INTRODUCTION .gov

?Decision 20-11-053 November 19, 2020 ASK Initials "Enter your initials in all CAPS (e.g. ATTY)" [/d "ATTY"]Initials \* MERGEFORMAT ASK AgendaNo "Enter the agenda item number (e.g. CA-4)" [/d "Agenda Item No."] \* MERGEFORMAT Before The Public Utilities Commission Of The State Of CaliforniaApplication of Pacific Gas and Electric Company for Approval of Demand Response Programs, Pilots and Budgets for Program Years 2018-2022.Application 17-01-012 ASK CaseNo "Enter the case number for this decision. If there is more than one, separate by hard returns." [/d "Case Number"] \* MERGEFORMAT ASK FilingDate "Enter the filing date for this case (Month day, year). If there is more than one case, separate with hard returns and keep in the same order as the case numbers they refer to." \* MERGEFORMAT ORDER denying rehearing of Decision (D.) 19-12-040INTRODUCTIONIn this Order, we dispose of the application for rehearing of Decision (D.) 19-12-040 (Decision) filed by CPower and Enel X North America, Inc. (together, Joint Applicants).The challenged Decision adopted refinements to the Commission’s Demand Response Auction Mechanism (DRAM). The Auction Mechanism is a pay-as-bid solicitation through which Pacific Gas and Electric Company (PG&E), San Diego Gas & Electric Company (SDG&E) and Southern California Edison Company (SCE) seek monthly demand response system capacity, local capacity, and flexible capacity, which contributes to the utilities’ resource adequacy (RA) obligation. We created the Auction Mechanism pilot as a tool to encourage new participation in the demand response (DR) market and to better ensure the reliability of demand response resources.In relevant part, the Decision determined that in order to improve DRAM resource reliability and performance, beginning with the 2021 Auction Mechanism, a resource procured through the Auction Mechanism must deliver at least 30 megawatt hours (MWh) per megawatt (MW) of average Qualifying Capacity (minimum energy dispatch requirement or Required Energy Quantity (REQ)) in the CAISO energy markets. It also confirmed that Auction Mechanism resources are considered to be both resource adequacy capacity and energy products.CPower and Enel X North America, Inc. (together, Joint Applicants) filed a timely application for rehearing alleging the Decision was unlawful because it: (1) imposed a minimum energy dispatch requirement for DRAM resources outside of the resource adequacy proceeding; (2) wrongly relied on D.19-10-021 as support for an energy dispatch requirement; (3) was discriminatory; (4) denied Joint Applicants adequate due process; and (5) was not supported by the findings or conclusions. Responses were filed by The Public Advocates Office (Public Advocates) and the California Efficiency + Demand Management Council (the Council).We have carefully considered the arguments raised in the application for rehearing and are of the opinion that good cause has not been established to grant rehearing. Accordingly, we deny the application for rehearing of D.19-12-040 because no legal error was shown. DISCUSSIONVenue for Determining DRAM Resource Attributes Joint Applicants contend that our Decision departed from Commission precedent by imposing a minimum energy dispatch requirement on DRAM resources outside of a resource adequacy proceeding. In Joint Applicants’ view, the resource adequacy proceeding is the only lawful venue in which to consider demand response resource adequacy obligations. (Rhg. App., pp. 3-5, citing, e.g., Order Instituting Rulemaking to Promote Policy and Program Coordination and Integration in Electric Utility Resource Planning [D.05-10-042] (2005) p. 44 (slip op.); Order Instituting Rulemaking to Oversee the Resource Adequacy Program, Consider Program Refinements, and Establish Annual Local Procurement Obligations [D.10-06-036] (2010) p. 34 (slip op.).)We do not consider the DRAM dispatch requirement to be a resource adequacy obligation per se. While the general intent of the Auction Mechanism is to procure resource adequacy capacity, the DRAM energy dispatch requirement is an Auction Mechanism requirement intended to ensure that demand response Auction Mechanism resources will be reliable when dispatched. Even if the dispatch requirement were a resource adequacy requirement, the decisions Joint Applicants cite to do not establish error. The decisions do show that we often consider demand response resource adequacy obligations in resource adequacy proceedings. But there is no legal authority that requires us to do so. Further, in their comments on the DRAM Working Group Report, Joint Applicants along with several other parties recommended that we consider DRAM resource obligations (such as the energy dispatch requirement) in this proceeding. They reasoned that it is difficult for demand response issues to receive priority attention in the broader resource adequacy proceeding. And any determinations reached here could later be harmonized in the resource adequacy proceeding as necessary to ensure alignment