Summary - California

?PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIAAgenda ID: 18971ENERGY DIVISIONRESOLUTION E-5110 December 17, 2020RESOLUTIONResolution E-5110. Request of San Diego Gas & Electric Company, Pacific Gas and Electric Company, and Southern California Edison Company for a Demand Response Auction Mechanism Pilot in 2022.PROPOSED OUTCOME: Adopts with modification the Pacific Gas and Electric Company (PG&E), Southern California Edison Company (SCE), and San Diego Gas & Electric Company’s (SDG&E) 2022 Demand Response Auction Mechanism (DRAM) Request for Offers (RFO) and Contract Language. SAFETY CONSIDERATIONS: There are no safety considerations associated with this resolution.ESTIMATED COST: This Resolution approves the 2022 DRAM RFO, which will utilize the budgets previously authorized in D.19-07-009. The 2022 DRAM budgets for PG&E, SCE and SDG&E are $6 million, $6 million and $2 million respectively. By Jointly Filed Advice Letters PG&E 5950-E, SCE 4293-E, SDG&E 3608-E, (also referred to as SDG&E 3608-E et al.), Filed on September 15, 2020 and Supplemental Advice Letters PG&E 5950-E-A, SCE 4293-E-A, SDG&E 3608-E-A, (also referred to as SDG&E 3608-E-A et al.), Filed on October 19, 2020. __________________________________________________________SummaryThis Resolution adopts with modifications Pacific Gas and Electric Company (PG&E), Southern California Edison Company (SCE), and San Diego Gas & Electric Company’s (SDG&E) 2022 Demand Response Auction Mechanism (DRAM) Request for Offers (RFO) and Contract Language, with the solicitation to be conducted in Q1 of 2021 resulting in Resource Adequacy contracts for third party Demand Response resource capacity to be delivered in 2022. This Resolution approves several proposals for technical improvements in the DRAM design, rejects or defers some of the refinement proposals, and clarifies certain contract implementation issues based on existing Commission decisions, including a significant correction by the Energy Division to capacity invoice payment calculation in the 2022 DRAM pro forma.BackgroundOn September 25, 2013, the California Public Utilities Commission (CPUC) issued Order Instituting Rulemaking (R.) 13-09-011 “To Enhance the Role of Demand Response (DR) in Meeting the State’s Resource Planning Needs and Operational Requirements.” In this rulemaking the CPUC considered a Resource Adequacy (RA) Capacity Payment Mechanism for DR and participation of retail DR in the California Independent System Operator (CAISO) wholesale market. On December 4, 2014, the CPUC issued Decision (D.) D.14-12-024 and ordered the three Investor Owned Utilities (IOUs) to file an advice letter for the design and implementation of the DRAM pilot, for 2016 & 2017 (2016 & 2017 DRAM), together with a standard contract. The DRAM pilot was intended to test: a) the feasibility of procuring DR Supply Resources for RA from third party DR Providers through an auction mechanism; and b) the ability of winning bidders to integrate their DR Resources directly into the CAISO market.Later in 2016 the CPUC adopted D.16-06-029 where it directed the IOUs to continue the DRAM pilot with an auction in 2017 for two-year deliveries in 2018 and 2019 (2018-2019 DRAM). On October 26, 2017, the CPUC issued D.17-10-017, and determined that it was reasonable to require PG&E, SCE, and SDG&E to conduct an additional 2018 auction for contract deliveries in 2019 (2019 DRAM). On November 29, 2018, the CPUC adopted D.18-11-029, which addressed the question of continuing the DRAM pilot beyond 2019, among other issues. D.18-11-029 emphasized the importance of the Energy Division’s evaluation and recommendations for those pilots. The Energy Division issued its final report on the evaluation of the DRAM pilot on January 7, 2019. On July 12, 2019 the CPUC issued D.19-07-009 which authorized a four-year extension of the DRAM pilot with deliveries in 2020 – 2023. The decision also adopted several enhancements to the DRAM design to improve the reliability and performance of DRAM resources and ordered a new evaluation of the re-designed pilots by an independent consultant. D.19-07-009 also authorized an annual Energy Division-led refinement process for DRAM.On December 23, 2019, the CPUC issued D.19-12-040, which adopted additional recommendations to improve the reliability and performance of DRAM resources. The new requirements applied to 2021 through 2023 DRAM deliveries. Pursuant to D.19-12-040, Ordering Paragraph (OP) 29, Energy Division hosted DRAM Working Group (WG) meetings on June 30, 2020, July 15, 2020 and August 3, 2020 to discuss potential refinements to the 2022 DRAM RFO, to be conducted in Q1 of 2021. Parties submitted their final proposals to the Energy Division on August 24, 2020. Energy Division compiled the proposals into a DRAM WG Report and distributed the report on September 1, 2020, to be included in a joint Advice Letters (AL) filing by the three large Investor-Owned Utilities (IOUs), along with a proposal for the 2022 DRAM RFO.In compliance with Ordering Paragraph (OP) 29 of D.19-12-040, the IOUs submitted joint Advice Letters PG&E 5950-E, SCE 4293-E, SDG&E 3608-E (SDG&E 3608-E et. al) on September 15, 2020, with the DRAM WG Report attached, seeking approval of the proposed 2022 DRAM Request for Offers guidelines and Contract Language. In the pro forma contract, included in the filing, the IOUs incorporated selected proposals from the WG Report and other changes not discussed in the WG Report. IOUs filed joint supplemental ALs PG&E 5950-E-A, SCE 4293-E-A, and SDG&E 3608-E-A (SDG&E 3608-E-A et. al) on October 19, 2020, with additional technical corrections or clarifications. NoticeNotice of ALs PG&E 5950-E, SCE 4293-E, SDG&E 3608-E, and ALs PG&E 5950-E-A, SCE 4293-E-A, SDG&E 3608-E-A were made by publication in the CPUC’s Daily Calendar. SDG&E, on behalf of the IOUs, states that a copy of the ALs were mailed and distributed in accordance with Section 4 of General Order 96-B. ProtestsAdvice Letters PG&E 5950-E, SCE 4293-E, SDG&E 3608-E (SDG&E 3608-E et. al) were timely protested. The California Efficiency + Demand Management Council (the “Council”), CPower, Enel X North America, Inc., Leapfrog Power, Inc., and OhmConnect, Inc. (collectively, “the Joint Parties”), and the Public Advocates Office at the California Public Utilities Commission (Cal Advocates) filed protests on October 5, 2020.On October 12, 2020, PG&E, SCE, and SDG&E filed a timely response to the protests of the Joint Parties and Cal Advocates. Advice Letters PG&E 5950-E-A, SCE 4293-E-A, SDG&E 3608-E-A (SDG&E 3608-E-A et. al) were timely protested by the Joint Parties on October 26, 2020. On October 28, 2020, PG&E, SCE, and SDG&E filed a timely response to the protest of the Joint Parties. Summary of the party protests and the IOUs responses are provided in the Discussion section. DiscussionThe CPUC has reviewed the Advice Letters, the protests, and the IOUs responses and resolves each issue as below.This section is divided into three parts. In the first part we address issues that were not included in the DRAM WG Report. In the second part we resolve issues that were included in the DRAM WG Report and in the third part we make clarifications or corrections on contract implementation issues based on existing CPUC decisions.Part I: Refinements Not Discussed in the DRAM WG Report SDG&E 3608-E et al., along with the attached pro forma, incorporates changes associated with certain refinement topics that were not included in the DRAM WG Report. These topics include:Resource ID FragmentationConcurrent Dispatch RequirementDC Invoice Calculation based on Average PerformanceDRAM Resource Limitation on LSE’s CustomersRequired Energy Quantity ThresholdPerformance Assurance ModificationThe Joint Parties noted in their protest that some of these proposals were weakly supported, some were not included in the WG Report, and some were never discussed during any of the WG sessions. We agree with the Joint Parties and confirm that any refinement proposals that were not included in the DRAM WG Report, whether briefly discussed during the WG meetings or not discussed at all, are deemed out of scope. We direct the IOUs to remove the references and changes associated with these refinements from the DRAM pro forma. Part II: Refinements Discussed in the DRAM WG Report In this section, we discuss the DRAM refinement proposals that were included in the DRAM WG Report, some of which are incorporated in the subject AL and some are not. The Report proposals are listed, with each item discussed individually further below:Use of Defined Terms and Capitalization in Contract ExhibitsData Issue Reporting Template EnhancementsQualifying Capacity (QC) Estimation and Assessment EnhancementsDRAM Payment/Penalty Structure ModificationsRestriction of Customer Movement Across Different Resource IDs in Different Months Prohibition of Resource ID Sharing Between ContractsDRAM Must Offer Obligation ClarificationQC and