Application of Southern California Edison
Company (U 338-E) for Approval of the
Results of Its 2013 Local Capacity
Requirements Request for Offers for the
Western Los Angeles Basin.
Application 14-11-012
(Filed November 21, 2014)
OPENING BRIEF OF POWERS ENGINEERING
Bill Powers, P.E.
Powers Engineering
4452 Park Boulevard, Suite 209
San Diego, California 92116
Telephone:
619-295-2072
Facsimile:
619-295-2073
Email: [email protected]
June 10, 2015
Table of Contents
Page
I.
Introduction .......................................................................................................................... 1
II.
The Major Contract Awards to High Capacity Combined Cycle Units Will Result in
Substantial Greenhouse Gas Emission Increases in the LA Basin and Violates California
Law ....................................................................................................................................... 2
III.
Lack of SCE Load Growth Is a Material Changed Circumstance That Negates the Need
for New Gas-Fired Generation in the LA Basin ................................................................... 3
IV.
CAISO Documents Not in Record of Track 1 or Track 4 Decisions Can Not Be Used to
Assert SCE’s Need Is Unchanged ........................................................................................ 6
V.
Mesa Loop-In and Other Non-GFG Projects Are Changed Circumstances that Have
Eliminated the LCR Capacity Need that the Application Is Intended to Fill ....................... 9
VI.
SCE Application Fails to Follow Loading Order - Non Fossil Resources and Storage
Alternatives Are Available ................................................................................................. 12
VII.
The SCE Solicitation Process Disadvantaged Preferred Resources In Favor Of
Gas-Fired Generation and Should Be Voided and a New Solicitation Issued ................... 12
VIII. Solicitation was Not Free of Anti-Competitive Behavior as Demonstrated by Vast
Majority of Capacity Awarded to Dominant, Entrenched Incumbents .............................. 14
IX.
Energy Storage Is a Better Fit Than Gas-Fired Generation for Meeting Both
Reliability Need and Renewable Energy Integration in the LA Basin ............................... 15
X.
SCE Arbitrarily Excluded 100s of MW of Energy Storage in Favor of Less Economic
CT and Internal Combustion Engines ................................................................................ 16
XI.
The SCE Award of Energy Storage Contracts to a Politically-Connected, Unqualified
Bidder are Unfair, Anti-Competitive, and Must be Voided by the Commission ............... 17
XII.
SCE Improperly Relies on CAISO’s Bias Against Preferred Resources to Nullify
Conventional DR Contract Awards .................................................................................... 19
XIII. Conclusion .......................................................................................................................... 20
i
BEFORE THE PUBLIC UTILITIES COMMISSION
OF THE STATE OF CALIFORNIA
Application of Southern California Edison Company
(U338E) for Approval of the Results of Its 2013 Local
Capacity Requirements Request for Offers for the
Western Los Angeles Basin
Application 14-11-012
(Filed November 21, 2014)
OPENING BRIEF OF POWERS ENGINEERING
I.
Introduction
Southern California Edison’s (“SCE”) Los Angeles (“LA”) Basin application contains unjust
and unreasonable costs that should not be passed on to SCE’s ratepayers. Moreover, the energy
choices contained in the application conflict with the Commission’s statutory mandates to
procure energy efficiency and renewable energy before fossil resources and reflects the pro-gas
bias of former Commission President Michael Peevey. The resources requested in the SCE
application are also contrary to the Governor’s recent Executive Order directing the State of
California to reduce greenhouse gases.
The overwhelming majority of contracted capacity, 1,384 Megawatt(s) (“MW”) of 1,883
MW, is awarded to AES, the incumbent owner and operator of the three remaining once-through
cooling (“OTC”) generating stations in the LA Basin. The 100 MW cap SCE imposed on infront-of-meter (“IFOM”) energy storage is arbitrary and facilitates gas-fired procurement that
would otherwise not take place. SCE’s decision to rely exclusively on the California
Independent System Operator (“CAISO”) as the source of its data for bid analysis has had the
effect of nullifying conventional Demand Response (“DR”) in the bid review process.
Moreover, SCE’s review process excludes the Commission entirely thereby undercutting
California law and Commission authority. SCE’s award of DR capacity for low efficiency gasfired resources violates California’s legislatively defined loading order and makes a mockery of
the concept of preferred resources.
The Commission should consider material changes in factual circumstances and reject SCE’s
application because of the lack of need for the application. The LA Basin is not currently
experiencing any growth in its peak demand and therefore it is inappropriate to accept the results
of SCE’s contracting process. Instead of providing a forum for an objective assessment of the
1
Basin’s future resource needs, SCE’s hurried procurement process was biased in favor of gasfired generation and against preferred resources. The primary beneficiaries of the SCE
solicitation are well-entrenched incumbents and a politically-connected novice energy storage
broker. For these reasons Powers Engineering recommends the Commission deny this
application and direct SCE to issue a new RFO.
II.
The Major Contract Awards to High Capacity Combined Cycle Units Will
Result in Substantial Greenhouse Gas Emission Increases in the LA Basin
and Violates California Law
Two-thirds of the contract capacity Edison awarded in A.14-11-012, 1,284 MW of 1,883
MW, is combined cycle gas turbine (“CCGT”) capacity. Neither the Track 1 nor the Track 4
decisions set aside a portion of the capacity contracts to be awarded to CCGT technology. The
Track 1 decision states that CAISO prefers the repowering at existing OTC plants with gas-fired
generation (“GFG”), a generic term that includes both CCGT and peaking combustion turbine
(CT) technology, as the most reliable LCR alternative.1 Thus, high proportion of high
greenhouse gas (“GHG”) emitting GFG in the application is inconsistent with the Commission’s
prior decisions directing resource procurement at alternatives that reduce or eliminate GHGs.
