Dear Commissioner Peterman, Administrative Law Judge Miles, and the Parties to A :

Transcription

1 Regina Coburn From: Sent: To: Subject: Attachments: Importance: Legal Admin Friday, 4:06 PM Regina Coburn A PRP RFO 2: SCE Letter re SCE Application for Approval of the Results of Second Preferred Resources Pilot (PRP) Request for Offers A SCE Letter to Comm. Peterman.pdf High Dear Commissioner Peterman, Administrative Law Judge Miles, and the Parties to A : Southern California Edison Company is transmitting the attached written substantive correspondence to Commissioner Peterman and the other Commissioners pursuant Rule 8.2(c)(3)(A)(1) of the Commission s Rules of Practice and Procedure, which provides that written ex parte communications are permitted in ratesetting proceedings, provided the interested person making the communication serves copies of the communication on all parties on the same day the communication is sent to a decisionmaker. SCE will not serve an after-the-fact notice under Rule 8.4 regarding this communication because such written ex parte communications are not subject to the reporting requirements set forth in Rule 8.4. See Rule 8.2(c)(3)(A)(2). (See attached file: A SCE Letter to Comm. Peterman.pdf) cc: Picker.Exparte@cpuc.ca.gov Guzman_Aceves.Exparte@cpuc.ca.gov Rechtschaffen.Exparte@cpuc.ca.gov Randolph.Exparte@cpuc.ca.gov Official Service List for R Official Service List for A Regards, Legal Administration Southern California Edison Company Telephone (626) legal.admin@sce.com 1

2 Colin E. Cushnie Vice President Energy Procurement & BY ELECTRONIC SERVICE ATTN: Commissioner Carla Peterman 505 Van Ness Avenue San Francisco, CA Re: Southern California Edison Company s Application for Approval of the Results of its Second Preferred Resources Pilot (PRP) Request for Offers, A Dear Commissioner Peterman: SCE appreciates the Commission holding a ratesetting deliberative meeting on, and its continuing consideration of, Southern California Edison Company s (SCE s) Application for Approval of the Results of its Second Preferred Resources Pilot (PRP) Request for Offers (PRP RFO 2). The Proposed Decision (PD) issued in the proceeding represents a significant departure from the Commission s support of the PRP endeavor, as well as its approach to analyzing the cost-effectiveness of Distributed Energy Resources (DERs). In addition, the Commission should understand that the summary denial of this Application will not only seriously frustrate, if not end, the PRP endeavor, but also have a disruptive effect on the market for preferred resources like DERs. SCE believes those outcomes are contrary to the state s clear environmental policies. In short, the PD proposes to summarily deny SCE s Application on the ground it is not cost effective to procure DERs based on the negative net present value (NPV) analysis SCE prepared. However, most policy-based procurement has a negative NPV valuation relative to market economics. Indeed, if preferred resources were always economic relative to market value, procurement mandates or special actions would not be necessary to develop the market for preferred resources. The PD also makes a finding contradicted by the record that the qualitative benefits of the PRP do not outweigh negative NPV because the PRP purportedly duplicates activities and efforts occurring through other proceedings. This finding ignores the primary purpose of the PRP, which is to measure, monitor and assess the performance of a concentration of DERs to meet projected load growth. As a preliminary matter, SCE appreciates the PD s recognition of SCE s support of grid modernization and the state s environmental goals. 1 It is true SCE initiated the PRP endeavor as an act of good corporate citizenship. Much of the PRP s activities, particularly the early stages of the endeavor, were purely internal efforts that did not require any Commission approval or authorization. SCE therefore limited its imposition on the Commission s time and resources to the activities that require Commission approval, such as approval for procurement. Nevertheless, to ensure the endeavor was sound, the entirety of the PRP, like Commission- 1 PD at p. 11 (stating, We applaud SCE s broader initiative to support grid modernization and the state s environmental goals. ) 2244 Walnut Grove Avenue Quad-1d, GO1 Rosemead, CA Tel. No.: FAX:

