Electricity Markets

Calif. stakeholders propose central-buyer resource adequacy framework

California stakeholders are proposing a “central buyer” framework for making sure the state has enough power supply to meet its needs.

Under the proposal, a Resource Adequacy-Central Procurement Entity would procure local, system and flexible resource adequacy capacity to fill in any gaps in a three-year forward procurement obligation that is not met by individual load-serving entities, according to an Aug. 30 filing with the California Public Utilities Commission.

“If adopted, the settlement agreement will advance the Commission’s stated preference for a central buyer framework, reduce the need for California Independent System Operator… backstop procurement, preserve LSE self-procurement autonomy, maintain and enhance a liquid and robust bilateral capacity market, and preserve a meaningful role for the state in ensuring reliability,” the stakeholders said in the proposal.

The proposal grew out of a drive by the PUC to revamp the state's resource adequacy program.

Currently, LSEs are required to make monthly and annual filings showing they have enough power supplies to meet their system, local and flexible resource adequacy requirements. The CAISO has several programs to provide backstop resource adequacy. 

In June 2018, the PUC said there should be a central buyer structure for multi-year resource adequacy for local areas unable to import enough electricity and directed parties to submit proposals on such structures. The commission then decided to delay implementation of a central buyer structure and ordered a series of workshops to find a “workable implementation solution” for the central procurement.

After negotiations, the stakeholders reached their agreement that addresses all issues raised by the PUC, except for exactly who would be the central buyer, while stating that it will be a competitively neutral, independent, and creditworthy entity

Under the proposed framework, LSEs would be able to procure all or part of their resource adequacy requirements. The central buyer would then procure any remaining needs on a least cost basis, according to the proposal. LSEs would pay for their share of the central buyer’s procurements.

The independent, revenue-neutral central buyer would handle any needed backstop procurement, replacing the CAISO in that role.

The proposal “retains California’s jurisdiction over procurement of preferred resources and facilitates LSEs’ ability to ‘invest … in procurement of local preferred resources’ to meet the tailored needs of customers in a local area, and/or to meet customers’ low carbon goals,” the stakeholders said in the proposal.

By limiting the central buyer’s procurements to three years, the agreement encourages LSEs to enter into contracts with generation resources for terms longer than three years, encouraging investment in new resources, the stakeholders said.

Under the agreement, the California Energy Commission would continue to develop load forecasts to be used by the PUC to establish LSE resource adequacy requirements.

The PUC and CAISO would continue working together to establish eligibility criteria for resource adequacy capacity.

Also, the PUC, working with the CEC and CAISO, would develop in its integrated resource planning rulemaking a process to make sure there are enough resources to meet the state’s needs.

Parties to the agreement are: the California Community Choice Association, Calpine Corp., the Independent Energy Producers Association, Middle River Power, NRG Energy, San Diego Gas & Electric Co., Shell Energy North America (US) and the Western Power Trading Forum.

Not all stakeholders signed onto the agreement.

The PUC is expected to vote on the proposal by the end of the year. If approved, the central buyer would be responsible in 2021 for covering resource adequacy for the following year.