SCE determined that CCGTs are cost-effective relative to energy storage in A.14-11-012
only by assuming high capacity factors for the proposed CCGTs at Huntington Beach and
Alamitos.2 At the same time SCE also determined that CTs are less cost-effective than energy
storage, leaving the high GHG-emitting CCGTs as the only form of GFG that is economic
relative to energy storage.3
CCGTs running at high capacity factors produce a large quantity of GHG emissions.4,5
The combined annual GHG emissions of the proposed 644 MW Huntington Beach CCGT and
the 640 MW Alamitos CCGT projects will be on the order of 4 million tons per year based on
1
D.13-02-015, p. 123, Finding of Fact 26.
SCE-1, p. 58, lines 14-17.
3
Transcript Vol I., p 82, lines 20-28; p. 83, lines 1-24.
4
SCE-1, p.58, lines 14-16. SCE eventually selected an optimization set with 644 MW of GFG at the AES Huntington
Beach site with 6,600 run hours per year, 640 MW of GFG at the AES Alamitos site with 4,600 run hours per year.
5
SCE-1, p. 81 , lines 9-11. Since it has been established that the AES facility in Hu ti gto Bea h is a overed
pro ure e t, that is ot su je t to a of the auto ati e e ptio s fro EP“, the e issio s rate of the
proposed facility must be no higher than the EPS Performance Level of 1,100 lb CO 2/MWh.
2
2
the usage rates assumed by SCE to model cost-effectiveness.6 These CCGT units will displace
existing low usage, low GHG once through cooled (OTC) steam boiler plants and will replace
the former GHG-free power from SONGS. The proposed CCGT generation, unlike low capacity,
peaking combustion turbines (CT), represents a major increase in GHG emissions compared to
the OTC and nuclear capacity being replaced. CCGT technology provides no operational
benefits over peaking CT technology for the specific purpose of providing LCR capacity.
SCE’s decision to contract for CCGT technology that require a high usage rate to be costeffective, will damage California’s and the world’s environment since these facilities must emit
large amounts of GHG emissions to be cost-effective. These CCGT contracts violate the express
precepts of the state’s loading order as codified in Section 454.5(b)(9)(C) of the Pub. Util. Code
and should be rejected by the Commission.7 The Commission recognized this mandate in D.1302-015, finding:
1. Consistent with § 454.5(b)(9)(C), which states that utilities must first meet their “unmet
resource needs through all available energy efficiency and demand reduction resources
that are cost-effective, reliable and feasible,” and the Commission’s Loading Order
established in the Energy Action Plan, utility LCR procurement must take into account
the availability of preferred resources before procuring non-preferred resources.
III.
Lack of SCE Load Growth Is a Material Changed Circumstance That
Negates the Need for New Gas-Fired Generation in the LA Basin
The February 13, 2013 2012 LTPP Track 1 final decision, D.13-02-015 authorized SCE
to contract for 1,000 MW to 1,200 MW of GFG.8 This authorization was expanded by the
Commission to up to 1,500 MW in the March 13, 2014 LTPP Track 4 decision, D.14-03-004.
Changed circumstances that have occurred since the Track 1 and Track 4 decisions were issued
have eliminated the need for this GFG authorization. SCE acknowledges the need to be flexible
to account for changed circumstances, while at the same time stating it must be inflexible about
any reduction in the GFG authorizations in Track 1 and Track 4:9
6
Huntington Beach CCGT annual GHG emissions = 644 MW x 6,600 hr/yr x [(1,100 lb/MW-hr)/2,000 lb/ton] = 2.34
million ton/yr. Alamitos CCGT annual GHG emissions = 640 MW x 4,600 hr/yr x [(1,100 lb/MW-hr)/2,000 lb/ton] =
1.62 million ton/yr. Therefore, total the annual Huntington Beach CCGT and AES Alamitos CCGT GHG emissions =
2.34 million ton/yr + 1.62million ton/yr = 3.96 million ton/yr.
7
D.13-02-015, Conclusion of Law 2.
8
D.13-02-015, Order No. 1, p. 131.
9
SCE-06, p. 17, lines 7-10.
3
While SCE acknowledges the need to be flexible to address changing
circumstances, in this instance, the approval of SCE’s LCR contracts is necessary
to ensure reliable operation of the transmission system, as discussed
in more detail below.
SCE goes on to assert that all future changed circumstances were accounted for in the
Track 1 and Track 4 authorizations.10 This is true only in the sense that the Commission
indicated that if the Track 4 decision results in over-procurement then no new procurement will
need to be authorized in future long-term procurement proceedings.11
However, this does not mean there would be a need to change or update this
decision. Instead, some combination of the following would occur: a)
procurement at or near the minimum levels authorized in this decision; b) less
procurement or no procurement authorized in future LTPP proceedings; and c)
less of a need to delay retirements of OTC plants.
In other words, over-building capacity now means only that less will be built in the
theoretical future. This carefree attitude toward over-procurement is contradicted by Finding of
Fact 4 in the Track 4 decision: “Over-procurement entails risks of excessive costs and
unnecessary environmental degradation.”12 The possibility that this capacity is not needed now
due to changed circumstances, and that it will not be needed at all in the future due to shift away
from GFG, is not considered. The facile position that over-procurement will resolve itself down
the road, without assessing intervening changed circumstances that may have reduced or
eliminated the authorized need impermissibly absolves the Commission from assuring just and
reasonable rates for today’s ratepayers, based on facts in the record that are known by or should
be considered by the Commission today.
