Final Calif. Decision Lowers Amount To Be Procured By Retail Suppliers For Share Of Incremental Reliability Resources & Renewable Integration Resources

Final Order Allows Retail Suppliers To Self-Provide (All or None), But Permits Use Of Utility Procurement Backstop

Final Order Allows Some Imports To Qualify

November 8, 2019

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Reporting by Paul Ring • ring@energychoicematters.com

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The California PUC issued a final order concerning the obligation of LSEs, including competitive retail suppliers (electric service providers, or ESPs) to procure their assigned share of needed incremental reliability and renewable integration resources identified by the order

The final order strikes the draft provision that had stated that that PUC would 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.

Instead, the final order states that,"we will implement a preference 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."

As such, the order allows ESPs to self-provide their assigned capacity, on an all-or-none basis (partial self-procurement is not permitted). To the extent an ESP informs the PUC that it will not self-procure its share of capacity, the IOU will serve as the backstop

The final order also states, "We also clarify that the capacity procured by the IOUs in response to this decision will be allocated on a non-bypassable basis through a modified CAM mechanism and not PCIA. In other words, we will not reduce the cost allocation amounts to be recovered by the IOUs after load migrates. Thus, we do not make the modifications suggested by SDG&E, in its comments, to account for load migration before or after the CCA or ESP elects whether it will self-provide, or for PCIA vintaging."

Concerning cost recovery for utility-procured capacity, including on behalf of an ESP, "We recognize that these are complex questions that are not completely addressed by current mechanisms. Therefore, we will request that Commission staff initiate a workshop or working group process by mid-January 2020 to begin to develop proposals for the exact mechanisms contemplated here," the order states

The order clarifies that the PUC is allowing ESPs to self-procure the assigned capacity even though CCAs are the only entities explicitly authorized by statute to have such ability.

The final order establishes the total capacity to be procured by all LSEs to be 3,300 MW (lower than the 4,000 MW included in the most recent prior draft)

The final order states, "We have revised the total capacity procurement requirement downward, as suggested by CalCCA in comments on the revised proposed decision, to account for the changes to the baseline articulated in this decision and because we are prioritizing early procurement action over conducting additional analysis of the exact number that needs to be procured. We intend to further assess the need for additional capacity procurement almost immediately in this proceeding with the analysis of the next Reference System Portfolio and expect that additional procurement requirements may be necessary. But given the impending retirement of additional resources, including Diablo Canyon, we still assess that at least 3,300 MW of system resource adequacy capacity will be needed in the timeframe as a least regrets strategy."

Under the final 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). The amounts have been lowered due to the lower overall total noted above.

System Resource Adequacy Incremental Procurement Requirement, Shares Allocated To ESPs

• PG&E Direct Access ESPs (Aggregated): 114.0 MW assigned to ESPs

• SCE Direct Access ESPs (Aggregated): 140.3 MW assigned to ESPs

• SDG&E Direct Access ESPs (Aggregated): 42.7 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.

A minimum amount of the overall requirements listed above must be met in the interim years.

For PG&E Direct Access ESPs in aggregate, 57.0 MW must be met by August 1, 2021, 85.5 MW by August 1, 2022, and 114.0 MW August 1, 2023

For SCE Direct Access ESPs in aggregate, 70.1 MW must be met by August 1, 2021, 105.2 MW by August 1, 2022, and 140.3 MW August 1, 2023

For SDG&E Direct Access ESPs in aggregate, 21.3 MW must be met by August 1, 2021, 32.0 MW by August 1, 2022, and 42.7 MW August 1, 2023

The final order included a new provision concerning the use of imports to meet an obligation, stating, "we will make the following provisions to allow some imports to count as incremental for purposes of the procurement requirements. Incremental imports may count for up to 20 percent of each LSE’s total procurement requirement by 2023, as long as the imported power is tied to a specific and identified generation resource and dynamically transferred or pseudo tied to the CAISO system. This incremental import capacity must also be tied to a contract of at least three years in length. The imported power must also meet all of the other resource adequacy requirements associated with imports."

Rulemaking 16-02-007

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