NQC Use in DC Invoice Payment and Templates ModificationScreening Criterion based on Net Long Run Avoided Cost of Capacity Cost Effectiveness Tool Development For DRAMCustomer Related (Non-Meter) Data Transfer Process Enhancements Use of Defined Terms and Capitalization in Contract ExhibitsIn the DRAM WG Report, PG&E proposes to modify several DRAM Exhibits to (a) minimize duplicative content that is otherwise defined in the body of the contract, (b) use defined terms (i.e., Buyer instead of IOU, Seller instead of DRP, etc.), and (c) add clarity in contract administration. The proposed modifications are incorporated in the subject AL.The IOUs support the proposed modifications by PG&E and incorporated them in the subject AL. The Joint Parties agree that these revisions will make the DRAM pro forma and associated exhibits clearer and therefore, support adoption of this proposal by the CPUC. No party protested this proposal.We agree with these parties and approve the proposed modifications to the DRAM Exhibits in the DRAM pro forma, as described in the SDG&E 3608-E et al., for use in the 2022 DRAM. Data Issue Reporting Template EnhancementsIn the DRAM WG Report, PG&E proposes to incorporate subscription IDs in the next iteration of the Data Issue Reporting Template to help accelerate the investigation of identified data issues. The participating parties in the working group unanimously agreed with this change and as a result the modification to this template was implemented in the next update to the DRAM Data Issue Reporting Template. The above proposal is incorporated in SDG&E 3608-E et al. The IOUs and the Joint Parties both agree that this is a process improvement that will save time by eliminating the need for the IOUs to submit a follow-up request to the DRAM Sellers for the added information. There were no protests to this proposal.We approve this revision to the Data Issue Reporting Template. The IOUs shall use the updated template in the 2022 DRAM pro forma contracts. We note that this and other DRAM templates can be updated at any time by Energy Division based on stakeholder input, and that a Resolution is not required for implementing revised templates. We included the Data Issue Reporting Template revision here simply as courtesy. Qualifying Capacity (QC) Estimation and Assessment EnhancementsD.19-09-041, and D.19-12-040 established new guidelines for the Qualifying Capacity (QC) estimation, supporting data, and assessment, starting with the 2020 DRAM solicitations. In managing the 2020 DRAM process, the IOUs gained experience with implementing the QC guidelines. Reflecting that experience, in the DRAM WG Report, the IOUs proposed to provide additional guidance to bidders to improve the clarity and consistency in the QC estimates and supporting data provided by the bidders and facilitate the IOU’s assessment of the submitted QC estimates. SDG&E 3608-E et al. incorporates the above proposal. The Joint Parties agree with the proposed modification and see them as an appropriate clarification of QC data requirements. No parties protested this proposal.We approve the additional guidelines already incorporated in the relevant pro forma exhibits and RFO material. DRAM Payment/Penalty Structure ModificationsIn D.19-07-009 the Commission adopted a new payment/penalty structure applicable to DRAM Demonstrated Capacity (DC) invoices that is based on capacity shortfalls between the Qualifying Capacity and Demonstrated Capacity. In the DRAM WG Report, PG&E proposes to modify the penalty structure to account for shortfalls between the Contracted Quantity and Demonstrated Capacity. PG&E states that the current lack of penalties for shortfalls between Contracted Quantity and Demonstrated Capacity allows Sellers to reduce capacities between Contracted Quantity and Qualifying Capacity without penalty, which shifts the risk to the IOUs to backfill, often on very short notice, the capacity that was committed and contracted for by the Sellers.In the subject AL, the IOUs implemented part of PG&E’s proposal to tie the Seller’s performance obligations to the monthly Contracted Quantity for each showing month. Specifically, the AL proposes to (a) modify the DC payment in Section 4.1 of the pro forma to be based on the ratio between the Demonstrated Capacity and the Monthly Contracted Quantity (rather than Qualifying Capacity), (b) eliminate the tolerance band of the payment/penalty structure, and (c) update the Seller performance-related event of default terms in Section 9.1, consistent with the updates to Section 4.1.The Cal Advocates protest supports the proposed payment/penalty structure and states that the current structure creates a scenario where ratepayers are made to overpay for RA capacity that did not exist. They state that the CPUC has an obligation to ensure just and reasonable rates which can be achieved by ensuring ratepayers only pay for actual received benefits. In their protest, the Joint Parties strongly oppose the IOUs’ proposed revisions to the payment/penalty structure and state that the proposed changes are premature and violate the CPUC’s balance of accountability and fairness struck in D.19-07-009. The Joint Parties state that any changes to the DC payment/penalty structure falls under the category of “policy” revision as opposed to technical changes permitted by the CPUC. They further argue that it is premature to make such significant revisions to the DRAM DC payment/penalty structure before the effectiveness of the current DC payment/penalty structure has been assessed in the upcoming CPUC ordered DRAM evaluation.The Joint parties also state that despite the best intentions of a DRAM Seller, they may sometimes not be successful in recruiting enough customers to deliver the exact amount of capacity that was contracted. Or in another potential scenario the DRAM Seller could lose one or more large customers to a competing DRAM Seller after the contract is executed.In their reply, the IOUs argue that capacity shortfalls have already been experienced in the 2020 DRAM contracts, with one IOU experiencing notable shortfalls, none of which were penalized under the 2020 DRAM Contract. They state that this essentially means that the DRAM contracted capacity is not actually firm capacity but merely a cap of what a Seller may be able to deliver under the DRAM Contract.On the issue of whether revisions to the DC payment/penalty structure is a policy matter, as argued by the Joint Parties, and hence outside of the scope of this AL, we choose to put the scoping issue aside for now and defer this proposal for the reason below. We note that the Qualitative Criteria adopted in D.19-12-040 for evaluating offers received in an auction include a penalty (in the form of an upward cost adjustment) for Sellers delivering DC invoices less than 75% of the Contracted Quantities in prior years. Adoption of any penalties for shortfalls between Contracted Quantity and Demonstrated Capacity would need to be balanced with modifications to the DRAM Qualitative Criteria to avoid penalizing the Sellers twice for the same capacity shortfall.In addition, Energy Division will be studying this issue further as part of its ongoing evaluations of DRAM and we will revisit this issue once we have more data. We, therefore, defer consideration of the IOU proposed revision to the DC invoice payment/penalty structure at this time and direct the IOUs to remove the changes associated with this proposal from the DRAM pro forma. Restriction of Customer Movement Across Different Resource IDs in Different Months D.19-07-009 restricted customer movement across DRAM Resource IDs within a given delivery month, except for certain specified reasons. This was done to prevent double counting of customers and over reliance on the same customers for performance across different Resource IDs. A somewhat similar scenario was discussed in the DRAM WG addressing customer movement within Resource IDs but across different delivery months. The IOUs built upon Energy Division’s initial discussion of the topic and deliberated on the associated benefits and risks of the practice in the DRAM WG Report. In the DRAM WG Report, the IOUs state that customer movement across different showing months could enable over reliance on the better performing customers for the purposes of showing higher performances via test or market dispatches on the DC invoices while using the poorer performers for instances where the DC invoice is based on the Must Offer Obligation. The IOUs state that this does not demonstrate that the entire resource is reliable throughout the contract. SDG&E 3608-E et al. proposes to limit customer movement across different delivery months along with extending the current exemptions adopted in D.19-07-009 applicable to customer movements within a delivery month, to this proposal as well.In their protest, the Joint Parties oppose the proposed restrictions on customer movements across different delivery months and state