The changed circumstances since the issuance of D.13-02-015 include:13 1) continued
actual peak demand decline in SCE and the LA Basin;14 2) steady decline in forecast 2020 peak
load; 3) approval by CAISO of the Mesa Loop-In Project with a 2020 operational date, which
will reduce LA Basin Local Capacity Requirement (LCR) need by 1,200 MW; 4) an increase in
SCE’s net-metered solar target from approximately 850 MW under the California Solar Initiative
(2007) to 2,240 MW under AB 327 passed into law in October 2013: 5) an increase in SCE’s
10
Ibid, p. 17, lines 11-13.
Ibid, p. 19, lines 2-7.
12
D.14-03-004, p. 130, Finding of Fact 4.
13
Powers-3, p. 1, lines 5-19.
14
Ibid, p. 7, line 23. LA Basin is 77 percent of SCE peak load.
11
4
energy storage target from 50 MW in D.13-02-015 to 580 MW in D.13-10-040 (October 2013):
and 6) the Commission’s establishment of explicit LCR values for rooftop solar and energy
storage in May 2014 in the 2014 Long-Term Procurement Proceeding (LTPP) that allow precise
calculation of the LCR need reduction achieved by additional rooftop solar and energy storage
projects in the LA Basin that were not quantified in either D.13-02-015 or D.14-03-004. The
actual SCE peak demand trend for 2006-2014 is shown in Figure 1.15
Figure 1. Actual 1-hour peak demand trend in SCE territory, 2006-2014
The demand forecast for SCE used by CAISO in its 2014-2015 Transmission Plan
projects a 2020 SCE peak demand that is 1,438 MW less than the 2020 SCE peak demand
projected in the 2009 forecast. The 2009 forecast was used to determine the SCE LA Basin need
authorization in D.13-02-015. This equates to a 2020 forecast reduction of 1,107 MW in the LA
Basin compared to the 2009 forecast. The downward revisions over time to the SCE 2020
demand forecast are shown in Figure 2.16
//
//
//
//
15
16
Ibid, p. 3, line 7.
Powers-3, p. 6, lines 3-12.
5
Figure 2. Comparison of 2020 SCE 1-hour 2009, 2011, and 2013 peak demand forecasts
Figures 1 and 2 demonstrate that the demand forecasts used as the basis for the proposed
SCE procurement are out-of-date. The current demand data constitutes materially changed
factual circumstances that the Commission should consider and incorporate in this decision. The
substantially lower load forecast negates the need for SCE’s application for new gas fired
resources.
IV.
CAISO Documents Not in Record of Track 1 or Track 4 Decisions Can
Not Be Used to Assert SCE’s Need Is Unchanged
SCE asserts in rebuttal testimony that CAISO modeling conducted for the CAISO 2013-
2014 Transmission Plan and 2014-2015 Transmission Plan corroborate the need authorizations
in D.13-02-15 and D.14.03-004.17 It is undisputed that this modeling took place after D.14-03004 was issued and is not in the record of the proceeding. Specific Commission decisions
contradict the CA ISO modeling. D.14-03-004 is explicit that when the Mesa Loop-In Project is
completed it will reduce the LCR in the LA Basin by 1,200 MW.18 D.14-03-004 states 588 MW
of load shedding should be deducted from the LCR need identified in CAISO modeling to offset
in part the critical N-1-1 contingency evaluated in CAISO LCR modeling in D.14-03-004. 433
17
18
SCE-6, p. 19, lines 10-12.
D.14-03-004, p. 127, Finding of Fact 36.
6
MW of the 588 MW total load shed would occur in the LA Basin.19 One month after D.14-03004 was issued, CAISO approved the Mesa Loop-In Project in its 2013-2014 Transmission Plan,
along with transmission upgrade projects in SDG&E territory that reduce LCR need in SDG&E
territory by approximately 770 MW.20
Incongruously, CAISO claimed the 2013-2014 Transmission Plan modeling
demonstrated that the LCR need in SCE LA Basin and SDG&E service territories actually
increased by 900 MW compared to Track 4 modeling, despite the incorporation of transmission
upgrades the reduced the LCR need in SCE/SDG&E territories by approximately 2,000 MW.21 It
is not known what changes CAISO incorporated into the 2013-2014 Transmission Plan model
compared to the model used in D.14-03-004. Nor should it matter to the Commission. The 20132014 Transmission Plan model is not in the record of D.14-03-004.
These transmission upgrade projects become “certain” for transmission planning
purposes when the CAISO approves them. The approval of these transmission projects one
month after D.14-03-004 was issued is a changed circumstance. The effect of these upgrades on
the CAISO LCR model results in D.14-03-004, the only CAISO model in the record of D.14-03004, is known and simple to calculate. It is a straight subtraction from the identified LCR need.
No new CAISO modeling is required to assess the effect of the approval of these transmission
projects on the LCR need identified in D.14-03-004.
To the extent that SCE relies on CAISO models not in the record of the Track 4
proceeding to assert the validity of the Track 1 and Track 4 procurement authorizations, the
Commission must reopen Track 4 to allow all parties to thoroughly evaluate the assumptions
used in the CAISO 2013-2014 and 2014-2015 Transmission Plan models.
