On June 11, 2020, the California Public Utilities Commission (“CPUC”) adopted a final Decision regarding a central procurement framework for the CPUC-jurisdictional Load-Serving Entities’ (“LSEs”) multi-year local Resource Adequacy (“RA”) requirements. This Decision impacts the procurement authority of many California LSEs and will affect the costs of meeting RA requirements.

The Decision designates Pacific Gas and Electric Company (“PG&E”) and Southern California Edison (“SCE”) as the central procurement entities for their respective areas beginning in the 2023 RA compliance year, while remaining open to designating other entities in the future. Under the adopted “Hybrid” procurement model, CPUC-jurisdictional LSEs in the PG&E and SCE areas will no longer receive local RA requirements for 2023 onward, but may continue to procure local resources to reduce the central procurement entity’s total procurement, among other purposes.

The Decision follows on a February 2019 decision in which the CPUC adopted multi-year local RA requirements beginning with the 2020 RA compliance year, but declined to adopt a central procurement framework at that time due to the lack of consensus over, inter alia, who would serve the role of central buyer. The February 2019 decision directed informal stakeholder workshops to address the central buyer issue, which took place during spring 2019. While the parties participating in the workshops did not reach a consensus, several entities, including community choice aggregators, submitted a proposed settlement adopting a Residual procurement framework, which would allow LSEs to procure their local RA requirements, and the central procurement entity would procure for individual or collective deficiencies. Conversely, PG&E and SCE advocated for earlier and more substantial roles for the central procurement entity. The Decision rejects the Residual procurement proposal in favor of a more active role for the central procurement entity.

The Decision defers consideration of several issues to the CPUC’s successor RA proceeding in Docket No. R.19-11-009, including: 1) whether to adopt multi-year system and flexible RA requirements; 2) a compensation mechanism to properly compensate LSEs for shown local preferred and energy storage resources; 3) treatment of existing contracts; and 4) how the central procurement entity could serve as the sole procurer of gas generation to meet local reliability needs.

The Decision is available here in CPUC Proceeding No. R.17-09-020.

For further information regarding California’s Resource Adequacy program, please contact Michael Postar, Peter Scanlon, Lisa Gast, Sean Neal, Bhaveeta Mody, or Lauren Perkins.