Laura DollLaura Doll

Deputy Executive Director, CPUCDeputy Executive Director, CPUC

October 18, 2006October 18, 2006

Platt’s CA Power Market ForumPlatt’s CA Power Market Forum

CALIFORNIA PUBLIC UTILITIES COMMISSION

Fulfilling Resource Adequacy Fulfilling Resource Adequacy Requirements: A Regulatory Requirements: A Regulatory PerspectivePerspective

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How did we get here?How did we get here?

2000-012000-01 Market meltdown, DWR Market meltdown, DWR procurementprocurement

20022002 AB57 put IOUs back in procurement, AB57 put IOUs back in procurement, ensured cost recovery with ensured cost recovery with

pre-pre- approved procurement approved procurement planplan

SB 1078 Renewables by 2017SB 1078 Renewables by 2017 20032003 Utilities responsible for procurementUtilities responsible for procurement 20042004 Adopted long-term procurement Adopted long-term procurement

framework, approved first framework, approved first 10-yr plans10-yr plans

20052005 AB 380: PUC must establish RAAB 380: PUC must establish RA

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What’s up today?What’s up today?

2006 Umbrella proceeding on Long 2006 Umbrella proceeding on Long term procurement plan (LTPP)term procurement plan (LTPP)– Supersedes all others: one combined Supersedes all others: one combined

procurement plan that includes information procurement plan that includes information from prior iterations of short-term and from prior iterations of short-term and long-term planslong-term plans

– Provides loading order “check-in”Provides loading order “check-in”– Scoping memo issued September 25Scoping memo issued September 25– November 20: IOUs file plans for 2007-November 20: IOUs file plans for 2007-

2016 and we’ll know what is under contract 2016 and we’ll know what is under contract for the next 10 years, including RPSfor the next 10 years, including RPS

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What’s up today? What’s up today? (continued)(continued) Ongoing Resource Adequacy ProceedingOngoing Resource Adequacy Proceeding

– August ruling kicked off identification of August ruling kicked off identification of major issues for Phase 2 (20+!)major issues for Phase 2 (20+!)

– Scoping memo expected soon, no schedule Scoping memo expected soon, no schedule yetyet

– Scope will include: (1) Refinement of Scope will include: (1) Refinement of existing RA program, plus (2) consideration existing RA program, plus (2) consideration of capacity markets and multi-year of capacity markets and multi-year requirements to further enhance policy requirements to further enhance policy framework supporting contractingframework supporting contracting

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Why are you here?Why are you here?

n California is a Huge Market for California is a Huge Market for Energy Energy

n $11 billion and growing, for $11 billion and growing, for the investor-owned utilities the investor-owned utilities alonealone

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CA Procurement Costs 2003-CA Procurement Costs 2003-0505 ($Millions)($Millions)

PG&EPG&E SCESCE SDG&ESDG&E TotalTotal

2003 DWR2003 DWR 2,2412,241 2,0152,015 563563 4,8194,819

2003 ERRA2003 ERRA 1,5151,515 2,7402,740 531531 4,7874,787

2003 Total2003 Total 3,7563,756 4,7554,755 1,0941,094 9,6059,605

2004 DWR2004 DWR 2,1102,110 2,3022,302 757757 5,1695,169

2004 ERRA2004 ERRA 2,2192,219 2,9632,963 329329 5,5115,511

2004 Total2004 Total 4,3284,328 5,2655,265 1,0861,086 10,68010,680

2005 DWR2005 DWR 1,9991,999 2,1682,168 720720 4,8874,887

2005 ERRA2005 ERRA 2,2042,204 3,4053,405 370370 5,9795,979

2005 Total2005 Total 4,2034,203 5,5735,573 1,0901,090 $10,866$10,866

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California Policy California Policy FoundationFoundation Energy Action Plans I and II (2003, 2005)Energy Action Plans I and II (2003, 2005) CEC’s biennial CEC’s biennial Integrated Energy Integrated Energy

