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HomeMy WebLinkAboutStaff Report 392-08TO: City of Palo Alto City Manager’s Report HONORABLE CITY COUNCIL FROM:CITY MANAGER DEPARTMENT: UTILITIES DATE:OCTOBER 20, 2008 CMR: 392:08 REPORT TYPE: CONSENT SUBJECT:Adoption of a Resolution Approving the City of Palo Alto Electric Utility Resource Adequacy Program and Authorizing the City Manager to Amend the Program or Part Thereof that Conform to Changes_in California Law and Policy that Implement Prudent Utility Practices RECOMMENDATION Staff and the Utilities Advisory Commission (UAC) recommend that the City Council adopt the resolution approving the City of Palo Alto Electric Utility Resource Adequacy Program described in Attachment B and delegating the authority to the City Manager or designee to make changes to the elements of the Electric Utility Resource Adequacy Program to conform to changes in state law and policy that implement prudent utility practices. BACKGROUND The City of Palo Alto is a member of Northern California Power Agency (NCPA). NCPA, acting on behalf of the City, schedules the City’s electric load and resources within the California Independent System Operator’s (CAISO) balancing authority area pursuant to the terms of the CAISO Tariff and the NCPA Metered Subsystem Aggregator Agreement. The City has established and adopted an Interim Electric Utility Resource Adequacy Program, which has been in place since May 2006 (Resolution No. 8~602, approved May 1, 2006). This Interim Program was intended to expire on the date that the CAISO’s Market Redesign and Technology Upgrade (MRTU) Tariff, which would introduce new resource adequacy responsibilities and reporting requirements, was implemented. However, because implementation of MRTU has been substantially delayed, the CAISO has incorporated resource adequacy compliance language in the currently effective CAISO Tariff. To Comply with current tariff requirements, and in anticipation of revised reporting requirements for 2009 under the CAISO’s MRTU Tariff, staff has been worldng with NCPA staff and member agencies to develop a replacement Electric Utility Resource Adequacy Program. CMR: 392:08 Page 1 of 3 DISCUSSION The attached Electric.Utility I~esource Adequacy Program has been developed to coordinate with the rules and requirements i_ncorporated within the CAISO’s MRTU Tariff. In addition to regulatory compliance, the prograna is designed to achieve a high degree of reliability in the electric service supplied to the City’s customers and includes the following information and requirements: ¯Applicability of the CAISO’s resource adequacy requirements to the City. ¯The City’s requirement to provide resource adequacy demonstrations to the CAISO. As the City’s Scheduling Coordinator, NCPA will submit the information to the CAISO on behalf of the City. The use of the California Energy Commission’s monthly peak demand determination for calculating the City’s capacity requirements. Determination of the capacity reserve margin, which states that the City shall retain capacity equal to no less than 115% of the monthly peak demand. Clarification that the CAISO’s authority to dispatch generation facilities is governed by the terms of Metered Subsystem Agreement. A description of the generation resources and contracts that count towards meeting the City’s capacity requirements, and the rules and criteria for counting capacity. " Procedures for compliance and enforcement of the resource adequacy requirements. BOARD/COMMISSION REVIEW AND RECOMMENDATIONS The Electric Utility Resource Adequacy Program was presented to the Utilities Advisory Commission (UAC) at its October 1, 2008 meeting. The Commission discussed local capacity issues such as how long the City had been subject to this requirement, how local capacity could be met or reduced through lowering peak demand and transmission investments, and sources for local capacity. The Commission also confirmed that the expected costs for local Capacity are included in the current budget for the electric utility. The Commission requested further clarification that the proposed Electric Utility Resource Adequacy Program was the result of a collaborative effort with NCPA and member agencies. The UAC voted unanimously to recommend that the City Council approve the Electric Utility Resource Adequacy Program. Excerpted minutes from the UAC meeting are included as Attachment C. RESOURCE IMPACT The costs of meeting the reliability requirements specified in the Electric Utility Resource Adequacy Program are included in the current electric utility budget. A new component of this updated program relates to local area requirements that are assigned to the City. The CAISO requires all load serving entities, such as the City of Palo Alto, to procure a large portion of their required resources from generators in their local areas - for Palo Alto that means within the San Francisco Bay Area. Current assumptions indicate that these requirements may cost $3.4 million per year. These costs for local area requirements were anticipated and are included in the electric budget. CMR: 392:08 Page 2 of 3 POLICY IMPLICATIONS Adoption of the Electric Utility Resource Adequacy Program is consistent with the Council- approved policy to follow regulatory mandates, maintain local control over utility services and provide reliabl~ electric power. Additionally, the Long-term Electric Acquisition Implementation Plan that was approved by Council on April 17, 2006, included a statement to, "Establish a policy to address mandatory resource adequacy requirements." ENVIRONMENTAL REVIEW Adoption of this resolution does not require review under the California Environmental Quality Act because it does not meet the definition of a "project’.’ pursuant to California Public Resources Code Section 21065. ATTACHMENTS A. Resolution Approving City of Palo Alto Electric Utility Resource Adequacy Program B. City of Palo Alto’s Electric Utility Resource Adequacy Program C. Excepted Minutes from the October 1, 2008 Utilities Advisory Commission Meeting PREPARED BY: REVIEWED BY: DEPARTMENT APPROVAL: CITY MANAGER APPROVAL: DEBRA LLOYD Senior Resource Planner J~,~NE O. RATChYE! .Utilities Assistant Director, Resource Management VALEmE Director of Utilities CMR: 392:08 Page 3 of 3 NOT YET APPROVED ATTACH RESOLUTION NO. RESOLUTION OF THE COUNCIL OF THE CITY OF PALO ALTO APPROVING THE CITY OF PALO ALTO ELECTRIC UTILITY RESOURCE ADEQUACY PROGRAM AND AUTHORIZING THE CITY MANAGER TO AMEND THE PROGRAM OR PART THEREOF THAT CONFORM TO CHANGES IN CALIFORNIA LAW AND POLICY THAT IMPLEMENT PRUDENT UTILITY PRACTICES WHEREAS, the City of Palo Alto ("City"), a municipal utility and a chartered city, is an electric load serving entity transacting business within the California electric transmission grid, operated by the California Independent Service Operator ("CAISO"); WHEREAS, the CAISO in order to serve electric load in a reliable manner coordinates the development of coherent resource adequacy standards that conform to state law and policy that implement prudent utility practices; WHEREAS, the City has established and adopted an Interim Electric Utility Resource Adequacy Program to comply with CAISO Tariff requirements and ensure reliable elecfric service for its customers; WHEREAS, the City’s Interim Electric Utility Resource Adequacy Program is set to expire on the date that the CAISO’s market Redesign and Technology Upgrade ("MRTU") Tariff is implemented; WHEREAS, the MRTU Tariff is expected to be implemented during Spring 2009; WHEREAS, compliance demonstration obligations associated with MRTU implementation are anticipated to be in force by October 31, 2008; Tariff WHEREAS, City staff has developed a replacement Electric Utility Resource Adequacy Program that reflects the currently effective CAISO Tariff and the changes associated with the anticipated MRTU Tariff; NOW, THEREFORE, the Council of the City of Palo Alto hereby RESOLVES as follows: SECTION 1. The Council acting as the local regulatory authority for the City of Palo Alto Electric Utility hereby approves the City of Palo Alto Electric Utility Resource Adequacy Program ("Program"), and hereby authorizes the City Manager to make any and all modifications to any element of the Program in order to conform to applicable changes in state law and policy that implement prudent utility practices. 080922jb 0073068 NOT YET APPROVED SECTION ~2. The Council finds that the adoption of this resolution does not constitute a project under the California Environmental Quality Act and no environmental assessment is required. INTRODUCED AND PASSED: AYE S: NOES: ABSENT: ABSTENTIONS: ATTEST: City Clerk APPROVED AS TO FORM: Mayor APPROVED: Senior Asst. City Attorney City Manager Director of Utilities Director of Administrative Services 080922jb 0073068 ATTACH Electric Utility Resource Adequacy Program City of Palo Alto October 20, 2008 Electric Utility Resource Adequacy Program Table of Contents 1 Background and Purpose of Program .........................................................................3 2 Applicability ................................................................................................................3 3 Compliance Demonstration ..........................................................................................4 3.1 Submission of Annual System Resource Adequacy Demonstration ..................4 3.2 Submission of Monthly System Resource Adequacy Demonstration ................5 3.3 Submission of Annual Local Area Resource Adequacy Demonstration ............5 3.4 Submission of Annual and Monthly Resource Adequacy Supply Plans ............6 4 Demand Forecast .........................................................................................................6 5 Planning Reserve Margin ............................................................................................7 6 CAISO Authority to Dispatch Generation Facilities ..................................................7 7 Resource Adequacy Qualifying Capacity Rules and Criteria .....................................7 7.1 Resource Adequacy Qualifying Capacity ...........................................................7 - 7.2 Qualifying Capacity Rules and Criteria - Eligible Resource Types ...................8 7.2.1 NCPA System .............................................................................................8 7.2.2 Jointly-Owned Facilities .............................................................................8 7.2.3 Thermal Resources ......................................................................................9 7.2.4 Hydro Electric Resources ............................................................................9 7.2.5 Unit-Specific Contracts .............................................................................10 7.2.6 Firm Energy Contracts ..............................................................................10 7.2.7 Industry Standard Contracts with Damages Provisions ............................10 7.2.8 Wind and Solar Resources .......................