Conclusion of Law 1 in D.13-02-015 accurately and succinctly describe the different
functions and responsibilities of the CAISO and the Commission:22
A significant difference between the ISO’s reliability mission under § 345 and the
Commission’s reliability emphasis under § 380(c) is that the Commission must
balance its reliability mandate with other statutory and policy considerations.
Primarily, these considerations are reasonableness of rates under § 451 and § 454
and a commitment to a clean environment under Pub. Util. Code sections
19
D.14-03-004, p. 79.
Powers-3, Exhibit PE-19.
21
Powers-3, Exhibit PE-20, p. 9.
22
D.13-02-015, pp. 126-127, Conclusion of Law 1.
20
7
including § 399.11 (Renewables Portfolio Standard) and § 454.5(b)(9)(C)
(Loading Order).
The notion that the CAISO has been anointed as the state’s oracle on transmission and
capacity need determinations runs contrary to the Commission’s mandate to protect consumer
interests. (See Pub. Util. Code sections 451, 454, 454.5). CAISO is not a state agency but rather
is a non-profit corporation. It has no statutory (or other) obligation to consider consumer
interests in its deliberations. In fact, the CAISO’s mandate to “keep the lights on” no matter
what is inimical to many of the Commission’s statutory obligations — particularly in the area of
protecting consumer needs and meeting the state’s greenhouse gas obligations. CAISO’s
analyses have repeatedly changed, used inconsistent assumptions, and have had a consistent bias
towards new construction. It is not only contrary to applicable law, but also deleterious to the
Commission’s consumer and environmental mandates to accept the CAISO’s determinations
without thorough and critical analysis.
CAISO’s assertion that the Commission should rely on its analyses, because CAISO has
a public stakeholder process, rings hollow.23 SCE witness Chinn, SCE’s transmission planning
expert, admitted that the CAISO stakeholder process is not evidentiary.24 Witness Chinn could
not name any of the stakeholders in the CAISO transmission planning standard proceeding he
referenced and relied on in his rebuttal testimony. The stakeholder process is advisory in nature,
at best, and CAISO has no obligation to address or incorporate recommendations made by the
stakeholders.
SCE asserts that the Procurement Review Group (PRG) was the place for parties to
review proposed contract agreements and suggest modifications to terms,25 while acknowledging
parties not in the PRG would not have been afforded this opportunity.26 The PRG is similar in its
advisory, non-evidentiary, non-binding nature to the CAISO stakeholder process. SCE can
incorporate or reject recommendations made by the PRG at its discretion, as explained by SCE
witness Cushnie:27
Q Very good. And so how does it work? Is it evidentiary? Is it majority vote?
23
CAISO-1, p. 5, lines 7-15.
Transcript Vol. II, p. 272, lines 10-24.
25
SCE-06, p. 2, lines 1-5.
26
Transcript Vol. II, p. 324, lines 20-27.
27
Transcript Vol. II, p. 323, lines 11-28; p. 324, lines 1-10.
24
8
If someone in the PRG says "I have a issue with how you structure your demand
response contracts" for example, is there some formal process so that SCE
incorporates that or does SCE just hear from someone on the PRG and you decide
one way or the other whether you're going to incorporate or not that suggestion?
A So the Procurement Review Group process a consultive process. There is no
membership, per se. The entities that participate that are not Commission staff
sign nondisclosure agreements. The Commission personnel participate under
the Commission's confidentiality Public Utility Code requirements. And it is a
process in which Edison as the utility puts forward its procurement
recommendations and it seeks feedback from these participants. And it's an
iterative process at times. It is certainly a dialogue. But at the end of the day,
there's no vote taken. Edison takes the feedback that it gets under advisement, and
then it moves forward.
The CAISO stakeholder process and SCE’s PRG come nowhere near the level of
scrutiny achieved in an evidentiary process where independent parties can probe the
validity of the facts at issue. What’s more, the CAISO stakeholder process and the SCE
PRG create the illusion of review where none in fact occurs. Parties not invited to or able
to participate in the closed process of the PRG would be denied due process if SCE’s
position were adopted by the Commission. The Commission should reject the CAISO
and SCE position that the workings of the CAISO stakeholder process and the SCE PRG
are sufficient to satisfy the due process requirements that afford every party access and a
meaningful opportunity to participate in the SCE need authorization or the contracts
awarded by SCE.
V.
Mesa Loop-In and Other Non-GFG Projects Are Changed Circumstances
that Have Eliminated the LCR Capacity Need that the Application Is
Intended to Fill
SCE states in its Track 4 application that the “Mesa Loop-In (Project) further
reduces the need for LCR resources in the LA Basin by 1,196 MW.”28 The Mesa Loop-In Project
was considered uncertain by the Commission in D.14-03-004. However, subsequent to the
issuance of D.14-03-004, the Mesa Loop-In Project was approved in the CAISO 2013-2014
Transmission Plan and is now considered certain.29
28
29
Powers-3, p. 16, lines 13-14.
Ibid, p. 2, lines 5-7.
9
D.14-03-004 includes an assessment of the LCR value of six non-GFG resources that the
Commission defined as “uncertain” in its Track 4 LCR need calculations, including: the Mesa
Loop-In Project, load shedding, energy efficiency, demand response, rooftop solar, and energy
storage. The total LCR capacity of these resources is 4,600 MW.
