Proposed Order Would Deny Retail Suppliers' Sought Relief Relating To Disaggregation Of PG&E 'Other' Local Resource Adequacy Area

Would Clarify Retail Suppliers Must Meet Local RA Requirement For Disaggregated PG&E 'Other' Area

August 28, 2019

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Reporting by Paul Ring • ring@energychoicematters.com

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A proposed decision from a California PUC ALJ would deny a petition from the Alliance for Retail Energy Markets for certain relief related to a prior decision to disaggregate the PG&E Other local resource adequacy area.

In Decision (D.) 19-02-022, the PUC adopted several refinements to the Resource Adequacy (RA) program. In particular, the decision ordered that the aggregated PG&E Other local area be disaggregated to the local capacity area level beginning with the 2020 RA compliance year. The PG&E Other area referred to six local capacity areas that were aggregated for procurement purposes: Fresno, Humboldt, Kern, North Coast/North Bay, Sierra, and Stockton. D.19-02-022 stated that because the Commission was not adopting a central buyer framework and that load-serving entities (LSEs) will continue to self-procure, the disaggregation of the PG&E Other local area is a necessary first step towards addressing inefficient procurement that may lead to backstop procurement.

On May 24, 2019, the Alliance for Retail Energy Markets (AReM) filed a petition for modification of D.19-02-022. AReM stated that the disaggregation of the PG&E Other area creates potential economic harm for LSEs with certain RA contracts for PG&E Other RA that were executed before the effective date of D.19-02-022 and that will be delivered in the 2020 RA compliance year or after. AReM argues that possible harm may result if local RA was previously procured for PG&E Other and does not match an LSE’s new Local Capacity Requirements (LCR) in the now-disaggregated local capacity areas.

AReM requested, for RA purchase contracts for PG&E Other RA which (1) will be delivered in the 2020 RA compliance year and beyond and (2) were executed prior to D.19-02-022, that the Commission ensure that the LSEs “can fully utilize them for RA compliance for the duration of the original contract term.” In addition, Petitioner requests that if an LSE’s existing PG&E Other contracts do not specify the local capacity area where the RA resource is located, "the LSE should meet and confer with the seller to determine if they can renegotiate the contract so that it specifies resources in one or more of the newly-disaggregated Local Capacity Areas." AReM stated that “[s]uccessful negotiations to match resources with an LSE’s new requirements would minimize the amount of assignment for generic PG&E Other to any disaggregated locations.”

The ALJ would deny the petition

As a preliminary matter, the ALJ proposed that the Commission clarify that D.19-02-022 does require LSEs to meet the local RA requirement for the now-disaggregated PG&E Other area beginning in the 2020 RA compliance year. Shell had argued that the PUC had only "encouraged", rather than required, such action

The ALJ said that the arguments from AReM were already addressed in the prior decision

"The Commission finds that the concerns raised in AReM’s petition were raised and considered in the proceeding prior to the issuance of D.19-02-022. In the proposed decision that preceded D.19-02-022, issued on November 21, 2018, the Commission proposed to adopt a full procurement, central buyer structure for the RA program. In comments to that proposed decision, several parties raised concerns regarding the existing contracts at issue in AReM’s petition, including AReM, CalCCA, Shell, and Sonoma Clean Power Authority (SCP)," the ALJ would find

"Therefore, the issues addressed in AReM’s petition were raised and considered prior to the issuance of D.19-02-022 and we find no basis to modify the decision. Additionally, we note that the CAISO’s Local Capacity Requirements are subject to change each year and therefore, forward contracting in the Resource Adequacy program is associated with some amount of risk. We also encourage sellers and buyers that are parties to these executed contracts to engage in good faith negotiations to assign resources to match the needs of buyers in the newly disaggregated PG&E Other areas. To the extent that an LSE is unable to sell any excess local capacity, we also note that these resources may still be used towards meeting system RA requirements," the ALJ would find

Rulemaking 17-09-020

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