~. ................................................10 7.2.9 Geothermal Resources ..............................................................................11 7.2.10 Participating Loads ...................................................................................11 7.2.11 Dispatchable Demand Resources ..............................................................12 7.2.12 Facilities Under Construction ...................................................................12 7.2.13 Non-Dynamically Scheduled System Resources (Imports) ..............~ .......12 7.2.14 Dynamically Scheduled System Resources (Imports) ..............................13 8 Compliance and Enforcement ...................................................................................13 1 Background and purpose of Program City of Palo Alto ("City") recognizes that to achieve a high degree of reliability in the electric service supplied to its customers, an amount of resources sufficient to not only meet the immediate loads of the City’s customers, but to also permit maintenance, to provide for planned and forced outages, and to account for load forecast errors is required. In order to achieve a high degree of reliability in the electric service supplied to its customers, the City has established this Resource Adequacy Program to accomplish this goal, which includes the following information and requirements: ¯Applicability ¯Compliance Demonstration "Demand Forecast ¯Planning Reserve Margin ¯CAISO Authority to Dispatch Qualifying Capacity ¯Qualifying Capacity Rules and Criteria ¯Compliance and Enforcement This Resource Adequacy Program has been developed to coordinate with the rules and requirements incorporated within the California Independent System Operator Corporation ("CAISO") Market Redesign and Technology Upgrade FERC Electric Tariff ("MRTU Tariff’’), as applicable to the City, and shall become effective at the time the MRTU Tariff is implemented or when approved by the City’s Council, referred to as the City’s Local Regulatory Authority ("LRA"), and willremain in effect until terminated by action of the LRA. This Resource Adequacy Program may be modified by the LRA per its discretion. Capitalized terms not otherwise defined within this Resource Adequacy Program shall be defined as set forth in the Master Definitions Supplement of the MRTU Tariff. 2 Applicability Pursuant to Section 40 of the MRTU Tariff all Load Serving Entities ("LSE") and their respective Scheduling Coordinators, with limited exemptions, are subject to certain Resource City of Palo Alto Electric Utility Resource Adequacy Program Page 3 of 14 Adequacy requirements based on its election of LSE status. The City currently operates within the CAISO Balancing Authority Area as a Load Following Metered Subsystem, pursuant to the terms of the Amended and ReStated NCPA Metered Subsystem Aggregator Agreement ("MS SA Agreement"), as amended from time to time, and therefore is recognized as a Load Following Metered Subsystem entity regarding the application of Resource Adequacy requirements. Therefore, the City is required to comply with the requirements encompassed within this Electric Utility Resource Adequacy Program and the CAISO Tar.iff, as applicable. 3 Compliance Demonstration Pursuant to this Electric Utility Resource Adequacy Program and the MRTU Tariff Section 40, the City is required to provide a system and local area Resource Adequacy demonstration to the CAISO that sets forth the amount of capacity procured by the City to satisfy the obligations described below. As a result, NCPA will submit, on behalf of the City, the following information to the CAISO: 3.1 Submission of Annual System Resource Adequacy Demonstration NCPA, acting as Scheduling Coordinator on behalf of the City, will submit an annual system Resource Adequacy demonstration to the CAISO for the apl~licable compliance period on behalf of the City, on a schedule and in a format set forth by the MRTU Tariff and the CAISO Business Practice Manual for Reliability Requirements. The annual system Resource Adequacy demonstration will include a monthly coincident peak Demand determination for the City for each of the five summer months, May through September, of the applicable compliance period, established pursuant to Section 4, and identify the megawatt (MW) quantity of Resource Adequacy Qualifying Capacity, established pursuant to Section 7, that the City will rely upon to satisfy ninety percent (90%) of its respective monthly coincident peak Demand determination plus the monthly Planning Reserve Margin, established in Section 5, for each of the five summer months, May through September, of the applicable compliance period. City of Palo Alto Electric Utility Resource Adequacy