California Public Utilities Commission Approves New Resources in Southern California

by Latham & Watkins LLP
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On March 13, 2014, the California Public Utilities Commission (CPUC) adopted D.14-03-004, which authorized Southern California Edison (SCE) to procure 500-700 MW of additional resources and San Diego Gas & Electric (SDG&E) to procure 500-800 MW of additional resources.  The CPUC will require the utilities to fulfill this authorization based on an unprecedented reliance on “preferred resources,” including demand response, energy efficiency and energy storage technology.

The decision was part of Track 4 of the Long-Term Procurement Plan (LTPP) proceedings, which the CPUC holds every two years to determine whether additional generation resources are required to meet the energy needs of the large investor-owned utilities.  The 2012 LTPP (R.12-03-014) was divided into four tracks:

  • Track 1 focused on the need for new local reliability sources to meet long-term local capacity requirements, particularly in regard to the retirement of once-through-cooling natural gas plants.  On February 13, 2013, the CPUC adopted D.13-02-015, which authorized the procurement of 1400-1800 MW of additional resources for SCE.  On March 21, 2013, the CPUC authorized 343 MW of additional resources for SDG&E in D.13-03-029.  
  • Track 2 considered procurement of system reliability resources but deferred a decision to the 2014 LTPP (R.13-12-020), which is in progress.
  • Track 3 evaluated rule and policy changes to procurement practices.  A final decision was issued on February 27, 2014.
  • Track 4 was added to the 2012 LTPP after the retirement of the San Onofre Nuclear Generation Station (SONGS).  Track 4 analyzed whether SONGS’ retirement triggered additional local area reliability needs beyond what was identified in Track 1. 

SCE

In Track 1, the CPUC authorized SCE to procure new resources, including 1,000 MW of gas-fired generation, 200 MW of all-source generation, 150 MW of preferred resources, and 50 MW of energy storage.  

In Track 4, SCE received an additional procurement authorization of 400-700 MW.  At least 400 MW must be obtained through preferred resources or energy storage.  100-300 MW may be from any resource, including gas-fired generation.  For Track 4, SCE had requested 500 MW from any source, including gas-fired generation. 

SCE’s Track 4 authorization will be combined with its Track 1 authorization and may use the results of the Track 1 request for offers (RFO).  SCE may also negotiate bilateral contracts for its Track 4 procurement.

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SDG&E

SDG&E’s local capacity needs were determined in a contemporaneous proceeding from the main Track 1 proceeding.  There, the CPUC approved 343 MW of new gas-fired generation.  SDG&E has already secured this entire authorization through the Pio Pico gas-fired project.

In Track 4, SDG&E was authorized to procure an additional 500-800 MW.  Of this, 175 MW must be from preferred resources and 25 MW from energy storage.  300-600 MW may be from any source, including gas-fired generation.  For Track 4, SDG&E had proposed an authorization of 500-550 MW from any source.  After the initial release of the Track 4 proposed decision, SDG&E’s all-source authorization was increased by 100 MW to a total of 600 MW.  SDG&E must issue an all-source RFO “for some or all” of its Track 4 authorization but can also procure through bilateral contracts.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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