CPUC Proposes Changes In California’s Central Procurement Entity (CPE) Framework

In June 2020 the California Public Utilities Commission issued Decision 20-06-002 adopting a new Central Procurement Entity (CPE) structure for procurement of local Resource Adequacy (RA) resources in the Pacific Gas and Electric Company (PG&E) and Southern California Edison Company (SCE) transmission access charge (TAC) areas. The CPA framework allowed the utilities to use resources procured to meet system and/or flexible RA needs for local RA, subject to bidding requirements and an option to revert to the CAISO’s backstop mechanisms for local resource procurement if bid costs are deemed unreasonably high.

The first annual CPE compliance reports, filed in the November 2021, showed shortfalls in monthly procurement of local RA for the 2023 compliance year, particularly for PG&E, and in December 2021 the CPUC issued an order scheduling consideration of “critical modifications to the CPE structure” for early 2022.

The Phase 1 Proposed Decision issued February 10, 2022 recommends several program modifications to address identified issues and facilitate CPE implementation and procurement:

Requirements for Self-Shown Resources

The Proposed Decision recognized that the mechanism allowing a utility to “self-show” local resources to reduce the local RA obligation elicited limited participation due to lack of compensation to the resource providers. Additional disincentives for self-showing may include the burden and cost of executing a contract between the self-showing load-serving entity (LSE) and the CPE, and the exposure to backstop procurement costs if a self-shown resource fails to perform. To address these issues, the Proposed Decision recommends that:

• If the CAISO makes a local backstop designation, the CPE will be charged any associated procurement costs, including for non-performance of self-shown resources.
• If the CAISO designation was due to non-performance to a planned outage, or any reason for LSE outside of the CPE’s service area, the cost will be recovered from all LSEs.
• If the CAISO designation was due to any other reason and resources were self-shown within the CPE area, the CPUC will be charged and pass through the costs to the LSE
• Attestation requirements will replace the previous requirement that shown resources be documented in a formal agreement.
• LSEs that decline to self-show or bid will be required to submit a statement with their year-ahead RA filing explaining why.
• LSEs’ self-shown commitments must be firm for Years 1 and 2 but may be replaced with other local resources in Year 3.

CPE Solicitation Selection Criteria

The Proposed Decision finds that certain selection criteria and data requirements may be unnecessarily discouraging LSEs from bidding or self-showing resources into the solicitation process. To address this the selection criteria would be modified by removing the local effectiveness factors (LEF), which change from year to year based on transmission assumptions. The Proposed Decision also recommends eliminating the requirement to submit data on certain operational characteristics, since some characteristics are excluding resources and in recognition that some data is not available to the LSE.

CPE Procurement Outside the Annual RA Solicitation

The Proposed Decision recommends allowing CPEs to procure local RA resources outside of the annual solicitation process to cover deficiencies identified after the CPEs’ annual solicitation is completed. The CPE may use broker markets or bilateral transactions to fill short positions for any deficiencies in the three-year forward period, using the least cost best fit methodology and considering applicable selection criteria. Contracts with terms of five years or less will be deemed reasonable and preapproved if the resource meets local capacity needs identified by CAISO, the CAM procurement review group (CAM PRG) was properly consulted, and procurement was deemed by the independent evaluator (IE) to have followed applicable guidance.

CPE Procurement Timeline

The Proposed Decision recommends adjusting the timeline for CPE procurement as follows:

• April-May: CAISO files draft and final LCR studies and parties file comments on the studies
• No later than mid-May: LSEs make self-shown commitment of local resources to the CPE
• No later than June: CPUC adopts multi-year local RA requirements
• No later than early July: CPE receives total jurisdictional share of multi-year local RA requirements for applicable compliance years
• July: LSEs receive initial RA allocations
• Mid-August: CPE makes local RA showing to the CPUC
• End of August: LSEs in SCE and PG&E TAC areas receive updated CAM credits for multi-year system/flexible capacity procured as a result of CPE’s multi-year local RA showing
• September: Final RA allocations
• End of October: LSEs make system, flexible and local RA showings, as applicable, and justification statements for local resources, and CPEs/LSEs committed to self-show make year-ahead showing to CAISO

Local Capacity Requirement Reduction

Given the limited number of RA-only contracts procured for the 2023 compliance year, the LCR RCM calculation would apply the calculation for Year 1 to subsequent years.

IOU Bidding at Levelized Fixed Costs

In response to arguments that the levelized fixed cost requirement results in inefficient and improper pricing of IOU resources, the Proposed Decision recommends removing the levelized fixed cost requirement and allowing the IOUs to bid their resources into the CPE’s solicitation at competitive market prices, subject to review by the IE and CAM PRG.

Reporting Requirements

In response to some parties’ arguments that current compliance report data requirements are insufficient, the Proposed Decision recommends adding new data requirements for the 2023 Annual Compliance Report and in the future, including total RA allocation, total local demand response (DR) resource allocation, total local CAM resources, total local resource procurement, total LSE self-shown local resources, net total position of the CPE, total capacity of preferred resources bid or shown, selected and not selected by the CPE, and total capacity procured from generation located in disadvantaged communities.

Confidentiality

The Proposed Decision adopts, with revisions, PG&E’s proposed matrix outlining applicable bases for confidential treatment of information submitted to the CPUC related to the CPE.

Cost Recovery

The Proposed Decision recommends approval of a proposal that CPE procurement costs be forecasted and implemented in rates through the annual Energy Resource Recovery Account (ERRA) proceeding and handled in a separate confidential chapter in ERRA forecast testimony. The Proposed Decision also provides clarification regarding cost recovery for IOU transactions.

Comments on the Proposed Decision are due March 2 and reply comments March 7, 2022.

Contact: Andy Brown or Brian Biering