1.
Provide a summary of your organization's comments on the Central Procurement Entity (CPE) Implementation final proposal:
California Community Choice Association (CalCCA) appreciates the opportunity to comment on the California Independent System Operator’s (CAISO’s) Central Procurement Entity (CPE) and Resource Adequacy Availability Incentive Mechanism (RAAIM) Settlement Modification Final Proposal. Despite concerns with how the current hybrid CPE framework for California Public Utilities Commission (CPUC) jurisdictional entities is functioning, CalCCA generally supports the CAISO’s proposal to implement changes to its tariff and systems to accommodate central procurement entities, with a caveat, and its proposal to modify the RAAIM settlement process. In summary:
- The CAISO should not remove existing tariff language in section 40.3.3 that states “Scheduling Coordinators for Load Serving Entities may aggregate responsibilities for procurement of Local Capacity Area Resources,” because not all load-serving entities (LSEs) who may want to aggregate local requirements are under a CPE established by their local regulatory authority (LRA);
- While CalCCA understands the CAISO is deferring to the CPUC on how best to balance self-showing incentives under the hybrid procurement framework,[1] imbalances between incentives and disincentives potentially impact the CAISO and its ability to backstop for local needs; and,
- CalCCA supports the CAISO’s proposal to modify the RAAIM settlement process to eliminate the rollover of excess funds from unavailability charges above the monthly cap.
[1] Final Proposal at 16.
3.
Provide your organization’s feedback on the Recognizing a Central Procurement Entity topic as described in section 5.1:
CalCCA generally supports the CAISO’s proposal with one important caveat:
The Final Proposal proposes to remove existing tariff language in section 40.3.3 that states “Scheduling Coordinators for Load Serving Entities may aggregate responsibilities for procurement of Local Capacity Area Resources,” on the basis that the language could cause confusion when implementing a formal CPE process in parallel with the existing informal aggregation opportunity.[1] The CAISO should not remove this tariff language because LSEs without a CPE may still want the ability to aggregate local obligations. For example, CPUC jurisdictional LSEs in the San Diego TAC area do not have a CPE. If the CAISO were to implement its proposed change, these LSEs would not have the ability to aggregate to meet their local requirement, as the CPUC as the LRA has not established a CPE in their area. LSEs without a CPE should be able to aggregate themselves to meet their local RA procurement obligations without having the barrier of having the LRA establish a CPE first. Therefore, the CAISO should keep the existing tariff language in 40.3.3 and provide both the CPE option and the LSE-based aggregation option in its tariff so that LSEs without a CPE may continue to aggregate their procurement obligations on their own.
[1] Final Proposal at 10.
6.
Please provide your organization’s feedback on the Clarification of CPM Process and Cost Allocations topic as described in section 5.4:
CPM Process and Cost Allocations Proposal
CalCCA does not oppose the CAISO’s proposed CPM process and cost allocation proposal. The proposal would allocate CPM costs for an individual local RA deficiency to the entity assigned the local obligation (the CPE in the current CPUC regulations) and allocate CPM costs for collective deficiencies pro-rata to all LSEs. However, CalCCA reiterates its previous position that for collective deficiencies, the CAISO should instead determine the load share of LSEs procured for by the CPE and allocate collective CPM costs to the CPE rather than directly to LSEs. This way, both individual and collective local deficiencies are allocated to the CPE first and can then be allocated to LSEs through CAM. Under this approach, all LSEs would still share the costs of both individual and collective CPE deficiencies and the allocations would be simpler for the CAISO and LSEs because backstop costs allocations would all be allocated to and from the same source, the CPE.
Impacts of the Hybrid Framework for CPUC Jurisdictional Entities
The CAISO’s proposal for the Capacity Procurement Mechanism (CPM) process and cost allocations also discusses how CPM cost allocation would work under the CPUC’s hybrid procurement framework. The CAISO states, “As a general principle, the CPM cost allocation for an individual local RA deficiency will follow the entity assigned the local obligation by the LRA.”[1] Under D.20-06-002, the CPE is the entity assigned the local obligation. Therefore, the CPE will be allocated the costs associated with local backstop procurement performed by the CAISO. The backstop costs incurred by the CPE would then be allocated to LSEs through the cost allocation mechanism (CAM). This would not change under the PD recently issued by the CPUC.[2] However, the PD would require the CPE, in collaboration with the CPUC, to then allocate all costs associated with the “non-performance” of a self-shown resource to the self-showing LSE. CalCCA is concerned with the PD’s direction because self-showing LSEs only receive a pro-rata share of the local benefits provided by self-shown resources, yet would face all of the backstop cost risks. For example, an LSE with a three percent load ratio share that shows a 100 MW resource would receive a reduction in cost allocation from the CPE of 3 MWs. However, in exchange for this reduction in cost allocation, the self-showing LSE takes on 100 percent of the CAISO CPM cost risk if the resource is unable to perform in a given month. Additionally, the risk of backstop costs associated with reallocation is only offset by the LCR RCM which is very low, often $0. Given the CAISO soft offer cap for CPM at $6.31/kW-month, the offsetting revenues and cost reductions are likely to be insufficient for an LSE to self-provide a resource. When the risks of self-showing outweigh the benefit an LSE receives by self-showing, the result will be fewer resources shown to the CPE.
While CalCCA understands the CAISO is deferring to the CPUC on how best to balance self-showing incentives under the hybrid procurement framework,[3] it raises the issue here to flag potential impacts to the CAISO and its ability to backstop for local needs. Because many local areas are extremely tight, such that most or all local resources are needed to meet the local RA requirement, it may be impossible for the CAISO to backstop to fill deficiencies. This is because all local resources not shown by the CPE or self-shown by LSEs are likely already under contract and being used by LSEs to meet their system obligations or are being held to provide substitution in case a self-shown local resource does not perform.
[1] Final Proposal at 15.
[2] Proposed Decision on Phase 1 of the Implementation Track: Modifications to the Central Procurement Entity Structure: https://docs.cpuc.ca.gov/PublishedDocs/Efile/G000/M449/K438/449438092.PDF
[3] Final Proposal at 16.
