CHAPTER
2.4. Reliable Electric Service Act of 2004
400.
This chapter shall be known, and may be cited, as the Reliable Electric Service Act of 2004.400.1.
(a) An electrical corporation has an obligation to, and shall, plan for and provide its customers with reliable electric service at just and reasonable rates, pursuant to Section 451, including those customers that take standby service from the electrical corporation on a commission-approved rate schedule.(b) For purposes of this chapter, “electric service” includes providing adequate and efficient resources, including cost-effective energy efficiency and other demand reduction resources, utility-owned and procured generation resources, such as new and repowered generation resources, cogeneration, and renewable generation resources, transmission and distribution resources, metering, billing, and employing an adequately sized, well-trained utility workforce, including contracting for maintenance of generation facilities.
(c) Notwithstanding subdivisions (a) and (b), an electrical corporation has no obligation to plan for or procure electricity or meet resource adequacy requirements for any customer that has entered into a direct transaction.
400.5.
(a) To ensure that adequate investments are made in resources necessary to provide customers with reliable electric service, the commission shall authorize an electrical corporation to provide efficient, cost-effective resources, including cost-effective energy efficiency and demand reduction resources, utility-owned and procured generation resources, which may include, among other resources, new and repowered generation resources, cogeneration, and renewable generation resources, consistent with the electrical corporation’s long-term integrated resource plan approved pursuant to Section 400.11 and its procurement plan adopted pursuant to Section 454.5.(b) The commission shall, after public hearing, approve and thereafter maintain just and reasonable rates sufficient to ensure that the electrical corporation fully recovers both of the following:
(1) The electrical corporation’s initial capital investment in generation resources specified, found reasonable, and approved in the certificate of public convenience and necessity if the investment complies with the conditions specified by the commission in the certificate of public convenience and necessity at the time the investment is approved.
(2) The electrical corporation’s full cost of contracting for generation resources with another entity found reasonable pursuant to Sections 454.5 and Article 16 (commencing with Section 399.11) of Chapter 2.3, taking into account any collateral requirements and debt equivalence associated with the contract, in a manner determined by the commission to provide the best value to ratepayers.
(c) Nothing in this chapter alters the requirements of Section 451, 454.5, 455.5, 463, or 1005.5.
(d) It is the intent of the Legislature in enacting this section to reaffirm California’s traditional regulatory doctrine, under which an electrical corporation has the obligation to provide reliable electric service at just and reasonable rates, and the commission ensures that the electrical corporation is afforded the means to carry out this obligation, specifically including a reasonable opportunity to fully recover from all customers of the electrical corporation, in a manner determined by the commission pursuant to this code, a return of, and a reasonable return on, reasonable investments in utility-owned generation, transmission, and distribution resources that are necessary to meet the utility’s obligation, the utility’s reasonable costs to operate and maintain those resources, and the utility’s reasonable costs for nonutility generation resources procured in accordance with Section 454.5 and Article 16 (commencing with Section 399.11).
400.10.
(a) To ensure that adequate investments necessary to meet the electrical corporation’s obligation to provide reliable electric service are made, every electrical corporation shall, commencing on January 1, 2006, and at least every three years thereafter, prepare and file with the commission a long-term integrated resource plan.(b) The long-term integrated resource plan shall accomplish all of the following:
(1) Ensure that adequate resources are identified to serve the utility’s customers reliably.
(2) Provide for investments in, or procurement of, resources proposed pursuant to Section 454.5 and Article 16 (commencing with Section 399.11).
(3) Be consistent with Section 701.1 and Chapter 4 (commencing with Section 25300) of Division 15 of the Public Resources Code.
(4) Achieve a diversified portfolio of efficient, cost-effective, and environmentally responsible supply and demand resources to serve the utility’s customers.
(5) Provide for funding of all practicable and cost-effective energy efficiency and load management resources.
(6) Provide for investments in, or procurement of, necessary generation resources, and may include extensions, renewals, or renegotiations of contracts for existing generation resources, new or repowered generation, and cogeneration projects.