The combined SCE LA Basin/SDG&E LCR need identified by CAISO in Track 4
resulting from the retirement of SONGS, prior to any adjustment by the Commission to account
for some level of “uncertain’ resources being available, was 2,390 MW.30 The maximum
authorization in D.14-03-004 between SCE and SDG&E is 1,500 MW. Therefore, the
Commission ultimately determined that as little as 890 MW of a projected 4,600 MW of six nonGFG resource types would be available to meet combined SCE LA Basin and SDG&E LCR
need by the end of 2021.31
Track 4 assumes that any two of the uncertain resources will be 100 percent available to
meet the LCR need, and that 67 to 80 percent of these resources will be developed in the SCE’s
LA Basin.32,33 Therefore, the D.14-03-004 determination that as little as 890 MW of non-GFG
resources will be contracted to meet the combined SCE LA Basin/SDG&E LCR need equates to
596 MW to 712 MW of non-GFG resources in the LA Basin.34
The treatment of load shedding in D.14-03-004 is inconsistent. D.14-03-014 authorizes
588 MW of load shedding to meet the LCR need, as stated in Conclusion of Law 12:35
12. It is reasonable to subtract 588 MW from the ISO’s forecasted LCR need to
account for resources that will not be procured at this time to fully avoid the
possibility of load-shedding in San Diego as a result of the identified N-1-1
contingency.
Of the 588 MW load shed authorized in D.14-03-004, 433 MW would take place in
SCE’s LA Basin.36 Yet D.14-03-004 also treats this authorized level of load shedding as
uncertain when calculating the contribution of non-GFG resources not considered by CAISO to
30
D.14-03-004, p. 76.
2,390 MW (LCR need) – 1,500 MW (maximum GFG authorization) = 890 MW.
32
Ibid, p. 76. Analyzing 100% availability of any two scenarios is a reasonable proxy for the largest amount of
available LCR reductions.
33
Ibid, p. 84.
34
890 MW × 0.67 = 596 MW. 890 MW × 0.80 = 712 MW.
35
D.14-03-004, p. 136.
36
Ibid, p. 79.
31
10
meeting SCE LA Basin and SDG&E LCR need. The net effect of this inconsistency is to
discount the Commission-authorized amount load shedding by 81 percent.37
Changed circumstances require the reclassification of the Mesa Loop-In Project from
“uncertain” to “certain.” This adds the full 1,196 MW LCR need reduction represented by the
Mesa Loop-In Project to SCE’s LA Basin. Consistent treatment of the load shedding
authorization in D.14-03-004 adds 433 MW of load shedding to meet the LCR need in the LA
Basin.
The minimum amount of LCR reduction available from the combination of 100 percent
availability of any two resources from among the four resource types remaining after the Mesa
Loop-In Project and Commission-authorized load shedding are excluded, which include energy
storage, uncommitted energy efficiency, rooftop solar, and demand response, is 1,478 MW.38
The amount of this LCR reduction in the LA Basin would range from 990 MW to 1,182 MW.39
The effect of these changed circumstances is to increase the amount of resources
available to meet the LA Basin LCR need by over 2,000 MW, as shown in Table 1. These
changes circumstances would entirely eliminate the need for the 1,883 MW of contracts in
SCE’s application. The Commission can order SCE to cancel the 2013 LCR RFO without
concern that such an action would lead to a shortage of LCR capacity in the LA Basin.
Table 1. Net Increase in LCR Capacity in SCE LA Basin due to Changed Circumstances
LCR capacity resource
LCR capacity (MW)
Mesa Loop-In Project
1,196
Commission-approved load shedding
433
100% availability of any two of four uncertain non-GFG
resources in LA Basin
Minimum LA Basin LCR capacity of six uncertain non-GFG
resources, including Mesa Loop-In and load shedding, in
D.14-03-004
Net increase in LCR capacity in LA Basin
37
Powers-3, p. 19, lines 1-3.
Ibid, Table 3, p. 78. uncommitted EE (733) + energy storage (745) = 1,478 MW.
39
1,478 MW × 0.67 = 990 MW. 1,478 MW × 0.80 = 1,182 MW.
38
11
990 – 1,182
(596 – 712)
2,023 – 2,099
VI.
SCE Application Fails to Follow Loading Order - Non Fossil Resources
and Storage Alternatives Are Available
The Commission stated in D.13-02-015 that:40
We anticipate that much of the additional LCR need currently forecast by the
California Independent System Operator can be filled by preferred resources,
either through procurement of capacity or reduction in demand. Preferred
resources include energy efficiency, demand response, and distributed generation
including combined heat and power.”55 . . . “In D.07-12-052 at 12, the
Commission stated that once demand response and energy efficiency targets are
reached, “the utility is to procure renewable generation to the fullest extent
possible.” The obligation to procure resources according to the Loading Order is
ongoing. (D.12-01-033 at 19.) In D.12-01-033 at 21, the Commission recognized
that procuring additional preferred resources is more difficult than “just signing
up for more conventional fossil fuel generation,” but consistency with the
Loading Order and advancing California’s policy of fossil fuel reduction demand
strict compliance with the loading order.
In this application, SCE has done what D.13-02-015 admonishes it not to do - “just
signing up for more conventional fossil fuel generation” – while relying on unsupported excuses
such as an arbitrary IFOM energy storage 100 MW cap or ex post facto changes to conventional
DR bid requirements that marginalize preferred resources. The magnitude of these artificially
marginalized preferred resources would largely or completely substitute for the proposed GFG
procurement.
VII.