Program Page 4 of 14 3.2 Submission of Monthly System Resource Adequacy Demonstration NCPA, acting as Scheduling Coordinator on behalf of the City, will submit a monthly system Resource Adequacy demonstration to the CAISO for the applicable compliance period, on a schedule and in a format set forth by the MRTU Tariff and the CAISO Business Practice Manual for Reliability Requirements. The monthly system Resource Adequacy demonstration will include a monthly coincident peak Demand determination for the City for the relevant reporting month of the applicable compliance period, established pursuant to Section 4, and identify the megawatt (MW) quantity of Resource Adequacy Qualifying Capacity, established pursuant to Section 7, that the City will rely upon to satisfy one-hundred percent (100%) of its monthly coincident peak Demand determination plus the monthly Planning Reserve Margin, established in Section 5, for the relevant reporting mdnth of the applicable compliance period. 3.3 Submission of Annual Local Area Resource Adequacy Demonstration NCPA, acting as Scheduling Coordinator on behalf of the City, will submit an annual local area capacity Resource Adequacy demonstration to the CAISO for the applicable compliance period, on a schedule and in a format set forth by theMRTU Tariff and the CAISO Business Practice Manual for Reliability Requirements. The annual local area Resource Adequacy demonstration will identify the megawatt (MW) quantity of Resource Adequacy Qualifying Capacity, established pursuant to Section 7, qualified as Local Capacity Area Resources that the City will rely upon to satisfy its allocated responsibility for procurement of Local Capacity Area Resources determined pursuant to the MRTU Tariff. The City’s allocated responsibility for procurement of Local Capacity Area Resources is based on its proportionate share of the Transmission Access Charge ("TAC") Area Load at the time of the CAISO’s annual coincident peak Demand set forth in the annual peak demand forecast for the next applicable compliance period, as determined by the California Energy Commission ("CEC"). Those Local Capacity Area Resources identified within the annual local area capacity Resource Adequacy demonstration will count towards the City’s overall system capacity requirements in addition to meeting the City’s local Resource Adequacy requirements. City of Palo Alto Electric Utility Resource Adequacy Program Page 5 of 14 3.4 Submission of Annual and Monthly Resource Adequacy Supply Plans A Load Following Metered Subsystem LSE such as the City is not required, pursuant to the CAISO Tariff, to provide the CAISO with annual and monthly Resource Adequacy Supply Plans for Resource Adequacy Qualifying Capacity that is used to meet its own system and local Resource Adequacy requirements. To the extent that a Load Following Metered Subsystem LSE such as the City provides Resource Adequacy Qualifying Capacity to a Reserve Sharing Load Serving Entity or a Modified Reserve Sharing Load Serving Entity, its Scheduling Coordinator is required to provide the CAISO with annual and monthly Resource Adequacy Supply Plans for this quantity of Resource Adequacy Qualifying Capacity. As a result NCPA, acting a Scheduling Coordinator on behalf of the City, will submit annual and monthly Resource Adequacy Supply Plans to the CAISO on behalf of the City (if required), on a schedule and in a formant set fol~h in the MRTU Tariff and the CAISO Business Practice Manual for Reliability Requirements. Both the annual and monthly Resource Adequacy Supply Plans shall include a listing of the City’s commitments to provide Resource Adequacy Qualifying Capacity to any Reserve Sharing Load Serving Entity or Modified Reserve Sharing Load Serving Entity for the applicable compliance period. 4 Demand Forecast Pursuant to the CAISO Tariff, the City’s Resource Adequacy Program shall utilize the monthly coincident peak Demand determination provided by the California Energy Commission for the applicable compliance period, which is based on demand forecast data ("Demand Forecast") submitted to the California Energy Commission by the City (or by NCPA on behalf of the City), or, if the California Energy Commission does not produce a monthly coincident peak Demand determination for the City, the monthly coincident peak Demand determination produced by the CAISO for the applicable compliance period for the City in accordance with the MRTU Tariff and the applicable Business Practice Manual, using Demand Forecast data submitted to the CAISO by the City (or by NCPA on behalf of the City). The monthly coincident peak Demand determination developed and provided by either the California Energy Commission or the CAISO are coincident with the CAISO monthly system peak demand forecast for the applicable City of Palo Alto Electric Utility Resource Adequacy Program Page 6 of 14 compliance period. If the California Energy Cormnission or the CAISO fail to produce a monthly coincident peak Demand determination for the City, the monthly coincident peak Demand determination that will be used for Resource Adequacy compliance shall be equal to the City’s contribution to the NCPA Pool’s monthly coincident peak demand forecasts for the applicable compliance period irrespective of the CAISO system coincident peak. 5 Planning Reserve Margin The City shall maintain an amount of Resource Adequacy Qualifying Capacity, as described in Section 7, equal to no less than one-hundred fifteen percent (115%) of the City’s peak hourly Demand Forecast for the applicable compliance period. The resulting fifteen percent (15%) capacity reserve margin which is in excess of the City’s peak hourly Demand Forecast, for the applicable month, is referred to as the Planning Reserve Margin. 