Over the past month, the California Public Utilities Commission’s effort to reform its Resource Adequacy program has hit a major snag, one centered on longstanding conflicts about how to value out-of-state imports as part of the state’s future grid capacity mix.
California has faced numerous challenges in its year-long effort to change the RA program, which sets the rules for how investor-owned utilities, community-choice aggregators and other load-serving entities contract for future generation or load-reduction capacity. These challenges include how to measure the value of all kinds of future grid resources, from the economically struggling natural-gas-fired power plants that have been closing across the state, to utility-scale solar-battery projects that are contracted for but have yet to be built.
One of the most contentious aspects of the RA debate has been over the value of imports from outside the boundaries of California grid operator CAISO. These can range from Pacific Northwest hydropower connected via the Pacific DC Intertie to a variety of fossil-fueled or renewable-powered resources from across the Western U.S.
In simple terms, the argument over imports breaks down to what rules California should use to determine whether the imports can be relied on in future years when the grid needs them the most.
Stakeholders such as the California Community Choice Association (CalCCA) have argued that import RA should retain its place as part of a diverse portfolio of resources, and that the California Public Utilities Commission’s proposed remedies would undercut that value. Other stakeholders, including CAISO but also environmental groups such as the Natural Resources Defense Council and the Environmental Defense Fund, have expressed concern that growing demand for carbon-free capacity resources across the Western U.S. could put pressure on California’s reliance on out-of-state resources and sap efforts to secure in-state resources to meet the same goals.
All of these arguments have been sidelined at present to address a much more pressing concern. On Oct. 17, the California Public Utilities Commission issued a decision (PDF) affirming its new Resource Adequacy rules for 2020. Included in the decision are new requirements for import RA that the CPUC said are needed to assure that future reliability.
But according to stakeholders, these new rules are not only legally flawed, but will also force them to renegotiate or cancel tens of millions of dollars’ worth of import RA contracts for the new year.
The firestorm over new import Resource Adequacy rules, explained
According to the community-choice aggregators (CCAs), generator groups and others, the CPUC’s decision uses a faulty legal premise to throw many existing RA contracts into doubt. CalCCA filed a motion to stay the decision, along with an application for rehearing (PDF), telling the CPUC that its decision “violates state and federal law.”
What’s worse, the CPUC’s new rules came mere weeks before the Oct. 31 deadline for load-serving entities to file their year-ahead compliance “showings” for meeting 2020 RA needs as well as a Nov. 17 deadline for RA showings for January 2020. That’s given the LSEs almost no time to absorb the changes before presenting new or existing contracts for approval.