Energy Planning & Resources Committee
of the Clean Power Alliance of Southern California
Regular Meeting
Wednesday, April 26, 2023
12:15 p.m.
Visit CPA’s YouTube Channel to watch a Live Stream of the Meeting *There may be a streaming delay of up to 90 seconds. This is a view-only live stream.
CPA Office
801 S. Grand Ave., Suite 400
Los Angeles, CA 90017
Members of the public may also participate in this meeting remotely at the following locations:
Manhattan Beach City Hall
City Manager Conference Room
1400 Highland Avenue
Manhattan Beach, CA 90266
Alhambra City Hall
Conference Room A
111 S. First St.
Alhambra, CA 91801
Carson City Hall
Executive Conference Room
701 East Carson Street
Carson, CA 90745
Sierra Madre City Hall
Council Chambers
232 W. Sierra Madre Blvd.
Sierra Madre, CA 91024
Thousand Oaks City Hall
Public Works Conference Room
2100 Thousand Oaks Blvd.
Thousand Oaks, CA 91362
City of Oxnard Service Center 1
East Conference Room
214 South C Street
Oxnard, CA 93030
West Hollywood City Hall
3rd Floor Conference Room
8300 Santa Monica Blvd.
West Hollywood, CA 90069
PUBLIC COMMENT: Members of the public may submit their comments by one of the following options:
• 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: The General Public Comment item is reserved for persons wishing to address the Committee 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 Committee at CPA’s Office are requested to complete a comment card and provide it to staff. If you Agenda Page 1
are attending from a remote location, please identify yourself to a CPA representative when your 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.
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CALL TO ORDER & ROLL CALL
GENERAL PUBLIC COMMENT
CONSENT AGENDA
1. Approve Minutes from March 22, 2023, Energy Committee Meeting
2. Receive and File March 2023 Risk Management Team Report
REGULAR AGENDA
3. Provide Feedback on Expanding Energy Procurement Options
COMMITTEE MEMBER COMMENTS
ADJOURN – NEXT MEETING MAY 24, 2023
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. Public records are available for inspection at CPA’s Office at 801 S. Grand Ave., Suite 400, Los Angeles, CA 90017, or online at www.cleanpoweralliance.org/agendas.
Agenda Page 2
Energy Committee Item 1
MINUTES
Energy Planning & Resources Committee
of the Clean Power Alliance of Southern California
Regular Meeting
Wednesday, March 22, 2023, 12:15 p.m.
Meeting videos are available on CPA’s YouTube Channel.
www.youtube.com/@CPApublicmeetings
Committee Members participated in this meeting from the following locations:
Manhattan Beach City Hall
City Manager Conference Room
1400 Highland Avenue
Manhattan Beach, CA 90266
CPA Office
801 S. Grand Ave., Suite 400
Los Angeles, CA 90017
Alhambra City Hall
Conference Room A
111 S. First Street
Alhambra, CA 91802
Carson City Hall
Executive Conference Room
701 East Carson Street
Carson, CA 90745
Sierra Madre City Hall
Council Chambers
232 W. Sierra Madre Blvd.
Sierra Madre, CA 91024
Thousand Oaks City Hall
Public Works Conference Room
2100 Thousand Oaks Blvd.
Thousand Oaks, CA 91362
City of Oxnard Service Center 1
East Conference Room
214 South C Street
Oxnard, CA 93030
West Hollywood City Hall
3rd Floor Conference Room
8300 Santa Monica Blvd.
West Hollywood, CA 90069
CALL TO ORDER & ROLL CALL
Committee Member Lesser, acting as Committee Chair, called the meeting to order at 12:15 p.m. and Gabriela Monzon, Board Clerk, conducted roll call.
ROLL CALL
Alhambra Jeff Maloney Committee Member Absent
Carson Reata Kulcsar Committee Member Remote
Manhattan Beach David Lesser Substitute Chair Remote
Oxnard Kathleen Mallory Committee Member Remote
Sierra Madre Robert Parkhurst Committee Chair Absent
South Pasadena Diana Mahmud Committee Member Absent
Thousand Oaks Helen Cox Committee Member Remote
West Hollywood Chelsea Byers Committee Member Remote
All votes are unanimous, unless otherwise stated.
Agenda Page 3
Clean Power Alliance Energy Planning & Resources Committee Page 2 of 3 March 22, 2023
GENERAL PUBLIC COMMENT
There was no public comment.
