California ALJ proposes statewide renewable energy procurement for utilities

Dive Brief:

A California Administrative Law Judge (ALJ) on Monday proposed statewide procurement for renewable resources, finding that proposed resource plans from utilities and other power providers will not reduce greenhouse gases enough to meet state goals.
The proposed decision from ALJ Julie Fitch would refuse to adopt the combined integrated resource plan (IRP) from the state's utilities and community choice aggregators (CCA) because it "does not meet the GHG emissions goals" and could challenge reliability. Instead, Fitch proposed a new statewide Preferred System Portfolio that would guide generation decisions out to 2030.
If adopted by the California Public Utilities Commission (CPUC), regulators at that agency would decide how power providers would comply with the new statewide portfolio. California regulators routinely adopt ALJ findings with minimal or no changes.

Dive Insight:

Fitch's proposal would create a statewide "procurement track" for generation capacity, dramatically changing the IRP protocols followed by the state's power providers today. If the proposed decision is approved by the CPUC, regulators will work on establishing the design of the procurement track.

"The procurement track will explore how the LSEs can be directed to follow the Preferred System Portfolio," Terrie Prosper, CPUC spokesperson, told Utility Dive via email.

While California is working to eliminate natural gas-fired generation, Fitch's proposed decision notes existing gas-fired capacity will still be needed in 2030 as the state continues to integrate renewables, making the resource part of the potential Preferred System Portfolio.

Existing natural gas resources are needed to "maintain system reliability and provide affordable electricity while the broader transition to California's GHG emissions reduction goals is underway," Prosper said.

Other resources in Fitch's recommended procurement track include eight-hour duration storage and enough diverse renewable resources to reach the 2030 Preferred System Portfolio. The portfolio is supposed to reach a statewide target to lower electric sector emissions to 42 million metric tons of GHG in 2030, a 61% decline from 1990 levels in the sector.

Fitch ruled that the plans proposed by nearly 50 load serving entities (LSEs) would not collectively meet that goal. She also expressed concerns about the plans community choice aggregators are putting together as the state prepares for the retirement of its sole nuclear generator — the 2.2 GW Diablo Canyon — in the mid 2020s.

"Since Diablo Canyon was a baseload resource and most renewable resources are not, if anything we are concerned that the replacement power procured mostly by CCAs will not represent as reliable a resource as Diablo Canyon has proven to be over the decades," Fitch wrote.

While 20 LSEs submitted IRPs in 2018 that were approved or certified, 19 did not provide sufficient information on the emissions of pollutants associated with the resources they would use, Fitch wrote. One LSE did not file an IRP and eight were exempt from the requirement.

A state-wide procurement process would affect every LSE.

"[W]e can assume that the new round of procurement will incur costs that [will] then be spread to all customers of each of the utilities, including the CCA and direct access customers," Matt Freedman, staff attorney for The Utility Reform Network (TURN), told Utility Dive.

The investor-owned utilities "are trying to shed resources because they've lost a lot of customers....So all of the need for new resources is with the new providers," he added.

At the same time, Freedman said, new electric service providers "are the ones that had the hardest time putting together resource plans for the company."

The CPUC received several vague IRPs that copied a template of requirements without providing details such as when the capacity would be added, he said. TURN found many IRPs "submitted very generic resource plans," which cloud the accurate assessments of the progress on GHG reductions.

Regulators "are trying to steer rapidly changing retail markets and they are struggling to bridge the gap between Statewide Resource Planning Objectives and the paradigm of customer choice," Freedman said.

A lot of details remain undecided about a new procurement plan, he added, which would need to be addressed if the CPUC approves Fitch's proposal.

"The open question is who would do that procurement and how you would operationalize such a requirement," Freedman said.

The proposed decision has no legal effect until adopted by the Commission. The earliest CPUC business meeting where it can be taken up is on April 25.