The SCE Solicitation Process Disadvantaged Preferred Resources In
Favor Of Gas-Fired Generation and Should Be Voided and a New
Solicitation Issued
The hurried solicitation process conducted by SCE to assure rapid progress on the
deployment of new GFG capacity disadvantaged preferred resource providers, as explained by
SCE witness Cushnie:41
A I think the largest concern that I personally had with our solicitation was we
had asked for more time to prepare to issue our bid docs so that we could engage
with the industry to understand what their concerns might be with our pro forma
40
41
Powers-3, pp. 22-23.
Transcript Vol. II, p. 293 , lines 1-14.
12
agreements and then try to deal with those proactively. And the Commission felt a
lot of pressure, I believe, to get the solicitation started as soon as possible because
getting gas-fired generation contracted, permitted, and built is a very long lead
time activity, and wanted to make sure we had at least that part of the portfolio
constructed by 2020.
Concurrently SCE expressed the opinion that if the Commission found fault with some of
the contract awards that the current solicitation should be cancelled and a new RFO issued:42
A . . .The offers were only effective to the point in time that we made our final
award selections, in which case in time the offers are no longer valid. So Edison is
always able to go back and ask bidders if they are willing to refresh bids, but I
would recommend against that. If we were going to do something like that, it
would make more sense to reissue a solicitation targeted to meeting our LCR need
and give bidders equal opportunity to participate.
Q So you would reopen -- you would do a new RFO, reopen to all resources?
A That would be my recommendation at this point in time. That is -- we know
more now than we did at the time, and we would want to reissue documents to
reflect what we know, with better contracts effectively.
A . . . And in the context of preferred resource as defined in preferred loading
order, Edison did not receive as many bids as it would have liked to allow us to
fully meet our preferred resource requirement.
Powers Engineering agrees with SCE’s overall characterization of the bidding process. It
was rushed to accommodate gas procurement. It was biased against preferred resources
procurement, as demonstrated by the arbitrary 100 MW cap on IFOM energy storage. The
incomplete requirements for conventional DR procurement resulted in 0 MW of conventional
DR contract awards. The overwhelming amount of capacity awarded by SCE went to two wellentrenched bidders, AES and NRG, that together own all four OTC plants in SCE’s LA Basin.43
Four of seven energy storage contracts were awarded affiliates of Susan Kennedy’s Advanced
Microgrid Solutions (AMS), a firm with no qualifying attributes other than a politically
connected CEO. In short, the SCE 2013 LCR RFO should be cancelled and a new RFO issued,
if necessary, in order to comply with the mandates of Pub. Util. Code Section 454.5(b).
42
43
Transcript Vol. II, p. 306, lines 3-21.
D.13-02-15, p. 119, Finding of Fact 4.
13
VIII. Solicitation was Not Free of Anti-Competitive Behavior as Demonstrated
by Vast Majority of Capacity Awarded to Dominant, Entrenched
Incumbents
When D.13-02-015 was issued in February 2013, the LA Basin had four existing OTC
plants.: AES Huntington Beach, AES Alamitos, AES Redondo Beach, and NRG El Segundo.44
1,555 MW of the 1,883 MW of contracts awarded by SCE in A.14-11-012 were awarded either
to either AES (1,384 MW) or NRG (171 MW).45 These two incumbent merchant OTC power
plant operators received over 82 percent of the contract capacity awarded by SCE in A.14-11012, even though SCE received almost 2,000 final offers for all resource types in response to the
2013 RFO solicitation.46,47
SCE reported how many offers it had received for both the Western LA Basin and
Moorpark sub-area in the A.14-11-012 application.48 When the 262.5 MW of capacity awarded
to NRG in the SCE Moorpark sub-area solicitation49 is added to the total NRG capacity awarded
in the LA Basin and Moorpark sub-area, the percentage of SCE 2013 RFO capacity awarded to
AES and NRG in the combined LA Basin and Moorpark sub-area solicitations increases to 85
percent.50
SCE witness Cushnie’s statement below that SCE made aggressive attempts to do
business with new parties is not reflected in the very large amount of capacity awarded to the
two most established generators in the LA Basin:51
We had a lot of counterparties that were fairly new in our space bringing us bids.
We had to make some determinations as to whether or not we should contract
with them. We erred on the side, clearly, of trying to do more business than less
business.
44
D.13-02-015, p. 119, Finding of Fact 4.
SCE-1, Table VII-21, p.67; Table VII-24, p. 74; Table VII-25, p. 78.
46
1,550 MW/1,883 MW = 0.823 (82.3 percent)
47
SCE-2, p. D-35. The solicitation response was very strong, with over 1,100 indicative offers and almost 2,000 final
offers re eived, represe ti g a ti es “CE’s apa it eeds.
48
SCE-1, p. 1, footnote 1.
49
SCE Application, A.14-11-016, Table 1-1, p. 3.
50
Total AES + NRG capacity awarded in LA Basin = 1,555 MW. NRG capacity awarded in Moorpark sub-area = 262.5
MW. Total SCE capacity awarded in LA Basin and Moorpark sub-area = 1,883 MW + 274 MW = 2,157 MW.
Therefore AES + NRG of total LA Basin + Moorpark sub-area capacity awarded = (1,555 MW + 262.5 MW)/2,157
MW = 0.848 (84.8 percent).
51
Transcript Vol. II, p. 314, lines 27-28; p. 315, lines 1-6.
