California Public Utilities Commission Approves Flexible Capacity Framework

Citing changes in the regional electric market related to the mandated addition of renewable generating facilities, and alluding to such other factors as tightened water resource regulations and the possibility of merchant power plant shut-downs, the California Public Utilities Commission has approved an interim “flexible capacity” framework as a further component of its annual Resource Adequacy (RA) requirements process. The commission defined flexible capacity need as the quantity of resources required by the California Independent System Operator (ISO) to manage grid reliability during the greatest three-hour continuous ramp in each month. It acknowledged that inclusion of flexible capacity can increase costs to ratepayers, but reiterated that such would not happen in the coming year, given its finding of adequate flexible capacity for 2014. The commission reported that, according to the ISO, the existing regulatory framework does not provide assurances that adequate flexible capacity will be available to the ISO in the future. The ISO has warned that such uncertainty is exacerbated by at least two other factors: (1) the possible retirement under rules set forth by the state’s Water Resources Control Board of a number of “once-through cooling” generation units; and (2) the possible retirement of some merchant generation facilities that may not be able to obtain sufficient revenues from the open market, as currently structured, to continue operations.  Decision 13-06-024, Rulemaking 11-10-023, June 27, 2013 (Cal.P.U.C.). For more analysis, subscribe to URN.