Dive Brief:
- The California Public Utilities Commission (CPUC) will soon vote on a proposal that would adopt a new centralized framework for its resource adequacy program.
- If approved, the decision would appoint Pacific Gas & Electric (PG&E) and Southern California Edison (SCE) as "central procurement entities" for their respective service areas, and the new system would go into effect in 2023.
- The proposal could "change things pretty significantly" for community choice aggregators and electric service providers, since it would get rid of their local resource adequacy requirements, Mark Specht, energy analyst with the Union of Concerned Scientists’ climate and energy program, told Utility Dive. Commissioners can vote on the proposed decision May 7 at the earliest.
Dive Insight:
The CPUC’s resource adequacy program provides a framework for procurement and infrastructure investments by load-serving entities, including utilities, community choice aggregators (CCAs) and energy service providers (ESPs), with the overarching goal of ensuring the California Independent System Operator has capacity when needed.
The agency has been mulling a centralized procurement framework for a while now; in a June 2018 decision, it concluded that a central buyer system would be cost effective and reliable, as well as likely to provide market certainty and customer protections.
The new proposal outlines a "hybrid" procurement model to implement that framework. Under the model, load-serving entities can procure their own local resources, and then opt for one of three strategies: use it for their own needs, sell it to either PG&E or SCE — the central procurement entities — or "show" the resources as part of their portfolio, reducing the total amount of capacity that PG&E and SCE would need to procure to fill any gaps that have not been met.
This hybrid model would help create an effective portfolio of local resources, reduce the need for backstop procurement and allocate costs equitably, the CPUC said in its proposed decision. While the decision would appoint PG&E and SCE as central buyers in their service territories, the commission left open the possibility of designating a different entity to take over procurement responsibilities down the line.
An area of concern for UCS is the potential impacts of this decision on the procurement of new, clean resources in local areas, which would allow gas plants to retire, Specht said.
"We have these goals to really clean up California’s energy system to reduce air pollution emissions in disadvantaged communities and resource adequacy is the program that basically decides what gas plants stick around on the grid and which gas plants don’t," he said, adding that it’s important to consider whether incentives are lined up for load-serving entities to go out and procure clean resources in local areas, allowing the gas facilities to retire.
"Personally, I’m still working out how all of these moving parts come together," Specht said.
The CPUC’s proposal also rejects an alternative blueprint for a central procurement framework sketched out by eight stakeholders in the proceeding, including the California Community Choice Association (CalCCA) and San Diego Gas & Electric, last year. The group filed a settlement with the agency endorsing a "residual" procurement model, in which a central procurement entity would take on the responsibility of purchasing residual resource adequacy capacity on behalf of all load-serving entities on an as-needed basis. However, the parties did not identify who would play the role of the central entity, saying instead that it would be "a competitively neutral, independent, and credit-worthy entity."
The CPUC rejected that framework for several reasons detailed in its own proposal, including the fact that it does not represent the interests of all the parties in the proceeding, and because it does not address the identity of the central buyer.
The commission’s decision is "very disappointing," CalCCA said in an emailed statement. "We are concerned that the [proposed decision] risks stranding the value of existing contracts and disrupting any current negotiations in local areas. It may also drive excess procurement, resulting in increased costs to ratepayers."
The group plans to file comments on the proposal on April 15.