6 CAISO Authority to Dispatch Generation Facilities As a Load Following Metered Subsystem Entity, the City is only required to comply with a limited set of provisions contain within the MRTU Tariff, and is not re@red to make available its Resource Adequacy Qualifying Capacity used to meet its capacity reserve requirements to the CAISO for Dispatch in the Day-Ahead Market or Real-Timd Market. However, the CAISO has authority to dispatch the City’s Resource Adequacy Qualifying Capacity used to meet its capacity reserve requirements pursuant to the terms of the MSSA Agreement, which is incorporated by reference as it now exists or may thereafter be amended. 7 Resource Adequacy Qualifying Capacity Rules and Criteria 7.1 Resource Adequacy Qualifying Capacity Resource Adequacy Qualifying Capacity shall be the quantity of capacity from a resource, stated in megawatts (MW), which is listed within the Resource Adequacy system and local area capacity demonstration. Resource Adequacy Qualifying Capacity is the megawatt (MW) quantity of capacity from resources, as calculated using the Qualifying Capacity Rules and City of Palo Alto Electric Utility Resource Adequacy Program Page 7 of 14 Criteria, that is used for resource adequacy compliance. The rules and criteria for determining the type of resources that may be eligible to provide Resource Adequacy Qualifying Capacity and for calculating the quantity of Resource Adequacy Qualifying Capacity provided from eligible resource types is documented within Section 7.2. Once calculated, the Resource Adequacy Qualifying Capacity will be provided to the CAISO to be used to verify compliance against submitted Resource Adequacy compliance demonstrations. 7.2 Qualifying Capacity Rules and Criteria - Eligible Resource Types The types of resources specified in Section 7.2 will be eligible to provide Resource Adequacy Qualifying Capacity to the extent that they meet the criteria for each type of resource set forth in this Section 7.2. Net Dependable Capacity ("NDC") defined by North American Electric Reliability Corporation ("NERC") Generating Availability Data System ("GADS") information will be used to determine the Resource Adequacy Qualifying Capacity of some of the resource types identified in this Section 7.2. For the purpose of this Section 7.2, NDC is equal to Gross Dependable Capacity ("GDC") less the unit capacity utilized for unit station service or auxiliaries. GDC is equal to Gross Maximum Capacity ("GMC") modified for seasonal limitations over a specified period of time. GMC is the maximum capacity a unit can sustain over a specified period of time when not restricted by seasonal or other deratings. 7.2.1 NCPA System As defined in the MSSA Agreement, the NCPA System means all transmission and distribution facilities owned or controlled by the NCPA Pool participants, including the City, and all Generating Units within the CAISO Balancing Authority Area owned or controlled by the NCPA Pool participants or any individual NCPA Pool participant or combination of NCPA Pool participants. 7.2.2 Jointly-Owned Facilities A jointly-owned facility must either be identified in Schedule 14 of the MSSA Agreement, located within the NCPA System, a Participating Generator, a System Resource, or a Qualified City of Palo Alto Electric Utility Resource Adequacy Program Page 8 of 14 Facility to be considered Resource Adequacy Qualifying Capacity. The Resource Adequacy Qualifying Capacity for the entire facility will be determined based on the type of resource as described within Section 7.2. ~Fhe City’s entitlement to the Resource Adequacy Qualifying Capacity of a facility may encompass the entire Resource Adequacy Qualifying Capacity of the facility, or may be limited to a portion of the Resource Adequacy Qualifying Capacity of the facility. The total amount of Resource Adequacy Qualifying Capacity that may be identified in the system and/or local area capacity compliance demonstration is limited to the total jointly- owned facility Resource Adequacy Qualifying Capacity as determined pursuant to Section 7.2. 7.2.3 Thermal Resources Thermal generating facilities must either be identified in Schedule 14 of the MSSA Agreement, located within the NCPA System, a Participating Generator, a System Resource, or a Qualified Facility to be considered Resource Adequacy Qualifying Capacity. The Resource Adequacy Qualifying Capacity of thermal facilities will be based on Net Dependable Capacity as defined in Section 7.2. 