Electricity Supply Strategic Reliability Reserve Agreements - - CA Water

Section § 80710

This section allows California's Department of Water Resources to take necessary actions to ensure reliable electricity supply during summer months and other critical times. They can implement projects and contracts for backup electricity and grid support, such as extending the life of some power facilities, creating emergency generators, and adding energy storage systems. Certain clean energy projects are prioritized, particularly zero-emission ones. The department can bypass standard competitive bidding for contracts until the end of 2023 if those contracts directly enhance grid reliability. They're also responsible for frequent updates on investments and ensuring compliance with state air quality regulations. The Department of Water Resources has broad authority to ensure California's energy needs are met without traditional state oversight processes, although they must still inform and coordinate with relevant agencies.

(a) The department, in consultation with the commission, shall implement projects, purchases, and contracts to carry out the purposes of Chapter 8.9 (commencing with Section 25790) of Division 15 of the Public Resources Code, including, but not limited to, the Distributed Electricity Backup Assets Program and the Demand Side Grid Support Program.

(b)

(1) In furtherance of subdivision (a) and notwithstanding any other law, the department may construct, own and operate, or contract for the construction and operation of, contract for the purchase of electricity from, or finance through loans, reimbursement agreements, or other contracts actions to secure resources for summer reliability or to preserve the option to extend the life of only the following facilities:

(A) Extension of the operating life of existing nonnuclear generating facilities planned for retirement.

(B) New emergency and temporary power generators of five megawatts or more. If a generator is operated using diesel fuel, the department shall not operate it after July 31, 2023.

(C) New energy storage systems that are located outside of the coastal zone and the jurisdiction of the San Francisco Bay Conservation and Development Commission, of 20 megawatts or more, that are capable of discharging for at least two hours.

(D) Generation facilities that are located outside of the coastal zone and the jurisdiction of the San Francisco Bay Conservation and Development Commission and use clean, zero-emission fuel technology of any size to produce electricity.

(E) Supporting the development of zero-emission generation capacity with a point of interconnection at a California balancing authority, with the majority of its capacity contracted for by a load-serving entity that has a service area primarily in California, with an operational date no later than December 31, 2024. For purposes of this subparagraph, only a facility with a net qualifying capacity of at least 50 percent of its nameplate capacity, as estimated at 8:00 p.m. on a date in September, shall be eligible.

(2) In furtherance of subdivision (a) of Section 80700, the department may reimburse electrical corporations, as defined in Section 218 of the Public Utilities Code, for the value of imported energy or import capacity products that are (A) delivered or capable of being delivered between July 1, 2022, and on or before October 31, 2023, and (B) are procured at above-market costs or in excess of procurement authorizations set by the Public Utilities Commission and above the requirements needed to serve its bundled customers in support of summer electric service reliability.

(c) Facilities, except those new energy storage systems described in subparagraph (C) of paragraph (1) of subdivision (b) that charge from the electrical grid but do not otherwise use any form of fossil fuel or fuel derived from fossil fuels, constructed and owned by the department or under a contract with the department pursuant to this division that use any form of fossil fuel shall only operate as necessary to respond to extreme events, as defined in subdivision (b) of Section 25790.5 of the Public Resources Code, and shall not operate at any other time.

(d) Facilities constructed by the department or under a contract with the department pursuant to this division shall not constitute State Water Resources Development System facilities under Chapter 8 (commencing with Section 12930) of Part 6 of Division 6.

(e)

(1) The department shall consult with the commission, the Public Utilities Commission, the Independent System Operator or other applicable California balancing authorities, and the State Air Resources Board in carrying out the purposes of this division.

(2) Beginning October 1, 2022, and at least every three months thereafter, the department shall provide an update on the investments made and being considered into the strategic reliability reserve at a commission business meeting. The President of the Public Utilities Commission or the president’s designee and the President of the Independent System Operator or the president’s designee shall attend the presentation.

(3) The department shall prioritize investments that do not compete with generating facilities already planned for development and disclosed by load-serving entities or local publicly owned electric utilities.

(4) In fulfilling the requirements of this division to achieve electricity reliability, the department shall prioritize investments in feasible, cost-effective zero-emission resources, and then feasible, cost-effective conventional resources.

(f) The department shall develop, execute, and implement contracts covering power generation, operation and maintenance, fuel management, site leases, power settlements, invoice verification, billing, and other associated items. The department shall also enter into contracts for external services to provide specialized expertise.