(7) Provide that an electrical corporation meets resource adequacy requirements established by the commission pursuant to Section 400.22, for the electric load served by the electrical corporation. For purposes of this chapter, “electric load served by the electrical corporation, including load served under a standby tariff,” does not include the electrical load of customers who have entered into a direct transaction.
(8) Include demand and supply forecasts for 5- and 10-year periods. The demand forecasts shall reflect all energy efficiency and load management programs approved by the commission.
(c) The long-term integrated resource plan may provide for investments in distributed generation that would improve electrical system reliability, thereby deferring or eliminating investments in distribution facilities that would otherwise be needed to improve system reliability, by either direct investment by the electrical corporation or under contract with a retail customer or a third party, if the commission finds that the investment in distributed generation would accomplish both of the following:
(1) Result in overall cost savings for ratepayers due to deferral or elimination of electric distribution projects.
(2) Provide the required reliability and operational characteristics to support adequate service reliability to customers in the affected area.
(d) If the distributed generation is provided under contract with a retail customer or a third party to reduce distribution system loads, the retail customer or third party shall maintain physical assurance that the contracted load reduction will be available during all required time periods.
400.11.
The commission shall, after public hearing, review and approve a long-term integrated resource plan for every electrical corporation, including those revisions to the plan that the commission determines are necessary to meet the requirements of Section 400.10 and achieve best value for utility customers.400.15.
In accordance with an electrical corporation’s long-term integrated resource plan approved pursuant to Section 400.11, and consistent with Sections 454.5 and 701.1 and Article 16 (commencing with Section 399.11), to meet resource adequacy requirements, each electrical corporation shall manage a diversified, efficient, cost-effective, environmentally responsible portfolio of non-utility-owned generation under contract with the utility, and utility-owned generation, combining the potential benefits of a competitive wholesale market, including operating efficiencies and lower prices, with the stability of cost-based generation resources, to achieve best value for ratepayers at just and reasonable rates.400.18.
(a) The commission shall, on or before July 1, 2005, prepare and submit to the Governor and the Legislature, a comprehensive plan to streamline the transmission siting process. The plan shall, at a minimum, include recommendations to eliminate regulatory overlap and duplication, and recommendations to reduce the time needed to process a request for transmission improvements. The commission shall consult with the State Energy Resources Conservation and Development Commission, the Independent System Operator, electrical corporations, and interested parties in the development and preparation of the plan.(b) On or before December 31, 2005, the commission shall prepare and transmit a report to the Legislature summarizing the status of proceedings for each site for authorization of construction of all upgrades, improvements, or additions to the transmission system infrastructure determined by the electrical corporation to be necessary to ensure reliability and for which the electrical corporation has filed an application for a certificate of public convenience and necessity. The report shall include action that the commission has taken or proposes to take to facilitate the siting and authorization of those facilities and the schedule for completion in order to address the reliability needs identified by the electrical corporation. To the extent that the commission determines that the transmission upgrade, improvement, or addition is not needed, the commission shall identify the alternative it intends to pursue in order to ensure reliability. The commission shall annually update its report as part of its annual workplan.
400.22.
(a) All electrical load serving entities, including nonutility electric service providers and community choice aggregators, shall be subject to the same requirements for resource adequacy, resource diversity, cost-effective energy efficiency, and the renewable portfolio standard, that are applicable to electrical corporations pursuant to this section, or otherwise as required by law, or by order or decision of the commission.(b) The commission, in consultation with the Independent System Operator, shall establish resource adequacy requirements to ensure that adequate physical generating capacity dedicated to serving all load requirements is available to meet peak demand and planning and operating reserves, at or deliverable to locations and at times as may be necessary to ensure local area reliability and system reliability, at just and reasonable rates.