that the IOUs provide no evidence that the customer movement restrictions adopted in D.19-07-009 have been ineffective in reducing customer double-counting or ensuring good behavior by DRAM Sellers. Though the Joint Parties agree with the IOUs that DRAM Sellers must be able to deliver the entire portfolio under contract, they argue that there may be valid reasons for which a Seller would need to move customers across Resource IDs in different months.Cal Advocates protest supports the IOUs’ proposal on limiting customer movement across different delivery months. They state that not adopting a limitation could create a situation where a Seller could be overly reliant on only a subgroup of high performing customers for tests because those customers can be shuffled to a different Resource ID in a different month before a known test or dispatch of that Resource ID. Reliance on only high performing customers will overestimate the capability of the Seller’s portfolio since lower performing customers will not be able to provide the required performance in a real-world dispatch.In their reply to protests, the IOUs state that they are open to alternative proposals, including limiting customer movements to once or twice per contract term, DRAM Seller-provided analyses that demonstrate a customer’s contribution is not being double counted as a result of monthly movements, or periodic concurrent dispatch of all resources within a SubLAP. The IOUs also note that these alternatives would benefit from further stakeholder discussions.We agree with the IOUs and Cal Advocates that DRAM resources must be reliable at their contracted commitments throughout the delivery period and that reliance on only high performing customers by moving them across Resource IDs will likely artificially inflate the portfolio’s real performance capability. Therefore, we approve limiting customer movement across Resource IDs in different delivery months with the same exemptions adopted in D.19-07-009 for customer movements within a delivery month. Resource IDs Sharing Prohibition Between Contracts The DRAM WG Report includes a proposal by the IOUs, also incorporated into the SDG&E 3608-E et al., to eliminate the “Joint Resource” clauses of the DRAM pro forma that allow for Resource IDs to be shared across contracts. The IOUs explain that Resource ID sharing was created to allow for two Sellers to meet the minimum size requirements of a Proxy Demand Resource (PDR) set by the CAISO. The IOUs state that it is very challenging to administer, and audit if needed, contracts where a Resource ID is shared by more than one contract. The IOUs assert that with the additional complications of QC assessment process, supply plans, invoices, minimum energy dispatch requirements and the sharp increase in the number of DRAM resources, it is reasonable to eliminate the Joint Resource clauses and disallow sharing of Resource IDs across contracts. Cal Advocates supports the elimination of the Joint Resource clause. The Joint Parties partially support limited restrictions on the sharing of Resource IDs between contracts. They state that the IOUs’ proposed prohibition on sharing of Resource IDs between contracts is reasonable as it pertains to sharing of Resource IDs among contracts associated with different DRAM Sellers. However, according to the Joint Parties, there are some specific conditions under which a DRAM Seller should be allowed to share Resource IDs between their own contracts. For instance, the Joint Parties explain that, if the DRAM Seller has multiple contracts with the same IOU, one of which may or may not be a DRAM contract, it may make sense from an operational standpoint to group customers from two or more contracts into a single Resource ID rather than using two separate Resource IDs. The IOUs reply to the Joint Parties protest by stating that the Joint Resource clauses in the DRAM contracts are not present in non-DRAM contracts, and thus the IOUs are only aware of its use within the context of multiple DRAM contracts with the same Seller. The IOUs reiterate that there are administrative burdens associated with allocating the performance of a resource ID across multiple contracts, which makes contract administration difficult and time-consuming.We first clarify that the there are two different types of resource sharing to discuss here:Sharing of Resource IDs among Contracts associated with Multiple SellersSharing of Resource IDs among Contracts associated with the Same SellerThe first type of resource sharing - Resource ID sharing by multiple Sellers - was historically permitted by the CPUC due to the CAISO’s restriction of a Proxy Demand Resource (PDR) aggregation to a single LSE. That restriction has since been removed by CAISO. The IOUs, the Joint Parties and the Cal Advocates all agree with prohibiting Resource ID sharing by multiple Sellers.With respect to the second type of resource sharing - sharing of Resource IDs by the same Seller across different contracts - the Joint Parties argue in favor of retaining this capability. We agree with the IOUs that sharing Resource IDs across contracts, regardless of the contracts being associated with multiple Sellers or the same Seller, makes contract administration very challenging and time-consuming for the reasons noted by the IOUs including the calculation and verification of DC invoicing, the QC assessment process, supply plans, and the minimum energy dispatch requirements. In addition, we note that resource sharing potentially creates complexities in performance verification for the purposes of the DRAM evaluations. Therefore, for the above reasons, we prohibit both type of resource sharing in DRAM contracts, either between different Sellers or by the same Seller across different contracts and approve the modifications incorporated in SDG&E 3608-E et al. implementing the prohibition of resource sharing. DRAM Must Offer Obligation (MOO) ClarificationIn the DRAM WG Report the CAISO explains that DR resources on supply plans have a Must Offer Obligation (MOO) such that the resource are required to bid into the CAISO markets according to CAISO tariff sections 40.6.1 and 40.6.2. The CAISO states that in general RA resources, such as DRAM resources, are required to bid into the CAISO energy markets all hours of the day the resource is available, as approved by the Local Regulatory Agency (the CPUC in case of DRAM). The CAISO states that in the absence of a clear and specific must offer obligation approved by the CPUC for DRAM, the DRAM resources are required to bid into the market 24 hours a day, 7 days a week. The CAISO further notes that while the Availability Assessment Hours (AAH), currently 4pm to 9pm, are typically the hours of greatest need, the CAISO has also observed tight supply conditions outside these hours which demonstrates the need for RA resources to be available at all times. The CAISO suggests that the CPUC considers these factors and DR resources’ availability when setting the DRAM MOO to ensure ratepayers are getting appropriate value for their investment in DRAM and the system is sufficiently benefiting from these RA resources.In SDG&E 3608-E et al., the IOUs state that they do not agree with CAISO’s position that the DRAM MOO is 24 hours a day, and 7 days a week; and state that CPUC decisions, such as D.19-07-009, make it clear that DRAM availability hours are specifically considered to be the Availability Assessment Hours. However, the IOUs agree to ensure the use of the MOO and AAH terms are accurate throughout the pro forma contract, and as such incorporated the modifications in the AL. The Joint Parties also disagree with the CAISO’s interpretation of the DRAM MOO and state that the DRAM contracts explicitly designate the AAHs as the MOO for DRAM.20 The Joint Parties support the IOUs’ proposed revisions to the DRAM pro forma for clarity. Cal Advocates also disagrees with CAISO’s interpretation of the DRAM MOO and states that in D.19-12-040 the CPUC identified the AAH as the hours of greatest grid need, and suggests the CPUC direct the IOUs to modify the pro forma to define the DRAM MOO and bidding requirements as being limited to the AAH.We note that the CPUC requires all supply side DR resources to be, at minimum, available and able to operate Monday – Friday, four consecutive hours during the AAH, and at least 24 hours per month from May – September. In addition to this minimum availability requirement, D.19-07-009 and D.19-12-040 required DRAM resources to demonstrate capacity and deliver energy during the Availability Assessment Hours. We agree with the parties that the above requirements define the Must Offer Obligation for DRAM resources is bidding during the Availability Assessment Hours in compliance with CAISO tariffs and requirements. Consistent with party suggestions, we direct the IOUs to modify the DRAM pro forma to clarify the MOO requirements accordingly.QC and NQC Use in DC Invoice Payment and Templates ModificationIn the