Revised Calif. Proposed Decision Would Alter Allocation Method & Amount For Assignment To Retail Suppliers Of Responsibility For Procuring Portion Of Incremental Reliability Resources & Renewable Integration Resources

October 24, 2019

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Reporting by Paul Ring • ring@energychoicematters.com

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A revised proposed decision from a California PUC ALJ would revise the allocation method, and amounts required, for the obligation of competitive retail suppliers (electric service providers, or ESPs) to procure their assigned share of needed incremental reliability and renewable integration resources identified by the proposed order

Originally, ESPs in aggregate were to be assigned an obligation to procure 355 MW in the SCE area

See our prior story here for more details

The revised proposed decision would find that assigning responsibility for a portion of resources to those LSEs only within the SCE service area is not appropriate, and would instead assign all obligations on a CAISO system basis

Furthermore, the total resources to be procured by all LSEs has increased from 2,500 MW to 4,000 MW

Under the revised proposed order, ESPs in aggregate would be assigned the following procurement obligation for statewide resources (the reference to service area is for allocating the responsibility only, not that any resources must be within such service area):

System Resource Adequacy Incremental Procurement Requirement, Shares Allocated To ESPs

• PG&E Direct Access ESPs (Aggregated): 138.2 MW assigned to ESPs

• SCE Direct Access ESPs (Aggregated): 170.0 MW assigned to ESPs

• SDG&E Direct Access ESPs (Aggregated): 51.7 MW assigned to ESPs

The ESP obligations are presented in aggregate due to the confidential nature of their load forecasts, but Commission staff will inform each ESP individually of its obligation within 10 business days of the adoption of the revised proposed decision.

The revised proposed decision does include a change in how the responsibility was allocated, due to concerns raised by retail suppliers

Under the new draft, the procurement requirement will be shared by all LSEs (CCAs, ESPs, and IOUs) that serve load in the CAISO footprint, on the basis of projected load share for 2021 in gigawatt hours (GWh) identified in Form 1.1c, 'California Energy Demand Update Forecast 2018-2030, Mid Demand Baseline Case, Mid Additional Achievable Energy Efficiency and Additional Achievable Photovoltaics,' of the 2018 IEPR, which was adopted by the CEC in February 2019. The IEPR forecast represents the most recent adopted and publicly-available source of load forecasts for these LSEs.

"However, to address the comments from AReM and others in response to the proposed decision about the differential impact of load shapes on the obligations identified for each LSE, we have utilized the 2020 year-ahead forecasts for resource adequacy capacity, aggregated by class of LSE, to first allocate the capacity by LSE type before further differentiating within LSE type by public load share. The peak capacity responsibility by LSE type is 66.5% to IOUs, 24.5% to CCAs, and 9.0% to ESPs for the 2020 resource adequacy year," the revised draft says

The revised proposal maintains an assignment of a procurement obligation to ESPs rather than having the IOU conduct the procurement for all customers, with cost allocation via CAM

"We prefer to assume at the outset that the LSEs with procurement obligations for system reliability and renewable integration would prefer to conduct their own procurement to fulfill their individual requirements. We also note that in many venues for many years, many parties have expressed some degree of dissatisfaction with the CAM, utilized to allocate costs of procurement done by IOUs on behalf of customers of ESPs and CCAs. In response to these criticisms, we will implement a requirement that each LSE, regardless of whether it is an IOU or an ESP or CCA, is responsible for its own share of the incremental reliability and renewable integration resources identified herein as needed," the revised draft states

"Our preference is that a cost allocation framework where IOUs procure on behalf of other LSEs in their territories be used as a backup plan, in the event that the LSEs with the primary responsibility fail to fulfill their obligations. We may need to utilize the CAM or a similar mechanism, as TURN and other parties suggest, but for the primary procurement responsibility, we prefer to assign responsibility where we believe it should be with the LSEs directly. In response to comments on the proposed decision from numerous parties seeking clarification on the backup plan, or alternatively seeking identification of an enforcement mechanism, we clarify that we will utilize the authority given to us in § 451.51(c) to require IOU procurement on behalf of non-performing LSEs, or those that elect not to self-provide renewable integration resources, with associated non-bypassable cost allocation to that LSE’s customers for that procurement, should it become necessary," the revised draft states

"We recognize that this would likely require further development and differentiation of the cost allocation mechanism by the Commission, since the current mechanism is implemented through distribution rates and applied to all customers, whereas the new mechanism would need to be applied to LSEs’ customers proportional to the amount of new reliability or renewable integration resources that they were responsible for but did not procure. For CCAs who elect not to self-provide, we will require that they notify the Commission by May 1, 2020. We also recognize that by the time we determine noncompliance from any other LSEs that do not procure, time will be extremely short to procure and bring online the needed reliability resources, and this type of 'just in time' procurement is typically quite expensive. For these reasons, we hope that such steps will not be necessary. But if they are, the Commission will take the appropriate steps to ensure this outcome," the revised draft states

"This is also an appropriate place to test how well the obligated LSEs perform when given a procurement requirement for system reliability and renewable integration resources in the context of IRP. As pointed out by numerous parties in response to the proposed decision, the procurement identified herein as necessary is for system resource adequacy, and it is for incremental resources beyond those already present in the CAISO system. Therefore, there is a collective responsibility among all of the LSEs to develop these additional incremental resources," the revised draft states

Rulemaking 16-02-007

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