(g)

(1) Contracts entered into pursuant to this division, amendments to those contracts during their terms, or contracts for services reasonably related to those contracts, and entered on or before December 31, 2023, shall not be subject to competitive bidding or any other state contracting requirements, shall not require the review, consent, or approval of the Department of General Services or any other state department or agency, and are not subject to the requirements of the State Contracting Manual, the Public Contract Code, or the personal services contracting requirements of Article 4 (commencing with Section 19130) of Chapter 5 of Part 2 of Division 5 of Title 2 of the Government Code.

(2) This subdivision shall not apply to any contract, grant, or loan entered into for purposes of this chapter that does not directly contribute to electrical grid reliability by October 31, 2027.

(3) This subdivision is inoperative December 1, 2026.

(h) For contracts entered into pursuant to this division, amendments to those contracts during their terms, or contracts for services reasonably related to those contracts, and executed after December 31, 2023, Sections 10295, 10297, and 10340 of the Public Contact Code do not apply to a contract that meets the conditions established by the department for those contracts.

(i) For contracts entered into pursuant to this division by the department after October 31, 2022, the department shall notify the commission through an investment plan of the terms, costs, and scope at a commission business meeting and the commission shall consider the investment plan for approval in a meeting held consistent with the terms of Chapter 3 (commencing with Section 25200) of Division 15 of the Public Resources Code. No less than 10 days after the commission approves the investment plan, the executive director of the commission shall give written notice to the Joint Legislative Budget Committee of the action.

(j) A contract entered into, or an approval granted by the department pursuant to this division is not subject to the California Environmental Quality Act (Division 13 (commencing with Section 21000) of the Public Resources Code) and regulations adopted pursuant to that act.

(k) Facilities constructed by the department or under a contract with the department pursuant to this division shall comply with both of the following:

(1) Regulations issued by the State Air Resources Board pursuant to Part 2 (commencing with Section 38530) of Division 25.5 of the Health and Safety Code, including the requirement to disclose emissions of greenhouse gases from facilities.

(2) Regulations issued by the State Air Resources Board pursuant to Part 5 (commencing with Section 38570) of Division 25.5 of the Health and Safety Code, including the requirement to comply with any market-based compliance mechanism established by the State Air Resources Board.

(l) The department may adopt guidelines to implement this division. The Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code) does not apply to any regulation or guidelines adopted by the department pursuant to this division.

electricity backup program grid support program emergency power generators zero-emission generation energy reliability state air regulations energy storage systems diesel generator restrictions summer reliability renewable energy projects contract exemptions California balancing authority grid reliability air resources compliance strategic reliability reserve

(Amended by Stats. 2025, Ch. 15, Sec. 8. (SB 127) Effective June 27, 2025.)

Section § 80711

This law states that any costs the department incurs related to this chapter will be reimbursed from a specific fund, not by the department or its customers. These costs will also not affect the prices, rates, or charges under water and electricity contracts.

The department, in consultation with the commission, shall recover all of the costs it incurs pursuant to this chapter from the Department of Water Resources Electricity Supply Reliability Reserve Fund established pursuant to Section 80720. The department and its customers shall not bear any of the costs associated with carrying out the purposes of Chapter 8.9 (commencing with Section 25790) of Division 15 of the Public Resources Code, and those costs shall not be included in the prices, rates, and charges for water and electricity under the water supply contracts executed pursuant to Chapter 8 (commencing with Section 12930) of Part 6 of Division 6.

cost recovery Department of Water Resources Electricity Supply Reliability Reserve Fund funding water supply contracts electricity rates Public Resources Code financial reimbursement rate protection fund allocation water and electricity pricing customer cost burden Section 80720

(Added by Stats. 2022, Ch. 61, Sec. 13. (AB 205) Effective June 30, 2022.)

Section § 80712

This section of the law allows a department to take various actions to fulfill its duties effectively. They can hire private parties for professional help, collaborate with other public agencies, make contracts, and employ personnel to support their operations. The hiring process is assisted by the State Personnel Board and the Department of Human Resources to ensure it's done quickly.

The department may do any of the following as necessary, as determined by the department, for purposes of this division:

(a) Engage the services of private parties to render professional and technical assistance and advice and other services in carrying out the purposes of this chapter.

(b) Contract for the services of other public agencies.

