Long-Term Procurement Plan Background

Background

This is an “umbrella” proceeding to consider, in an integrated fashion, all of the Commission’s electric procurement policies and programs. In 2002, Public Utilities Code 454.5 codified AB 57 and changed the paradigm from after-the-fact review to upfront standards which, if met, ensure approval of Investor-owned utility (IOU) procurement plans. To comply with these standards, IOUs must show that their proposed procurement will provide safe, reliable capacity which complies with State policies and is at the least cost to ratepayers.

Evaluating Need

To evaluate need, the Proceeding takes a 10-year-ahead look at system, local, and flexible needs. The assumptions used in this evaluation are developed in conjunction with the Energy Commission (which provides the demand forecast) and the California Independent System Operator (which uses the same assumptions for transmission planning). In a simplistic analysis, demand is compared with existing generation and new resources, less retirements in the form of a load and resources table. A more complex analysis uses the assumptions to model overall electric system reliability needs, reliability needs specific to areas with transmission limitations (local areas), and system flexibility needs (such as resources needed to integrate renewables). The assumptions are revised every two years to incorporate changes in the resource mix and revisions to State policies (e.g. higher RPS targets). Current assumptions are hosted on the CPUC website. In addition to forecasting expected resource needs the Proceeding develops information on alternative paths to meeting the state’s policy goals, such as increasing distributed generation, or energy efficiency expenditures. Each step of the process asks for and incorporates stakeholder feedback.

Authorizing Procurement

When needs are identified, the CPUC authorizes procurement in the form of a Commission Decision. The most recent example of this was D.14-03-004 which authorized procurement in SCE and SDG&E territory to maintain reliability in light of the unexpected closure of the San Onofre Nuclear Generating Station (SONGS). Authorizations in recent years have been increasingly specific – the SONGS Decision above, for example, ordered IOUs to procure preferred resources and energy storage at specific substations which provide the most benefit to the grid.

Procurement Rules

LTPP Decisions adopt rules which govern the procurement process. These rules are updated biennially and support competitive procurement through various mechanisms: requiring auctions for certain purchases, Procurement Review Groups which allow non-market participants to provide feedback on procurement plans in a confidential environment; Independent Evaluators which monitor the cost-effectiveness and overall appropriateness of transactions; and quarterly audits by CPUC.

Procurement Plans

Procurement plans detail what is going to be procured and how it will be done. These plans must adhere to State Policies, including the Loading Order, which mandates that energy efficiency and demand response be pursued first, followed by renewables and lastly clean-fossil generation. If the procurement plans do not comply with State policies and adequately balance safety, reliability, cost, and environmental goals, utilities are ordered to modify them.

Applications

Utilities submit proposed long term procurement via applications. These seek approval of contracts or authority to build utility-owned resources. Stakeholders have an opportunity to file testimony on the utilities applications and request hearings on disputed issues. To learn more about the current proceeding (R.13-12-010), we recommend you begin with the Order Instituting Rulemaking and Scoping Memo, and Ruling on Planning Assumptions. This later document enshrines the assumptions upon which our examination of long-term procurement needs is based. To join the service list for this proceeding (R.13-12-010), click here for the proper form. If you have any questions regarding the LTPP please contact Neal Reardon of the CPUC's Energy Division. Documents relating to the current proceeding and past LTPP proceedings can be accessed by clicking the following link: History of Long Term Procurement Plan Proceedings.