Last week, the California Public Utilities Commission took its latest crack at fixing the state’s resource adequacy program, which sets the rules for how the state procures enough generation capacity to assure its grid stays running even in times of peak energy demand.
The RA program has served that purpose well in the decade-plus since it was created after the California energy crisis. But the rise of renewable energy, the looming closure of many natural gas-fired power plants, and the increasing share of customers being served by community choice aggregators, are creating new challenges that require some significant changes, according to the decision passed unanimously by the CPUC’s five commissioners.
We’ve been covering the transformation of California’s energy system over the past decade, including the rise of solar power as a significant, and sometimes excessive, contributor to the state’s generation profile, and the concomitant decline for the natural gas-fired power plants that have traditionally served as the resource of last resort for the state’s capacity needs.
We’ve also been covering the rise of CCAs, from a handful of scattered counties and cities procuring their own renewable energy portfolios, to a scale and scope that threatens to remove millions of customers from the rolls of the state’s investor-owned utilities — most notably Pacific Gas & Electric, which is also undergoing a transformational bankruptcy proceeding.
For the RA program, these changes have led to an increasingly unstable situation, as Commissioner Liane Randolph wrote in a blog post: “The law requires us to avoid costly backstop procurement, but that has become more frequent in recent years.” According to CPUC president Michael Picker, last year saw 11 waivers issued to CCAs or small electricity providers that could not fully meet their RA requirements.
State grid operator CAISO must procure “backstop” resources to fill those gaps, under the requirements set by the Federal Energy Regulatory Commission, and with fewer and fewer gas-fired plants in the state remaining to provide that reliability, “plant owners are increasingly able to exercise market power,” Randolph wrote.
Over the past few years, various CPUC commissioners, including President Picker, have raised the concern that increasing migration of utility customers to CCAs is undermining the RA program. The program now relies on a complex set of rules to govern how and when CCAs take over RA responsibilities from the utilities they’re being carved out of.
We’ve seen some far more contentious policy battles over the role of CCAs in the state’s energy landscape. In October, the CPUC unanimously voted to boost the Power Charge Indifference Adjustment fees that CCAs, as well as competitive energy providers under the state’s Direct Access program, pay utilities when they take over their customers — a move decried by CCAs as potentially adding hundreds of millions of dollars to their costs.
But in the matter of how to fix RA, CCAs are more aligned than at odds with the state’s utilities. In fact, the various parties to the RA proceeding have shown a remarkable level of agreement on what’s needed to improve the state’s capacity mechanism.