with resource adequacy rules. We agreed. Joint Applicants also contend we erred in characterizing DRAM resources as both resource adequacy and energy products. They argue resource adequacy requirements are capacity-based, not energy-based requirements. (Rhg. App., p. 4, citing Order Instituting Rulemaking to Promote Policy and Program Coordination and Integration in Electric Utility Resource Planning [D.04-10-035] (2004) p. 45 (slip op.); D.05-10-042, supra, p. 103 [Conclusion of Law Number 1] & p. 104 [Conclusion of Law Number 13] (slip op.).)We agree that resource adequacy is generally described as a capacity-based program. Yet, even where we have not required resource adequacy contracts to include an energy component, we have clearly contemplated that such requirements may be needed. For example, in D.04-10-035 the Commission stated:It is pointless to create a body of resource adequacy requirements that create contractual obligations for generators to serve load, and then not require generators to do so.(D.04-10-035, supra, p. 52 [Finding of Fact Number 18] (slip op.).)The Commission went on to state:Because we are persuaded that the likely benefits of a local deliverability requirement outweigh the likely costs, we adopt this requirement and direct the parties to address the implementation details of a local reliability requirement in future proceedings.(D.04-10-035, supra, p. 55 [Conclusion of Law Number 22] (slip op.).)Again in D.05-10-042, the Commission stated:We are unwilling to adopt a rule that could cause LSEs to contract for large amounts of capacity that will not be called upon, because there is little assurance that such a rule would create reliability benefits that outweigh the cost of that capacity.(D.05-10-042, supra, p. 74 (slip op.).)Consistent with these statements, our Decision in this proceeding explained: …we agree with the CAISO, the Public Advocates Office and OhmConnect that resource adequacy capacity cannot be divorced from the expectation and obligation to reliably provide energy in the CAISO market and if Auction Mechanism resources are not being dispatched they are neither used nor useful, nor are they meeting the environmental objectives of California or the goal of the Auction Mechanism established in D.19-07-031.(D.19-12-040, p. 14, citing D.19-07-009, supra, pp. 36-38 (slip op.) [“To help California meet its environmental objectives, cost-effectively meet the needs of the grid, and enable customers to meet their energy needs at a reduced cost while spurring innovation and growth of a competitive third-party market.”].)Based on all these statements, it was neither unreasonable nor unlawful for our Decision to impose a minimum energy dispatch requirement on DRAM resources and characterize such resources as both resource adequacy and energy products. D.19-10-021 Joint Applicants contend that we wrongly relied on D.19-10-021 to support establishing the minimum energy dispatch requirement for DRAM resources. Joint Applicants argue that the energy requirement adopted in D.19-10-021 involved only import contracts, thus that decision was not relevant here. (Rhg. App., p. 6.) We were aware that the energy requirement in D.19-10-021 was limited to import contracts. But the decision was relevant here because both proceedings involved concerns regarding resource reliability. For example, in D.19-10-021 we expressed the following concern:[T]he Commission is concerned that some load serving entities (LSEs) may be relying on unspecified imports for RA in a manner that does not conform with the D.04-10-035 and D.0510-042 requirements and could undermine the integrity of the RA program. Specifically, some unspecified imports used by LSEs to meet RA requirements may not provide firm energy delivery, which raises the question of whether these resources will be able to deliver energy to the grid when it is needed most.(D.19-10-021, supra, p. 6 (slip op.).)We went on to state:One of the goals of the RA program is to ensure that sufficient energy flows into California when the system is peaking in order to maintain grid reliability.(D.19-10-021, supra, p. 8 (slip op.).)Here, the Energy Division’s DRAM Evaluation Report flagged similar reliability issues, noting that Auction Mechanism resources were the least active of resources in the CAISO energy markets and had low scheduling rates as compared to other market resources used to support peak load. As a result, Energy Division recommended a minimum energy dispatch requirement to, among other things, improve resource reliability, increase confidence that capacity will actually be available when the resource is called upon to relieve grid stress, and ensure that resources are bid economically. Given these similar concerns, it was not unreasonable to consider the approach taken in D.19-10-021. And in any case Joint Applicants cite no legal authority that bars us from looking to our own prior determinations. Still, Joint Applicants counter that it was unreasonable to look to D.19-10-021 because that decision