CONSENT AGENDA
1. Approve Minutes from January 25, 2023, Energy Committee Meeting
2. Receive and File January and February 2023 Risk Management Team Reports Motion: Committee Member Cox, Thousand Oaks
Second: Committee Member Mallory, Oxnard
Vote: The consent agenda was approved by a roll call vote.
REGULAR AGENDA
3. Approve Entering into Negotiations for Bilateral Offer(s) for Power and Resource Adequacy Purchase Agreements as Recommended by the Review Team John McNamara, Director, Structured Contracts, provided a presentation on the two bilateral offers for power and Resource Adequacy (RA) purchase agreements.
Mr. McNamara reviewed CPA’s typical process for entering into long-term contracts as well as “bilateral” offers, which are proposals received outside of the Request for Offers (RFO) process. Mr. McNamara indicated that the recent MTR decision issued by the California Public Utilities Commission (CPUC) was a favorable one for CPA and explained CPA’s current MTR procurement need. CPA is unlikely to meet its RA compliance obligations through short-term transactions alone and may need to enter into long-term contracts to help contribute to CPA’s 2024 and 2025 RA compliance obligations. Mr. McNamara noted that the contracts recommended for approval will not bring CPA into compliance for RA but will help lessen CPA’s short position. Mr. McNamara provided the project overview, rationale, and evaluation summary for Project A, standalone storage for energy and RA, and Project B, standalone storage with an RA-only offer.
Committee Member Byers inquired about the timeframe of the two projects and requested more background on the process. Matt Langer, Chief Operating Officer, noted that Project B was part of CPA’s short-term RA solicitations and became a bilateral offer, as it did not conform to the usual offers. Ted Bardacke, CEO, commented that staff is often approached to enter into negotiations outside of the RFOs and most are directed to an upcoming RFO; only those contracts with unique criteria are advanced to a Review Team. Committee Member Lesser inquired about the number of vendors approaching CPA staff with potential RA opportunities and asked about potential penalties for non-compliance. Mr. Langer indicated that it is rare for staff to receive proposals with 2023/2024 volumes, which is where there are compliance challenges. CPA has two departments within the Power Supply group that handle procurement, Structured Contracts, which generally handle long-term contracts typically focused on energy storage and renewable energy facilities, and a team that focuses on filling the 2023/2024 requirement with short-term transactions including short-term energy hedging, RA, and short-term renewable energy carbon-free products. Regarding penalties, Mr.
Langer specified that if CPA cannot meet compliance requirements there will be fines; although there have been discussions at the CPUC and legislative level about additional fines and penalties on top of the existing ones, no decisions have been made. Mr. Langer indicated that there is a multiplier escalating the fine if the compliance requirement is missed consecutively, but this is the first time CPA may fall short of compliance so it is not in the multiplier category this year. Committee Agenda Page 4
Clean Power Alliance Energy Planning & Resources Committee Page 3 of 3 March 22, 2023
Member Lesser expressed a desire to communicate with the legislature, as it appears counterintuitive to penalize due to market conditions beyond CPA’s control. Mr. Bardacke agreed that although a penalty structure is needed, increased penalties do not create a supply market increase.
Motion: Committee Member Byers, West Hollywood
Second: Committee Member Cox, Thousand Oaks
Vote: Item 3 was approved by a roll call vote.
COMMITTEE MEMBER COMMENTS
Committee Member Byers introduced herself to the Energy Committee and expressed gratitude to CPA staff for the onboarding process.
ADJOURN
Acting Chair Lesser adjourned the meeting at 12:47 p.m.
Agenda Page 5
Staff Report – Agenda Item 2
To: Energy Committee
From: Geoff Ihle, Director, Energy Market Risk Management Approved by: Ted Bardacke, Chief Executive Officer
David McNeil, Chief Financial Officer
Subject: Risk Management Team Report
Date: April 26, 2023
March 2023 RMT REPORT
Key Actions
• Reviewed current counterparty credit exposure
• Reviewed February 2023 market performance
• Reviewed February 2023 generation and storage performance • Reviewed energy positions and approved 2023-2027 hedges • Reviewed December 2022 day-ahead load forecast performance and March 2023 long-term load forecast update
• Reviewed positions for RPS and carbon free products
• Reviewed Resource Adequacy (RA) positions, including CPA’s 2023 Month-Ahead and 2024 Year-Ahead open position and procurement strategy. • Review March 2023 CRR Allocations and Auction and 2023 YTD performance Policy Compliance
Policy Deviation Required Action
Energy Hedges: As of March 27, 2023, Q1
2024 was hedged at 84%, one percent
less than the ERMP minimum.
