Proposed Decision Would Authorize SCE Local Capacity Procurements, Allocation of Costs to Direct Access Customers

A proposed decision from the California PUC would allow Southern California Edison to procure nearly 1,800 MW in local capacity requirements, with such procurement eligible for cost allocation mechanism (CAM) treatment. The draft order would also decline to make any changes in the CAM, such as those sought by retail suppliers.

Specifically, the draft would authorize Southern California Edison to procure between 1,050 MW and 1,500 MW of electrical capacity in the West Los Angeles sub-area of the Los Angeles basin local reliability area to meet long-term local capacity requirements by 2021. Additionally, Southern California Edison Company would be authorized to begin a process to procure between 215 MW and 290 MW of electric capacity to meet local capacity requirements in the Moorpark sub-area of the Big Creek/Ventura local reliability area.

Such procurements would be eligible for treatment under the CAM, which assigns the costs of the resources to benefiting customers, with such customers defined as including competitive supply (direct access) customers.

The draft order would reject all changes sought to the CAM by retail suppliers. "[W]e continue the current Commission policy of allocating CAM costs and benefits at the IOU service area level," the draft provides.

Among other things, the draft rejects changes to the CAM to recognize any unique contributions to peak load and capacity needs driven by bundled versus competitive load, and rejects a two-step/six criteria framework for invoking CAM proposed by retail suppliers.

The draft finds that the retail suppliers' proposed framework appears to create a precise determination of "benefitting customers."

"However, precision is not the same as fairness. The Commission's previously adopted [CAM] criteria fairly apportion costs to customers as envisioned by past Commission and the legislature actions. While creating more complexity, nothing in AReM's proposal improves on the fairness of the current allocation. Thus, the costs of local reliability needs shall continue to be allocated in accordance with previous Commission decisions," the draft states.

The draft also rejects a proposed cap on CAM, and a proposal to levelize the annual revenue requirement.

Retail suppliers also proposed changes to the energy auction used as part of the CAM, including changes to energy auction terms and the adopted program's proxy calculation.

"We have stated an openness to revisit the energy auction mechanism adopted in D.07-09-044. Toward that end, we appreciate the suggestions from parties in the current proceeding to consider improvements toward the current auction mechanism structure, including valuing net capacity costs. The record, however, fails to provide an adequate basis upon which to comprehensively consider and adopt any potential changes to the auction mechanism. We may consider taking a more focused look at these issues in the future," the draft states.

The proposed decision rejects a CAM opt-out for retail suppliers as well, and dims the prospects for any future adoption of an opt-out.

"The issue of a CAM opt-out is complex. AReM has properly raised legitimate questions regarding equity of the current CAM structure. However, while AReM's detailed proposal of a potential opt-out structure is helpful, it is unclear how its five-year contract term/project life requirement would adequately ensure investment in new resources. Further, it is not at all clear that a CAM opt-out could be implemented without undue administrative burden. After considering comments from parties, we find the record insufficient to resolve these questions, and therefore do not adopt an opt-out at this time. We will not rule out consideration of a CAM opt-out at a future date. However, we have considered parties' positions on more than one occasion, and declined to adopt a CAM opt-out. Therefore, we are disinclined to relitigate this issue in the future unless all or nearly all impacted parties can agree on a specific, detailed and implementable proposal, or there are significant changed circumstances," the draft states.

Docket: R. 12-03-014