was stayed and cannot be relied on pending resolution of a rehearing application. (Rhg. App., p. 6.) It is correct that we issued a stay of D.19-10-021. Subsequently, however, we granted limited rehearing. And while D.19-10-021 does remain stayed pending disposition of that rehearing, it is stayed only as to issues involving a self-scheduling requirement and to clarify the distinction between resource-specific and non-resource-specific resource adequacy imports. Those issues are separate and distinct from the adopted energy requirement. Thus, that aspect of D.19-10-021 was still relevant here.DiscriminationJoint Applicants contend that no other utility-administered demand response programs have an energy dispatch requirement, so there is a question as to whether it was discriminatory to create an energy dispatch requirement for only Auction Mechanism resources. (Rhg. App., p. 7.)We reject this challenge for two reasons. First, there is nothing inherently discriminatory about adopting an energy dispatch requirement. As discussed above, the Commission adopted similar energy requirements for resource adequacy import contracts without encountering any claim of discrimination. Second, we find no error under the relevant law governing discrimination claims. Discrimination claims are governed by the equal protection clause, which requires that similarly situated entities be treated equally unless disparate treatment is warranted. Auction Mechanism resources are not similarly situated to other demand response or resource adequacy resources. Our Decision explained that the Auction Mechanism is not a traditional procurement mechanism. It is a carve-out mechanism designed specifically to encourage third-party demand response providers to participate in the CAISO market. DRAM resources do not compete directly with other resource adequacy resources. Even if they did, in cases of economic regulation such as this, equal protection requires only that there be a reasonable relationship between the classifications drawn and the purpose for which they are made. Here, there was a reasonable relationship between the minimum energy dispatch requirement for Auction Mechanism resources and the purpose for which it was made. It was adopted to address problems of reliability and performance of Auction Mechanism resources in the CAISO markets. Even Joint Applicants concede that the dispatch requirement will achieve the goal of more frequent dispatch. (Rhg. App., p. 7.)Still, Joint Applicants speculate that dispatch may not be economic in relation to the opportunity cost and market clearing prices. Yet they point to nothing in the record to support such a conclusion, and speculation is not evidence nor does it establish legal error. , they fail to establish that the minimum energy dispatch requirement violated relevant discrimination standards or was otherwise unlawful. Section 1708 and Due ProcessJoint Applicants claim that the Decision violated Public Utilities Code Section 1708 because we were required to modify our resource adequacy decisions if we wanted to adopt a DRAM energy dispatch requirement. (Rhg. App., p. 10-11.) We disagree.Section 1708 allows us to rescind, alter, or amend any Commission decision or order so long as parties receive adequate notice and opportunity to be heard. However, Joint Applicants fail to identify any resource adequacy decision that we needed to modify in order to adopt the DRAM energy dispatch requirement. In fact, Joint Applicants identify no resource adequacy decision that is even relevant to the issue of DRAM-specific resource requirements. That is because Auction Mechanism issues have consistently been considered in the demand response proceeding, not the resource adequacy proceeding. Thus, it was logical, reasonable, and lawful for the Commission to adopt any changes to the Auction Mechanism requirements here.Joint Applicants argue that in any case, their constitutional right to due process was violated because we imposed the energy dispatch requirement without affording parties adequate notice and opportunity to be heard. (Rhg. App., pp. 6, 10-11.) That is incorrect. Due process principles require that parties receive adequate notice and opportunity to be heard before the Commission adopts requirements such as an energy dispatch requirement. However, the parties received more than adequate due process here.Parties were first given notice of potential changes to the Auction Mechanism back in 2016, following the two-year pilot authorized in D.14-12-024. At that time, we found that we could not determine, based on the two-year pilot, whether the Auction Mechanism framework was successful. Accordingly, we directed Energy Division to conduct an independent evaluation of the Auction Mechanism, hold public workshops, and provide a public report identifying any recommendations for changes to the Auction Mechanism. In January 2019, the Energy Division’s DRAM Evaluation Report was released to the public by an Administrative Law Judge (ALJ) Ruling. The Report