The California Public Utilities Commission on Thursday rejected a huge boost in megawatts for the San Francisco Bay Area that CAISO insists NERC and Western Electricity Coordinating Council reliability standards require.

In a unanimous vote, the commission agreed with Administrative Law Judge Debbie Chiv that adding 1,850 MW of capacity in the Bay Area by next year is unworkable. It decided to postpone the increase and convene a multiagency working group to study the issue.

The decision was part of the CPUC’s annual assessment of local capacity requirements (LCRs) that it’s been performing in conjunction with CAISO since 2007.

CAISO said a 500-kV Pacific Gas and Electric substation in San Jose poses a significant reliability threat for the region, requiring far more local capacity. But Pacific Gas and Electric, which operates most of the Bay Area’s grid, argued that the ISO had misinterpreted NERC standards when it evaluated the vulnerabilities of the Metcalf substation.

Commissioner Martha Guzman Aceves urged CAISO and PG&E to resolve the “enormous increase in the greater Bay Area obligation” as quickly as possible.

“It’s the largest increase that we’ve seen in local requirements in the past 13 years,” Guzman Aceves said. “I really hope that the parties can come together … and provide some alternative pathway than this additional cost burden to the ratepayers.”

The Utility Reform Network (TURN), a consumer advocacy group, opposed CAISO’s decision as too costly for ratepayers.

CAISO said it updated its local capacity criteria to comply with NERC reliability standard TPL-001-4, which requires that transmission planning ensure reliability “over a broad spectrum of system conditions and following a wide range of probable contingencies.”

The ISO conducted a stakeholder process in 2019, and FERC approved CAISO’s Tariff changes to align with the new standards on Jan. 17. The updated LCR criteria resulted in a 517-MW (2.2%) increase statewide from 2020 to 2021.

The changes didn’t have much effect on California as a whole or on most local areas. Some areas, including the Los Angeles Basin and San Diego, saw a decrease in CAISO’s LCRs because of new transmission projects and decreased load. (See CAISO Tx Planners Look at Reliability, Capacity Reqs.)

But the Bay Area, with its 7 million residents, was singled out for its reliance on the Metcalf substation, which was the site of a 2013 sniper attack that led to NERC’s physical security standard (CIP-014-2). CAISO predicted the failure of two transformer banks at the substation could disrupt electricity flowing into the Bay Area from generators to the south.

PG&E countered that CAISO had not highlighted the outage in previous LCR studies and that the utility’s “layered and robust strategy for addressing the loss of high-voltage transformers at the Metcalf substation” means the ISO’s concerns do not align with NERC standards.

The CPUC largely agreed with PG&E’s assessment, declining to adopt the new reliability criteria set out in CAISO’s 2021 LCR report.

“While CAISO states that the revised reliability criteria are intended to align with current mandatory reliability standards developed by NERC and WECC, the commission has not directly considered this newly adopted local reliability criteria and the costs to ratepayers associated with this dramatic increase in the Greater Bay Area LCR,” the commission said in its decision.

However, the commission called the increase in LCR need for the Bay Area “concerning” and directed the disputing parties to establish a local resource adequacy working group “to evaluate CAISO’s updated criteria and other LCR-related issues and propose improvements to the local RA requirement process.” The group should be “co-led” by the CPUC’s Energy Division and an environmental or consumer advocacy organization, the commission said.

‘A Conservative Margin’

CAISO and the CPUC have been struggling with RA amid projections of a potential shortfall during peak demand in the summers of 2021-2023. Contributing factors include the state’s mandate for 100% clean energy by 2045, the retirement of natural gas and coal plants in the West, and tightening imports from other states.

The CPUC responded by ordering load-serving entities under its jurisdiction to procure a total of 3,300 MW of capacity by 2023 and ordered gas plants that had been set to retire to continue operating. (See California PUC Votes to Keep Old Gas Plants Operating.)

The commission on Thursday also directed staff to review the 15% planning reserve margin that California adopted after the Western energy crisis of 2000/01. The potential shortfalls, predicted by CAISO and the CPUC in the coming years, show supply dipping below the reserve margin but not necessarily below expected peak demand.

“That’s a conservative margin that we adopted many years ago in response to the energy crisis, and it may very well be time to think hard about whether it makes sense,” Commissioner Clifford Rechtschaffen said.