2. Background

Decision (D.) 04-01-050, issued in Rulemaking 01-10-024, adopted a policy framework for Resource Adequacy Requirements (RAR) in California. Under this regulatory framework, each of the three major California investor-owned electric utilities (IOUs) as well as the energy service providers (ESPs) and community choice aggregators (CCAs) operating within their service territories (collectively, LSEs) will be obligated to procure capacity and a planning reserve margin sufficient to meet their own forecasted load. D.04-01-050 provided for workshops to address implementation issues, and the April 1, 2004 order that instituted this rulemaking (OIR) provided that implementation issues not resolved in R.01-10-024 will be addressed in this proceeding.

D.04-10-035, the Interim Opinion Regarding Resource Adequacy decided in this proceeding on October 28, 2004, addressed various RAR issues that were raised in the initial workshop report issued on June 15, 2004. Among other things, D.04-10-035 provided definition and clarification with respect to the RAR policy framework adopted in D.04-01-050. It also established a second procedural phase (Phase 2) of the RAR portion of this rulemaking to further develop the program, provided for additional workshops in Phase 2, and announced the Commission's intention to implement a functioning RAR program during 2005.

A key component of the RAR program is the requirement for annual resource adequacy filings by LSEs. In these filings, LSEs must demonstrate that they have contracted for resources to meet 90% of their summer peaking needs plus a 15% planning reserve margin (PRM) for May through September of the following calendar year.¹ The Commission determined that these annual RAR filings will be made on September 30 of each year. However, for 2005 only, the filings will be due 90 days after the date of the Phase 2 decision since that decision will be issued after June 30, 2005. (D.04-10-035, Section 3.2, p. 12.)

D.04-10-035 provided that the California Energy Commission (CEC) will review the hourly load forecasts that are to be the bases for the resource commitments in the LSE filings. The Commission provided that this review will include a coincidence analysis and a comparison of forecast loads with historic loads of each LSE. (D.04-10-035, Sections 3.4.1 and 3.4.2, pp. 16-17.) It is now apparent that the review will also need to include the impacts of energy efficiency, demand response and distributed generation programs that each LSE could not be expected to assess individually. The CEC will calculate adjustments to the load forecasts submitted by the LSEs, and the LSEs in turn will use the adjusted data in their September 30 filings.

The April 1, 2004 OIR named the three IOUs as respondents to this rulemaking. Anticipating the need for the Assigned Commissioner or the Administrative Law Judge (ALJ) to order the submission of load data by ESPs and CCAs as well as the IOUs, D.05-03-013 modified the OIR to also name registered ESPs and CCAs as respondents.

¹ The RAR program is scheduled to be implemented for the 2006 summer season. For 2006 only, the LSEs' RAR filings will be for June through September rather than May through September because the 15% PRM requirement takes effect on June 1, 2006.