specifically identified the minimum energy dispatch requirement as among the recommendations for public comment and discussion in the workshops. To ensure parties received adequate due process, the ALJ Ruling gave notice of two public workshops at which parties could make heard their positions, and it allowed parties an opportunity to submit written comments on Energy Division’s proposed improvements to the DRAM. After the first public workshop was held, a second ALJ Ruling was issued soliciting additional public comment in preparation for the second workshop. The Ruling also established two public stakeholder working groups: one to address improvements for DRAM performance and accountability (including minimum dispatch hours); the other to address proposed improvements to DRAM pro forma contracts.Finally, a third ALJ Ruling was issued giving parties yet another opportunity to provide comment in response to a specific set of questions, provide comments on proposals by Working Group 1, and provide any further comments on the Energy Division Evaluation Report – all of which included the issue of potential DRAM energy dispatch requirements. That Joint Applicants had notice and availed themselves of the various opportunities to be heard on the issues is evidenced by the comments they filed in response to the ALJ Rulings, as well as their comments on the Proposed Decision. Accordingly, we find no merit to any claim that the Joint Applicants were denied adequate due process on the relevant issues. Findings and ConclusionsJoint Applicants contend the Decision violated Section 1705 and related case law because it failed to establish a factual or legal basis for creating a minimum energy dispatch requirement. (Rhg. App., pp. 8-10, citing e.g., California Manufacturers Association v. Public Utilities Commission (“Calif. Mfrs. Assn.”) (1979) 24 Cal.3d 251, 258-259; California Motor Transport Co. v. Public Utilities Commission (1963) 59 Cal.2d 270, 273.)Section 1705 requires that Commission decisions contain separately stated findings of fact and conclusions of law on all issues material to the order or decision. Relevant case law further explains that findings are essential to “afford a rational basis for judicial review and assist the reviewing court to ascertain the principles relied upon by the Commission….” Joint Applicants claim that we failed to meet this standard based on their reading of Finding of Fact Numbers 8, 16 and 17, and Conclusion of Law Numbers 4 and 5. (Rhg. App., p. 9.) However, Joint Applicants ignore that the Decision contained twelve other formal findings to support the energy dispatch requirement. Those findings explained, among other things, the purpose of the Auction Mechanism, the obligation of resources to provide reliable energy in the CAISO market, and the fact that energy dispatch is necessary for resources to be used and useful, consistent with the State’s environmental objectives, and consistent with the Auction Mechanism goals discussed in D.19-07-009. The findings also explained that the Auction Mechanism is a unique (non-traditional) type of procurement mechanism whose resources do not compete directly with other resource adequacy resources. And they explained that a dispatch requirement is needed for Auction Mechanism resources to be more successful in offering competitive wholesale market prices. Our Decision text also discussed our determination in the context of addressing parties’ positions, Energy Division’s Evaluation Report findings, and relevant Commission Auction Mechanism goals and decisions. Together, the text and formal findings were adequate to afford a rational basis for judicial review and allow a reviewing Court to ascertain the principles we relied on in reaching our determination.We also note that Joint Applicants’ specific challenge of Finding Numbers 16, 17 and 8, and Conclusion Numbers 4 and 5 is unpersuasive. Finding Numbers 16 and 17, and Conclusion Number 4 merely memorialize our intent to implement the energy dispatch requirement in time for the 2021 Auction Mechanism. Implementation timing is a discretionary issue entirely within our authority to determine. Finding Number 8 and Conclusion Number 5 relate to the energy component of Auction Mechanism resources. Our Decision explained those statements with specific reference to relevant supporting Commission decisions. Joint Applicants do not address those decisions or establish that we were wrong. Accordingly, we find no legal error. CONCLUSIONFor the reasons stated above, we deny the application for rehearing of D.19-12-040 because no legal error was established. THEREFORE, IT IS ORDERED that: 1. The application for rehearing of D.19-12-040 is denied.2.This proceeding, Application (A.) 17-01-012, remains open.This order is effective today.Dated November 19, 2020, at San Francisco, California.MARYBEL BATJER PresidentLIANE M. RANDOLPHMARTHA GUZMAN ACEVESCLIFFORD RECHTSCHAFFENGENEVIEVE SHIROMA Commissioners ................
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