A proposed decision that would allow firm liquidated damages contracts to count toward utilities' resource-adequacy requirements appears to satisfy stakeholders. The pending ruling is in response to concerns on the part of Southern California Edison, the grid operator, and generators. "This is a significant proposed decision because it clarifies important issues regarding how power imports count for resource adequacy," stated Gary Ackerman, Western Power Trading Forum executive director. The insider controversy over liquidated damages contracts stems from the grid operator's opposition to utilities, and other load-serving entities, using them to meet resource-adequacy capacity requirements. CAISO was concerned because the contracts keep it from knowing what resources are intended to satisfy the capacity mandate. In addition, the contracts don't allow the grid operator to validate the amount of electricity resources represented by the agreements. Firm liquidated damages is a mechanism that allows a seller of electricity to pay cash instead of supplying the power promised for a particular time period. The payment amount is determined by the buyer's cost to procure the equivalent energy elsewhere. While some declare a difference between firm and nonfirm liquidated damages contracts, the grid operator believes that all such contracts are nonfirm, according to CAISO spokesperson Gregg Fishman. That is because if a contractor fails to deliver, it doesn't have to find other power to replace the lost electricity. Resource adequacy is the regulatory mandate that utilities keep a 15-17 percent extra supply of electric capacity over predicted needs. The November 14 proposed decision by administrative law judge Mark Wetzell would have electricity imports identified at a specific intertie point to the California Independent System Operator's controlled grid. That is intended to allow the purchaser of electricity to count that power as firm because the delivery point is specified. Meanwhile, nonfirm liquidated damages contracts are being phased out and are not to be counted toward meeting a utility's resource adequacy. The decision would also specify that it is difficult, if not impossible, for these particular contracts to respond to real-time dispatches from the grid operator. Thus, that imported electricity would be exempt from the current real-time obligation. "The CAISO can't reach into those same import resources for real-time dispatch as it can for in-area generation," states the proposed decision. - J.A. Savage