PolicyPolicy ReportReport is the statewide energy is the statewide energy planplan

Loading Order:Loading Order:– Energy efficiencyEnergy efficiency– Demand responseDemand response– RenewablesRenewables– Electricity adequacy and infrastructureElectricity adequacy and infrastructure

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Resource Adequacy Implements Resource Adequacy Implements the State Integrated Energy Policy the State Integrated Energy Policy ReportReport November 2005 IEPR identified 9000 MW November 2005 IEPR identified 9000 MW

of contractual procurement need in 2009of contractual procurement need in 2009 Need to be met through contracts with Need to be met through contracts with

new and existing capacity resources, new and existing capacity resources, plus energy efficiency, demand plus energy efficiency, demand response, distributed generation and response, distributed generation and RPS resources above targeted levelsRPS resources above targeted levels

CPUC has approved IOU program plans, CPUC has approved IOU program plans, contracts and/or solicitation processes to contracts and/or solicitation processes to meet the needmeet the need

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New CA Capacity Additions New CA Capacity Additions 8000+ MW Approved or in Process8000+ MW Approved or in Process PG&EPG&E

– Signed Contracts for Signed Contracts for 2,2502,250 MW, online 2009-2010 MW, online 2009-2010– Contra Costa 8 - Contra Costa 8 - 500500 MW, online 2009 MW, online 2009

SCE SCE – Launched an RFO in July 2006 for Launched an RFO in July 2006 for 15001500 MW of new capacity, online 2007- MW of new capacity, online 2007-

20092009– Announced intention to seek Announced intention to seek 500 MW500 MW more through current RFO more through current RFO – Peakers for 2007 -- Peakers for 2007 -- 245245 MW, online 2007 MW, online 2007

SDG&ESDG&E– Announced new RFO for ~Announced new RFO for ~250250 MW in 2008 MW in 2008– Announced another RFO will be released ~December 2006 for later online Announced another RFO will be released ~December 2006 for later online

datesdates– Otay Mesa approved for completion - Otay Mesa approved for completion - 583583 MW, online 2009 MW, online 2009

Renewables (all 3 IOUs)Renewables (all 3 IOUs) – CPUC has approved RPS contracts CPUC has approved RPS contracts 1,400 – 2,7001,400 – 2,700 MW from pre-2005 RFOs MW from pre-2005 RFOs– More MW coming as a result of ongoing 2005 and 2006 RPS solicitationsMore MW coming as a result of ongoing 2005 and 2006 RPS solicitations

Not Yet Announced RFOs for New GenerationNot Yet Announced RFOs for New Generation– Each IOU’s LTPP must identify timeframe and MW of future New Gen RFOsEach IOU’s LTPP must identify timeframe and MW of future New Gen RFOs– CPUC will make need determination, likely targeting 2010-2012 timeframesCPUC will make need determination, likely targeting 2010-2012 timeframes

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Contracts in PG&E Contracts in PG&E ApplicationApplication

Tierra Energy Hayward

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CA’s Aggressive Energy CA’s Aggressive Energy Savings GoalsSavings Goals

$2 billion$2 billion funding for 2006-2008; 4000 MW funding for 2006-2008; 4000 MW goalgoal

Electricity and Natural Gas Savings Goals (Established 9/04)

2004 2005 2006* 2007 2008 2009 2010 2011 2012 2013

Annual Electricity Savings (GWh/year)

1,838 1,838 1,885 2,275 2,505 2,538 2,465 2,513 2,547 2,631

Cumulative Savings (GWh)

1,838 3,677 5,709 7,984 10,489 13,027 15,492 18,005 20,552 23,183

Peak Savings (MW)

379 757 1,199 1,677 2,205 2,740 3,259 3,789 4,328 4,885

Annual Natural Gas Savings (MMTh/year)

21 29 30 37 44 52 54 57 61 67

Cumulative Natural Gas Savings (MMTh)

