At a California Public Utilities Commission October 1 workshop, independent generators claimed the state’s current resource adequacy market largely shuts them out. “So long as investments continue to be regulatory-based by the CPUC with utility backing, merchant generation won’t be forthcoming,” said Mary Lynch, Constellation Energy vice president. She said the current market for spare capacity should instead be met with “bilateral contracts based on transparent price signals,” as provided by a capacity market, which meet specific businesses needs. However, The Utility Reform Network attorney Mike Florio--representing a coalition of large and small consumer groups supporting bilateral deals--applauded the last two years of success under the resource adequacy program. Specifically at issue in the workshop was the current and future state requirement that utilities have a 115-117 percent electricity supply cushion, and the possible role, shape and cost of a capacity market. The latter allows the trading of energy capacity, in small or large increments, as a means of shoring up utilities’ supply reliability at times of high demand. The commission and others, in and outside the state, have grappled with ground rules for a capacity market for a number of years. “The state has gotten through two heat waves and very high demand, and the resources have been there,” said Florio. He agreed, however, that there are problems with the current capacity program because it is resulting in new baseload power projects. Florio warned against allowing “generic capacity” in place of reserves that fit the specific needs of the grid. “If we need quick start power then we shouldn’t be buying baseload power.” Generally, baseload power is fueled by fossil and nuclear so the plants run around the clock. Those plants also need massive transmission systems to get their power from source to use. Non baseload peaker plants also use fossil fuel but may only need local distribution systems to send out electricity. Solar and wind power are intermittent sources. Florio and some utility representatives pointed out that the CPUC’s 115-117 percent “resource adequacy” requirement should not be viewed in isolation. It is only one part of a “very textured, complicated” energy market, which includes the state’s loading order and its top priority for energy efficiency, the 20 percent renewables portfolio standard, and demand response programs, said Todd Strauss, Pacific Gas & Electric director of analysis. For PG&E and consumer advocates the bottom line is cost, although Strauss admitted that natural gas costs are higher than would be the additional costs of any capacity market. Representatives from the California Independent System Operator urged that the burden and cost of supplying needed capacity not fall solely on their shoulders. “We need a better assessment of need” to better serve the market, said Lorenzo Kristov, CAISO principal market architect.