CPA cured the deviation by purchasing
additional Q1 2024 energy hedges in
April 2023.
Carbon Free Energy: As of December 1,
2022, carbon free energy under contract
for 2023 was above the ERMP maximum
of 100%
None. As previously reported, due to
scarcity of carbon free energy
(hydroelectric power), CPA is procuring
additional supply in advance as it
becomes available.
Resource Adequacy: As of December 1,
2022, July, August and September 2023,
Resource Adequacy under contract was
below the ERMP Month-Ahead minimum
of 90%.
As a result of recent procurement
activity, CPA has cured the July 2023
deviation. CPA is running solicitations to
buy August and September 2023
Resource Adequacy.
Agenda Page 6
Energy Committee Item 2
ATTACHMENT
None.
Agenda Page 7
Staff Report – Agenda Item 3
To: Energy Committee
From: Lindsay Saxby, Vice President, Power Supply
Matt Langer, Chief Operating Officer
Approved by: Ted Bardacke, Chief Executive Officer
Subject: Expanding Energy Procurement Options
Date: April 26, 2023
RECOMMENDATION
Provide feedback on the item.
ATTACHMENT
1. Presentation on Expanding Energy Procurement Options Agenda Page 8
Item 3 - Expanding
Procurement Options
April 26, 2023
Agenda Page 9
Executive Summary
Current market conditions for renewable energy and Resource Adequacy (RA) are constrained and expected to be so for the next several years
While CPA is on track to meet or exceed its long-term contracting requirements under the Renewable Portfolio Standard (RPS) and the Mid-Term Reliability (MTR) order, supply shortages mean that short-term procurement will be challenging In its next Clean Energy RFO, scheduled for release in early June, CPA will be seeking to fill a larger portion of its portfolio needs with long-term contracts To prepare for this next Clean Energy RFO, staff is seeking initial feedback on a number of additional procurement options to access a greater number of supply opportunities in a seller’s market
Agenda Page 10
2 Agenda
Medium and Long-Term
Compliance Status
Short-term Procurement
Challenges
Ideas and Considerations
Agenda Page 11
3 Compliance
Status
Agenda Page 12
4 Long-Term Renewables and Mid-Term
Reliability Compliance
Assuming resources contracted for in existing PPAs come online as expected, CPA will meet its current mid-term reliability and long-term renewable energy compliance requirements for much of the rest of this decade
This includes the following:
• Renewable Energy through 2030
• New capacity through 2026
• Baseload renewables (geothermal and biomass) through 2028* • Long duration storage through 2028
*Assumes CPA executes a 11.5 MW biomass power purchase agreement that has entered into an exclusivity agreement with CPA.
Agenda Page 13
5 Short-term
Procurement
Challanges
Agenda Page 14
6 Short-Term Procurement
and Compliance
• Despite ongoing outreach to RA and
RPS suppliers, achieving short-term
targets remains a concern
• Historically, ample supply of
renewable energy and RA were
available at generally stable prices
• Today, meeting CPA’s needs is much
more challenging
Agenda Page 15
7 Renewable Energy Pricing and Availability
REC pricing has increased, in part, due to the
following:
o Supply chain and interconnection delays
have caused renewable resources that
were expected to be online in 2023 and
2024 to be delayed
o RPS programs have been established in
neighboring states (OR, WA) increasing
out-of-state competition for renewable
energy and decreasing imports into the
state
o CCA growth, corporate buyers, and higher
RPS targets have also contributed to
increased demand for renewable energy
*Market Price Benchmark published by the CPUC based on market transactions for that year **Based on recent broker quotes for short-term PCC1 renewable energy Agenda Page 16
8 Resource Adequacy Pricing and Availability
RA availability is scarce in 2023 and 2024 and likely
beyond. Issues include
o Higher RA requirements due to the impacts of
extreme weather and climate change
o Issues delaying construction of new resources
including supply chain challenges, permitting, and
interconnection
o Retirements of existing generating units
o New restrictive import rules
o Changes in RA counting rules that reduce available
supply
This shortfall of capacity is leading to extremely high prices and puts our ability to procure our full RA requirements in jeopardy in the near-term
Year
Annual Average RA
Price ($/kw-mo)
Sept Average RA
Price ($/kw-mo)
2019 $3.46 $4.08
2020 $4.97 $6.10
2021 $5.89 $16.00
2022 $9.35 $40.00
2023 $16.08 $55.00
2024 $18.00 $60.00
Annual RA Prices
Agenda Page 17
9 Competition for New Resources
The MTR requirements for new capacity
have increased competition amongst
buyers, shifting new resource
procurement from a buyer’s to a seller’s
market
This has led to fewer offers submitted in
CPA’s long-term RFO’s in recent years
Staff is seeking ways to attract a
competitive pool of offers to the Clean
Energy RFO so CPA can add a significant
amount of long-term resources to the
portfolio and reduce dependence on the
volatile short-term markets
Long-Term RFO Offers Received Annually
Agenda Page 18
10 Benefits of Increasing
Long-Term Procurement
• Adding more long-term contracts above
minimum compliance requirements will allow
CPA to become less dependent on volatile
short-term markets
o Long-term contracts typically include a
combination of energy, capacity and/or
renewable attributes at a fixed price,
providing price certainty and reducing
need to procure multiple products
• In the upcoming solicitation, the available
number of offers could be a limiting factor on
how much CPA procures
• As a countermeasure, staff is considering a
variety of measures to attract more interest
from developers in the upcoming RFO
11 Current long-term vs. short-term mix
• If all contracted resources come online by
2025, 72% of CPA’s renewable target will be
met with long-term contracts and 28% will be
met with short-term contracts.