DRAM WG Report, PG&E proposes to clarify the use of Qualifying Capacity (QC) and Net Qualifying Capacity (NQC) in the DRAM DC invoice templates to properly implement D.19-07-009. PG&E also proposes to modify the pro forma language to indicate that for each DRAM resource the DC should be capped by the lower of its QC and NQC, in order to properly implement D.19-07-009, which states that one resource’s over-performance should not compensate for under-performance by another resource. The IOUs agree and have incorporated the PG&E proposed modifications to the DRAM DC invoice templates in SDG&E 3608-E et al. and pro forma contract. Cal Advocates supports the proposed changes because it would correct an oversight that conflicts with the CPUC’s goal of incentivizing the required performance of each resource in DRAM.The Joint Parties protest the adoption of the proposed modification and explain that the IOUs are misinterpreting CPUC’s language in D.19-07-009. The Joint Parties state that the Commission rejected incenting resource performances beyond 100% but allowed for performance aggregation of concurrently dispatched resources. In their response to the protests, the IOUs contend that D.19-07-009 unambiguously states that “the Commission should not adopt incentives for over-performance in the Auction Mechanism.” They disagree with the Joint Parties’ claim that the CAISO system is not negatively impacted by over-delivery of capacity that offsets under-delivery of another resource. As a counter example, the IOUs assert that the Joint Parties’ position allows for the poor or non-performance of a PDR in Fresno receiving a market dispatch at the beginning of a month to be offset by over-delivery of another PDR in the North Bay Sub-LAP during a capacity test two weeks later.The IOUs also argue that the Joint Parties’ position on this issue directly conflicts with the CAISO’s comments summarized in D.19-07-009, which states: “As cautioned by the CAISO, resources should perform according to CAISO market instructions and not below or above. … The CAISO asserts that the Commission should incentivize Auction Mechanism resources to perform as accurately as possible.”The IOUs add that the CAISO may issue penalties for failure to perform as instructed. They note that without the IOUs’ proposed modification, a DRAM Seller may “make up” for one resource’s underperformance with another resource’s over performance and receive a full capacity incentive payment for a behavior that would otherwise be penalized by the CAISO.First, we clarify the meaning of “Over-Performance” as it pertains to the performance of a DRAM resource in the context of D.19-07-009. The over-performance that the CPUC discouraged and declined to compensate for refers to DC performances of a PDR beyond 100% of its QC. In D.19-07-009, the CPUC considered the parties’ proposal of allowing a higher DC payment for performances above 100% of a resource’s QC but declined to adopt it. However, D.19-07-009 specifically allowed the performance aggregation during concurrent dispatch by stating: “Where multiple resource IDs within an Auction Mechanism contract are dispatched concurrently in a particular delivery month, the aggregate performance of the concurrently dispatched resource IDs may be utilized for the purpose of Demonstrated Capacity invoicing and compared with the sum of Qualifying Capacity on the monthly Supply Plan of those resource IDs.” Next, we clarify the meaning of “Concurrent Dispatches” in the context of D.19-07-009. We observe the plain meaning of “concurrent” in Webster: “operating or occurring at the same time [emphasis added].” Contrary to the example set forth in the IOUs’ reply, concurrent dispatches by definition cannot happen at different times within a delivery month. Concurrent dispatches of multiple Resource IDs refer to these resources responding to a market dispatch or capacity test happening during the same time interval on the same day. While the location of the resources in the case of System RA is unrestricted, for local RA resources the aggregation of concurrently dispatched Resource IDs is restricted to resources located within the same SubLAP. In addressing the proposed modifications to QC and NQC in the DC invoice templates, we note that in D.19-07-009 and D.19-12-040 the CPUC uses the QC (not the NQC) of the resources in setting the DC invoice requirements for DRAM resources. We conclude that the references to the QC value should be used for the purposes of DC invoice calculation payments. We direct the IOUs to modify all relevant sections of the DRAM pro forma contract, including the exhibits to use the QC value for the purposes of DC invoice calculation payments, and remove the added language on capping DC payments at the lesser on QC and NQC values, in section 1.6.b. (iv) of the pro forma. Screening Criterion based on Net Long Run Avoided Cost of Capacity D.16-09-056 established the August Bid Price Cap and the Long Run Avoided Cost (LRAC) as capacity bid price caps for screening offers to encourage competitive bidding behavior in DRAM solicitations. Pursuant to the Energy Division’s DRAM evaluation and recommendations, the CPUC eliminated the August bid price cap, while leaving the LRAC in place as the bid price cap, and directed exploration of an alternative screening criteria.In the DRAM WG Report, the Energy Division proposed the Net Long Run Avoided Cost (Net LRAC) of Capacity as a floor for screening an offer based on its normalized (per unit capacity) Net Market Value (NMV) during the DRAM solicitation process. The Net LRAC (a per unit capacity quantity) would be calculated by deducting the LRAC (also a per unit capacity quantity) from the short-term IOU specific RA benefit of a unit of capacity. Energy Division provided an offer screening example comparing the use of the LRAC cap versus Net LRAC floor. In screening the offers submitted during a solicitation, the example demonstrated that using the LRAC cap against the weighted average price of the offer (as is the case today) could potentially exclude bids with higher NMVs over bids with lower NMVs. This is because in using the LRAC, the IOUs would merely consider an offer’s cost (weighted average price), rather than the offer’s net benefits. In contrast, the use of the Net LRAC as a floor against the normalized NMV of an offer ensures the selection of offers providing the most net benefit, while protecting the ratepayers.In the subject AL, the IOUs raise concerns on the complexity and transparency around using the Net LRAC. The IOUs argue that while the current LRAC (with pro-ration for sub-annual bids) was an effective price cap for screening bids in the recently completed 2021 DRAM solicitation, the Net LRAC method introduces additional complexity and reduces transparency for market participants. The IOUs suggest that consideration of the Net LRAC proposal be delayed until after the pending evaluation of DRAM, including the efficacy of the current LRAC cap method, by the Independent Consultant. In their protest, the Joint Parties agree with the IOUs’ position that no changes to the LRAC screening methodology should be made. While the Joint Parties appreciate the Energy Division’s concerns about the risk that the current LRAC methodology could result in the rejection of higher value bids, they argue that the competitiveness of the DRAM auctions has driven bid prices lower, such that the LRAC cap was not a significant factor in the selection of the shortlisted offers in the most recent solicitation.Cal Advocates supports Energy Division’s proposal but suggests that it be modified to consider the monthly offer volume in each bid when assessing the Net LRAC, that is a volume weighted Net LRAC. Cal Advocates proposed modification would compare the NMV of the offer to the volume weighted Net LRAC to determine if an offer should be accepted or rejected. We do not agree that the Net LRAC adds further complexity as it simply uses the existing NMV framework that the IOUs already utilize for ranking bids and shortlisting offers during the offer evaluation stage of the solicitation process. We also note that neither the IOUs nor the Joint Parties address the concern with the current LRAC method about the possibility of higher value bids getting rejected over lower value bids. We defer consideration of Net LRAC as a floor to screen against an offer’s NMV for the purpose of bid selection during the DRAM solicitation. As explained in the following section, we see other uses for the Net LRAC at this time.Cost Effectiveness Tool Development For DRAMIn the subject AL, the IOUs propose to use the existing DR cost effectiveness protocols and a simplified application of the Total resource Cost (TRC) test using the current Avoided Cost Calculator (ACC) to measure the cost effectiveness of DRAM. The IOUs, however caution that this issue appears to be a policy issue, or at least an issue with strong policy implications, and note that the IOUs are