7.2.4 Hydro Electric Resources Hydro electric generating facilities must either be " ’ ~identified ~n Schedule 14 of the MSSA Agreement, located within the NCPA System, a Participating Generator, a System Resource, or a Qualified Facility to be considered Resource Adequacy Qualifying Capacity. The Resource Adequacy Qualifying Capacity of a pond or pumped storage hydro electric facility will be based on Net Dependable Capacity as defined in Section 7.2, minus variable head de-rate based on current reservoir levels with average year forecasted inflows. The Resource Adequacy Qualifying Capacity of a run-of-river hydro electric facility will be based on Net Dependable Capacity as defined in Section 7.2, minus actual or forecasted conveyance flow, stream flow, or canal head de-rate. City of Palo Alto Electric Utility Resource Adequacy Program Page 9 of 14 7.2.5 Unit-Specific Contracts Unit-specific contracts will fully qualify as Resource Adequacy Qualifying Capacity. The generating facility identified in the contract must either be identified in Schedule 14 of the MSSA Agreement, located within the NCPA System, a Participating Generator, a System Resource, or a Qualified Facility to be considered Resource Adequacy Qualifying Capacity. 7.2.6 Firm Energy Contracts Firm energy contracts, executed by the City of Palo Alto prior to October 27, 20051, which contain provisions to ensure reliable physical delivery of Energy and that contain provisions that identify non-delivery as a default condition subject to contract termination, and that does not require the seller to source the Energy from a particular unit, but specifies a delivery point internal to the CAISO Balancing Authority Area will fully qualify as Resource Adequacy Qualifying Capacity. The capacity value from such firm energy contracts will not be traded with other load serving entities or scheduling coordinators. 7.2.7 Resource Adequacy Capacity Products Resource Adequacy Capacity products that provide the City~ith Designated Resource Adequacy capacity from a generation unit located in the CAISO control area, and that provide Resource Adequacy Requirement (RAR) attributes or Local Area Reliability (LAR) attributes will fully qualify as Resource Adequacy Qualifying Capacity. 7.2.8 Wind and Solar Resources The Resource Adequacy Qualifying Capacity of wind and solar generating facilities, with backup sources of generation, will be based on Net Dependable Capacity as defined in Section 7.2. 1 The October 27th 2005 cutoff date for counting firm energy contracts towards resource adequacy requirements is consistent with the CAISO’s default qualifying capacity criteria in the currently effective tariff (Section 40.8.1.5 of Appendix CC: http://www.caiso.com/201 c/201 cc 1 b31 fca0.pdf). City of Palo Alto Electric Utility Resource Adequacy Program Page 10 of 14 The Resource Adequacy Qualifying Capacity of wind and solar facilities, without backup sources of generation, will be based on their monthly historic noon to 6:00 p.m. capacity factor, using a three2y~ar rolling average. Wind and solar generating facilities without backup sources of generation which do not have three years of historic performance data will be assigned a default Resource Adequacy Qualifying Capacity value for each year of missing historical performance as follows: The Resource Adequacy Qualifying Capacity of a solar or wind generator with historic data located in the same weather regime with similar technology adjusted for the nameplate capacity ratio of a new generator and the similarly situated proxy generator. If historical data of a solar or wind generator located in the same weather regime with similar technology is not available, then l~istoric performance data from the monthly. average production factors of all units (wind or solar) within the TAC Area in which the generator is located will be utilized. The default Resource Adequacy Qualifying Capacity values will be replaced on a year by year basis with actual performance data as the data becomes available to form a three year rolling average. 7.2.9 Geothermal Resources Geothermal generating facilities must either be identified in Schedule 14 of the MSSA Agreement, located within the NCPA System, a Participating Generator, a System Resource or a Qualified Facility to be considered Resource Adequacy Qualifying Capacity. The Resource Adequacy Qualifying Capacity of a geothermal facility will be based on Net Dependable Capacity as defined in Section 7.2, adjusted for steam field degradation. 7.2.10 Participating.Loads Participating Loads must either be identified in Schedule 14 of the MSSA Agreement or located within the NCPA System to be considered Resource Adequacy Qualifying Capacity. Participating Loads must be available at least 48 hours during the five summer months (May - City of Palo Alto Electric Utility Resource Adequacy Program Page 11 of 14 September) to be counted in a system and/or local area Resource Adequacy compliance demonstration as Resource Adequacy Qualifying Capacity. If Participating Loads are available for the minimum requirement/the stipulated megawatt (MW) quantity reduction in Demand will be treated as supply and be eligible to be listed as Resource Adequacy Qualifying Capacity. 7.2.11 Dispatchable Demand Resources Dispatchable Demand resources must either be identified in Schedule 10B of the MS SA Agreement or located within the NCPA System to be considered Resource Adequacy Qualifying Capacity. Dispatchable Demand resources must be available at least 48 hours during the five summer months (May - September) to be counted in a system and/or local area Resource Adequacy compliance demonstration as Resource Adequacy Qualifying Capacity. If a Dispatchable Demand resource is available for the minimum requirement, the megawatt (MW) quantity reduction stipulated in the contract or program will be treated as supply and be eligible to be listed as Resource Adequacy Qualifying Capacity. 