• If all contracted resources come online by
2025, 45% of CPA’s Resource Adequacy
target will be met with long-term contracts
and 55% will be met with short-term
contracts.
There is no “optimal” mix of short-term vs. long-term contracting. However, staff’s current view is that there should be a higher percentage of long-term contracts for both compliance and to meet customer demand
Agenda Page 19
Ideas and
Considerations
Agenda Page 20
12 Ideas for Attracting More Offers in the
2023 Clean Energy RFO
CPA is exploring procurement options to attract more offers in its upcoming Clean Energy RFO such as:
o More Flexible Contract Duration: Historically, CPA has requested conforming offers with 15- year duration (“term”) but is considering allowing counterparties to bid terms anywhere from 10 to 20 years
o Package Deals: CPA may allow for inclusive offers so bidders may bid a portfolio of resources at a lower price relative to individual offers for each resource o RA-only: Historically, CPA has only allowed long-term resources to bid both energy and RA but may consider long-term RA-only offers to attract more offers o RA with Natural Gas Energy: Consider requesting offers for natural gas energy bundled with RA as a means to access RA from existing facilities that might otherwise not bid to CPA Additionally, staff is beginning research on the potential to join CC Power, a JPA of CCAs set up to do joint procurement – this topic will be subject of future discussions if necessary Agenda Page 21
13 Agreements for Natural Gas Energy and RA
Procurement of natural gas bundled with RA, known as tolling agreements (tolls), can:
o Attract bidders that have not previously participated in CPA’s RFO’s and generate more offers for RA
o Provide energy to the grid during critical heat events and help CPA hedge its exposure to market price spikes. Depending on the type of facility, these facilities may only be used for a few days or hours each month o Pair the resource with new technologies such as energy storage or green hydrogen to reduce emissions and be a catalyst for transitioning those resources to a cleaner profile; these may be the most attractive type of tolls for CPA from a mission perspective
Agenda Page 22
14 Power Content Label/GHG Implications
Unspecified Power is generic system power that CPA purchases to meet the balance of customers needs that is not met by specified sources like renewables and large hydro
CPA currently shows significant amounts of Unspecified Power on the Power Content Label (PCL) in the Lean and Clean Power products Natural gas energy purchases would displace Unspecified Power on the PCL, but the emissions impact is unit specific, and may be better or worse than Unspecified Power
o Unit specific emissions along with location, new low-carbon technology deployment and other factors would be key evaluation criterion in any evaluation of a natural gas toll
Agenda Page 23
15 Tolling Agreement Evaluation Considerations
CPA will need to create new or modified evaluation criteria for considering natural gas tolling agreements. Modifications could include:
o Impacts on Disadvantaged Communities (DACs)
o Impact of the agreement on transition to cleaner operations of the plant o Impact of the agreement on retirement plans for the plant o Impact of generation and GHG emissions on the Product Content Label Agenda Page 24
16 Conclusion and Next Steps
Staff is seeking the Energy Committee's feedback on soliciting for natural gas resources in the 2023 Clean Energy RFO, including modifications to evaluation criteria
Any long-term agreement with a natural gas resource would go through the standard Committee and Board review process after issuance of the solicitation
Staff is in the process of preparing the solicitation materials for the 2023 Clean Energy RFO and will present RFO plan to the Energy Committee in May for launch in June
Agenda Page 25
17 Questions and
Discussion
Agenda Page 26
18