precluded from addressing policy issues within an advice letter. The IOUs propose to apply the existing DR cost effectiveness protocols to DRAM based on CPUC’s prior decisions on using the ACC and the cost effectiveness tests in various Commission Rulemakings. The IOUs recommend that a neutral third party be contracted to perform the cost effectiveness evaluations of DRAM resources and propose to use the approved funding for the 2022 DRAM for this effort. They state that using a portion of the 2022 DRAM budget would presumably reduce the amount of capacity contracted unless another source of funds is approved by the CPUC.The Joint Parties agree with the IOUs that any cost effectiveness methodology is a policy issue and should not be addressed through an advice letter. With regards to the IOUs’ cost-effectiveness proposal, the Joint Parties state that the proposal is severely lacking in detail and thus should not be adopted. The Joint Parties contend that should the CPUC move forward with the IOUs’ proposed DRAM cost-effectiveness tool, a neutral third party be contracted and funded out of the IOUs respective DR program budgets set aside for EM&V activities.Cal Advocates find the IOUs cost effectiveness proposal reasonable and agree that it is appropriate to start with the same tools and procedures used to evaluate IOU DR programs. They agree this will allow IOU and third-party DR programs to be evaluated on a fair and level playing field. Although some of the IOU requirements may not be applicable to DRAM resources, the Cal Advocates suggest the CPUC should err on the side of inclusion at this time because DR providers will not be penalized for failing to meet cost effectiveness thresholds while DRAM is still a pilot.We note that D.19-12-040 states that “unless otherwise stated in this decision, all policy determinations will be addressed through a decision that considers the Auction Mechanism evaluation recommendations.” We further observe that D.19-12-040 explicitly directs that, as part of the Energy Division-led refinement process, an initial cost effectiveness measurement tool be ready for testing in the 2022 DRAM. In fact, the same decision found it “reasonable for the Energy Division to explore and develop for testing alternative tools to measure the cost-effectiveness of the Auction Mechanism resources.” In other words, the directed task is to select a tool for testing cost-effectiveness of DRAM resources; whether the tool is actually adopted as a policy and used to determine the course of DRAM is a matter of the CPUC’s discretion to consider in a future proceeding. Therefore, we conclude that the issue of selecting a Cost Effectiveness tool as a test is in scope for SDG&E 3608-E et al.Next, we address the IOUs reference to prior CPUC decisions on using the ACC and the cost effectiveness tests in various CPUC rulemakings. Both decisions referenced by the IOUs, D.16-06-007 and D.19-05-019, predate the DRAM decision D.19-07-009 and D-19-12-040. In D.19-12-040, the CPUC explicitly states that “The cost-effectiveness protocols factors A, B, C, D, E, F, and G are not a suitable measurement of cost-effectiveness…” for DRAM and as such “we retain the sole use of the least-cost best fit model for evaluating bids “. Therefore, we decline to select the IOUs’ proposed cost effectiveness method based on the use of factors in the existing cost effectiveness protocols. As an alternative, and in the spirit of exploration encouraged by D.19-12-040, we propose to use the Energy Division’s Net LRAC proposal as a tool for assessing the cost effectiveness of the 2022 DRAM resources on a what-if basis. This is consistent with the CPUC direction in earlier DRAM pilots which required the IOU to evaluate the costs and benefits of DRAM by using the LRAC as a benchmark to measure cost effectiveness of the DRAM and authorized the IOUs to reject any capacity bids beyond the LRAC value. Therefore, we find it appropriate to use the Net LRAC methodology as a tool to test cost effectiveness of the 2022 DRAM on a what-if basis, without changing the bid selection process during a DRAM solicitation. Consistent with the discussion above, we direct the IOUs to 1) file a new AL to modify the 2022 DRAM RFO guidelines to note that IOUs will use the Net LRAC methodology as a tool to test (on a what-if basis) the cost effectiveness of DRAM resources short listed in the solicitation process, while maintaining the status quo evaluation process for selecting the actual winning bids and 2) disclose the test results in the confidential portion of the AL to be submitted seeking the CPUC approval of executed 2022 DRAM contracts.Customer Related (Non-Meter) Data Transfer Process EnhancementsIn the DRAM WG Report the Council proposes several modifications to the process for transferring customer related (non-meter) data by the IOUs to the DRAM Sellers. These include defining timeframes for customer movement, the ability to forward date customer movement, standard data requirements, and establishing a tracking system for resolving problems associated with data transfer.In SDG&E 3608-E et al., the IOUs state that they appreciate the work put into this proposal; however, because the proposal would require the IOUs to upgrade their IT systems, implement additional process enhancements and cause potential revisions to Rule 24/32 and program tariffs, the IOUs assert that the proposal cannot be implemented in the near-term. The IOUs believe this AL is not the appropriate forum for addressing these issues and suggest a separate stakeholder process to resolve the Council’s proposal.The Joint Parties disagree with the IOUs that the proposed improvements to the customer related data transfer process could not be implemented in time for 2022. They contend that due to the relatively narrow scope of the proposal, the necessary details and associated changes to Electric Rule 24/32 and DR program tariffs can be developed within a reasonable time period. The Joint Parties support the IOUs’ suggestion that a separate public discussion process be used to resolve this proposal. They suggest this process be completed in the first half of 2021 to allow enough time for implementation by early 2022.As noted in Energy Division’s DRAM evaluation report, many data transfer issues have been experienced throughout the various DRAM pilots and we acknowledge that these issues affect the success of Sellers and the DRAM pilot in general. We view several aspects of the Council’s proposal positively but also agree with the IOUs and the Joint Parties that this AL is not the appropriate venue for addressing this proposal. It is unclear whether some of the issues/proposals could or should be considered in the currently active Click-Through proceeding A.18-11-015 et al. or in the next DR five-year budget application proceeding anticipated in Q4 2021. We request the parties to opine on this matter when submitting comments on this Resolution.In either case, we find it appropriate for Energy Division to initiate a Customer Information Working Group no later than 60 days after the adoption of this Resolution. The WG is tasked to study the Council’s proposal, develop potential solutions that could be implemented in time for the 2022 DRAM, and produce recommendations before or by May 1, 2021. The IOUs shall file a Tier 2 AL incorporating solutions that can be implemented for the 2022 DRAM should be filed by the IOUs before or by July 1, 2021.Part III: Clarifications on Existing Commission DecisionsIn this section we consider and approve three clarifications or corrections related to contract implementation issues based on existing CPUC decisions: DC Invoice Hour Clarification DRAM Contract Confidentiality Error Correction DC Invoice Payment Calculation CorrectionThe IOUs initiated items 12 & 13 in SDG&E 3608-E et al. and SDG&E 3608-E-A et al. The last item, initiated by the Energy Division, is being introduced via this Resolution to bring the DRAM pro forma contracts in compliance with D.19-07-009 and D.19-12-040.DC Invoice Hour ClarificationIn SDG&E 3608-E et al., the IOUs propose a definition for “Clock Hour” as the sixty (60) minute interval that starts at HH:00 and ends at HH:59. The clock hour is used in the context of DC invoice calculations for a resource market dispatch or capacity test.The Joint Parties find the IOUs’ proposed definition highly problematic because the CAISO’s Real-Time Market (RTM) regularly clears on non-clock intervals. They state that constraining settlements to clock hour intervals would be contrary to prior CPUC directives that DRAM settlements for a resource be based upon market awards and market-based performance.In response to the Joint Parties protest, the IOUs clarify that the Day-Ahead Market (DAM) dispatches by CAISO are done solely on clock hours and CAISO settlement requires performance to be assessed in the same manner. The IOUs add that the CPUC-approved baselines require capacity tests to also be based on clock