The president of California's utility commission directed certain investor-owned utilities in the state to seek additional power capacity before next summer, despite a cacophony of concerns regarding the true need for more capacity in the Golden State.
California Public Utilities Commission President Marybel Batjer in the final days of 2020 ruled that large IOUs must seek additional capacity in order to help California avoid more rolling blackouts like those that occurred in August [R20-11-003]. However, some experts in the proceeding cite other potential causes of last summer's blackouts, such as computer software glitches and electricity export policies.
Batjer directed Pacific Gas & Electric, Southern California Edison and San Diego Gas & Electric to submit proposed power procurement contracts to the commission by Feb. 15. The contracts should help the state meet its net peak demand in summer 2021 and summer 2022.
However, two key reports about the August 2020 blackouts "belie the notion that the rolling blackouts . . . demonstrated a supply capacity shortage in California," The Utility Reform Network staff attorney Marcel Hawiger said in December comments to the CPUC.
"The focus on increasing supply for the summer of 2021 is all too likely to result in harmful policies that create unintended consequences," Hawiger said.
TURN said the August blackouts were primarily caused by a software error in the California Independent System Operator's computer system, which allowed for more than 3,500 MW to be scheduled for export in the day-ahead market.
Similarly, the CPUC's Public Advocates Office said the commission's record does not support the need for incremental procurement. The record "remains unclear" on whether or not the supply-side resources that are now under consideration for procurement are needed, according to the office.
The Union of Concerned Scientists and associated groups suggested changes to CAISO's export operations in order to prevent future outages. CAISO and the CPUC should address problems in the day-ahead market, including a failure to perform a reliability check in CAISO's residual unit commitment process, which allowed for continuous exported power during the time leading up to the blackouts, the group said.
"It is a much more feasible, cost-effective, and reliable measure to change market practices than to expect physical resources to come on line by summer 2021," the group said.
- However, California's "potential" system reliability challenges are now "actual system reliability challenges," Batjer said in the ruling. She added that the additional capacity must be available during the peak and net-peak demand periods. The resources can include utility-owned generation and can encompass incremental capacity from existing power plants through efficiency upgrades or revised power-purchase agreements; contracts with generation resources that are at risk of retirement; incremental energy storage capacity; firm forward imported energy contracts; and resource adequacy-only contracts or contracts that include tolling agreements.
- The ruling does not identify a specific capacity target for each IOU, CPUC spokesperson Terrie Prosper said in an email to California Energy Markets. Furthermore, the resources can include imports that meet existing CPUC resource-adequacy program requirements, Prosper said.
Other experts are concerned about the environmental and social effects if additional capacity is secured from California's natural gas power plants.
Increasing the amount of procured capacity from a gas plant also increases the potential amount of greenhouse gases emitted by the plant, representatives with the California Environmental Justice Alliance, Sierra Club, UCS and GRID Alternatives said in December comments to the commission. If emissions increase, the plant owner must obtain an updated permit under federal and state law, a process that takes months and could extend beyond the commission's deadline for availability, the group said.
But obtaining a permit for a gas plant might not be an issue, lawyers representing Calpine Corp., which operates natural gas plants in California, said in December comments to the CPUC. For all of the near-term upgrades that Calpine is contemplating, estimated emissions for the upgraded units would still remain within the current limits of the units' air permits, Calpine lawyers Patrick Ferguson and Katie Jorrie said.
In December, Calpine's leaders engaged in ex parte communications with CPUC member Liane Randolph's advisors Anand Durvasula and Suzanne Casazza. Calpine Vice President Avis Kowalewski called Randolph's advisors to discuss potential upgrades to existing generation facilities for the summer season of 2021 and beyond, according to a filing. Calpine recommended immediate direction from the commission regarding the procurement strategy and cost recovery for the upgrades, the filing says. Gov. Gavin Newsom on Dec. 9 appointed Randolph to the top position at the California Air Resources Board.
Calpine is looking for 10-year contract terms in some cases, which "would allow for reasonable amortization of the costs of upgrades," its lawyers said in a separate December filing to the commission. However, Calpine will also consider shorter-term contracts, which would require higher contract prices in order to recover plant upgrade costs over a shorter time frame, representatives said in the filing.
The commission should "explicitly encourage" the IOUs to seek contracts that secure a "reasonable volume" over a multiyear term, representatives said. The contracts should be for a plant's existing capacity, not merely for the additional capacity, representatives said.
As for the IOUs, SCE in a filing said that reducing demand by enabling more participation in demand-response programs is more likely to be achievable at a meaningful scale prior to summer 2021. SCE also agreed that incremental efficiency upgrades to existing power plants should be eligible for procurement if those upgrades increase the plant's capacity. SCE on Dec. 30 requested proposals for additional capacity for summer 2021 or summer 2022.
PG&E representatives said the IOU "generally supports" the commission's proposals, but continues to believe that conducting additional analyses is a necessary and critical step to determine near-term reliability needs for summer 2021.