7.2.12 Facilities Under Construction Resource Adequacy Qualifying Capacity for facilities under construction will be determined based on the type of resource as described elsewhere in this gection 7.2. The facility will be eligible to be identified as Resource Adequacy Qualifying Capacity in a system and/or local area capacity compliance demonstration of the City pursuant to the anticipated operational date of the facility. 7.2.13 Non-Dynamically Scheduled System Resources (Imports) The Resource Adequacy Qualifying Capacity of Non-Dynamically Scheduled System Resources to which the City has an entitlement shall be the amount of the City’s entitlement, measured in megawatts (MW). City of Palo Alto Electric Utility Resource Adequacy Program Page 12 of 14 7.2.14 Dynamically Scheduled System Resources (Imports) The Resource Adequacy Qualifying Capacity of a Dynamically Scheduled System Resource to which the City has an entitlement shall be the amount of the City’s entitlement. Eligibility as Resource Adequacy Qualifying Capacity is contingent upon the City securing transmission through any intervening Balancing Authority Areas for the resource entitlement that cannot be curtailed for economic reasons or trumped by higher priority transmission. 7.2.15 CAISO’s Backstop Procurement Allocated to the City To the extent allowed by the CAISO’s MRTU Tariff, and in the event that the CAISO uses its backstop procurement authority to purchase capacity under the terms of the MRTU Tariff and allocates the cost of such capacity to the Pool Members on the basis of the CAISO-determined annual local or system capacity shortfall of the Pool, and any such allocation that is determined to be the responsibility of the City will be eligible to be listed as Resource Adequacy Qualifying Capacity in subsequent Monthly System Resource Adequacy Demonstrations. 7.2.16 Other Resources At such time that the City purchases, or enters into a contract for, a resource not listed in this Section 7.2, the City’s LRA reserves the right to establish Qualified Capacity Criteria for the new resource. Future resources could include, but are not limited to: customer-owned distributed generation; ocean!tidal generation; and small solar projects (<5MW). 8 Compliance and Enforcement Once the CAISO has received the system and/or local area capacity compliance demonstrations. submitted by NCPA on behalf of the City, acting as Scheduling Coordinator, the CAISO will verify that the City has procured sufficient Resource Adequacy Qualifying Capacity to comply with the Pla~ming Reserve Margin established in Section 5, and any requirements established by the City’s LRA. To the extent the system and/or local area capacity demonstrations do not include sufficient Resource Adequacy Qualifying Capacity to satisfy the Planning Reserve Margin and/or the Local Capacity Area Resource Adequacy requirements, or in the case of a City of Palo Alto Electric Utility Resource Adequacy Program Page 13 of 14 mismatch between information included in the compliance demonstration and the Resource Adequacy Supply Plan submitted by the Scheduling Coordinator of a resource identified in the City’s compliance demonstrat{on, the CAISO will notify NCPA and attempt to resolve the issue. To the extent that NCPA is unable to resolve the identified issue, the CAISO will notify the City’s LRA of the potential deficiency. Once the City’s LRA is informed of the identified deficiency and confirms that the City’s system and/or local area capacity compliance demonstration is deficient, the City’s LRA may determine if and how the deficiency will be resolved. If the CAISO identifies a mismatch between the information included in the City’s system and/or local area capacity compliance demonstration and a Resource Adequacy Supply Plan submitted by the Scheduling Coordinator of a resource identified in the Resource Adequacy compliance demonstration, and the identified mismatch is not resolved prior to the 10th day before the effective month during the applicable compliance period, the CAISO will accept the value contained in the Supply Plan to set the Resource Adequacy Qualifying Capacity value for the applicable compliance period. If the City’s LRA requires the City to resolve an identified deficiency in the system and/or local area capacity compliance demonstration, and the City has not resolved the identified deficiency, the City must provide an explanation as to why the identified deficiency has not be resolved to its LRA. The City may incur penalties or other sanctions adDpted.by the City’s LRA for failure to cure the deficiency. NCPA, acting as Scheduling Coordinator, is required to report to the CAISO within thirty (30) days of any action taken by the City’s LRA in response to the deficiency notification if the City’s LRA does not provide public access to records or information regarding action taken for violations of the City’s Resource Adequacy Program policies or rules. City of Palo