45
14
Mr Cushnie’s testimony is inconsistent with SCE’s behavior in this case. SCE had an
obligation to contract for a minimum of 600 MW of preferred resources in this solicitation. That
did not happen. SCE contracted for 99 MW fewer MW than the minimum preferred resources
allocation of 600 MW.52 To address this shortfall, SCE will have to conduct a new solicitation.53
Alternatively, Mr. Cushnie testified that SCE will request that CAISO do another
reliability model run for Southern California’s grid to determine if changed circumstances will
reduce need such that the 99 MW preferred resources shortfall does not need to be filled.54 SCE
is advocating that changed circumstances be considered. However, SCE wants changed
circumstances considered to avoid filling the minimum preferred resources allocation, and not to
reconsider the need for 1,382 MW of GFG contract awards in the application.
Over 82 percent of the capacity awarded went to the two merchant OTC power plant
operators in the LA Basin and SCE could not meet the minimum preferred resources target. This
solicitation process was not free of anti-competitive behavior, and is another reason why the
Commission should deny this application.
IX.
Energy Storage Is a Better Fit Than Gas-Fired Generation for Meeting
Both Reliability Need and Renewable Energy Integration in the LA Basin
Shell Energy North America LLC enumerated the disadvantages of low capacity factor
gas-fired generation for renewable energy integration, and the advantages of energy storage in
the same application, in the A.14-07-009 proceeding:55
In order to integrate new renewable energy supplies, renewable resources must be
balanced by resources that can provide frequency response and VAR support.
Peaking facilities generally have a low capacity factor (are only on-line for
limited time periods), resulting in very limited ability to provide VAR support.
Peaking facilities also do not provide the frequency response that is needed to
stabilize the grid upon the loss of a generation unit or transmission line. In
addition, due to their expected low capacity factor, peakers do not provide
consistent system inertia, which is the ability of a power system to support
imported energy. The characteristics of peaking facilities raise serious questions
about whether a PPTA for 600 MW of peaking capacity is consistent with the
need to integrate increased renewable supplies into SDG&E’ s local reliability
area. . . In light of (CAISO) Mr. Sparks’ expressed concern about voltage stability
52
Vol. II, p. 293, lines 24-28.
Ibid.
54
Transcript Vol. II, pp. 300, lines 22-28; p. 301, lines 1-7.
55
Powers-3, p.13, lines 14-33; p. 14, lines 1-5.
53
15
and “degradation of deliverability of renewable generation in the Imperial
Valley,” (Ex. 4 at p. 8), it is questionable whether peaking units with a low
capacity factor are the best resources to meet the local reliability need created by
the loss of SONGS. . . Other resources, including pumped hydro storage, provide
system inertia, VAR support and frequency response, all of which are necessary
to integrate renewables and provide system stability. . . Alternative resources may
have operational characteristics that are more consistent with the State’s loading
order and that more efficiently integrate the delivery of renewable energy into the
San Diego sub-area, but these resources may be pre-empted by the Commission’s
approval of the Carlsbad Energy Center PPTA.
Shell’s testimony is consistent with SCE’s optimization modeling runs described in its
application. When SCE conducted optimization modeling in the LA Basin solicitation the
results confirmed that IFOM energy storage was more economic than GFG, except in the
self-defeating case, from a climate change perspective, of combined cycle GFG with high
usage rates and attendant high GHG emissions.
X.
SCE Arbitrarily Excluded 100s of MW of Energy Storage in Favor of Less
Economic CT and Internal Combustion Engines
SCE received 1,136 offers from bidders, encompassing all of the technology types SCE
solicited.56 579 of these offers, about half the total, were for energy storage.57 SCE confirmed
that its energy storage model was robust and well developed.58 According to the Independent
Evaluator (IE), the considerable energy and ancillary services value of IFOM energy storage
resources tended to cause excessive energy storage resource procurement to crowd out preferred
resource selection.59
When SCE modeled its optimized maximum procurement scenario the outcome
indicated the acquisition of 900 MW of IFOM energy storage would be the most economic
scenario.60 Even though SCE received a large number of energy storage offers, it made a
“judgment call” to cap IFOM energy storage at 100 MW and award the entire 100 MW in a
single contract to AES. SCE witness Singh provided no evidence to support his statement that
56
SCE-1, p. 35, lines 8-10. The 1,136 indicative offers included offers for both the Western LA Basin and Moorpark
sub-area.
57
Ibid.
58
Transcript Vol. I, p. 173, lines 24-28: p. 174, lines 1-13.
59
SCE-2, D-22.
60
SCE-1, p. 57, lines 7-8.
16
there is not more than that (100 MW) available in the markets, 61and it is directly contradicted by
SCE’s receipt of 5,709 offers for energy storage in this solicitation.
Witness Singh provided no evidence to support his statement that energy storage is “sort
of a (sic) unknown product.”62 Mr. Singh’s lack of familiarity with energy storage is in direct
conflict with witness Bryson’s awareness of SCE’s 1 MW utility-scale sodium-sulfur battery
project on Catalina Island.63
SCE has violated Ordering Paragraph 11(e) in D.13-02-015 and Ordering Paragraph 8(e)
in D.14-03-004 by arbitrarily placing a 100 MW cap on IFOM energy storage. These ordering
paragraphs state that SCE shall specify how the totality of the contracts meet:
A demonstration of technological neutrality, so that no resource was arbitrarily or
unfairly prevented from bidding in SCE’s solicitation process. To the extent that
the availability, viability and effectiveness of resources higher in the Loading
Order are comparable to fossil-fueled resources, SCE shall show that it has
contracted with these preferred resources first.
