MEETING of the Energy Planning & Resources Committee
of the Clean Power Alliance of Southern California
Wednesday, March 23, 2022
12:15 p.m.
SPECIAL NOTICE: Pursuant to the Proclamation of the State of Emergency by Governor Newsom on March 4, 2020, AB 361, and enacting Resolutions, and as a response to mitigating the spread of COVID19, the Energy Planning & Resources Committee will conduct this meeting remotely.
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• Email Public Comment: Members of the public are encouraged to submit written comments on any agenda item to [email protected] up to four hours before the meeting. Written public comments will be announced at the meeting and become part of the meeting record. Public comments received in writing will not be read aloud at the meeting. • Provide Public Comment During the Meeting: Please notify staff via email at [email protected] at the beginning of the meeting but no later than immediately before the agenda item is called.
o You will be asked for your name and phone number (or other identifying information) and agenda item similar to filling out a speaker card so that you can be called on when it is your turn to speak.
o You will be called upon during the comment section for the agenda item on which you wish to speak on. When it is your turn to speak, a staff member will unmute your phone or computer audio.
o You will be able to speak to the Committee for the allotted amount of time. Please be advised that all public comments must otherwise comply with our Public Comment Policy. o Once you have spoken, or the allotted time has run out, you will be muted during the meeting.
If preferred, you may also submit written comments during the meeting via email to:
[email protected]. The written comments will be shared with Committee. *While downloading the Zoom application may provide a better meeting experience, Zoom does not need to be installed on your computer to participate. After clicking the webinar link above, click “start from your browser.” Agenda Page 1
Clean Power Alliance Energy Planning & Resources Committee March 23, 2022
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PUBLIC COMMENT POLICY: The General Public Comment item is reserved for persons wishing to address the Board on any Clean Power Alliance-related matters not on today’s agenda. Public comments on matters on today’s Consent Agenda and Regular Agenda shall be heard at the time the matter is called.
Comments on items on the Consent Agenda are consolidated into one public comment period. Members of the public who wish to address the Board are requested to contact the Board Clerk, as specified above, at the beginning of the meeting but no later than immediately prior to the time an agenda item is called.
Each speaker is limited to two (2) minutes (in whole minute increments) per agenda item with a cumulative total of five 5 minutes to be allocated between the General Public Comment, the entire Consent Agenda, or individual items in the Regular Agenda. Please refer to Policy No. 8 – Public Comment for additional information.
CALL TO ORDER & ROLL CALL
GENERAL PUBLIC COMMENT
CONSENT AGENDA
1. Approve Minutes from February 23, 2022 Energy Committee Meeting
2. Receive and File February 2022 Risk Management Team Report
REGULAR AGENDA
3. Review PCIA Voluntary Allocation & Market Offer (VAMO)
COMMITTEE MEMBER COMMENTS
ADJOURN – NEXT MEETING APRIL 27, 2022
Public Records: Public records that relate to any item on the open session agenda for a Committee Meeting are available for public inspection. Those records that are distributed less than 72 hours prior to the meeting are available for public inspection at the same time they are distributed to all, or a majority of, the members of the Committee. Those documents are available for inspection online at www.cleanpoweralliance.org/agendas.
Agenda Page 2
MINUTES
REGULAR MEETING of the Energy Planning & Resources Committee of the Clean Power Alliance of Southern California
Wednesday, February 23, 2022, 12:30 p.m.
Pursuant to the Proclamation of the State of Emergency by Governor Newsom on March 4, 2020, AB 361, and enacting Resolutions, and as a response to mitigating the spread of COVID19, the Energy Planning & Resources Committee conducted this meeting remotely.
CALL TO ORDER & ROLL CALL
Chair Parkhurst called the meeting to order at 12:30 p.m. and Interim Clerk of the Board, Raynette Tom, conducted roll call.
ROLL CALL
Alhambra Jeffrey Maloney Committee Member Remote
Carson Reata Kulcsar Committee Member Remote
Culver City Daniel Lee Committee Member Remote
Oxnard Kathleen Mallory Committee Member Absent
Sierra Madre Robert Parkhurst Chair Remote
Thousand Oaks Helen Cox Committee Member Absent
Ventura County Carmen Ramirez Committee Member Remote
All votes are unanimous, unless otherwise stated.
GENERAL PUBLIC COMMENT
There was no public comment.
CONSENT AGENDA
1. Approve Minutes from January 26, 2022, Energy Committee Meeting
2. Receive and File January 2022 Risk Management Team Report In response to a question from Chair Parkhurst on the RMT, Ted Bardacke, Chief Executive Officer, stated that some exceedances of renewables purchases have been removed because a new load forecast has been incorporated that includes the default rate changes.
