Dive Brief:

• The California Public Utilities Commission (CPUC) last week approved all but six of 63 contracts, representing 1,813 MW of resources and stemming from a highly-contested local capacity requirement request for offers (LCR-RFO) issued by Southern California Edison (SCE) in 2013, the San Diego Tribune reports. 
• Some parties in the RFO contested the process, arguing that SCE picked more gas-fired generation —1,382 MW — than called for in the RFO instead of procuring more energy storage, even though the utility signed contracts for 263 MW of storage, far above the 50 MW called for by regulators.
• The CPUC found that SCE substantially complied with the procurement directives, even though it is 17 MW short of the generation target set in the RFO and 99 MW short of the target set for preferred resources. 
• SCE says it intends to address the shortfall after considering updated forecasts by the California Independent System Operator and will use “existing procurement mechanisms, as appropriate” to remedy any shortfall.

Dive Insight:

SCE’s LCR-RFO was challenged on several fronts by a variety of stakeholders. The Sierra Club, for instance, argued that certain contracts with affiliates of NRG Energy did not meet the requirements for a demand response resource or even a preferred resource under the LCR-RFO because they rely on reciprocating engines to support load during curtailment and do not reduce net demand.

The CPUC sided with the Sierra Club and rejected six of the seven NRG contracts, reducing the total capacity of the proposed resources to 70 MW from 75 MW on the grounds they use fossil fuels to back up curtailment. The seventh contract lacked information on the extent that fossil fuels would be used to support load during a curtailment, but the CPUC approved it based on NRG’s willingness to amend the contract to exclude behind-the-meter gas-fired generation.

The CPUC also clarified that gas-fired backup generation does not constitute a preferred resource. The agency also found that SCE is authorized, but not obliged, to procure further resources to make up for the loss of the 70 MW of capacity represented by the denied contracts.

A SCE spokesman said the utility "will attempt to leverage other procurement programs to add local resources" to fill the 70-MW shortfall, as well as a 99-MW shortfall in the preferred resource category identified by the CPUC, if the California ISO determines that capacity is needed.

Sierra Club, along with the Office or Ratepayers Advocates and Powers Engineering, contested SCE’s 100-MW cap on in-front-of-the meter energy storage. Powers said that the cap gave generation resources an unfair advantage over storage.

The Sierra Club argued that the cap resulted in SCE’s selection of the 98-MW Stanton gas-fired generator.

Stanton, in its reply, noted that the peaking plant would also be able to provide voltage support by serving as a synchronous condenser and that it would have a battery storage of an unspecified size that would allow it to provide ancillary services.

On Stanton, the CPUC sided with SCE, which argued that the RFO was issued on a tight timeline and was unique in that it had limited information to assess the benefits of storage resources against generation resources as it was the first time that it had administered a solicitation that sought a wide range of resources.

The CPUC, however, did say that SCE’s choices were not “perfect.” The commission highlighted comments by demand response provider EnerNOC, which filed documents arguing that demand response resources were disadvantaged because the operational requirements changed considerably after bids were submitted.

“We see room for improvement in the all-source RFO process,” the CPUC wrote in the decision, and directed SCE to facilitate a workshop to explore how to “bring more transparency to the RFO process, examine criteria and methods used to assess bids, and review the processes for determining resource operational requirements.”

The Sierra Club and Powers Engineering also objected to the amount of gas-fired generation that SCE selected. Powers, for instance, noted that lack of demand growth in the targeted Western LA Basin since 2013 when the RFO process began. The CPUC, however, sided with SCE, saying that the utility acted based on prevailing conditions and estimates.

"The decision is a testament to the nearly complete disconnect between the resources that SCE was just authorized to procure and California law requiring energy efficiency and non-fossil generation to meet new demand," Bill Powers, principal at Powers Engineering, said. "Once you look beyond the hype about the types of resources included in the RFO, it is little more than a status quo authorization to build two high capacity factor combined cycle power plants."