SCE arbitrarily established an IFOM energy storage cap of 100 MW SCE presented no
evidence that energy storage technology is not sufficiently mature to be deployed to the
maximum extent possible. At the same time, SCE did not craft the solicitation requirements to
assure further procurement of mature utility-scale battery technologies with which it has direct
experience, such as the 1 MW sodium-sulfur battery installation on Catalina Island.64 No cap
should have been imposed and SCE should have awarded contracts for 900 MW of IFOM energy
storage.
XI.
The SCE Award of Energy Storage Contracts to a Politically-Connected,
Unqualified Bidder are Unfair, Anti-Competitive, and Must be Voided by
the Commission
SCE received approximately 200 final offers for energy storage.65 Sedway Consulting
was engaged by SCE as the independent evaluator (IE) to ensure that the solicitation process was
61
Transcript Vol. I, p. 27, lines 4-6.
Transcript Vol. I, p. 26, lines 21-23.
63
Transcript Vol. I, p. 198, lines 23-28.
64
Transcript Vol. 1, p. 198, 24-28; p. 199, lines 1-5.
65
Transcript Vol. II, p. 313, lines 23-28; p. 314, lines 1-3.
62
17
fair to all qualified bidders. Sedway was required to make a determination as to whether SCE’s
final selection was fair and free from anti-competitive behavior.66
Four of the seven energy storage contract awards went to affiliates of one company,
AMS. AMS was formed two months after the SCE 2013 RFO solicitation was issued in
September 2013 by former CPUC commissioner Susan Kennedy.67 SCE characterized the four
offers by the AMS affiliates as “among the best offers that we received,”68 even though AMS
has no operating history, specific designated storage technology, no creditor collateral, and no
site control.69 One element of the IE assessment of contractor eligibility is the bidder’s
experience level.70 AMS and its affiliates should have scored zero on experience and should not
have been short-listed by SCE.
SCE executives gave conflicting testimony on the experience level of AMS, alternatively
stating the firm had no known experience (SCE witness Bryson) and as possessing the necessary
level of experience (SCE witness Cushnie).71,72 Ms. Kennedy organized former CPUC President
Michael Peevey’s tribute dinner in February 2015 and regularly advises current CPUC Michael
Picker on CPUC-related business.73 The award of energy storage contracts to an unknown firm
with no operating experience or track record, inadequate capitalization and no site control
suggests that the selection process was not based on an objective evaluation of the bids received.
These contracts do not meet the requirements set forth in the SCE 2013 RFO solicitation. SCE
provides no evidence or support in the record that justifies the award of these contracts to an
unproven firm whose primary qualification appears to be being well-placed politically. Doing so
is anti-competitive and does not result in just and reasonable costs that SCE ratepayers should
bear. The AMS contracts should be disallowed by the Commission.
//
//
//
//
66
SCE-1, p. 29, lines 1-4.
Powers-2.
68
Vol. II, p. 319, lines 9-15.
69
Vol. II, p. 318, lines 1-12.
70
SCE-2, D-40.
71
Transcript Vol. I, p. 193, lines 1-16.
72
Vol. II, p. 314, lines 19-26; p. 318, lines 22-28; p. 319, lines 1-8.
73
Powers-2.
67
18
XII.
SCE Improperly Relies on CAISO’s Bias Against Preferred Resources to
Nullify Conventional DR Contract Awards
The CAISO has consistently rejected the use of preferred resources to meet reliability
needs, as summarized in D.13-02-15 citing to the testimony of CAISO’s Southern California
transmission planning manager Robert Sparks:74
No capacity from demand response was included in any ISO analysis because
the ISO “does not believe that demand response can be relied upon to address
local capacity needs, unless the demand response can provide equivalent
characteristics and response to that of a dispatchable generator.” The ISO
claims “demand response does not have these characteristics at this time.”
Nor does the ISO include any demand reduction for uncommitted energy
efficiency or uncommitted combined heat and power (CHP) in its forecasts.
Mr. Sparks was responsible for defining the qualifying parameters for DR resources, and
for exercising the professional judgment that SCE stated it deferred to regarding eligible DR
resources. The qualifying conditions imposed by CAISO were used to analyze the DR bids
received in response to SCE’s 2013 RFO.75 While deferring to CAISO’s alleged grid reliability
expertise is a facile solution for the Commission, it is not reasonable for the Commission to
rely on CAISO’s perspective when CAISO’s view conflicts with the Commission’s statutory
mandates. Pub. Util. Code Section 454.5(b)(9)(C) states that utilities must first meet their
“unmet resource needs through all available energy efficiency and demand reduction
resources that are cost-effective, reliable and feasible.” Thus, the Commission must meet
unmet needs through energy efficiency and demand reduction resources first. The CAISO’s
dismissal of behind-the-meter renewable energy, energy storage, and other DR resources is
not sufficient evidence on which the Commission can rely to act contrary to the mandate of
Section 454.5.
Moreover, the 75 MW of DR awarded by SCE is not clean energy DR at all. No
demand will be reduced. The demand will instead be met by behind-the-meter low
efficiency internal combustion engines rebranded as DR resources based on a tortured
interpretation by SCE of the term “distributed generation.”76
74
Powers-3, p. 23, lines 9-21.
Ibid, p. 24, lines 24-28.
76
Transcript Vol. I, pp. 106-107.
75
19
XIII. Conclusion
The primary beneficiaries of the SCE solicitation are well-entrenched incumbents and a
politically-connected novice energy storage broker. For these reasons Powers Engineering
recommends the Commission deny this application and direct SCE to issue a new RFO.
20