(c) The commission shall implement and enforce these resource adequacy requirements in a nondiscriminatory manner as to all load serving entities. The electrical corporation’s costs of meeting those resource adequacy requirements, including the costs associated with system reliability and local area reliability, that are found reasonable by the commission, shall be fully recoverable from those customers taking service from the electrical corporation, at the time the commitment to incur the cost is made or thereafter, on a fully nonbypassable basis pursuant to rates that are just and reasonable, as determined by the commission.
(d) Resource adequacy requirements established by the commission shall provide for, and ensure, all of the following:
(1) System-wide and local area grid reliability.
(2) Adequate physical generating capacity dedicated to serve all load requirements, including planning and operating reserves, where and when it is needed.
(3) Adequate and timely investment in new generating capacity to meet future load requirements, including planning and operating reserves.
(4) Market power mitigation.
(5) Deliverability.
(6) In order to ensure that new resources can be constructed if necessary to meet the need, resource commitments by load serving entities shall be made sufficiently far in advance, and no less than three years in advance of need.
(e) Load serving entities may procure physical generating capacity through a market-based mechanism, provided that the commission, after a hearing, determines that there is convincing factual evidence that the mechanism will achieve all of the following:
(1) Adequate physical generating capacity dedicated to serve all load requirements when and where the electricity is needed, including planning and operating reserves to ensure local area reliability and system reliability.
(2) Adequate and timely investment in new generating capacity to meet future load requirements, including planning and operating reserves.
(3) Electricity that is purchased through the market is deliverable to the load for which it is purchased.
(4) Reliability of the electrical grid is not impaired.
(5) A prospective market monitoring process and market power mitigation measures are in place that are sufficient to ensure a well-functioning wholesale electricity market.
(f) The commission shall adopt rules and regulations necessary to enforce resource adequacy requirements established pursuant to this section uniformly among all load serving entities, including establishing a uniform accounting mechanism to identify, count, track, and verify all capacity needed to meet these resource adequacy requirements for each load serving entity. Pursuant to its authority to revoke or suspend registration pursuant to Section 394.25, the commission shall suspend the registration for a specified period, or revoke the registration, of an electric service provider that fails to comply with the rules and regulations adopted by the commission to enforce resource adequacy requirements.
(g) For purposes of this chapter, “load serving entity” does not include a local publicly owned electric utility as defined in Section 9604, the State Water Resources Development System commonly known as the State Water Project, or customer generation, if the customer generation (1) takes standby service from the electrical corporation on a commission-approved rate schedule that requires the customer’s load serving entity to provide for adequate backup planning and operating reserves for that customer generation or (2) is not physically interconnected to the transmission grid, so that if the customer generation fails, backup power is not supplied from the electricity grid.
400.30.
To ensure that the obligation to provide customers with reliable electric service at just and reasonable rates is met by an electrical corporation, the commission shall adopt rules and regulations consistent with the policies and provisions of this chapter.400.40.
Nothing in this chapter shall alter or affect any outcome of a competitive procurement process conducted by an electrical corporation pursuant to any other law, including Section 454.5, prior to January 1, 2005.400.50.
Nothing in this chapter shall alter or affect the implementation of the California Renewables Portfolio Standard Program pursuant to Article 16 (commencing with Section 399.11).400.60.
(a) Nothing in this chapter limits the ability of any customer to participate in a community choice aggregation program pursuant to Section 366.2.(b) In designating the earliest possible date for implementation of a community choice aggregation program, the commission shall ensure that there will be no cost-shifting or stranding of investments made pursuant to a long-term integrated resource plan of the electrical corporation that has been approved by the commission pursuant to Section 400.11. In considering approval of the electrical corporation’s long-term integrated resource plan, the commission shall also ensure that the plan includes a reasonable estimate of the customer load departure through community choice aggregation, as such estimate is provided for by a community choice aggregator pursuant to Section 366.2.
400.70.
On or before June 30, 2006, the commission shall prepare and submit to the Legislature a report describing the extent to which existing rate allocations for each customer class reflect cost of service and describing how the continuing costs resulting from the energy crisis of 2000–01, including, but not limited to, bond charges and above-market contract costs incurred by the Department of Water Resources, are being recovered from each customer class.