Discussion Paper � Standard Capacity Product Workshop by VGLW5vR


									                  Discussion Paper – Standard Capacity Product Workshop
                                     December 14, 2009

           For many years RA proceedings have discussed the idea of a standard capacity
product (SCP) and the CPUC has expressed support1 for an SCP. Parties have requested
California ISO to develop an SCP to reduce transaction costs associated with RA compliance.
In 2008 and 2009, California ISO facilitated a stakeholder process that led to an adoption by
FERC of a limited SCP. At the same time, the CPUC considered these issues and decided
that the SCP would be accepted, but not required, for 2010 RA compliance. The adopted
SCP is a framework of availability standards as well as penalties and payments for
performance relative to these standards. This SCP will be effective beginning January, 2010.
FERC has directed California ISO to work toward extending SCP to currently exempt
resources (Demand Response and resources whose QC is based on historical data that is not
“corrected” for outages including, wind, solar, cogeneration, and other non-dispatchable
           Now, California ISO is beginning a stakeholder proceeding to extend the SCP to
these exempt resource types and has posted an issue paper on its website.2 California ISO
has suggested in comments that the CPUC should reach a decision on Qualifying Capacity
(QC) counting rules relevant to the currently exempt resources by March, 2010. This would
allow California ISO to rely on these updated counting rules in an April, 2010 filing at FERC
to extend the SCP to currently exempt resources. Then, California ISO would expect a
FERC decision adopting the extended SCP in June, 2010 – in time for the 2011 RA
compliance year.
           In the Pre-hearing Conference (PHC) in R.09-10-032, many parties offered strong
resistance to the idea of a March SCP decision and stated that they do not feel that ending the
exemptions is an urgent issue. Further, many parties noted that the currently exempt resource
classifications are not generally traded in the RA markets. Therefore, there is little need for
the SCP rules for these resources to be adopted significantly before the year-ahead RA
filings. Beyond this lack of urgency, there were three basic objections noted by parties to a
March SCP decision:

    See, e.g. D.09-06-028 at 42; D.06-07-031 at 4; D.05-10-042 at 26; D.04-10-035 at 42
               Some parties that represent Qualifying Facilities (QFs) oppose addressing the
        relevant counting rules at this time because of the ongoing QF settlement process.
        Similarly, parties pointed to the application for rehearing of the wind and solar QC
        counting rules adopted by D.09-06-028 and suggested delaying further consideration
        premised on these counting rules.
               Availability standards for DR resources raise complex issues, which are also
        at issue in other forums including California ISO’s Proxy Demand Resource (PDR)
        process and R.07-01-041.
               Many parties noted in comments, and at the PHC, that they feel a higher
        priority issue should be ending the LSE-based replacement obligation for RA
        resources on scheduled outages.3 These parties indicated at the PHC that they do not
        wish to devote procedural effort to ending exemptions to the SCP that, in their view,
        would be better spent seeking a means to end the LSE-based replacement obligation.

Objectives of the Workshop:
    1. Assist California ISO in development of SCP proposal
    2. Assist Parties to R.09-10-032 to develop proposals to coordinate CPUC’s
        Resource Adequacy (RA) rules with SCP
    3. Inform California ISO and CPUC staff about views of market participants on the
        connections between SCP, RA, and DR
    4. Cultivate smooth collaboration between the California ISO SCP stakeholder
        process and the CPUC’s RA and DR programs and proceedings

Brainstorm 1 – Resources with QC based on Historical Data
        One class of resources currently exempt from the SCP is resources whose QC is
determined using historical data that has not been corrected for forced outages. This
includes: wind, solar, and non-dispatchable cogeneration, biomass, and geothermal.
What is an outage for intermittent facilities? How is it reported and measured?
      California ISO’s SLIC data system does include forced outages for these resources
and therefore the same methodology could apply to these resources as the other resource
types already included in SCP. However, staff understands that some intermittent resources

 See section 13 of the 2010 RA Guide: http://www.cpuc.ca.gov/NR/rdonlyres/14DFD39E-40C6-4FAF-
may be using the SLIC outage codes differently than conventional resources. Are there any
necessary changes to the SLIC system to incorporate these resources into SCP?
“Correcting” historical data to remove forced outages
      The exemption to the SCP is premised on the potential “double jeopardy” associated
with forced outages for these resource types. There is one penalty for a forced outage in the
form of a reduced QC value and a financial penalty under the SCP. In D.09-06-028, the
CPUC adopted a methodology to “correct” historical data for scheduled outages. Could this
same methodology be applied to forced outages? Would this correction be sufficient to end
the exemption? Would such a change create any concerns?

Brainstorm 2 – Demand Response
       Demand Response resources are exempt from the SCP. Other proceedings both at
CPUC (R.07-01-041) and California ISO (Proxy Demand Resource) are considering issues
fundamental to DR in California.
What is an outage for DR? How is it reported and measured?
       As noted in California ISO’s issue paper, DR is not included in the ISO markets.
Therefore no mechanism exists to track the availability of DR resources. How should these
resources be tracked?
Does CPUC need to change QC counting rules in order for SCP to apply to DR?
      The exemption for DR does not explicitly refer to the way DR resources are counted
in RA. Are there any changes that should be made to DR counting in order to coordinate
with SCP? Are these necessary for SCP?
Are there any other changes to RA that CPUC needs to make for SCP to apply to DR?
       Is there anything about the way RA is currently structured that prohibits SCP from
applying to DR?

Brainstorm 3 – Coordination of RA, SCP, and DR
       As noted above, there are many overlapping processes covering these issues. Further,
SCP touches many parts of RA.
Is it possible to end the LSE-based replacement obligation for scheduled outages?
        Parties have suggested that the SCP is not meeting its goals because LSEs are
required to provide replacement capacity for RA resources on scheduled outages. Therefore,
the SCP is not yet a fungible product that can be freely traded once it is purchased. What are
solutions to this problem? Can the replacement obligation be placed on generators? What is
the CPUC’s role and what is California ISO’s?
How does SCP effect procurement for local RA?
      In the California ISO’s local capacity technical study, all resources in the local area
are assumed to operate at their August NQC. Does the SCP provide a sufficient incentive
that some resources may not sell their full NQC value? Is it possible that this could lead to a
residual local procurement deficiency? If so, what happens; should ISO use backstop
procurement to fill the deficiency? Should this concern impact the way the LCR study is
performed or the way local RA obligations are adopted?
Should NQC calculations change due to SCP?
       In the discussion of the previous question, the possibility of SCP incentives impacting
RA procurement and other RA processes is considered. Should there be any changes to NQC
calculations as a response?

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