Motion: Committee Member Ramirez, Ventura County
Second: Committee Member Maloney, Alhambra
Vote: The consent agenda was approved by a roll call vote.
REGULAR AGENDA
3. Oral Update on Mid-Term Reliability RFO
Natasha Keefer, Vice President, Power Supply, provided an oral report on the item.
CPA shortlisted five projects and waitlisted five projects in February. Several Agenda Page 3
Clean Power Alliance Energy Planning & Resources Committee Page 2 of 3 February 23, 2022
shortlisted projects have since dropped out and projects from the waitlist have been invited to enter exclusivity. Ms. Keefer specified the current estimate is that 3-4 projects will enter PPA negotiations, including utility scale storage, geothermal, and long-duration storage resources. Staff intends to release another RFO later this year to procure additional resources for compliance.
4. Resource Adequacy Reform Update
CC Song, Director, Regulatory Affairs, provided a presentation on Resource Adequacy (RA) including background information, CPA principles for RA reform, and a summary of proposals. Although RA was designed to ensure sufficient capacity to meet system-wide gross peak, resources on the grid have become increasingly variable and energy-limited. The California Public Utilities Commission (CPUC) found a need to develop a better framework for the future.
CalCCA and Southern California Edison (SCE) submitted a joint proposal where Load Serving Entities (LSEs) would provide a portfolio with sufficient energy to meet both its load and storage charging needs. The CPUC opted for an alternate proposal and directed working groups to develop implementation details around a “slice-of-day” framework for RA compliance in 2024. Ms. Song reviewed three principles that guided CPA’s engagement and evaluation process and presented two proposals: a 24-hourly slice proposal and a 2-slice proposal. Ms. Song reviewed pros and cons for each. The 24-hourly slice proposal requires each LSE to demonstrate each month that they have enough capacity to meet their load profile in all 24 hours on the CAISO’s worst day. The 2-slice proposal requires each LSE to demonstrate it has enough capacity to meet its share of CAISO gross peak and net peak. Ms. Song reviewed how each measures up to CPA’s guiding principles and noted that the 24-hour slice more accurately values renewable resources and provides visibility into an individual LSE’s resource mix’s ability to meet demand. The 2-slice proposal’s renewable resource valuation would be based on a methodology that heavily discounts solar and wind capacity contribution and does not appropriately value their contribution to the grid and will not be as durable. Ms. Song described the support for the two proposals. Amongst CalCCA membership, one group of CCAs supports the adoption of a 24-hourly slice proposal with a deferred implementation until 2025, because the CPUC’s decision does not provide sufficient time for thoughtful implementation. Another smaller group supports the 2-slice proposal as a temporary bridge while a more durable framework can be developed. CPA staff will continue to work with CalCCA to develop comments on the workshop report expected in March and will identify potential opportunities for engagement. The CPUC proposed decision is expected in early summer 2022.
In response to questions from Chair Parkhurst regarding the impact of the CPUC’s proposed decision on procurement strategy, staff explained that CPA’s short-term contracts for RA are very specific to the current RA framework and may need amendments to reflect a new RA program structure. However, the impacts will be better understood once a decision is issued. Committee Member Ramirez asked how the Ukraine crisis impacts the energy market and demand for renewables.
Staff noted that renewables demand is highly driven by California environmental targets. As it pertains to natural gas, the United States is somewhat insulated from the Ukraine crisis, because it relies on the domestic production of gas. Mr.
Bardacke added that building new transmission will eventually need to be a priority to expand the supply of renewables.
Chair Parkhurst asked how transmission planning is developed and how that impacts CPA’s Integrated Resource Plan. Staff clarified that in California, Agenda Page 4
Clean Power Alliance Energy Planning & Resources Committee Page 3 of 3 February 23, 2022
transmission planning happens at the CAISO; it presents some challenges because transmission building might incorporate multiple jurisdictions.
Transmission planning affects the IRP in how resources are incorporated based on CPUC and CAISO planning efforts.
COMMITTEE MEMBER COMMENTS
Chair Parkhurst and Committee Member Ramirez both expressed their gratitude for all the hard work accomplished by CPA staff. In response to Committee Member Maloney’s question regarding billing issues, Mr. Bardacke noted that staff has been working closely with cities with the highest percentage of impacted customers, SCE sent out an email notice to all impacted customers who have an email address on file, and an informational banner was posted on CPA’s website for further explanation. The banner was clicked on over 3,000 times and the number of calls and wait times at the call center have both normalized. Two holidays have passed without further issues, so the particular holiday synching issue between SCE and CPA’s billing manager appears to have been addressed.
