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<title>November 2004: California PUC Accelerates Planning Reserve Margin
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<p align="left"><strong><small><font face="Arial">About The Author:</font></small></strong></p>
<p align="left"><font face="Arial" style="font-size: 9pt">Robert A. Olson is a partner in the law firm of
Brown, Olson & Gould, P.C. which maintains a nationwide practice in energy law,
public utility law and related commercial transactions.</font></p>
<p><small><font face="Arial"><font style="font-size: 9pt">He can be reached at:</font><br>
<br>
<b><font color="#0000FF">Brown, Olson & Gould, PC</font></b><br>
2 Delta Drive<br>
Suite 301<br>
Concord, NH 03301<br>
<a href="mailto:[email protected]">[email protected]</a><br>
(603) 225-9716<br>
<a href="mailto:[email protected]"></a></font></small></p>
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<p ALIGN="left"><u><b>November 2004</b></u><font size="6"><b><br>
California PUC Accelerates Planning
Reserve Margin Requirement</b></font><strong><br>
by Robert Olson -- Brown, Olson and Wilson, P.C.<br>
</strong><font face="Arial" size="2">(<em>originally published by PMA OnLine Magazine:
200</em>5/01/08</font><font size="2">)</font></p>
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<p align="justify">The California Public Utilities Commission (the “PUC”)
recently voted to accelerate the deadline for full implementation of a 15% –
17% planning reserve margin requirement from January 1, 2008, to June 1,
2006. “Interim Opinion Regarding Resource Adequacy,” Order Instituting
Rulemaking to Promote Policy and Program Coordination and Integration in
Electric Utility Resource Planning (Rulemaking 04-04-003, filed April 1,
2004) (draft ALJ decision approved October 28, 2004) (the “Interim
Opinion”).<br>
<br>
In the wake of the electricity crisis of 2000-2001, the
PUC undertook to develop reserve adequacy requirements for load-serving
entities (“LSE”), including investor-owned utilities, energy service
providers, and community choice aggregators. Among other things, the PUC
adopted a requirement that all LSEs maintain a reserve planning margin of
between 15% and 17% above and beyond peak loads for every month of the year,
and required forward contracting for 90% of this total “resource adequacy
requirement” (i.e., peak load plus the planning reserve margin) for the peak
“summer” months of May through September. These requirements were to be
phased in until full implementation on or before January 1, 2008.<br>
<br>
According to the Interim Opinion, Governor Schwarzenegger expressed the view
that the phase-in schedule was “too slow.” Pointing to its own concern that
“retirements of aging power plants without long-term contracts is a
continuing threat,” the PUC stated that it agreed with the governor that
accelerating the January 1, 2008, date was “of overriding importance.”<br>
<br>
In addition to accelerating the date for full compliance to June 1, 2006,
the PUC clarified its earlier orders to specify that 90% of the summer
resource adequacy requirement must be under contract by September of the
prior year. The PUC also adopted a new 100% month-ahead forward commitment
requirement for all months of the year.<br>
<br>
The PUC stated that “[i]ncreasing supply will cost money, and ensuring
reliability does not come cheap,” but cautioned that “we will not ‘pay any
price’ or require utilities to sign contracts that meet these requirements
at any cost. In Phase 2 of the resource adequacy track of the
rulemaking proceeding, the PUC will, among other things, adopt reporting
requirements to enable it to “monitor the terms and prices of contracts . .
. to ensure that they are reasonable and that the extra capacity and
reliability provided by [the] reserve requirement is available at reasonable
cost to ratepayers.”</p>
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<blockquote>
<p align="left"><font face="Arial">
<small>Robert A. Olson is a partner in the law firm of Brown, Olson &
Gould P.C.
which maintains a nationwide practice in energy law, public utility law and related
commercial transactions. He can be reached at:</small></font><p align="center">
<font face="Arial"><small><font color="#0000FF"><b>Brown, Olson & Gould, PC</b></font><br>
2 Delta Drive, Suite 301<br>
Concord, NH 03301 <br>
<br>
<a href="mailto:[email protected]">[email protected]</a> | (603) 225-9716<a href="mailto:[email protected]"></a></small></font>
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