CPUC Resource Adequacy Leaves Issues Unaddressed

By Published On: September 30, 2005

In a less than robust attempt to keep blackouts at bay, the California Public Utilities Commission has issued a draft resource-adequacy decision it hopes will spur investments in new power plants that feed the grid when and where they are needed. The proposal released September 27 says the commission “rejects business as usual,” referring to the lack of deals that would provide financing for power projects. However, it leaves gaps in the proposed ground rules for how utilities and other power providers should meet the 15-17 percent reserve requirement set for June 2006. Among the issues it puts off are rules for local capacity need and penalties for noncompliance. The draft insists on increased power reliability, but not at any cost. “Ultimately, measures proposed to promote greater grid reliability should be evaluated by weighing their expected cost against the value of their expected contribution to reliability,” it states. The document also rejects eliminating the Federal Energy Regulatory Commission must-offer obligation, which requires plants to feed power into the grid when supplies are short. Generators have long contended that this requirement, imposed during the state’s energy crisis, is onerous and outdated. The draft ruling says the must-offer rules should be eliminated only when the grid operator’s market redesign is finalized-a time line that has been constantly extended. Some criticized the draft for tossing the reliability hot potato over to the grid operator when it’s trying to get away from reliability-must-run contracts. “This may effectively force the CAISO to go out and secure these contracts if the investor-owned utilities refuse to secure adequate generation” through the solicitation process, said an industry stakeholder, who asked not to be named. “The CPUC effectively punted the ‘reliability’ football back over to the CAISO at a time when the CAISO is actually trying to move away from the issuance of reliability-must-run contracts,” said an industry stakeholder, who asked not to be named. “This may effectively force the CAISO to go out and secure these contracts if the investor-owned utilities refuse to secure adequate generation” through the solicitation process. Provisions in the draft order by administrative law judge Mark Wetzel include: ? Requiring utilities or other load-serving entities to identify the specific resources they would count toward the reserve mandate. This requirement will be phased in, however. ? Liquidated damages clauses, which would allow payment of money in place of contracted power to qualify for the reserve mandate until 2008, but no longer.

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