ADJOURN
Chair Parkhurst adjourned the meeting at 1:24 p.m.
Agenda Page 5
Staff Report – Agenda Item 2
To: Clean Power Alliance (CPA) Energy Committee
From: Geoff Ihle, Director of Market Risk
Approved by: Ted Bardacke, Chief Executive Officer
Subject: Risk Management Team Report
Date: March 23, 2022
February 2022 RMT REPORT
Key Actions
• Discussed January 2022 market performance.
• Reviewed energy positions and approved 2022-2025 hedges. • Reviewed positions for RPS, carbon free, and Resource Adequacy. • Reviewed the PCIA Voluntary Allocation & Market Offer (VAMO) process and SCE’s initial allocation volumes.
• Reviewed Community Default-Change impacts on Load Forecast.
Policy Compliance
There were no policy deviations reported for January.
ATTACHMENT
None.
Agenda Page 6
Staff Report – Agenda Item 3
To: Clean Power Alliance (CPA) Energy Committee
From: Natasha Keefer, Vice President, Power Supply
Approved By: Ted Bardacke, Chief Executive Officer
Subject: PCIA Voluntary Allocation & Market Offer (VAMO) Date: March 23, 2022
RECOMMENDATION
Receive and file.
ATTACHMENT
1) PCIA Voluntary Allocation & Market Offer (VAMO) Presentation Agenda Page 7
PCIA Voluntary
Allocation & Market
Offer (VAMO)
March 23, 2022
Agenda Page 8
Executive Summary
CPA has an opportunity to secure voluntary allocations (VA) of PCIA-eligible renewable resources from SCE in May 2022 for deliveries beginning in 2023 o These are renewable resources that CPA customers already pay above market costs for through the PCIA, but do not yet count towards CPA’s portfolio o CPA actively engaged in the PCIA proceeding to allow for access to these resources for the benefit of CPA’s customers
Available voluntary allocations include short-term (2023 and 2024) renewables as well as long-term (10 year +) contracts
o Pursuant to the Energy Risk Management Policy, CPA’s Board would need to approve long-term renewable allocations ahead of the May enrollment period CPA will have another opportunity to secure allocations in 2024 for 2025 and beyond Today, Staff is seeking feedback from the Energy Committee on the approach to selecting allocations, ahead of presenting the approach to the Board on April 7th Agenda Page 9
2 Agenda
Overview
Indicative Forecast
Short-term Contract
Recommendation
Long-term Contract
Recommendation
Next Steps
Agenda Page 10
Overview
Agenda Page 11
4 Simplified PCIA Calculation Example
Benchmark goes down
PCIA
goes up
How the PCIA Works
The Power Charge Indifference Adjustment
(PCIA) is the “exit fee” CCA customers pay to
reimburse SCE for the above-market costs of the
energy resources procured on behalf of those
customers
The PCIA rate is based on the difference
between actual Brown Power market energy
revenues, Renewables (RPS) and RA contract
costs and Market Price Benchmarks (MPB) for
each
When prices for renewables, RA, or Brown
Power are inexpensive, the PCIA rate goes up;
conversely, if prices are high the PCIA rate goes
down
5 Contract
Costs
RPS
MPB
RA
MPB
Energy
Revenues
PCIA
Rate
Agenda Page 12
Regulatory Background
In the past, CPA customers paid for these above market costs through the PCIA, but CPA was not able to count the PCIA resources in its portfolio In 2021, the CPUC ordered the IOUs to offer PCIA-paying LSEs voluntary allocations of PCIA-eligible renewable resources, and then sell any unallocated resources through an annual market offer (MO) process
CPA now has an opportunity to secure voluntary allocations of PCIA-eligible renewable resources from SCE at the Market Price Benchmark, which is established by the current market price in any given year and is the same price at which the PCIA is set Agenda Page 13
6 PCIA Voluntary Allocation Overview
The open enrollment period for selecting voluntary allocations is May 2 – May 13, 2022 LSEs have the option to receive allocations from IOU portfolios based on each LSE’s most recent annual load share (MWh)
o LSEs may elect their allocations in 10% increments of the total allowable allocation SCE remains the counterparty of the resource contracts
The PCIA renewable allocation is bundled renewable energy but does not provide RA value or an energy hedge
Once transferred to the LSE portfolio, LSEs may resell the elected Voluntary Allocation renewable energy
