California Opens Rulemaking to Examine Multi-Year Resource Adequacy Requirement for Retail Suppliers

The California PUC yesterday voted to open a new rulemaking on a multi-year resource adequacy requirement for load serving entities.

The rulemaking is to consider:

1. Two and three-year forward-looking resource adequacy procurement requirements.

2. Implementing a long term joint reliability planning assessment with the California Independent System Operator (CAISO) and California Energy Commission (CEC).

3. Determining rules and Commission policy positions with respect to the CAISO's development of a market-based backstop procurement mechanism to replace its existing Capacity Procurement Mechanism which expires in 2016.

The PUC's decision notes that the CAISO staff has reiterated its opinion that California should institute a three to five-year forward capacity market. "But we have previously considered and rejected proposals to institute a centralized capacity auction in California, and we will not revisit our decision rejecting a centralized capacity market in this proceeding," the PUC said.

"We remain concerned today that the approaches taken in the eastern centralized capacity market construct do not provide a secure regulatory environment for state regulatory commissions to ensure achievement of environmental or reliability-based procurement goals, without posing risks of over-procuring generic capacity. Accordingly, we will not consider proposal for a mandatory centralized capacity auction for California at this time," the PUC said.

"We will, however, consider alternative proposals for policy changes that may be necessary to ensure long-term resource adequacy, such as supporting a limited form of an organized capacity auction to fulfill CAISO backstop procurement needs, should they arise. Our decision will be considered against the Commission's concerns expressed in D.10-06-018," the PUC said.

Specific issues to be addressed regarding the multi-year forward procurement of capacity include:

• What percentage of resources should the PUC require LSEs to procure two- or three- years ahead of the resource adequacy delivery year for each kind of capacity?

• How should the Commission address load migration or load shifting among LSEs between the three-year forward compliance showing and the resource adequacy delivery year?

A staff proposal on a multi-year resource adequacy framework is scheduled to be issued in June 2014.

R.14-02-001