hours. However, as the Joint Parties note, the DRAM contract also permits RTM dispatches to be used to demonstrate capacity, and such dispatches may not always align with a clock hour. The IOUs agree that such dispatches, RTM dispatches not aligning with a clock hour, should be assessed in the DRAM contract in alignment with CAISO and CPUC baseline and settlement requirements as applicable.Consistent with the discussion above, in SDG&E 3608-E-A et al., the IOUs provided additional clarification on this issue, as it pertains to RTM dispatches.In their protest to SDG&E 3608-E-A et al., the Joint Parties again recommend that the CPUC reject the IOUs’ additional revision to the DC Dispatch definition because they contend the IOUs neglect to provide any explanation for why this proposal is necessary or appropriate. The Joint Parties state that in their October 5 protest they highlighted that the IOUs had not provided a formal proposal for this revision in the DRAM WG Report, or the body of SDG&E 3608-E et al., other than noting the revisions made to the DRAM contract language.The IOUs responded to the Joint Parties’ protest by reiterating that DRAM contracts already require compliance with CAISO tariff settlement processes. The IOUs reference the related sections of the CAISO tariff showing that the settlement period is defined as “the period beginning at the start of the hour and ending at the end of the hour“. They also add that they are not aware of any non-Clock Hour settlement explicitly allowed in other DR programs or mechanisms, and that allowing so could create an unlevel playing field with results that are not comparable with those of other Demand Response Providers.We do not consider the IOUs’ proposed DC invoice hour clarification as a new proposal; instead it is a clarification on the contract language implementing existing decision policy. D.19-12-040 requires that the same baseline method must be used for energy settlement at the CAISO and DC invoices. Therefore for all the below market dispatch and capacity test scenarios the following applies:For all DAM awards, where the CAISO dispatch instructions by design are based on clock hours, the Sellers are required to submit DC invoices that also align with the same clock hours. For any RTM awards, where the CAISO dispatch instructions are based on clock hours, the Sellers are required to submit DC invoices that also align with the same clock hours. For any RTM awards, where the CAISO dispatch instructions do not start or end?on the clock hour, the Sellers are authorized to submit DC invoices that do not align with clock hours but such invoices must still align with the same interval associated with the CAISO dispatch instructions. For all capacity tests, consistent with existing testing requirements for supply side DR, the Sellers shall conduct their tests based on clock hours and submit DC invoices accordingly.We direct IOUs to modify the 2022 DRAM contract language to reflect the above clarification related to the clock hour. DRAM Contract Confidentiality Error CorrectionIn SDG&E 3608-E-A et al., the IOUs request to correct a numbering error in the Confidentiality and Privacy Obligations section within the DRAM pro forma contract. The IOUs note that the proposed correction is incorporated into the 2022 DRAM contract language but will also apply to the 2021 executed contracts. The IOUs do not intend to initiate modification to the 2021 DRAM contracts for this correction but state that they will continue to administer these contracts consistent with the corrected 2022 contract language. The IOUs assert that continuing to administer the confidentiality provisions consistent with previous years (and the 2022 contract as corrected in this AL) will reflect both the parties’ past practice throughout the history of DRAM and the parties’ intent with respect to 2021 DRAM contracts.No party protested this correction.We approve this the correction related to confidentiality on in the 2022 DRAM contract language. DC Invoice Payment Calculation CorrectionEnergy Division staff recently noticed a discrepancy between DRAM contracts (the 2020 & 2021 executed contracts and the 2020 pro forma language submitted in the subject AL) versus the direction in DRAM decisions, D.19-07-009 and D.19-12-040. We explain the background and reasoning as follows: D.19-07-009 and D.19-12-040 directed that the DC/QC performance ratio be assessed for each resource (Resource ID) individually when applying the approved payment/penalty structure to a DC invoice. However, the language in the current pro forma and the 2020 and 2021 DRAM contracts indicates that the DC/QC performance ratio will be assessed based on the aggregated performance of all resources (all Resource IDs) within a DRAM contract (that is, the ratio of the sum of DC across all resources and the sum of QC across all resources). The discrepancy results from a misinterpretation of the DC payment/penalty structure adopted in D.19-07-009, which was incorporated into the pro forma language and was overlooked during the review and approval of earlier submissions of the DRAM pro forma for 2020 and 2021 delivery years. The table below shows the DC payment/penalty structure adopted in D.19-07-009 and D.19-12-040, applicable to the 2020 and subsequent DRAM contracts.Table 5Price De-Ration and Payment Forfeiture for Demonstrated CapacityShortfallsBandRange of DemonstratedCapacity(% of QC)PaymentTolerance>90% to 100%Capacity Price ($/kW)*QC (kW)Pro-rated>70% to 90%Capacity Price ($/kW)*DC (kW)De-rated50% to 70%Capacity Price ($/kW)*DC(kW)*75%Forfeiture<50%$0QC: Resource’s Qualifying Capacity on the monthly supply plan for the invoiced monthDC: Resource’s Demonstrated Capacity for the invoiced month Capacity Price: Resource’s contract purchase price for capacity for theinvoiced monthThe reference to “Resource’s” in the above table should be interpreted as a singular resource (interchangeable with a “single Resource ID”). However, the IOUs appear to have interpreted this term as an aggregation of all Resources within a DRAM contract. Multiple decision references in D.19-07-009 and D.19-12-040 Appendix B indicate that the “Resource” terminology in the above table should be interpreted as “a single Resource” or “a single Resource ID” in the context of DC invoicing when assessing DC/QC performance ratio for the purposes of applying the payment/penalty structure, not as an aggregated contract. In D.19-07-009, the above Table 5 is immediately followed by: “Where multiple resource IDs within an Auction Mechanism contract are dispatched concurrently in a particular delivery month, the aggregate performance of the concurrently dispatched resource IDs may be utilized for the purpose of Demonstrated Capacity invoicing and compared with the sum of Qualifying Capacity on the monthly Supply Plan of those resource IDs. For Local resource adequacy, we clarify that the aggregation of concurrently dispatched resource IDs is only allowed for resources within the same SubLAP.” We note that if performance aggregation at the contract level was intended as the standard practice in the above Table 5, there would have been no need for the CPUC to describe a specific exception for instances where performance aggregation across (specifically limited to) multiple concurrently dispatched resources (not at the contract level) is allowed.Moreover, we observe that the above specific exception language is omitted entirely in the pro forma submission in the subject AL (as well as in the 2020 and 2021 DRAM contracts).In the dicta in D.19-07-009 following Table 5, the Commission defines default condition as: “With respect to the definition of an Auction Mechanism contract default, in the case of Demonstrated Capacity shortfall, we clarify that the Utility may (but is not required to) put a Seller’s contract in default when, for two sequential months with dispatch based invoices (after excluding any intervening months with invoices based on Must Offer Obligation), the Seller has invoiced aggregated [emphasis added] Demonstrated Capacity that is 50 percent or less than the aggregated [emphasis added] Qualifying Capacity applicable to the showing month.” If performance aggregation at the contract level was intended as the default practice in Table 5, instead of assessing performance at a single resource level, there would have been no need for the CPUC to refer to “aggregated” DC & QC in defining the “default” condition in the above dicta.“At the auction bid submissions and the year-ahead resource adequacy filing, it is sufficient to provide the above information at the contract level. For monthly resource adequacy Supply Plan submissions, the above information must be provided at the resource level.”Further, the above dicta uses the “resource” terminology to distinguish a singular resource from the contract level.