Agenda Page 14
7 PCIA Voluntary Allocation Overview (cont.)
The LSEs will have the choice to receive allocations separately for short-term (terms < 10 years remaining) and/or long-term (terms > 10 years remaining) contracts If an LSE chooses to receive a long-term allocation, the allocation will span the full term of the underlying contracts
Long-term and short-term allocations will be offered once per compliance period o In the first Voluntary Allocation, the short-term allocation will be offered for vintages 2023-2024 only, since these are the remaining years of the CA RPS Compliance Period 4 (2021-2024)
o Next opportunity for allocation will be in 2024 for the 2025-2027 compliance period Agenda Page 15
8 Market Offer Process
Any remaining short-term and long-term allocations not elected by LSEs will be sold to the market through the market offer process
o SCE has a price floor (confidential) at which they can sell through the market offer process
CPA may be able to secure additional RECs through the market offer process, although the price will be subject to the price floor
Any unsold volumes in the market offer process will remain with SCE for the benefit of their customers
Agenda Page 16
9 2022 VA Election Schedule
10 VA Enrollment & Contracting Activities Date
Indicative Allocation Forecast provided to LSEs February 1, 2022 Final Allocation Forecast provided to LSEs By April 30, 2022 Voluntary Allocation enrollment period May 2-13, 2022
Contracting for Voluntary Allocation commences May 14, 2022 Deadline for LSEs to execute & return May 24, 2022
CPA will seek approval from the Board on the long-term voluntary allocation approach at its April 7th Board meeting
Agenda Page 17
Key Considerations
CPA has a large and growing renewable energy demand; allocations help offset additional renewable energy demand of member agency default rate opt-ups Long-term allocations contribute to CPA’s SB 350 long-term contracting obligations Allocations would effectively reduce CPA’s demand for new-build renewables Allocations that remain in SCE’s portfolio (i.e. not obtained by LSEs) will only benefit SCE’s customers
Agenda Page 18
11 Indicative
Forecast
Agenda Page 19
12 Indicative Forecast of CPA’s VA
CPA received an indicative forecast from SCE on the available short-term and long-term resources
o Short and long-term resources will be described in further detail on the next slides
CPA has evaluated the portfolio of resources and has no material concerns related to any projects or technologies However, SCE’s PCIA RPS portfolio includes PCC0 resources; the CPUC has not yet determined how out-of-state PCC0
resources will transfer to LSE portfolios
o There is a risk that out-of-state PCC0s will transfer to LSEs as PCC3s (but charged to CPA at the PCC1 price)
o PCC3s are valued at a significant discount to PCC1, are discouraged by the JPA, and are difficult to remarket
13 Procurement from contracts
executed before June 1, 2010, are
not subject to the PCC classifications
established in D.11-12-052, and
thus qualify for “PCC0”
PCC0 RECs are treated like PCC1
RECs on the Power Content Label
Portfolio Content Category (PCC) 0:
Agenda Page 20
Short-Term Indicative Allocation
14 Short-Term Resource Type & Volume (GWh) Short-Term Renewable Product Mix 14%
55%
30%
1% 0%
Solar
Geothermal
Wind
Biomass
Small Hydro
CPA could take the entire allocation of short-term resources, which would only meet a portion of CPA’s remaining renewable energy demand for 2023 and 2024 The short-term portfolio has a large percentage of out-of-state PCC0s 79%
21%
PCC1
Out-of-state PCC0
Agenda Page 21
Long-Term Indicative Allocation
15 Long-Term Resource Type & % of VA Portfolio Long-Term Renewable Product Mix 59%
2%
37%
2%
Solar
Geothermal
Wind
Small Hydro
96%
4%
PCC1
Out-of-state PCC0
Approx. 41% of the long-term portfolio are non-solar resources The long-term portfolio has a small percentage of out-of-state PCC0s Agenda Page 22
Long-Term Average Hourly Profile
16 The long-term voluntary allocation would provide some beneficial baseload renewables to CPA’s portfolio
Agenda Page 23
Short-Term
Contract
Recommendation
Agenda Page 24
17 Short-Term Allocation Recommendation
Pros
Opportunity to fill a portion of CPA’s
remaining renewables need in 2023 and
2024 at a competitive price
18 Cons
The short-term portfolio has a large
percentage of out-of-state PCC0s (which
may transfer as low value PCC3s)