3 Commissioner Peterman Page 2 mandated programs, has been conducted in a transparent manner with broad stakeholder involvement. SCE publishes and routinely reports on its PRP activities on its public website. 2 The PRP has been informed from the outset by stakeholder input from customers, environmental justice organizations, energy market participants, and members of the regulatory community. SCE s Application was subjected to the Commission s oversight, due process procedures, provided the opportunity for stakeholder involvement, and was contested and litigated. These are the same features present in proceedings involving Commission-mandated programs. In that regard, any distinction between the PRP and Commission-mandated programs is one without material difference. That is particularly true with respect to the Commission s approach to cost-effectiveness of utility procurement of DERs. The PD appears to propose to adopt the Office of Ratepayer Advocates (ORA s) false equivalence between NPV and cost-effectiveness. When analyzing the cost-effectiveness of preferred resources, particularly storage, it is not appropriate to focus exclusively on NPV. NPV is not the sole measure of cost-effectiveness; instead, it is a quantitative measure based on market valuations used for ranking and selection. Even with mandated Commission programs, the targeted, particularly urban, procurement of preferred resources historically has had negative NPVs, including LCR procurement, CR-RAM, SPVP 5, ACDR and ACES RFOs/RFPs, and various procurements via feed-in tariffs, such as RAM, BioRAM, DRAM and ReMAT. 3 The PD does not explain why negative NPV is acceptable for mandated procurement, but not for the PRP RFO 2, particularly when both are subject to the same reasonableness review by the Commission. The arbitrary result of the PD sends conflicting messages about the Commission s support of preferred resources that will likely have lasting downstream and disruptive effects. The PD may also signal to other parties that this is the new standard for analyzing DER procurement, inviting this fallacious argument in other proceedings. The Commission can inspect the record SCE provided on valuation and cost-effectiveness in its Opening and Rebuttal Testimony. 4 SCE believes it clearly met its burden to prove the PRP RFO 2 resources are costs-effective. The independent evaluator also agreed the procurement was reasonable. 5 2 See 3 SCE-03C at p SCE-01C, pp (Valuation Methodology); Id. at pp (Solicitation Results); Id. at p. 75; SCE-03C, pp. 3-7 (The PRP RFP 2 Contracts Are Cost Effective). 5 SCE-01C, Appendix D, p. 8 (stating, Sedway Consulting believes that SCE s LCBF methodology was fair and rigorous. It was consistent with evaluation approaches that Sedway Consulting has seen applied in other utilities solicitations. Although the fine details may differ from solicitation to solicitation, most utilities employ a combination of quantitative and qualitative assessments similar to those developed by SCE for its PRP RFO 2 evaluation process ), p. 28 (stating, Sedway Consulting concludes that all of the above contracts merit CPUC approval because the contracts economics and their general terms and conditions represent the best resources available from a competitive solicitation. Sedway Consulting s parallel evaluation yielded results that confirmed the appropriateness of the selection of these contracts. )

4 Commissioner Peterman Page 3 SCE also met is burden to prove the qualitative benefits of the PRP. SCE s testimony, briefing and comments clearly explain the results of the PRP are important to inform whether SCE can procure, deploy, and rely upon preferred DERs as the state diminishes its reliance upon conventional gas-fired generation or when such conventional resources become unavailable. The Commission can find information about the value of the PRP endeavor in the record in SCE s Opening Testimony, 6 Supplemental Testimony, 7 Rebuttal Testimony, 8 Opening Brief, 9 Closing Brief, 10 and Opening Comments on the PD, 11 as well as in the PD. 12 SCE launched the PRP RFO 2 to determine if high concentrations of locally-sited, preferred, DERs could be deployed in sufficient quantities and on reasonable terms to offset 238 MW load growth by 2022 without resorting to gas-fired generation. 13 In other words, if SCE can successfully complete the PRP, it will demonstrate whether such locally sited resources can manage incremental load growth in a manner similar to a like-sized gas-fired generation plant. The obvious value of such data increases as the grid is becoming more reliant on DERs and the state and planning agencies look to DERs to meet customers electrical needs at a mass scale. The results will support customer choice and reveal the true value and ability of DERs for the benefit of market participants and the state s planning activities. SCE is unaware of any other endeavor or pilot anywhere being conducted on the scale and concentration of the PRP. Given the benefits of conducting the PRP, it is not surprising the Commission has been publicly and formally supportive of the PRP since its inception. For example, in the Track IV Long-Term Procurement Plan Decision, the Commission noted,... in concept the Living Pilot is promising both as a way to meet LCR needs and as a laboratory for innovation regarding preferred resources. 14 The Distribution Resources Plan (DRP) Demonstration Project C Decision states, [t]he Commission appreciates that SCE has chosen an area that has a high anticipated load growth and that SCE will leverage third-party resources already acquired to support the PRP to 6 SCE-01C, pp SCE-02C, pp SCE-03C, pp SCE s Opening Brief, pp SCE s Reply Brief, pp SCE s Opening Comments on PD, pp PD at p SCE established the load growth in this region in its Opening Testimony. No party contested SCE s figures or the methodology it used to forecast this load growth. SCE also incorporated its public and published PRP reports with this information by reference in its testimony. See SCE-01C, pp. 5-8 ( Since the PRP s inception, SCE evaluated the J-S Region load growth annually as part of the portfolio design process. How SCE determined the load growth and how SCE is evaluating the impact of the most recent 2016 load growth value on the preferred resources portfolio is discussed in SCE s Preferred Resources Pilot, Portfolio Design Report, Revision 1, February 5, 2016, which is publicly available at: e1f8-446f-a db38ec353/prp_portfoliodesignreport.pdf?mod=ajperes. SCE will make the 2016 load growth impact analysis available early in ) Those incorporated by reference publications are thus part of the record. 14 D

