CPUC Authorizes New Measures To Address Anticipated Load Shortages In 2022 And 2023

To meet anticipated power shortfalls in 2022 and 2023, the California Public Utilities Commission (CPUC) has issued Decision 21-12-015 authorizing the large investor-owned utilities (Pacific Gas and Electric Company, Southern California Edison Company, San Diego Gas & Electric Company) to make a number of changes in demand-side programs and supply-side energy procurement practices.(See CPUC Focused on Addressing Summer 2022 and 2023 Electric Liability for background on the proposals considered by the CPUC in this and other dockets.)

In August 2020 the state experienced power outages blamed in part on inadequate planning and resource procurement to meet energy demand during an extreme heat wave. On July 30, 2021, Governor Newsom issued an Emergency Proclamation urging all state energy agencies to ensure there is adequate electricity to meet the needs of Californians in 2022. The CPUC has determined that 2000-3000 megawatts of new demand and supply-side resources will help address grid reliability concerns during extreme weather events in 2022 and 2023.

This week’s decision provides a detailed discussion of how it reached the conclusion that current procurement efforts may fall short, and adopts both demand and supply-side measures to provide additional “contingency resources” to meet this near-term need.

Demand-side measures include:

• Expanding and modifying the Emergency Load Reduction Program (ELRP) to increase participation and provide clarity in guidance. Modifications include increasing the ELRP compensation rate to $2 per kilowatt hour for all participants, adjusting size parameters, and removing some eligibility requirements.
• Adding an ELRP program that allows residential customers to receive compensation for reductions in energy use during system emergencies, with special outreach to low-income customers and customers in disadvantaged communities.
• Allowing aggregation of electric vehicle-to-grid managed charging and discharge to support the grid at net peak, and adding program incentives (e.g. guaranteeing 30 hours minimum VGI dispatch per season) to increase participation.
• Continuing the existing Flex Alert media campaign, and expanding it to encourage participation in the new residential ELRP program and discourage residential use of diesel generators during ELRP events.
• Authorizing utilities to procure incremental resource adequacy capacity from third party (non-utility) demand response providers through bilateral contracts. These resources will be integrated into the CAISO markets as economic DR (under a proxy DR product) and must abide by all RA and CAISO rules.
• Adopting PG&E proposal to increase the current Base Interruptible Program (BIP) compensation level by $1/kW for the months of May-October for the years 2022-23.
• Approving a $22.5 million smart thermostat incentive program aimed at installation of up to 300,000 smart thermostats in hot climate zones, in order to reduce air conditioning a few degrees during emergencies, with special protection for low-income customers.
• Adding two pilots to test the effectiveness of dynamic rates that change rapidly in response to grid emergencies. One pilot, proposed by Valley Clean Energy will focus on shifting agricultural water pumping to off peak times through use of dynamic rates and incentives. The second pilot, will be aimed at shifting load for customers using EVs, behind the meter storage, and other flexible technologies.

In a limited response to concerns about the climate, environmental justice and public health impacts of using diesel generators during emergency events, the adopted decision prohibits the use of backup generators to achieve incremental load reduction in the ELRP by non-residential participants located in disadvantaged communities.

Supply-side measures include:

• Allowing energy storage projects that are not fully deliverable (under CAISO rules) as long as they provide peak and net peak grid reliability benefits in summer 2022 or 2023. In response to many parties’ concern that the original proposal would unfairly prioritize utility-owned storage proposals, the final decision ordered utilities to “take reasonable actions” to minimize negative impacts on other projects in the interconnection queue, and that utility-owned storage would “not be given any preferential treatment” in the queue.
• Expanding use of the PG&E and SCE function as Central Procurement Entities as a means of procuring reliability resources located in local areas.
• Encouraging accelerated online dates for procurement already ordered.

The CPUC decision acknowledges that the approved measures may not yield the target IOU procurement by summer 2022 or 2023, and observes that in the event that “sufficient progress” has not been made by mid to late spring 2022, “the State can determine whether there is a need for additional action to further reduce the risk of outages resulting from an extreme weather event…”

Contact: Andy Brown or Lynn Haug