21 51 81 119 163 215 269 325 386 453

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Long Term Procurement Long Term Procurement Plans and Resource Plans and Resource AdequacyAdequacy CPUC gets resource adequacy in CPUC gets resource adequacy in

the short term through the 1 year the short term through the 1 year RA requirement/RA programRA requirement/RA program

Longer term, RA comes through Longer term, RA comes through an intricate web of long-term an intricate web of long-term procurement policiesprocurement policies

The two proceedings work in The two proceedings work in tandem to achieve the big picture tandem to achieve the big picture goal of RAgoal of RA

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Long Term Procurement Long Term Procurement Plan GoalsPlan Goals

Approve one set of plans, merging short Approve one set of plans, merging short and long termand long term

Integrate loading order goalsIntegrate loading order goals Review practices and proceduresReview practices and procedures Review 10-year resource plansReview 10-year resource plans Review select procurement policy issuesReview select procurement policy issues Identify need for new resources (2007-Identify need for new resources (2007-

16)16)

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LTPP NeedLTPP Need DeterminationDetermination

We’re asking for specifics:We’re asking for specifics:– Range of need, on a system and a Range of need, on a system and a

bundled customer basisbundled customer basis– TimeframeTimeframe– LocationLocation– Type of resourceType of resource– Timeframe of RFOTimeframe of RFO

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Next Steps in LTPPNext Steps in LTPP

November 20: LTPP Filings dueNovember 20: LTPP Filings due By 12/8: IOU workshops on LTPP By 12/8: IOU workshops on LTPP

filingsfilings 1/17/07: Intervenor Testimony 1/17/07: Intervenor Testimony

DueDue

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Some Good NewsSome Good News

CA ISO’s Reliability Must-Run (RMR) CA ISO’s Reliability Must-Run (RMR) designations for 2007 are way downdesignations for 2007 are way down– 4000 MW vs. 10,000 anticipated4000 MW vs. 10,000 anticipated– Reduction based on 2007 Local RA capacity Reduction based on 2007 Local RA capacity

submittals adopted by CPUC; 3 IOUs and 12 submittals adopted by CPUC; 3 IOUs and 12 ESPs demonstrated local procurement in ESPs demonstrated local procurement in CAISO areas (LA Basin, San Diego, Bay Area, CAISO areas (LA Basin, San Diego, Bay Area, Aggregation of 6 Areas in PG&E service Aggregation of 6 Areas in PG&E service territory)territory)

– Major step forward for LSE-based Major step forward for LSE-based procurementprocurement

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Other Good News: RA Other Good News: RA filings for 2006filings for 2006

LSEs reported more resources LSEs reported more resources than requiredthan required

July resources 10% more than July resources 10% more than RARRAR

Liquidated Damage contracts are Liquidated Damage contracts are 11-13% of provided resources11-13% of provided resources

Imports are about 6% Imports are about 6%

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Where are we now?Where are we now?

Basic building blocks of Resource Basic building blocks of Resource Adequacy are in place; will be useful Adequacy are in place; will be useful going forward if capacity markets are going forward if capacity markets are adoptedadopted– Load forecast, thanks to CECLoad forecast, thanks to CEC– Reserve marginReserve margin– Contract processContract process– Local resource adequacyLocal resource adequacy– Rules for qualifying capacity, i.e., we have Rules for qualifying capacity, i.e., we have

defined the RA productdefined the RA product

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Challenges? Challenges? Absolutely.Absolutely.

We need to hold to the loading order We need to hold to the loading order and focus on long term objectivesand focus on long term objectives

We need ways to encourage new We need ways to encourage new investment and deal with market investment and deal with market power (especially in the forward power (especially in the forward capacity market)capacity market)

We need to get transmission builtWe need to get transmission built We need to address ongoing tensions: We need to address ongoing tensions:

transparency, financeability, tracking transparency, financeability, tracking progressprogress