Long Term Procurement Planning Overview

R.12-03-014Commissioner Florio

ALJ Gamson

DRA EMC PresentationAugust 1, 2012

2

What is LTPP?

Consideration of all electric resource procurement policies and programs for three large investor owned utilities (IOUs).

Generally occurs on a two-year cycle.

IOUs must submit:

Procurement plans that project system resource needs;

Action plan for meeting bundled customer needs;

Generally covers a ten-year horizon.

3

Brief History

Assembly Bill (AB) 57 established Public Utilities Code 454.5 (effective 2004).

Allowed IOUs to resume procurement of electricity for their customers, after the electricity crisis.

Pursuant to AB 57: CPUC established up-front standards for IOUs’ procurement activities and cost

recovery by reviewing/approving procurement plans.

Obviated need for after-the-fact reasonableness reviews for utility procurement transactions in compliance with up-front approved standards.

Previous LTPPs: 2004 LTPP (D.04-12-048).

2006 LTPP (D.07-12-052).

2008 LTPP (R.08-02-007, closed through Rulemaking to open 2010 LTPP)

2010 LTPP (Tracks 1 and 2 D.12-04-046, Track 2 D.12-01-033).

4

More History – 2010 LTPP

Decision (D.) 12-04-046 (Tracks 1 and 3) adopted settlement agreement for the 2010 LTPP as well as procurement rules.

The settlement agreement determined: Parties agreed that no decision should be made on system need.

Renewable integration studies were inconclusive, and further work was necessary.

Need to consider a forthcoming CAISO study on the impact of once-through cooling power (OTC) power plant retirement due to state water resource control board regulations.

Need for determination of OTC retirement impact on local transmission-constrained areas of LA Basin, Big Creek/Ventura, and San Diego.

Recommendation that the Commission issue a decision by the end of 2012 on the need for resources to address renewable integration and OTC retirement.

5

Current LTPP

The 2012 LTPP will consider unresolved issues from the 2010 LTPP:

System need;

Long-term local reliability needs;

Renewable integration.

The 2012 LTPP will be divided into three major tracks:

1.Local Reliability.

2.System Needs.

3.Procurement Rules and Bundled Procurement.

6

Track 1 – Local Reliability

This is the first time the CPUC will determine whether there is a long-term local capacity requirement (LCR) need.

LCR is usually only considered on a year-ahead basis in the Resource Adequacy proceeding.

Consideration only for two Edison LCR areas: Big Creek/Ventura;

LA Basin.

San Diego LCR area is being considered in a separate proceeding (A.11-05-023).

No LCR for PG&E at this time.

CAISO completed a study of LCR needs through 2021, focused on retirement of once-through cooling (OTC) plants.

7

Track 1 – Schedule

May 23, 2012: CAISO submitted LCR analysis and recommendations as testimony.

June 25, 2012: Opening testimony by all parties in response to CAISO analysis.

July 23, 2012: Reply testimony by all parties, in response to opening testimony.

August 7-10 and 13-17, 1012: Evidentiary Hearings.

November/December 2012: Proposed Decision.

8

Track 1 – DRA Recommendations

CAISO analysis is extremely conservative.

There is a risk to over-procurement as well as to under-procurement.

Determination of need should include demand-side input assumption and transmission reinforcement assumption, which lowers CAISO’s estimated LCR need.

Reject CAISO’s determination of need for LCR areas, as CAISO has not accounted for preferred resources in accordance with California’s loading order.

Coordinate between LTPP and various other proceedings (including Resource Adequacy and SDG&E’s Power Purchase Tolling Agreement proceedings).

9

Track 2 – System Need

The Commission determined that in order to maintain and ensure reliability, must consider: Potential retirement of existing plants;

Likelihood of relicensing of nuclear power plants;

Changes in mandates for renewable power;

Development of energy storage facilities;

Increased energy efficiency and demand response resources;

Development of distributed generation resources.

Determine standard planning assumptions.

Develop specific supply and demand scenarios for the next 20 years.

Resume renewable integration modeling and make a determination on need.

Determine resource mix to fill renewable net short.

10

Track 2 – Schedule

May 10, 2012: Energy Division (ED) proposal for standard planning assumptions.

May 31, 2012: Comments on ED proposal.

June 11, 2012: Reply Comments on ED proposal.

June 21, 2012: Assigned Commissioner Ruling (ACR) adopting standard planning assumptions.

11

Track 2 – Schedule (continued)

August 1, 2012: ED draft scenarios.

September 1, 2012: Comments on ED draft scenarios.

September 14, 2012: ACR adopting scenarios.

November 2012: Proposed Decision.

TBD: Schedule for renewable integration.

12

Track 2 – DRA Recommendations

Planning horizon should be limited to ten years.

Standard planning assumptions should be adjusted to: Include uncommitted energy efficiency;

Include incremental nondispatchable and peak time rebate demand response;

Incremental photolvoltaics should be increased to account for expanded net metering; and

Include known and likely OTC replacement.

13

Track 2 – Adopted Standard Planning Assumptions

ED made few changes to standard planning assumptions:

Clarified some language;

Incremental energy efficiency assumptions were modified to reflect CPUC decisions and California Energy Commission forecasts (adjusted downward); and

Increased photovoltaic assumptions to reflect expanded net metering.

14

Track 2 – Renewable Integration Modeling

As we move toward 33% renewables in 2020, there will be a need for flexible resources to address variability issues.

A renewable integration model (RIM) was developed for 2010 LTPP, but results were inconclusive. Most results showed no need.

CAISO runs the renewable RIM.

DRA consultant plans to validate the RIM and run DRA-scenarios.

Considerations: Assumptions and inputs greatly impact need for renewable integration.

There is a need for stochastic modeling.

May need to adjust the planning reserve margin.

Need to simulate variability at small intervals, which may lower the need – currently model at one hour increments.

Considering possible market that would use available flexible resources within Western Coordinating Council area, which would lower the need for new generation in California.

15

Track 3 – Procurement Rules and Bundled Procurement Plans

Two sections to Track 3.1. Consider any changes to procurement rules, and whether any new

rules are necessary.

2. Require IOUs to file bundled procurement plans.

The IOUs bundled plans should be easily compared to each other.

More detail and an updated schedule is forthcoming.

16

Track 3 – Schedule

October 15, 2012: Parties file proposed procurement rules.

November 5, 2012: Reply comments to proposed rules.

January 2013: Proposed decision on rules.

March 2013: IOUs file bundled procurement plans.

LTPP Team

Project Manager: Karin Hieta

Attorneys: Diana Lee

Iryna Kwasny

Analysts: (Nika Rogers)

Peter Spencer

Jordan Parrillo

David Siao

Yakov Lasko

Radu Ciupega

Alan Wecker