Path 1 (if out-of-state PCC0s transfer as PCC3s):
Take 0% of the Short-Term Voluntary Allocations
Avoid paying the PCC1 Market Price Benchmark for the PCC3s CPA may be able to secure PCC1s through SCE’s subsequent Market Offer process Path 2 (if out-of-state PCC0s are allowed to transfer):
Take 100% of the Short-Term Voluntary Allocations
Agenda Page 25
Long-Term
Contract
Recommendation
Agenda Page 26
19 Long-Term VA Considerations
Pros
Insurance for meeting SB 350 long-term
contracting requirement in case of LT PPA
delays/failure
Voluntary Allocations help offset position
impacts of Member Agency opt-ups
Market Price Benchmark will be at a
competitive price
20 Cons
Allocations would effectively reduce CPA’s
demand for new-build renewables
If out-of-state PCC0s transfer as PCC3s,
CPA would need to remarket PCC3s
Agenda Page 27
SB 350 Risk
21 CPA may be at risk of meeting its long-term contracting requirements given COVID-19 and other industry-wide supply chain/commodity price pressures *CPA standard assumptions for project failure are 0% failure for online projects, 10% failure for projects under construction, and 20% for projects under development RPS Under SB100 and SB350 Long-term Contracting Requirement per Compliance Period 2021-2024 2025-2027 2028-2030
1 State Mandated RPS per Compliance Period - %
of Retail Sales 40% 49% 57%
2 State Mandated % of Mandated RPS (Row #1) to
be Contracted Under RPS LT Contracts 65% 65% 65%
3 CPA’s LT RPS Mandate = Row #2 * Row #1 25.9% 32.1% 36.8% 4 RPS Achieved by CPA with Existing LT Contracts 29.9% 54.5% 53.1% 5 Open Position relative to State Mandate (Row
3,4) +Above/ (-) Short 4.0% 22.4% 16.2%
10 RPS Achieved by CPA with Existing LT Contracts
+ Pending Contracts (Failure Rates Included) 28.2% 48.8% 47.5% 11 Open Position relative to State Mandate (Row
3,10) +Above/ (-) Short with Failure Rates 2.2% 16.7% 10.7% 2021-2024 2025-2027 2028-2030
1 State Mandated RPS per Compliance Period - %
of Retail Sales 40% 49% 57%
2 State Mandated % of Mandated RPS (Row #1) to
be Contracted Under RPS LT Contracts 65% 65% 65%
3 CPA’s LT RPS Mandate = Row #2 * Row #1 25.9% 32.1% 36.8% 4 RPS Achieved by CPA with Existing LT Contracts 29.9% 54.5% 53.1% 5 Open Position relative to State Mandate (Row
3,4) +Above/ (-) Short 4.0% 22.4% 16.2%
10 RPS Achieved by CPA with Existing LT Contracts
+ Pending Contracts (Failure Rates Included) 25.7% 41.4% 40.4% 11 Open Position relative to State Mandate (Row
3,10) +Above/ (-) Short with Failure Rates -0.2% 9.4% 3.6% Assuming standard failure rates* Assuming additional project failures Agenda Page 28
Long-term Voluntary Allocation Approach
22 Three Options Considered:
% of Long-Term
Allocation
Rationale Impact to CPA’s
Renewables Position
10% • Minimum allocation required to
cover BS 350 compliance risk Small
50%
(RECOMMENDED)
• Material contribution to meeting
CPA’s renewable open position
• Allows room for CPA contracting
of new build resources
Moderate
100% • Maximize allocation to minimize
stranded PCIA resources Large
Agenda Page 29
Long-term Allocation Recommendation
23 Recommendation: Take 50% of the Long-Term Voluntary Allocations Ensures CPA will meet its SB 350 long-term contracting requirement in the 2021-2024 RPS Compliance Period
Minimizes volume of PCIA resources at risk of being stranded in the Market Offer process
Allows for procurement of new resource build
Additional PCIA long-term contracts may be secured in the 2024 VAMO process Out-of-state PCC0s make up a very small portion of the long-term portfolio Agenda Page 30
Recommendation Summary
24 Recommendation: Take
Short-term: CPA’s final action will be contingent on the CPUC’s clarification on the treatment of out-of-state PCC0s
o If out-of-state PCC0s transfer as PCC3s, take 0% of the short-term voluntary allocation
o If out-of-state PCC0s are allowed to transfer, take 100% of the short-term voluntary allocation
Long-term: Take 50% of the long-term voluntary allocation Agenda Page 31
Next Steps
Agenda Page 32
25 Next Steps
26 CalCCA and CPA are currently seeking to clarify the treatment of out-of-state PCC0s with the CPUC
CPA will present a long-term allocation approach to the Board on April 7th CPA will finalize enrollment by May 13
CPA will continue to engage in the regulatory oversight of the VAMO process Today, Staff is seeking Energy Committee’s feedback on the voluntary allocation approach
Agenda Page 33