Alto Electric Utility Resource Adequacy Program Page 14 of 14 ATTACHMENT C Excerpt from the Utilities.Advisory Commission Meeting Minutes of October 1,2008: Draft ITEM 2: ACTION ITEM: Adoption of Resolution Approvin.q the City of Palo Electric Utility Resource Adequacy Pro.qram and Dele.qatin,q the Authority to the City Mana.qer to Make Changes to Elements of the Proqram to Conform to Chanqes in State Law and Policy that Implement Prudent Utility Practices Senior Resource Planner Debra Lloyd gave a presentation on a proposed replacement of the Electric Utility’s Resource Adequacy Program. The City’s current program, adopted May 2006, is no longer in line with requirements of the California Independent System Operator (CAISO) Tariff. So, to comply with current tariff requirements, staff has been working with Northern California Power Agency (NCPA) and member agencies to develop a replacement Electric Utility Resource Adequacy Program. One major change proposed is the submission of an annual local area resource adequacy (local capacity) demonstration to the CAISO. The City already has a responsibility to procure local capacity, which is included in the current electric utility budget. The new Resource Adequacy Program also makes changes to the system capacity demonstration to the CAISO, in anticipation of revised reporting requirements for 2009, and some changes to -the - definition of resources that count towards system capacity, to reflect current market products. These changes to system capacity counting and reporting should not result in procurement of system capacity for 2009. Commissioner Melton asked where we are finding local capacity. Fong answered: other munis such as SVP and Alameda, and the suppliers with whom we have Electric Master Agreements. The grid has reliability needs, with 7 load pockets in Northern California. If we buy capacity from any of these pockets, it helps towards maintaining grid reliabili!y. Commissioner Keller asked whether lowering the peak demand would help meet the requirement. Lloyd explained that Demand Response program may count towards capacity and that energy efficiency programs which lower demand would also reduce the local capacity procurement needs in the long term. Commissioner Keller made a comment about the cost of lowering demand versus increasing capacity. As capacity gets tighter, it gets more expensive. Lloyd said that costs are relatively low now, but costs are expected to increase in the future. Fong added that we’re continuing to look at demand-side options. Commissioner Keller asked whether transmission is less efficient during peak times because of heat and if new transmission capacity is needed. Lloyd stated that new transmission lines are very expensive and that, in the past, transmission owners would at times build peaking generation plants to support the transmission grid rather than build more expensive transmission that is only needed for a few hours of the year. This was a balance between oversizing the transmission grid with the cost of building a peaker plant. Commissioner Waldfogel asked whether the $3.4M for local capacity is included in the $6M estimate of above budget costs identified in the earlier presentation. Ratchye noted that the money to procure local capacity was included in the base budget for FY 08-09 and is not a part of the estimated $6M in costs above budget. Commissioner Waldfogel asked after any obligations on the part of NCPA to do certain functions, Lloyd responded that NCPA is obligated to perform the functions outlined in the Scheduling Coordinator agreement, Commissioner Rosenbaum asked staff to identify changes regarding the need to procure local capacity, Lloyd replied that Palo Alto has had a local capacity responsibility since 2007 and the new Resource Adequacy Program now includes the requirement to report the local capacity in the City’s portfolio to the California Independent System Operator (CAISO), Commissioner Melton asked whether the NCPA members have surplus power. Fong stated that some are long and some are short, Palo Alto is shod. Commissioner Waldfogel commented that he needed more information to make a sound policy judgment. Commissioner Waldfogel didn’t feel that he was fully in a position to assess this policy. He noted that the rationale in the presentation was not found in the written report. Lloyd explained that this is the product of working with NCPA and member agencies to design a program that uses the CAISO’s default program as the basis. Fong further stated that this policy is necessary to remain consistent with the CAISO requirements. She added that she will be more diligent in the future about specifying who prepared the policy, and what guidance was sought to give the MAC- comfort that it is complete and accurate. Commissioner Waldfogel seemed satisfied that this is drafted as a result of collaborative effort. Rosenbaum moved and Keller seconded the motion to "Recommend that Council approve the City of Palo Alto Electric Utility Resource Adequacy Program and delegate to the City Manager the authority to make changes to the elements of the Electric Utility Resource Adequacy Program to conform to changing utility practices and State policy" ACTION: The Commission voted unanimously (4-0) to approve the motion.