.

Implementation Issues

Implementing the first cycle of year-ahead RAR compliance filings for 2006 and the first round of month-ahead RAR compliance filings for 2006 may reveal RAR program gaps or deficiencies that must be resolved by the Commission before 2007 compliance filings are due. An example may be the issue of responsibility for forced outages. Parties will be permitted to comment on the Energy Division's recently issued Resource Adequacy Filing Guide (including related "FAQs") for the 2006 year-ahead compliance and issues raised in the March 7, 2006 Energy Division workshop on the month-ahead compliance filings.

Issues deferred from D.04-10-035 and D.05-10-042

The Commission identified various topics for which it would entertain proposals in future RAR proceedings. For example, the Commission said it would consider extending an adder for determining the capacity value of newer wind technologies. Parties interested in pursuing such topics will be permitted to make their proposals in Phase 1, provided that such proposals must include a showing (a) that the proposal needs to be resolved in Phase 1 rather than Phase 2 and (b) that the proposal can be fairly and effectively considered in Phase 1 without unduly impacting the schedule.

Phase 2 Topics

Topic

Remarks

Assembly Bill (AB) 380 Implementation

In Phase 2 the Commission will complete its implementation of AB 380, including in particular establishment of appropriate RAR for the smaller and multi-jurisdictional IOUs.

General Order

Develop a new Commission general order that assembles the Commission's RAR regulations (including both system RAR and local RAR) into a single source document.

Capacity Markets

Review whether/how to develop a centralized capacity market regime. May include resource tagging and trading concept. Includes review of August 25, 2005 capacity markets white paper and comments and replies filed in R.04-04-003 along with opportunity to supplement that record.

Multi-Year RAR

Review whether/how to establish a multi-year forward commitment concept to overlay the year-ahead and month-ahead RAR program components.

Zonal RAR

Review whether/how to establish a zonal RAR concept to overlay the system and local RAR program components.

Confidentiality Issues

To the extent, if any, that the Phase 1 decision in the confidentiality rulemaking (R.05-06-040) requires or warrants Commission consideration of RAR-specific confidentiality issues, such consideration may occur in Phase 2.

Issues deferred from D.04-10-035 and D.05-10-042

Except as provided above in connection with Phase 1, Phase 2 is the forum for parties interested in pursuing these topics to make their proposals.

Topic	Remarks
Local RAR	Key LCR issues include reliability criteria, local area definitions, and other issues identified in the CAISO's February 22, 2006 report on the meet and confer on input assumptions. Among the key local RAR issues are allocation of LCR determinations to load serving entities (LSEs); the IOUs' transfer pricing proposal; operational responses to contingencies identified in the LCR study such as short-term equipment upgrades, reevaluation of line ratings, and demand response and load shedding options that should be counted towards the LCR obligation; market power definition and mitigation; CAISO backstop procurement; and local RAR waivers.
Tradable Capacity Product	This topic may be of critical importance to enable LSEs to efficiently acquire capacity to meet their local (LCR-based) procurement obligations and is therefore included in Phase 1. Focus is the definition of standard contract criteria and/or terms that would meet CAISO operational needs and facilitate capacity trading. Consideration should be coordinated with the proposed availability requirements of the CAISO's pre-MRTU RA tariff (see Feb. 9 workshop, transcript pp. 219-220). Does not include development of a centralized capacity market regime.
Compliance Topics	D.05-10-042 adopted the broad policy that a penalty equal to 300% of the cost for new capacity (150% for 2006 only) is an appropriate sanction for an LSE's failure to acquire the capacity needed to meet its RAR obligation. The OIR provided that this proceeding will consider ways to give definition and clarity to this policy and address concerns that penalties might accrue to the General Fund of the State of California. Providing such definition and clarity, including how penalties and backstop procurement interact, may be particularly important in connection with local RAR.
Implementation Issues	Implementing the first cycle of year-ahead RAR compliance filings for 2006 and the first round of month-ahead RAR compliance filings for 2006 may reveal RAR program gaps or deficiencies that must be resolved by the Commission before 2007 compliance filings are due. An example may be the issue of responsibility for forced outages. Parties will be permitted to comment on the Energy Division's recently issued Resource Adequacy Filing Guide (including related "FAQs") for the 2006 year-ahead compliance and issues raised in the March 7, 2006 Energy Division workshop on the month-ahead compliance filings.
Issues deferred from D.04-10-035 and D.05-10-042	The Commission identified various topics for which it would entertain proposals in future RAR proceedings. For example, the Commission said it would consider extending an adder for determining the capacity value of newer wind technologies. Parties interested in pursuing such topics will be permitted to make their proposals in Phase 1, provided that such proposals must include a showing (a) that the proposal needs to be resolved in Phase 1 rather than Phase 2 and (b) that the proposal can be fairly and effectively considered in Phase 1 without unduly impacting the schedule.

Topic	Remarks
Assembly Bill (AB) 380 Implementation	In Phase 2 the Commission will complete its implementation of AB 380, including in particular establishment of appropriate RAR for the smaller and multi-jurisdictional IOUs.
General Order	Develop a new Commission general order that assembles the Commission's RAR regulations (including both system RAR and local RAR) into a single source document.
Capacity Markets	Review whether/how to develop a centralized capacity market regime. May include resource tagging and trading concept. Includes review of August 25, 2005 capacity markets white paper and comments and replies filed in R.04-04-003 along with opportunity to supplement that record.
Multi-Year RAR	Review whether/how to establish a multi-year forward commitment concept to overlay the year-ahead and month-ahead RAR program components.
Zonal RAR	Review whether/how to establish a zonal RAR concept to overlay the system and local RAR program components.
Confidentiality Issues	To the extent, if any, that the Phase 1 decision in the confidentiality rulemaking (R.05-06-040) requires or warrants Commission consideration of RAR-specific confidentiality issues, such consideration may occur in Phase 2.
Issues deferred from D.04-10-035 and D.05-10-042	Except as provided above in connection with Phase 1, Phase 2 is the forum for parties interested in pursuing these topics to make their proposals.