The California Public Utilities Commission issues an unprecedented Resolution that will test the nascent energy storage industry.
On May 26, the California Public Utilities Commission (CPUC) issued Resolution E-4791 (the Resolution), which directs Southern California Edison (SCE) to procure energy storage projects on an emergency basis. Notably, energy storage projects are only eligible if they can be operational by December 31, 2016. Such a short timeframe is nearly without precedent for major utility procurements and is an important test for the nascent energy storage industry.
To address potential power outages, California Governor Jerry Brown ordered the CPUC and the California Energy Commission, in coordination with the California Independent System Operator (CAISO), “to take all actions necessary to ensure the continued reliability of natural gas and electricity supplies in the coming months . . . ” [1] The CPUC subsequently identified energy storage as one mechanism to address potential disruptions in electricity service and issued the Resolution.
The Resolution orders SCE to procure roughly 100 MW of new storage resources. Those resources are subject to challenging procurement and location requirements. The requirements include the following:
One of the controversial aspects of this procurement authorization is the requirement that the energy storage resources be operational by December 31, 2016. This is extraordinarily fast for any new energy resources, let alone technologies around which the regulatory rules are still under development. (By way of comparison, San Diego Gas and Electric’s current solicitation for preferred resources, including energy storage resources, that was authorized by the CPUC pursuant to D. 14-03-004 commenced months before a draft of the Resolution was circulated, and the solicitation is not scheduled to conclude until after December 31, 2016.) Here, the CPUC is not only requiring SCE to conclude the solicitation process but also requiring the developer to engineer, procure, construct, and interconnect the new resources within a matter of months, as compared to a process that SCE noted in its comments on the Resolution that normally takes three years.[2]
The CPUC circulated a draft of the Resolution on May 12, 2016, and received a number of comments, some of which were incorporated in the final Resolution. Many argued that energy storage resources online in 2017 should be eligible for this solicitation, but the CPUC rejected this comment, suggesting how urgent the needs are and how seriously the CPUC is taking the issue.
The CPUC did address several other comments in revisions to key parameters:
In its comments to the draft Resolution, SCE proposed the following schedule:
May 27, 2016 |
SCE launches RFO |
June 17, 2016 |
Offer submittal deadline |
July 6, 2016 |
SCE’s shortlist offer selection notification |
July 29, 2016 |
SCE’s final offer selection notification |
August 15, 2016 |
SCE’s CPUC approval filing target (Tier 3 Advice Letter)[3] |
September 15, 2016 |
Target CPUC Approval |
Although the CPUC did not expressly endorse this schedule, it included SCE’s proposed schedule in the Resolution and agreed to SCE’s request to waive the “Final CPUC Approval” provision in SCE’s standard procurement contracts. Given the delays that many projects have encountered as a result of appeals by party opponents in the CPUC approval process, the CPUC agreed that such a waiver was required to allow such projects to be online by the end of 2016. In addition, the CPUC recommended that SCE include a bidders’ conference in its solicitation schedule in advance of the offer submittal deadline.
If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:
Los Angeles
Neeraj Arora
Philadelphia
Kenneth M. Kulak
San Francisco
William D. Kissinger
Monica A. Schwebs
[1] State of California, Executive Department, “Proclamation of a State of Emergency,” (Jan. 6, 2016).
[2] Comments of Southern California Edison Company on Draft Resolution E-4791,” (May 19, 2016) at p.5.
[3] A Tier 3 Advice Letter is an informal request by a utility for commission approval or authorization and is an appropriate approval vehicle for a contract “that would result in an increase to a rate or charge” where such “change has been authorized by statute or by other Commission order.” CPUC General Order 96-B, General Industry Rules 3.1 and 5.1, and Energy Industry Rule 5.3.