Proposed Decision Addressing Modifications to the Central Procurement Entity Structure

Requirements for Self-Shown Resources

• Under the hybrid procurement framework adopted in D.20-06-002, if an LSE procures a resource that meets a local RA need, the LSE may elect to: (a) show the resource to reduce the CPE’s overall local procurement obligation and retain the resource to meet its own system and flexible resource adequacy needs, (b) bid the resource into the CPE’s solicitation, or (c) elect not to show or bid the resource to the CPE and only use the resource to meet its own system and flexible resource adequacy needs.

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Non-Performance of Self-Shown Resources.

• If the California Independent System Operator (“CAISO”) makes a local Central Procurement Mechanism (“CPM”) designation, the CPE shall be charged any associated CAISO backstop procurement costs, including for the nonperformance of self-shown resources.
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• “Non-Performance” is defined as failure to provide: (a) the Commission with an Resource Adequacy (“RA”) plan with the self-shown resource, and (b) the CAISO with a matching supply plan for the self-shown resource. An LSE with a non-performing self-shown resource will be notified of the resulting CAISO backstop costs within 45 days after the assignment of the CPM backstop costs to the CPE. Cost allocation shall not exceed the amount that was provided by the self-shown resource.
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• If the CPM designation was due to the non-performance of self-shown local resources that failed to perform due to (1) a planned outage, or (2) any reason if the load-serving entity (“LSE”) is outside of the CPE’s Transmission Access Charge (“TAC”) area, then the CPE shall distribute the backstop costs evenly to all LSEs in the CPE’s TAC area through the Cost Allocation Mechanism (“CAM”).

• If the CPM designation was due to (1) the non-performance of a self-shown resources for any reason, other than a planned outage, and (2) the resources were self-shown by an LSE within a CPE’s TAC area, the CPE shall be charged any associated CAISO backstop procurement costs. The CPE will then identify the non-performing self-shown resource, in coordination with Energy Division, and assign the resulting CAISO backstop costs to the LSE that attested to self-show the resource.
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CPE Solicitation Selection Criteria

To guide the selection of local resources procured by the CPE, the CPE shall use the all-source selection criteria, including the loading order, and least cost best fit methodology adopted in D. 04-07-029. The least cost best fit methodology employed shall also include the following selection criteria:

• Future needs in local and sub-local areas;
• Resource costs;
• Operational characteristics of the resources (facility type);
• Location of the facility (with consideration for environmental justice);
• Costs of potential alternatives;
• Greenhouse Gas (“GHG”) adders;
• Energy-use limitations; and
• Procurement of preferred resources and energy storage (to be prioritized over fossil generation).

Changes to solicitation criteria.

• Removes the Local Effectiveness Factors (“LEFs”)
• Grants the CPE discretion regarding the operational characteristics to be considered
• No longer requires submission of heat rate information
• Require the CPE to consider any contract term length greater than or equal to one Month
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CPE Procurement Outside of Annual RA Solicitation

• CPE may procure outside of annual RA solicitation, only if the CPE does not procure sufficient resources in the annual all source solicitation. Additionally, the CPE may use broker markets or bilateral transactions to fill short positions for any deficiencies in the three-year forward period.
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• The CPE is required to use the lease cost, best fit methodology, if applicable for the procurement undertaken, and consider the selection criteria above.
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• For contracts that exceed a 5-year term, the CPE must submit a Tier 3 Advice Letter for approval. Contracts less than 5 years are deemed approved if (1) the resource meets the local capacity needs identified by the CAISO’s Local Capacity Reliability Technical Study (“LCRTS”), (2) the CAM Performance Review Group (“PRG”) was properly consulted, and (3) procurement was deemed by the Independent Evaluator (“IE”) to have followed all relevant Commission guidance.
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CPE Timeline

CPE allocations will be sent to LSEs at the end of August to assist LSEs in managing their system and flexible positions. The following is the new CPE procurement timeline:

• April-May: The CAISO files draft and final LCR one- and five-year ahead studies. LCR studies will include any CAISO-approved transmission upgrades from the TPP LCR study. Parties file comments on draft and final LCR studies.
• No Later Than Mid-May: LSEs in SCE and PG&E TAC areas make self-shown commitment of local resources to the CPE for the applicable RA years.
• No Later than June: The Commission adopts multi-year local RA requirements for the applicable compliance years as part of its June decision.
• No Later Than Early July: CPE receives total jurisdictional share of multi-year local RA requirements for the applicable compliance years.
• July: For the SCE and PG&E TAC areas, LSEs receive initial RA allocations, including CAM credits from CPE procured system and flexible capacity from the prior year and any bilateral contracts. For the SDG&E TAC area, LSEs receive initial RA allocations (system, flexible, local requirements) and CAM credits.
• Mid-August: CPE makes local RA showing to the Commission.
• End of August: LSEs in the SCE and PG&E TAC areas receive updated CAM credits for multi-year system/flexible capacity that was procured by the CPE as a result of the CPE’s multi-year local RA showing to the Commission in Mid-August.
• September: For PG&E and SCE’s TAC areas, LSEs are allocated final year-ahead system and flexible RA allocations, including CAM credits from CPE procured system and flexible RA capacity based on revised year-ahead load forecast load ratios. For the SDG&E TAC area, LSEs receive final RA allocations (system, flexible, local requirements) and CAM credits.
• End of October: LSEs in SDG&E TACs make system, flexible, and three-year local RA showing. LSEs in PG&E and SCE TACs make year-ahead system and flexible showings and provide applicable justification statements for local resources not self-shown or bid to the CPE. CPEs and LSEs that committed to self-show make year-ahead showing to CAISO.

Cost Recovery

• CPE procurement costs will be forecast and implemented in rates through the annual Energy Resource Recovery Account (“ERRA”) forecast proceeding.
• Only CPE transactions that include compensation for sale of system RA attributes to the CPE will be required for inclusion in the supporting workpapers or other testimony.

Transactions with IOUs:

• An IOU LSE transaction with the CPE should be presented as it would be if the transaction was with an LSE (e.g., RA sale from PCIA-eligible resource to the CPE would continue to be an RA sale in the PCIA revenue calculation).
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• Existing principles on how attributes are sold between entities and presented for cost recovery should be maintained.
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• Only attributes identified in a CPE agreement as sold to the CPE should be recovered as volumes and costs with CAM.
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• Self-shown IOU resources with no transaction should not be recorded as an RA purchase by the CPE within CAM or the underlying cost recovery mechanism. Self-shown IOU resources that receive a LCR RCM credit will be modeled as revenue only transactions, but because they do not include system RA being sold to the CPE, no system RA volumes would be presented as being sold from one cost recovery mechanism to CAM.
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• Unsold PCIA-eligible resource with system RA within a local area will continue to be retained based on the local RA price benchmark. The underlying position for PCIA-eligible resources self-shown or unsold will continue to be retained based on the local RA benchmark in the ERRA forecast proceeding.

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