(c) Engage in activities or enter into contracts or arrangements as may be necessary or desirable to carry out the department’s duties and responsibilities pursuant to this division.

(d) Hire personnel necessary and desirable for the timely and successful implementation and administration of the department’s duties and responsibilities pursuant to this division. The State Personnel Board and the Department of Human Resources shall assist the department in expediting that hiring.

private parties assistance professional services technical assistance public agency contracts personnel hiring department duties state personnel board department of human resources contracting services technical advice public agency collaboration department responsibilities hiring process administration implementation expediting hiring

(Added by Stats. 2022, Ch. 61, Sec. 13. (AB 205) Effective June 30, 2022.)

Section § 80713

This section explains a process from now until June 30, 2027, for situations when a load-serving entity fails to provide enough electricity resources as required by the law. If the Department of Water Resources ends up using its resources to cover this gap, the Public Utilities Commission (PUC) will charge the entity a capacity payment. This payment is not a penalty, but the PUC can still impose penalties for non-compliance. The capacity payment is adjusted if there's already a penalty, and is to be paid within 30 days of notification.

Additionally, the PUC will calculate the cost per kilowatt that entities must pay if they don't provide enough resources. This cost is based on actual monthly expenses, with adjustments for certain months and credits for resources procured by others on behalf of the defaulting entity. Further adjustments might be made if some resources don't perform as expected.

(a)

(1) On and before June 30, 2027, if the Department of Water Resources determines that resources it procured through the Electricity Supply Strategic Reliability Reserve Program were used in a given month to meet a load-serving entity’s identified reliability need, the Public Utilities Commission shall annually assess a capacity payment on each load-serving entity that during that same month fails to meet its system resource adequacy requirements pursuant to Section 380 of the Public Utilities Code. The capacity payment is not a penalty and does not prohibit the Public Utilities Commission from assessing a penalty on a load-serving entity for a failure to comply with any resource adequacy requirement.

(2) If a load-serving entity fails to comply with its system resource adequacy requirements pursuant to Section 380 in a month when resources procured by the Department of Water Resources through the Electricity Supply Strategic Reliability Reserve Program are used to meet the load-serving entity’s identified reliability need and a penalty is assessed by the commission on the load-serving entity for that failure, then, on and before June 30, 2027, both of the following requirements shall apply:

(A) If the penalty is less than the capacity payment, the capacity payment shall be reduced by the amount of the penalty and the penalty shall be deposited into the Load-Serving Entity Capacity Payment Account.

(B) If the penalty is more than the capacity payment, then an amount of the penalty equal to the otherwise applicable capacity payment shall be deposited into the Load-Serving Entity Capacity Payment Account.

(3) The annual capacity payment shall be remitted to the Load-Serving Entity Capacity Payment Account by a load-serving entity that was assessed a capacity payment pursuant to paragraph (1) within 30 days of the commission notifying the load-serving entity.

(b) The Public Utilities Commission, in consultation with the commission, shall determine a capacity payment unit cost in kilowatt per month for load-serving entities that is based on the monthly cost of the resources procured using moneys from the Department of Water Resources Electricity Supply Reliability Reserve Fund, including the Load-Serving Entity Capacity Payment Account, with the total costs weighted two-thirds for June through September and one-third for the remaining eight months, and this unit cost shall be multiplied by the amount of kilowatts that the load-serving entity was deficient in its system resource adequacy requirements during the same month the Electricity Supply Strategic Reliability Reserve Program resources were used, based on the resource adequacy program rules, requirements, and resource counting conventions in place at the time of the deficiency, after crediting the deficient load-serving entity with its share of any reliability resources procured by other entities on its behalf. The Public Utilities Commission may make any further adjustments to the capacity values of any nonperforming resources included in a load-serving entity’s portfolio when determining the amount of this deficiency. Any adjustments made by the Public Utilities Commission shall align with any adjustments made by the commission as authorized by subdivision (b) of Section 80714.

load-serving entity capacity payment Electricity Supply Strategic Reliability Reserve Program Public Utilities Commission system resource adequacy requirements penalty adjustment Load-Serving Entity Capacity Payment Account resource deficiency kilowatt unit cost resource counting conventions nonperforming resources Department of Water Resources reliability needs monthly cost assessment electricity resources compliance

(Added by Stats. 2023, Ch. 367, Sec. 12. (AB 1373) Effective October 7, 2023. Operative January 31, 2024, by its own provisions.)