“In order to increase visibility into Demonstrated Capacity invoicing, ensure reliability of the Auction Mechanism resources, but provide flexibility to the Providers, we maintain the current three invoicing options but refine them. Accordingly, we require, for each resource ID [emphasis added], Demonstrated Capacity invoices [emphasis added] based on market dispatches or capacity test events in 50 percent of the contracted months (rounded downward in case of a contract involving an odd number of months), with one of the months being August.”“Demonstrated Capacity invoicing is at the resource level [emphasis added], or at the aggregated level [emphasis added] to the extent permitted in the previous section.”Here again, the above dicta distinguishes a singular resource from the permitted multiple resource aggregation in the exception case described earlier.“Demand Response Sellers in the Demand Response Auction Mechanism shall submit Demonstrated Capacity invoices using the following timeline and policies: a) Once a Seller receives 95 percent of Revenue Quality Meter Data for a resource’s dispatch event, the due date for the Demonstrated Capacity invoice is no later than 30 days after receiving the data; and b) Demonstrated Capacity invoicing is at the resource level.” In the above context, “a resource’s” can only be interpreted as a singular resource and cannot be interpreted as an aggregation of resources at the contract level.Multiple references to “resource” in Appendix B (“Implementation Guidelines for Demonstrated Capacity Invoicing”) as an individual resource.We note that there are 25 references to “resource(s)” in Appendix B guidelines of D.19-12-040 for DC invoicing. In the context of the guidelines all references to “resource” can only be interpreted as a singular resource (Resource ID) and not an aggregation of resources at the contract level, in order for the guideline to be meaningful (except for the two obvious cases used in the context of “resource adequacy”).Thus, we conclude that the incorrect implementation of the DC invoice payment/penalty structure in the subject AL pro forma (and the 2020 and 2021 DRAM contracts) can result in full capacity payments even if individual performance of some resources are below 50% (which according to the above table should result in zero payment for that resource). A numerical example is provided in Attachment A of this Resolution. We acknowledge that the 2020 DRAM contracts are already delivering, and the 2021 DRAM contracts will soon begin delivery as of January 1, 2021. Accordingly, we leave these contracts undisturbed to avoid market disruption and correct the pro forma language for 2022 DRAM going forward to bring it into compliance with CPUC’s decisions.We clarify and reiterate that the DC payment/penalty structure approved in D.19-07-009 as applicable to the DC/QC performance ratio is assessed at the individual resource level. Hence, we direct the IOUs to modify the DRAM pro forma language, in SDG&E 3608-E et al., in accordance with the above interpretation (including the permitted exception involving the concurrent dispatch of multiple resources as a prerequisite for performance aggregation) and to bring the 2022 DRAM pro forma into compliance with D.19-07-009 and D.19-12-040. CommentsPublic Utilities Code section 311(g)(1) provides that this resolution must be served on all parties and subject to at least 30 days public review. Please note that comments are due 20 days from the mailing date of this resolution. Section 311(g)(2) provides that this 30-day review period and 20-day comment period may be reduced or waived upon the stipulation of all parties in the proceeding. The 30-day review and 20-day comment period for the draft of this resolution was neither waived nor reduced. Accordingly, this draft resolution was mailed to parties for comments, and will be placed on the Commission's agenda no earlier than 30 days from today.FindingsD.19-12-040 authorized the Energy Division to develop an annual schedule for the staff-led refinement process with workshops leading to a Tier 2 Advice Letter submittal by the Utilities no later than September 15, 2020, for the 2022 Demand Response Auction Mechanism.The refinement proposals in the subject Advice Letter that were not included in the DRAM WG Report, whether they were briefly discussed during the WG meetings or not discussed at all, are deemed out of scope for this Advice Letter. The use of defined terms and capitalization in the DRAM pro forma is reasonable to improve clarity.It is reasonable to include the subscription ID field in the Data Issue Reporting Template to facilitate problem solving by the IOUs.It is appropriate for Energy Division to update the DRAM templates at any time by based on stakeholder input, and a Resolution is not required for implementing revised templates.The additional guidelines for Qualifying Capacity, proposed in the subject Advice Letter, will improve the clarity and consistency of the QC estimation and assessment.DRAM contracted capacities are counted as Resource Adequacy and are to be regarded as firm and reliable capacity available to the grid, and the DRAM Sellers have an obligation to meet their contractual commitments.Adoption of any penalties for shortfalls between Contracted Quantity and Demonstrated Capacity, would need to be balanced with modifications to the DRAM Qualitative Criteria to avoid penalizing the Sellers twice for the same capacity shortfall.DRAM contracts must be reliable at their contracted commitments throughout the delivery period.Reliance on only high performing customers for performance by moving them across Resource IDs in different months artificially inflates the capability of the overall Seller’s portfolio. Resource ID sharing between multiple Sellers was allowed by the Commission to accommodate CAISO’s restriction of a Proxy Demand Resource aggregation to a single LSE.CAISO has removed its requirement of limiting a Proxy Demand Resource aggregation to a single LSE.Sharing of Resource IDs across contracts, regardless of the contracts being associated with multiple Sellers or the same Seller, makes contract administration very challenging and time-consuming.Sharing of Resource IDs across contracts, regardless of the contracts being associated with multiple Sellers or the same Seller, may potentially create complexities in performance verification for the purposes of the DRAM evaluations.The CPUC requires all supply side DR resources to be, at minimum, available and able to operate Monday – Friday, 4 consecutive hours during the AAH, and at least 24 hours per month from May – September.D.19-07-009 and D.19-12-040 required DRAM resources to demonstrate capacity and deliver energy during the Availability Assessment Hours. The term “over-performance” as it pertains to the performance of an individual DRAM resource in the context of D.19-07-009, refers to Demonstrated Capacity performances of a resource beyond 100% of its Qualifying Capacity. D.19-07-009 specifically allowed the performance aggregation of multiple resources (Resource IDs) when dispatched concurrently, for Demonstrated Capacity invoicing. In D.19-07-009 the Commission discouraged and declined to compensate DRAM resources for performances beyond 100% of their Qualifying Capacity, both at the Resource ID level and at the permitted aggregated level in case of a concurrent dispatch.Concurrent dispatches of multiple resources (Resource IDs) refer to these resources responding to a market dispatch or capacity test happening during the same time interval on the same day.In D.19-07-009 and D.19-12-040 the CPUC uses the Qualifying Capacity (not the Net Qualifying Capacity) of the resources in setting the Demonstrated Capacity invoice requirements for DRAM resources.The Net LRAC does not add further complexity as it simply uses the existing NMV framework that the IOUs already utilize for ranking bids and shortlisting offers during the offer evaluation stage of the solicitation process.It is reasonable to allow more time for the development of an alternative screening criterion and defer consideration of the Net LRAC as a floor to screen against an offer’s NMV for the purpose of bid selection during the DRAM solicitation.In D.19-12-040 the CPUC stated that the cost-effectiveness protocols factors A, B, C, D, E, F, and G are not a suitable measurement of cost-effectiveness of DRAM.It is reasonable to use the Net LRAC methodology as a tool to test cost effectiveness of the 2022 DRAM on a what-if basis, without changing the bid selection process during the DRAM solicitation.Energy Division’s DRAM evaluation report noted many data transfer issues experienced throughout the various DRAM pilots. It is unclear whether some of the customer (non-meter) data issues/proposals could or should be considered in the currently active Click-Through proceeding A.18-11-015 et al. or in the next DR five-year budget application proceeding anticipated in Q4 2021.It is appropriate for Energy Division to initiate a Customer Information Working Group no later than 60 days after the adoption of