California utilities support centralized renewables procurement proposal, but urge caution

Dive Brief:

  • California’s investor-owned utilities are “generally supportive” of a proposed statewide procurement process for renewable resources, they said at an all party meeting last week with state regulators to discuss the proposal. But they cautioned the Public Utilities Commission against moving too quickly on a centralized renewables procurement system.
  • In March, a California Administrative Law Judge (ALJ) issued the proposal after concluding plans filed by utilities and community choice aggregators (CCA) would not reliably meet the state’s climate goals.
  • Pacific Gas & Electric (PG&E) said it supports development of a “designated special purpose entity” that would act as a central buyer with decisions subject to commission approval. Other utilities also indicated support for the idea, while pushing for clarification on a few key provisions.

Dive Insight:

California has aggressive environmental goals, but more renewable resource procurement by community aggregation groups has complicated the question of reliability for IOUs charged with delivering the energy.

The proposed decision, issued March 18, noted that while IOU customers have “historically shouldered the burden of reliability resources, particularly natural gas, the load is departing rapidly for alternative providers, particularly CCAs, and the responsibility has not appeared to shift proportionally.”

The state’s largest utilities concede that in the next decade, CCAs are likely to take on the most procurement, which means more coordination will be necessary. The proposed decision would open a procurement track and consider a central buyer for renewable resources.

“The approach the commission ends up utilizing for a central buyer in the [resource adequacy] proceeding should inform the IRP procurement track and future [load serving entity – LSE] planning processes,” PG&E told the commission in its comments. Additional coordination with the California ISO’s transmission planning process is needed, “including to address local reliability needs and transmission-based alternatives,” the utility added.

Overall, PG&E is “generally supportive of the proposed decision … which sets a strong foundation for the next IRP cycle,” said the utility’s Senior Manager of Portfolio Management Kurt Hansen at last week’s meeting.

PG&E also supports the development of a “procurement track,” but a key point is how quickly the state could move ahead on it.

According to the utility, once the commission determines the needs for reliability and renewable integration in the 2019-2020 IRP cycle, regulators “can then determine what proceeding and what procurement mechanism most efficiently meets these resources needs.”

San Diego Gas & Electric “supports the proposed decision overall,” Hillary Hebert, resource planning manager for the utility said at the meeting, adding “now is the right time to solidify CPUC’s authority over the planning process by instituting enforcement provisions.”

“SDG&E recognizes the procurement landscape is changing,” said Hebert. But the first round of a procurement track “should not result in a mandated procurement.”

SDG&E said the idea of a central buyer should be considered, but asked that the proposed decision specify the timing. The utility said in its comments that it wants to clarify “that while the procurement track will be established as the result of the final decision adopted by the Commission in this proceeding, there will not be procurement undertaken in response to the 2017-2018 IRP cycle as this round is a proof-of-concept exercise.”

Southern California Edison (SCE) told the commission that it supports a procurement track, which will be “an important venue for beginning to tackle some of the key questions faced by the state” when it comes to meeting environmental goals while maintaining reliability and affordability.

“With increasing LSE fragmentation and disaggregation, it is important for the commission to consider whether a central buyer is needed and if so, who would serve that role and what the scope of the central buyer’s role would be,” SCE wrote.

The utility suggested some clarification on the decision, to specify the procurement track will consider “both resources needed to maintain reliability and the procurement of policy-driven resources.”

Despite support from the state’s largest IOUs, not everyone is on board and there are issues beyond procurement.

Shell Energy North America is a non-utility entity offering direct access to commercial customers as an electric service provider (ESP). In its comments, the company called for the commission to reject the ALJ’s recommendation to require ESPs to provide resource cost information in their IRP filings.

Shell attorney John Leslie told the all-party meeting last week the company is “very disappointed in the proposed decision. It is way too prescriptive.”

The Utility Reform Network supports the proposed decision, “but it asks more questions than it answers,” said Matthew Freedman, an attorney for the group. TURN filed comments that call for development of a “backstop mechanism” for procurement as a first priority.

“The identification of specific resource needs and the authorization of procurement should occur afterwards,” the group said. “Unless a mechanism has been approved for this purpose, LSEs considering incremental procurement would lack basic information about the backstop structure that will be used to address any deficiencies.”

TURN also said that if the commission determines an LSE has “uniquely contributed” to a resource shortfall, it “should be held responsible for the costs of curing the deficiency.”

Otherwise, the group said, the IRP process “could lead to a wave of LSEs that overpromise and underperform without consequence.”

“This process needs teeth if it’s going to succeed,” said Freedman.