Section § 80714

This law outlines a process where the Department of Water Resources (DWR) evaluates if resources it procured were necessary to satisfy electricity reliability needs. If so, electric utilities that didn't meet their reserve margins are charged a fee. This fee is calculated based on the utilities' capacity deficiencies and is paid into a specific account.

The law introduces an annual payment structure for electric utilities that fail to maintain a required reserve margin. It explains how these payments are calculated, factoring in costs over different months with higher weight given to June through September. It also allows for adjustments in calculating shortages to reflect any non-performing resources.

The commission responsible for these evaluations can adopt regulations to enforce this section and must report by January 31, 2024, on whether utilities met requirements for 2023. The term 'minimum planning reserve margin' refers to a standard reserve margin, unless revised based on specific recommendations.

(a)

(1) Upon the submission of the report pursuant to subdivision (d) and on and before June 30, 2027, if the Department of Water Resources determines that resources it procured through the Electricity Supply Strategic Reliability Reserve Program were used in a given month to meet an identified reliability need, the executive director of the commission shall annually assess a capacity payment on each local publicly owned electric utility in the Independent System Operator balancing area that during that same month fails to meet its minimum planning reserve margin.

(2) The annual capacity payment shall be remitted to the Local Publicly Owned Electric Utility Capacity Payment Account by a local publicly owned electric utility that was assessed a capacity payment pursuant to paragraph (1) within 30 days of the executive director notifying the local publicly owned electric utility.

(b) Upon the submission of the report pursuant to subdivision (d), the commission, in consultation with the Public Utilities Commission, shall determine a capacity payment unit cost in kilowatt per month for local publicly owned electric utilities that is based on the monthly cost of the resources procured using moneys from the Department of Water Resources Electricity Supply Reliability Reserve Fund, including the Local Publicly Owned Electric Utility Capacity Payment Account, with the total costs weighted two-thirds for June through September and one-third for the remaining eight months, and this unit cost shall be multiplied by the amount of kilowatts that the local publicly owned electric utility was deficient in its minimum planning reserve margin during the same month the Electricity Supply Strategic Reliability Reserve Program resources were used using the same resource counting conventions applied by the Public Utilities Commission pursuant to subdivision (b) of Section 80713, after crediting the deficient local publicly owned electric utilities with their share of any reliability resources procured by other entities on their behalf. The commission may make any further adjustments to the capacity values of any nonperforming resources included in a local publicly owned electric utility’s portfolio when determining the amount of this deficiency. Any adjustments made by the commission shall align with any adjustments made by the Public Utilities Commission as authorized by subdivision (b) of Section 80713.

(c) Upon the submission of the report pursuant to subdivision (d), the commission may adopt regulations to implement this section.

(d) On or before January 31, 2024, the commission, in consultation with the Public Utilities Commission, shall submit a report to the appropriate policy and budget committees of the Legislature that includes an assessment of whether each local publicly owned electric utility exceeded, met, or failed to meet its minimum planning reserve margin for 2023 and the system resource adequacy requirements from June 1, 2023, to September 30, 2023, inclusive, that the Public Utilities Commission established for load-serving entities pursuant to Section 380 of the Public Utilities Code and adopted in Public Utilities Commission Decision 22-06-050 (June 23, 2022) Decision Adopting Local Capacity Obligations for 2023–2025, Flexible Capacity Obligations for 2023, and Reform Track Framework.

(e) For purposes of this section, “minimum planning reserve margin” means a local publicly owned electric utility’s planning reserve margin, as described in Section 9620 of the Public Utilities Code, unless the local publicly owned electric utility revises that planning reserve margin based on recommendations from the commission pursuant to subdivision (b) of Section 25704.5 of the Public Resources Code, in which case “minimum planning reserve margin” means the local publicly owned electric utility’s revised minimum planning reserve margin.

Electricity Supply Strategic Reliability Reserve Program Department of Water Resources local publicly owned electric utility capacity payment reserve margin balancing area resource deficiency capacity payment unit cost Electricity Supply Reliability Reserve Fund nonperforming resources commission regulations report requirements system resource adequacy minimum planning reserve margin Public Utilities Commission

(Added by Stats. 2023, Ch. 367, Sec. 13. (AB 1373) Effective October 7, 2023.)