California Public Utilities Commission directs IOUs to procure additional capacity to ensure summer reliability

Houston — The California Public Utilities Commission is directing the state's three large investor-owned utilities to seek contracts for additional power generation capacity for summer 2021 reliability after extreme heat led to rotating outages in August 2020.

Pacific Gas and Electric Company, Southern California Edison Company, and San Diego Gas & Electric Company are ordered to seek contracts for capacity that conform with parameters outlined by the CPUC's decision approved during the Feb. 11 meeting. PG&E, SCE and SDG&E are to submit contracts for consideration to the CPUC by Feb. 15.

"We must move quickly," CPUC president Marybel Batjer said. "There is not a day to waste. Summer is right around the corner."

The rulemaking establishes policies, processes and rules to ensure reliable electric service in California in the event of an extreme weather event in 2021 by expediting procurement that could be online by summer 2021.

"This is one piece of the puzzle," Commissioner Clifford Rechtschaffen said. "We are vigorously pursuing all the other actions from the Root Cause Analysis."

Addressing supply-side resources is one strategy, and the CPUC took action on it first since procurement can require long lead times, Batjer said. The CPUC will take action in March on demand-side resources, which Batjer said is her priority.

"We can't solve this problem with only demand-side resources or only supply-side resources. We need both," Batjer said. "Any additional capacity the utilities can procure will be minimal."

Commissioners Martha Guzman Aceves and Genevieve Shiroma also said there needs to be greater enhanced penalties when generation commitments are made but don't come through, something several people mentioned during public comments.

Numerous people spoke out against the utilities procuring additional resources, calling it a "blank check for utilities to purchase more fossil fuels" with many citing a Clean Coalition webinar where speakers pointed to a computer glitch and exports as what fueled the summer outages, not a shortage of available power.

Guzman Aceves said she agreed with comments that other elements were found to have contributed to summer 2020 outages and the CPUC is committed to working to resolve these problems as well.

Procurement direction details

Resources must be deliverable during both peak and net peak demand periods. Potential resources may include utility-owned generation.

Resource types that may be considered for procurement include incremental capacity from existing power plants through efficiency upgrades, revised power purchase agreements; at-risk retirement generation; incremental energy storage capacity; and firm forward imported energy, according to the CPUC.

The preference is for energy storage, efficiency upgrades and short-term contracts, Batjer said.

The CPUC encourages the California Independent System Operator to ensure these resources do not support exports even if they are not designated as resource adequacy resources, according to the CPUC filing.

August 2020 outages

A historic heat storm led the ISO to declare Stage 3 emergencies on Aug. 14 and 15, triggering rotating power outages for the first time since 2001. SP15 on-peak day-ahead locational marginal prices set a record high of $697.91/MWh Aug. 18, when ISO peakload reached almost 47 GW, a nearly three-year high, according to ISO data.

California Governor Gavin Newsom proclaimed a state of emergency and sent a letter Aug. 17 to the ISO, the California Energy Commission and the CPUC seeking details on the outages. In October, the three entities released a joint preliminary root cause analysis and in January 2021 a final root cause analysis was released.

"The summer 2020 rolling outages spotlighted reliability deficiencies in California's electricity system," according to CPUC filing directing IOUs to seek additional capacity for summer 2021. "The Preliminary Root Cause Analysis and the party comments to this proceeding have pointed to a number of causes for the outages, as well as an array of solutions. There is little disagreement that a problem exists and that there is a risk that outages could occur again in the summer of 2021."

Integrated Resource Planning

Separately, the CPUC transferred electric resource portfolios to Cal-ISO for analysis in the 2021-22 transmission planning process, including the base-case scenario that meets a 46 million metric ton greenhouse gas emission target in 2021 and sensitivity portfolios that meet a 38 MMT GHG emission target in 2031 and include 8 GW of offshore wind to study for associated transmission needs for future planning purposes.

All load-serving entities with demand response resources shall submit to the ISO the specific busbar locations on the transmission system where the demand response resources will be delivered.