Calif. PUC Issues Draft 2012 Resource Adequacy Order, LSEs' Capacity Would Not be Discounted for Outages

May 24, 2011
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The California PUC has issued a proposed decision establishing local procurement obligations for 2012 and further refining the resource adequacy program (Rulemaking 09-10-032).

At a high level, the draft order would make the following changes to the resource adequacy (RA) program:

1. The Standard Capacity Product is now a mandatory part of the RA compliance program.

2. Penalties for RA program violations are modified to impose specific, flat dollar penalties ($5,000 or $10,000) for deficiencies remedied within five business days after notification from Energy Division (versus penalties based on the size of the deficiency).

3. For 2012 only, availability of a unit to count towards meeting the defined load-serving entities' (LSEs) RA obligations shall not be discounted during scheduled outages.

4. The Humboldt, North Coast/North Bay, Sierra, Stockton, Greater Fresno, and Kern local areas within the Pacific Gas and Electric territory (known as 'other PG&E' local areas) are permanently aggregated for RA compliance purposes.

5. LSEs are no longer required to file a Preliminary Local Resource Adequacy Filing, and are no longer allowed to use Portfolio Resources as RA capacity

6. The requirement that, to qualify for RA requirements, a resource must be able to operate for a minimum of four hours per day for three consecutive days, now will apply to all demand response resources in the RA program.

7. For 2012, demand response program totals allocated towards RA credit for the Base Interruptible Program, the Summer Discount Plan, and the Agricultural Pumping Interruptible Program shall be less than or equal to 543.9 MW for PG&E; 1087.8 MW for Southern California Edison Company; and 27.2 MW for San Diego Gas & Electric Company.

8. For the 2012 RA program only, PG&E is granted an exemption from the RA program requirement that demand response programs must operate from 1:00 p.m. to 6:00 p.m.

The proposed order would decline to adopt the Alliance for Retail Energy Markets' proposal to use additional load profiles for the coincident adjustment factor, rather than using a system average approach. AReM had proposed developing three or more LSE load profiles categories: 1) LSEs serving all customers; 2) LSEs serving commercial and industrial customers only; and 3) LSEs serving only residential and small commercial customers.

The draft would decline to adopt AReM's proposal at this time, citing significant technical analysis which remains to be produced before the proposal can be implemented. The draft would request that the PUC's Energy Division Staff and California Energy Commission Staff work to refine AReM's concept over the course of the next year and provide a recommendation to the Commission in next year's RA proceeding for further consideration and possible implementation in 2013.

While declining any instant modification, the draft does stress that, "We are committed to greater cost transparency and cost allocation based on cost causation for the RA program. All customer classes should be aware of the costs unique to the 'peakiness' of that particular customer class, and all LSEs should face costs consistent with cost causation. An average coincidence factor across all customer classes hides certain cost differences among classes and LSEs. In essence, this method serves as a cross subsidy from industrial and commercial customers to residential customers."

The draft rejects the proposed Planned Outage Adder supported by SCE and AReM.

However, "we are convinced that the only reasonable option for outage management is for the CAISO to manage outages and require additional procurement only when needed."

Thus the draft would eliminate the current "LSE-replace" rule and request that the CAISO provide feedback on the best and most effective way for CAISO to manage outages, and the draft would only require replacement or additional procurement when needed.

Accordingly, the draft would adopt a provisional removal of the scheduled outage rules adopted in D.06-07-031. For the 2012 RA compliance year only, LSEs would be allowed to count resources that are on scheduled outage in their RA Filings, so long as the resource submits a supply plan to the CAISO validating that RA capacity for the LSE.

The proposed decision would decline to change the RA trigger waiver price at this time, and would retain the current Path 26 allocation process. A seasonal RA requirement would also be rejected at this time.

The draft also provides LSEs with additional flexibility to adjust their RA forecast, recognizing the increase in direct access load.

Finally, the draft would maintain the current "best estimate" method for RA forecasts, as opposed to the to "current customer" approach.

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