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Calif. Orders Implementation Of Multi-Year Resource Adequacy Requirements For Retail Suppliers, LSEs

June 25, 2018

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Copyright 2010-17
Reporting by Paul Ring •

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The California PUC adopted an order directing the implementation of multi-year Resource Adequacy (RA) requirements starting in 2020, though specifics will be addressed in a further track of the proceeding

The PUC held that implementation of multi-year RA requirements should be initiated for 2020.

Furthermore, the PUC said that implementation of a central buyer structure for multi-year local RA requirements should be initiated for 2020.

Further study should be initiated to develop multi-year local RA requirements and guide multi-year local RA procurement, the PUC said

The PUC directed that, in their Track 2 testimony parties should propose a multi-year local resource adequacy requirement with a three-to-five-year duration.

In their Track 2 testimony parties should propose central buyer structures for multi-year local resource adequacy procurement, the PUC said

Discussing its direction, the PUC said, "the Commission believes that there is value to having a multi-year local RA requirement to ensure that resources needed for reliability are procured in an orderly fashion, and intends to implement a multi-year local RA requirement in Track 2 of this proceeding. Although it is premature to spell out the details of such a requirement at this point in the proceeding, we can lay the groundwork to support implementation of a multi-year local RA requirement for 2020. We do not intend to adopt multi-year requirements for flexible and system RA in this proceeding at this time, particularly in light of anticipated changes to the flexible RA construct, but this decision does not preclude LSEs from procuring flexible attributes of capacity that is procured to meet the local RA requirements. In fact, when an LSE procures capacity to meet its multi-year local RA requirement and that local capacity is capable of flexibility, the LSE should procure the flexible attributes along with the local capacity. Going forward, the Commission may consider an expansion of multi-year requirements to flexible and/or system RA."

The PUC said that, in light of the need to increase market certainty in the near term, a 100% local requirement for the first year is appropriate, and may be appropriate for the second year, but there is some concern that this could result in over-procurement.

"Accordingly, we will set the second year requirement at 95%," the PUC said

"Parties should propose a reasonable amount of local RA procurement for Year 3 (and beyond, if a longer program is proposed) basing their proposals on data such as that presented by Energy Division in its proposal. In general, local RA procurement requirements should be greater than current voluntary local RA forward procurement levels," the PUC said

Regarding a central buyer, the PUC said, "Weighing both the concerns and the potential benefits of moving to a central buyer system, we believe that a central buyer system - for at least some portion of local RA - is the solution most likely to provide cost efficiency, market certainty, reliability, administrative efficiency, and customer protection. At the same time, to preserve procurement flexibility for all LSEs and limit program modifications to only the most critical areas, we do not adopt a framework for central procurement of system or flexible RA at this time. Central procurement of system or flexible RA may be considered in future years."

"Therefore, parties should propose central buyer structures for multi-year forward procurement of local RA in their Track 2 testimony. Proposals involving centralized procurement may have a single central buyer or a single central buyer per TAC [Transmission Access Charge] area, and should address the ability to procure all available resource attributes (e.g. flexible RA), not just local RA requirements," the PUC said

"It is possible that there could be more than one central buyer per TAC area, and we are willing to consider such proposals, but we are not yet persuaded of the feasibility of permitting two buyers per TAC area. Therefore, any such proposals must provide additional detail to allow the Commission to evaluate their feasibility. Specifically, proposals with two buyers in one TAC area must be concrete and implementable, and: 1) address equitable allocation of costs to all customers, and 2) ensure cost-effective, efficient and coordinated procurement for each local and sub-local area within the TAC. Finally, all proposals must address how the central buyer structure would balance economic procurement criteria with other essential state policies, such as greenhouse gas emissions reductions targets and consideration of impacts on disadvantaged communities. In particular, we remain concerned that a centralized capacity market may not meet these objectives," the PUC said

Rulemaking 17-09-020

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