this Resolution.The proposed DC invoice hour clarification is not a new proposal; instead it is a clarification on the contract language implementing existing decision policy.D.19-12-040 requires that the same baseline method must be used for energy settlement at the CAISO and DC invoices.The “Resource” terminology in Table 5 of D.19-07-009 should be interpreted as “a single Resource” or “a single Resource ID” in the context of DC invoicing when assessing DC/QC performance ratio for the purposes of applying the payment/penalty structure, not as an aggregated contract. The “Resource” terminology in Table 5 of D.19-07-009 has been incorrectly interpreted as an aggregate contract level resource in the subject AL and 2020/2021 DRAM contracts already executed and approved.The incorrect implementation of the DC invoice payment/penalty structure can result in full capacity payments even if individual performance of some resources are below 50% (which according to D.19-07-009 should result in zero payment for that resource).The pro forma language proposed for the 2020 DRAM, and the 2020 & 2021 executed contracts are inconsistent with D.19-07-009 and D.19-12-040 with respect to the implementation of the DC invoice payment/penalty structure applicable to a resource’s performance.It is reasonable to correct the implementation of the payment/penalty structure in the subject AL but leave the 2020 and 2021 DRAM contracts undisturbed.Therefore it is ordered that:We approve Pacific Gas and Electric Company (PG&E), Southern California Edison Company (SCE), and San Diego Gas & Electric Company’s (SDG&E) (collectively as the IOUs) request to approve the 2022 Demand Response Auction Mechanism (DRAM) Request for Offers (RFO) and Contract Language in the subject AL, including the subject supplemental AL, with modifications as discussed here. The IOUs shall remove all changes made to the DRAM pro forma and its exhibits related to the topics this Resolution deemed out of scope. These topics include:Resource ID FragmentationConcurrent Dispatch RequirementDC Invoice Calculation based on Average PerformanceDRAM Resource Limitation on LSE’s CustomersRequired Energy Quantity ThresholdPerformance Assurance ModificationWe approve the refinement proposals listed below as modified in SDG&E 3608-E et al. and SDG&E 3608-E-A et al.Use of defined terms and capitalization in the DRAM pro forma. Inclusion of the Subscription ID field in the Data Issue Reporting Template.The additional guidelines for the Qualifying Capacity estimation and assessment for inclusion in the relevant pro forma exhibits and RFO material.The limitation on customer movement across Resource IDs in different delivery months including the same exemptions adopted in D.19-07-009 for customer movements within a delivery month.Corrections related to confidentiality in the 2022 DRAM contract language. The IOUs are directed to file a Tier 1 AL incorporating modifications associated with proposals as addressed herein, no later than 30 days from the adoption of this Resolution. The AL shall include the modified DRAM pro forma in its entirely. The IOUs shall modify the DRAM pro forma to reflect the prohibition of both type of resource (Resource ID) sharing in DRAM contracts, either between different Sellers or by the same Seller across different contracts.The IOUs shall modify the DRAM pro forma to clarify the DRAM Must Offer Obligations that the DRAM Sellers shall bid their resources into the CAISO markets during the Availability Assessment Hours in compliance with CAISO tariffs and requirements as discussed in the Resolution.The IOUs shall modify all relevant sections of the DRAM pro forma including the exhibits, to use the QC (and not the NQC) value for the purposes of DC invoice calculation payments and remove the added language, on capping DC payments at the lesser on QC and NQC values, in section 1.6.b (iv) of the pro forma. The IOUs shall modify the 2022 DRAM RFO guidelines to note that the IOUs will 1) use the Net LRAC methodology as a tool to test (on a what-if basis) the cost effectiveness of DRAM resources short listed in the solicitation process, while maintaining the status quo evaluation process for bid selection and 2) disclose the test results in the confidential portion of the Advice Letter to be submitted seeking the CPUC approval of executed 2022 DRAM contracts.The IOUs shall modify the DRAM pro forma to clarify the use of clock hour in DC invoices for the following market dispatch and capacity test scenarios: For all DAM awards, where the CAISO dispatch instructions by design are based on clock hours, the Sellers are required to submit DC invoices that also align with the same clock hours. For any RTM awards, where the CAISO dispatch instructions are based on clock hours, the Sellers are required to submit DC invoices that also align with the same clock hours. For any RTM awards, where the CAISO dispatch instructions do not start or end on the clock hour, the Sellers are authorized to submit DC invoices that do not align with clock hours but such invoices must still align with the same interval associated with the CAISO dispatch instructions. For all capacity tests, consistent with existing testing requirements for supply side DR, the Sellers shall conduct their tests based on clock hours and submit DC invoices accordingly.The IOUs shall modify the DRAM pro forma language in accordance with the interpretation, approved in this Resolution, of the DC payment/penalty structure adopted in D.19-07-009, that the DC/QC performance ratio shall be assessed at the individual resource (Resource ID) level (with the permitted exception involving the concurrent dispatch of multiple resources as a prerequisite for performance aggregation), to bring the 2022 DRAM pro forma in compliance with D.19-07-009 and D.19-12-040. The Energy Division is authorized to initiate a Customer Information Working Group (WG) no later than 60 days after the adoption of this Resolution. The WG is tasked to study the Council’s proposal from the DRAM WG, develop potential solutions that could be implemented in time for the 2022 DRAM, and produce recommendations before or by May 1, 2021.The IOUs shall file a Tier 2 AL incorporating solutions that can be implemented for the 2022 DRAM should be filed by the IOUs before or by July 1, 2021.The IOUs shall use the most updated DRAM Templates, released by Energy Division, for the purposes of the 2022 DRAM solicitations and contract execution. This Resolution is effective today.I certify that the foregoing resolution was duly introduced, passed and adopted at a conference of the Public Utilities Commission of the State of California held on December 17, 2020; the following Commissioners voting favorably thereon:_____________________Rachel PetersonActing Executive DirectorAttachment AExample 1: Contract X includes Resource A-EResource A-E have no CAISO dispatches or capacity testsResource F has a CAISO dispatch with a performance of 48%Based on decision language performances of resources A-E (w no dispatches) are based on their Must Offer Obligation (MOO) and deemed as 100%. Performance of resource F is 48%ResourceResourcePricePerformance Performance BasisA100 $100%MOOB100 $100%MOOC100 $100%MOOD100$100%MOOE100$100%MOOF100$48 %CAISO DispatchThe DC invoice calculation and payment:Current Pro-Formaper Decision LanguagePayment CalculationMethodPerformances are aggregated at contract levelContract payment is based on aggregated performance Payment is calculated at Resource Level performance Resource level payments are summed for contract paymentPayment Band91% -> Tolerance Band100% -> Tolerance Band100% -> Tolerance Band100% -> Tolerance Band100% -> Tolerance Band100% -> Tolerance Band48% -> ForfeitureTotal Payment600 $(Full payment for Contract X)500 $Example 2:ResourceResourcePricePerformance Performance BasisA100 $100%MOOB100 $100%MOOC100 $100%MOOD100$88 %CAISO DispatchE100$66 %CAISO DispatchD & E are Non-Concurrent Dispatches Current Pro-Formaper Decision LanguagePayment CalculationMethodPerformances are aggregated at contract levelContract payment is based on aggregated performance Payment is calculated at Resource Level performance Resource level payments are summed for contract paymentPayment Band91% -> Tolerance Band100% -> Tolerance Band100% -> Tolerance Band100% -> Tolerance Band88% -> Pro-rated Band66% -> De-rated BandTotal Payment500 $(Full payment for Contract X)437 $D & E are Concurrent DispatchesCurrent Pro-Formaper Decision LanguagePayment CalculationMethodPerformances are aggregated at contract levelContract payment is based on aggregated performance Payment is calculated at Resource Level performance Resource level payments are summed for contract paymentPayment Band91% -> Tolerance Band100% -> Tolerance Band100% -> Tolerance Band100% -> Tolerance Band(88% +66%)/2 = 77% -> Pro-rated BandTotal Payment500 $(Full payment for Contract X)477 $ ................
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