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?PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIAENERGY DIVISION RESOLUTION E-5109 February 11, 2021RESOLUTIONResolution E-5109. Request by Pacific Gas and Electric Company to Modify Appendix A, Appendix B, and Appendix S of its 2014 Conformed Bundled Procurement Plan.PROPOSED OUTCOME: This Resolution would approve Pacific Gas and Electric Company’s request to revise its 2014 Conformed Bundled Procurement Plan.SAFETY CONSIDERATIONS:There are no safety considerations associated with this Resolution.ESTIMATED COST: There are no costs associated with this Resolution.By Advice Letter 5905-E, Filed on August 5, 2020. __________________________________________________________SummaryIn Advice Letter (AL) 5905-E, Pacific Gas and Electric Company (PG&E) requests several modifications to Appendices A, B, and S of its 2014 Conformed Bundled Procurement Plan (“2014 BPP”). Some modifications would enable PG&E to access products and procurement processes that are substantially similar to those that the Commission approved for Southern California Edison (SCE) in Resolution E-5063. Other revisions would clarify portions of the 2014 BPP or would broaden PG&E’s procurement flexibility in response to recent decisions and market conditions. This Resolution approves PG&E’s request in AL 5905-E without modification.BackgroundAppendix A of PG&E’s 2014 BPP lists approved procurement products – including “non-standard products” – and Appendix B outlines approved procurement methods. Decision (D.)03-12-062 expanded existing procurement rules by clarifying, among other things, that the investor owned utilities (IOU) could pursue bilateral transactions for “longer term non-standard products.” D.15-10-031 defined sales of Resource Adequacy (RA) capacity as non-standard products. In AL 5905-E, PG&E proposes to define all RA products (including purchases of RA capacity) as “non-standard products,” which PG&E claims would “remove competitive disadvantages that the BPP creates for IOUs as compared to other [load serving entities (LSE)] with respect to purchases of RA products for terms longer than one quarter.” PG&E notes that:[w]hile PG&E agrees with the sentiment that [requests for offers (RFO)] remain the most appropriate vehicle for the majority of RA purchases, the restrictions associated with treating RA capacity as a standard product that must only be transacted through RFOs when PG&E is the buyer have come to limit PG&E’s ability to cost-effectively comply with RA requirements in recent years.In particular, PG&E argues that disaggregation of “Other PG&E Areas” in D.19-02-022 “has eliminated the excess capacity associated with the aggregation. This has constrained the available quantity, reduced potential market participants, and limited the time-frame for transactions in many cases.”PG&E also requests “clarifications and corrections to reflect the intended meaning” of certain portions of its Sales Framework, which appears in Appendix S of the 2014 BPP. First, PG&E requests that the Commission approve “simultaneous purchase and sale of different RA resources [which] may be the only means by which PG&E can acquire unique Local RA attributes from other LSEs.” PG&E notes that the Commission approved similar transactions (known as “RA Swaps”) for SCE in Resolution E-5063 but that unlike SCE, PG&E does not intend to treat simultaneous purchases and sales as a single product. Second, PG&E proposes to remove language related to “physical energy only sales” in Appendix S. PG&E clarifies that:[w]hile PG&E has no intention of beginning to sell physical energy only products at this time, there may be instances in which PG&E has purchased physical energy from imports for the purpose of meeting RA requirements, yet, due to changes in need, the physical energy may no longer be needed for RA compliance. The ability to sell this physical energy utilizing approved processes and methods outside of the standards and criteria currently set forth in Appendix S may benefit customers.Finally, PG&E requests clarifications in Appendix S regarding the calculation of minimum price curves for import capacity counting rights when there are no import energy offers, the function of operational constraints in calculating monthly local RA and flexible RA positions, and the fact that PG&E considers brokered transactions to be bilateral transactions.NoticeNotice of AL 5905-E was made by publication in the Commission’s Daily Calendar. Pacific Gas and Electric Company states that a copy of the Advice Letter was mailed and distributed in accordance with Section 4 of General Order 96-B.ProtestsAdvice Letter 5905-E was timely protested by the Public Advocates Office (Cal Advocates) on August 25, 2020. Cal Advocates specifically protests the re-categorization of RA purchase transactions, arguing that “PG&E’s request to eliminate the RFO requirement for RA purchases with durations that exceed three consecutive months would impair the ability of the Commission and stakeholders to monitor procurement.” Cal Advocates notes that the Commission rejected an earlier PG&E proposal to allow bilateral contracting for RA purchases in D.03-12-062 and that the Commission “explicitly defined RA capacity as a standard product” in D.14-02-040. Cal Advocates argues further that “PG&E provides no empirical evidence…to demonstrate that PG&E itself is encountering higher prices, constrained supply, or limited responses to RFOs” and that PG&E ignores that the Commission “partially re-aggregated” Other PG&E Areas in D.20-06-031.PG&E timely replied to the protest of Cal Advocates on September 1, 2020. PG&E notes that Resolution E-5063 acknowledged tight conditions in the RA markets, discussed precedent for allowing bilateral transactions for (local) RA purchases, and clarified that existing procurement rules would still apply to bilateral contracts. PG&E argues that AL 5905-E “would simply afford PG&E treatment equal to that already approved for SCE through Resolution E-5063” and that treating PG&E differently from SCE with regard to similar procurement processes would be “unreasonable and unwarranted.”With regard to procurement challenges, PG&E states that it was unable to meet local requirements in 2020 and argues that it “likely continues to face even more difficult market conditions than SCE, at least with respect to procurement of local RA, given that the Other PG&E local area remains disaggregated pursuant to Decision 20-06-031.” PG&E claims that it did not ignore D.20-06-031, noting that the Decision “merely adopted an alternative compliance mechanism…that still requires LSEs to attempt to procure in all six disaggregated areas using all commercially reasonable efforts.” PG&E also states that it “intends to continue to utilize solicitations to the greatest extent possible to fulfill its RA obligations” but that the inability to contract bilaterally “ultimately puts PG&E, and its bundled customers, at a disadvantage in the RA markets, since other LSEs, including SCE, can contract bilaterally for the RA capacity for terms in excess of three months, while PG&E cannot.” Finally, PG&E argues that it only received offers from five sellers in the RA solicitation that Cal Advocates cites, which is “an insufficient number for PG&E to meet its requirements.” PG&E concludes its reply by requesting that the Commission approve the proposals in AL 5905-E without modification.DiscussionThe Commission has reviewed AL 5905-E, the protest of Cal Advocates, and the reply of PG&E and finds that the proposed modifications to PG&E’s 2014 BPP in AL 5905-E are reasonable. Defining RA Products as Non-Standard ProductsAs Cal Advocates observes, D.15-10-031 stated “that RA capacity is a standard product and that RFOs are the appropriate vehicle for RA purchases.” However, as we noted in Resolution E-5063 (at 4), D.04-12-048 also enables the IOUs to update their Bundled Procurement Plans between biennial proceedings via advice letter. Resolution E-4828 reaffirmed this interim revision process. Furthermore, PG&E’s 2014 BPP specifically states that “[u]pdates and modifications to the BPP proposed before the next BPP application, including a request for an extension of procurement authority, will be made via an advice letter.” PG&E is correct that we identified tightness in the RA markets as one reason for allowing SCE to classify RA purchases as non-standard products in Resolution E-5063. This market situation has not improved in the intervening months. With respect to local requirements, Cal Advocates is correct that D.20-06-031 addressed procurement challenges that were exposed by disaggregation of the Other PG&E local areas. However, we did not find that it was reasonable to fully re-aggregate the Other PG&E areas in that Decision, and we left procurement requirements for individual local areas in place. For these reasons, we agree with PG&E’s argument that PG&E is facing procurement challenges (including for local RA) that are similar to those we identified in Resolution E-5063.We disagree with Cal Advocates’ argument that expanding PG&E’s ability to access RA capacity through bilateral transactions, if needed, will inhibit monitoring of PG&E’s procurement. Transactions for products over one quarter in length still require oversight by the Procurement Review Group (PRG), bilateral transactions under one quarter in length generally require a strong showing in the associated Quarterly Compliance Report (QCR), and although they do not require a strong showing, bilateral transactions for non-standard products with terms under 31 days still require a justification in the associated QCR. Cal Advocates is active in both the PRG and in QCR review. Finally, we reiterate that Resolution E-5063 enabled SCE to categorize RA purchases as non-standard products in its 2014 Conformed Bundled Procurement Plan. We agree with PG&E that it would be unreasonable to deny PG&E’s proposed re-categorization of RA products in AL 5905-E after approving substantially similar changes for SCE in Resolution E-5063. Considering the discussion above, we believe that it is reasonable to allow PG&E to classify RA products as non-standard products and thus “to pursue longer-term RA contracts via certain bilateral transactions, in addition to the more competitive (and preferred) methods.” We find that PG&E’s proposed changes to Appendix A and Appendix B are reasonable.Other Changes Proposed in Advice Letter 5905-EThe other proposed changes in AL 5905-E affect Appendix S, PG&E’s Sales Framework. Many of the changes are ministerial, such as expanding the abbreviation “flex” to “flexible RA” and reducing the three-year-forward sales window to two years per D.20-06-022. We find that these revisions and other “clarifications and corrections to reflect the intended meaning” of portions of Appendix S are reasonable. We approved “RA Swaps” for SCE in Resolution E-5063, and it is also reasonable to enable PG&E to engage in simultaneous purchase and sale transactions, which will enhance PG&E’s access to RA capacity. For the reasons PG&E describes in AL 5905-E, we also agree that it is reasonable to remove the portions of Appendix S relating to sales of physical energy only. In conclusion, we find that PG&E’s proposed revisions to Appendix S are also mentsPublic 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 on December 22, 2020.The Commission did not receive comments on the Draft Resolution. We have made two edits in the final Resolution to correct typos.FindingsIn D.04-12-048, the Commission enabled the investor owned utilities to update their Bundled Procurement Plans between biennial proceedings via advice letter. Resolution E-4828 reaffirmed this interim revision process.The Resource Adequacy market remains constrained.Expanding Pacific Gas and Electric Company’s ability to access Resource Adequacy capacity through bilateral transactions, if needed, will not inhibit monitoring of Pacific Gas and Electric Company’s procurement.Resolution E-5063 enabled Southern California Edison to categorize Resource Adequacy purchases as non-standard products in its 2014 Conformed Bundled Procurement Plan.It would be unreasonable to deny Pacific Gas and Electric Company’s proposed re-categorization of Resource Adequacy products in Advice Letter 5905-E after approving substantially similar changes for Southern California Edison in Resolution E-5063. Pacific Gas and Electric Company’s proposed revisions to Appendix A and Appendix B are reasonable.Pacific Gas and Electric Company’s proposed revisions to Appendix S are reasonable.Therefore it is ordered that:The request of Pacific Gas and Electric Company to modify its 2014 Conformed Bundled Procurement Plan as requested in Advice Letter 5905-E is approved.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 February 11, 2021; the following Commissioners voting favorably thereon: /s/Rachel PetersonRachel PetersonExecutive DirectorMARYBEL BATJER PresidentMARTHA GUZMAN ACEVES CLIFFORD RECHTSCHAFFENGENEVIEVE SHIROMA Commissioners ................
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