California Clarifies Timelines for Mid-Term Reliability Procurement Mandates of Renewables and Storage

The California Public Utilities Commission has clarified that load-serving entities must have projects online by June 1 to meet annual renewable or zero-emissions energy targets, but they do not have to include these resources in their June Resource Adequacy supply plans.

• In 2021, the Commission ordered load-serving entities in the state to procure 11.5 GW of net qualifying capacity from renewable and zero-emission resources.
• The requirement became known as Mid-Term Reliability procurement.
• The Commission set mandatory annual procurement targets for different categories of resources and required that projects be “online” by June 1 to count toward that year’s compliance requirement.

The Commission later pushed the deadlines for the category of long-lead time resources until 2028, while ordering an additional 4,000 MW of procurement.

What It Means for Developers and Utilities

Developers and load-serving entities have negotiated the risks related to the June 1 compliance deadline. Given that developers generally are asked to indemnify load serving entities for compliance-related penalties, developers (and their financing parties) focus on the risks associated with failing to meet the June 1 deadline. 

• In guidance, Commission staff outlined an expectation that Mid-Term Reliability resources be fully deliverable and qualify for Resource Adequacy to achieve compliance.
• As a result, the general understanding over the past few years was that a project needed to provide Resource Adequacy capacity for June, meaning a project needed to achieve commercial operation and certify its net qualifying capacity about 45-60 days before June.

In a recent decision, the Commission provided much-needed clarification that the resources load-serving entities use to satisfy Mid-Term Reliability procurement requirements are not mandated to be included in any particular monthly Resource Adequacy supply plan. While a resource must be fully deliverable to count toward the Mid-Term Reliability requirements, the Commission explained that a June 1 commercial operation date “is sufficient to qualify for compliance.”

Want to know more about Mid-Term Reliability compliance or assess how the Commission’s decision affects a particular project or offtake contract? Contact Patrick Ferguson, Monica Molina or another member of Orrick’s energy team.