5 Commissioner Peterman Page 4 the extent possible. 15 Most recently, the Commission included it in its California s Distributed Energy Resource Action Plan: Aligning Vision and Action (DER Action Plan). 16 Moreover, the PD s emphasis on the PRP RFO 2 resources not meeting a defined reliability need is misplaced as reliability needs are a moving target. The PD relies upon the CAISO s May 2017 Local Capacity Technical Analyses, which found a surplus for 2018 and 2022, and a decreasing California Energy Commission (CEC) load forecast to conclude that the PRP resources are not needed, even as a hedge. 17 As SCE insisted throughout this proceeding, the CAISO analysis does not take into account potential delays and cancellation of LCR contracts and transmission projects. The Commission is likely aware, due to its internal experience and expertise, perfect performance of procured resources is rare. In fact, with respect to this Application, of the 19 contracts for 125 MW for which SCE initially applied for approval, only 12 contracts, representing 105 MW, remain, with a corresponding 17% reduction in the cost associated with the PRP RFO 2 procurement. This speculative quality is equally true of load forecasts. Compared to last year s CEC California Energy Demand Update Forecast , this year s recently adopted California Energy Demand Revised Forecast now projects approximately 720 MW load increase by the year 2021 in SCE s Western LA Basin. 18 It is therefore likely premature to conclude the PRP RFO 2 resources will not provide some future reliability benefit and hedge against SCE being put in a position to conduct last minute, costly procurement. It is also not the case that the PRP s goals and activities are duplicative of other Commission endeavors like the Integrated Distributed Energy Resources (IDER) distribution deferral pilots. 19 Those other endeavors assume it is a foregone conclusion that DERs can perform reliably. The importance of the PRP is to validate those assumptions to right-size future grid and DER investments. The PRP is not primarily studying distribution deferral (which is the focus of 15 D DER Action Plan, Appendix A (acknowledging DER procurement by utilities and customers is supported by a wide-ranging suite of (Commission) policies and twice referencing the PRP in Appendix A.) 17 PD at pp. 14, 30. SCE notes the CAISO analysis with regard to declining system load forecast has little bearing on the local PRP Region load growth. No party mentioned, much less challenged, SCE s local load growth figures. SCE s load growth figures in the record remain uncontroverted and credible. Thus, the PD s assertion there is no explanation for the difference between SCE s local PRP Region load growth calculations and the CAISO s system load growth figures is not only incorrect, but lacks evidentiary foundation. See PD at p Compare Form 1.5d at 05/TN216263_ T144019_Corrected_LSE_and_BA_Tables_Mid_Baseline No_AAEE.xlsx with Form 1.5d at SCE respectfully requests the Commission take judicial notice of the CEC s data because the facts can be readily ascertained from sources whose accuracy cannot reasonably be questioned, such as government agency documents. CPUC Rule of Practice and Procedure 13.9; Cal. Code Evid. 452 (g), (h); Fed. Rule Evid. 21. SCE also notes that this information is not hearsay. It is offered not for the truth that the revised forecast is accurate, but for the proposition that forecasts change. 19 PD at pp

6