18. Concurrent Customer Participation in Multiple Demand Response Programs
In the past, customers have generally been able to participate in only one demand response program or dynamic pricing tariff at one time. As dynamic tariffs become more common and the utilities implement default Critical Peak Pricing, current rules against participation in more than one demand response program or tariff may limit the amount of peak load reduction that can be achieved through demand response. For this reason, several parties to this proceeding advocate for new rules that would allow customers to participate in more than one demand response program, in an effort to capture more peak load reduction when it is needed.
18.1. Utility Proposals for Concurrent Customer Participation in Two Demand Response Programs
SCE advocates for maintaining rules against allowing an individual customer to participate in more than one program, arguing that allowing dual program participation could potentially lead to double payment to customers for a single load drop.189 SCE's application states, "... SCE's [demand response] programs and dynamic tariffs should encourage customers to select the single program or tariff that is best suited to each particular customer's situation."190 Still, SCE acknowledges that it may be useful to allow dual participation in certain limited situations or between specific programs in which the risk of double payment is minimal or can be avoided, and suggests a few situations in which dual participation may be possible. SCE also recommends reevaluating participation requirements in 2012.191
SDG&E currently allows individual customers to participate in certain combinations of existing demand response programs, and supports increasing the opportunities for a customer to simultaneously participate in two demand response programs.192 SDG&E reasons that, "... permitting multiple program participation will allow customers to respond more effectively to the need for load reduction under a mix of differing circumstances; restricting customers' participation to just a single program limits this flexibility to respond under a variety of circumstances."193 SDG&E anticipates that allowing customers greater flexibility to participate in a mix of programs will ultimately lead to the availability of more demand response in the state. SDG&E agrees with SCE that it is important to avoid duplicative incentive payments for the same load reduction.194 In order to accomplish this while facilitating participation in two programs, SDG&E proposes establishing processes and safeguards so that customers do not receive multiple or duplicative incentives for the same load reduction, and to ensure that load reductions are credited to the appropriate program(s) through a program hierarchy mechanism.195
SDG&E envisions rules for demand response programs that would permit customers to enroll in more than one program if the programs have differing triggers, and advocates for establishing a system to measure load reductions in order to allocate the load drop appropriately among the programs responsible for producing them.196 In those instances in which the load reduction cannot be measured for specific program allocation, SDG&E describes a possible program hierarchy that would determine which program gets credit for the load reduction, and what incentive payment the customer should receive.197 Like SCE, SDG&E provides a matrix outlining dual program participation guidelines in an appendix of its testimony.198
Like SCE and SDG&E, PG&E states that its current demand response dual program participation rules are based on the premise that a customer should not be paid twice for the same load reduction.199 PG&E explains that its demand response program portfolio allows concurrent participation in specific combinations of demand response programs, and advocates for limiting customers' ability to enroll in two programs.200 PG&E suggests that utilities should be allowed to request authority to modify the dual program participation rules ultimately approved in this proceeding if they find that they are unable to make reliable demand response load reduction forecasts for the CAISO. PG&E also points out that the outcome of the 2008 Rate Design Window and Phase 2 of the 2011 General Rate Case may necessitate a change in the ability of Real Time Pricing customers to participate in additional demand response programs. Like SCE and SDG&E, PG&E provides a chart outlining dual program participation guidelines.201
SCE, SDG&E and PG&E all support the idea that a customer should not be paid twice for the same load reduction. Still, based on their discussions and lists of possible program combinations, it appears that SCE and PG&E have a much narrower view of how much dual program participation is appropriate. SDG&E seems to offer the broadest support for dual program participation by proposing processes and safeguards to facilitate smooth operation and implementation.
18.2. Party Positions on Dual Program Participation
Parties offer varying opinions about the appropriateness of allowing customers to participate concurrently in two demand response programs. DRA asserts that SDG&E does not explain how it evaluates programs when a customer participates in two programs.202 DRA also questions the SDG&E proposal for allocating load reductions to specific programs, how incentives for avoided capacity costs can be calculated for each program when a customer participates in two programs, and how SDG&E will avoid paying duplicative incentives. DRA also expresses concern that barriers to customer participation in more that one demand response program may result in loss of potential load reductions from demand respond.203
Consumer Powerline expresses strong support for equal treatment among third party and utility demand response programs.204 Consumer Powerline also asserts that the utilities should allow customers to participate concurrently in more than one demand response program, including programs run by third-party demand response aggregators, "unless this can be shown to be infeasible."205 Similarly, the Joint Parties recommend that the utilities should allow commercial and industrial customers to simultaneously participate in two demand response programs, including offerings from aggregators.206 The CLECA also supports dual program participation, specifically "that there should be provision for dual program participation and... that customers participating in PG&E's RTP should be allowed to participate in any other [demand response] program(s)."207
CDRC specifically identifies SCE's Default Critical Peak Pricing Program as a program that should be modified to allow customers to also participate in day-of options of programs, such as the bilateral contracts and Capacity Bidding Program. The CDRC supports SDG&E's determination that it is appropriate to establish a framework for dual program participation that permits customers to enroll in programs with different trigger events.208 According to CDRC, utility proposed commercial and industrial demand response programs should be open to Demand Response Providers including access to incentives.209
On October 9, 2008, SCE filed reply comments stating that, "... it is open to the idea of providing customers additional program choices as long as double dipping and double payments are avoided."210
PG&E contends that allowing customers to participate concurrently in demand response programs run by aggregators and utilities would complicate load drop forecasts and lead to other problems. PG&E suggests if multiple programs called events at the same time, "[s]uch a situation would result in an inaccurate forecast to the CAISO and possible double counting and double-payments in dual participation situations."211 PG&E maintains that demand response program forecasts are used for resource adequacy consideration and load forecasting accuracy is diminished by mixing day-ahead programs and day of programs between aggregators and utilities.212 PG&E argues that allowing participation in multiple demand response programs could cause resource planning and system reliability problems.213 PG&E notes that its current rules allow a customer to participate in a capacity-payment program and an energy-payment program, but not in two capacity payment programs or two energy payment programs. 214 According to PG&E, this minimizes the possibility of double payments for a single load drop. PG&E states that its approach to dual program participation balances the need to give flexibility to customers, obtain maximum load impacts, and provide an accurate demand response forecast to the CAISO.215 SCE contends that there are "...administrative complexities related to adjusting incentive payments for dual participation customers [raising the possibility of] increased administrative costs and customer confusion."216 In comments on the proposed decision, SCE, PG&E, and CLECA strongly object to considering critical peak pricing, noting that for some utilities, the critical peak pricing tariff constitutes a reduction in customer demand charges, and that when this discount is combined with the Base Interruptible Program rate, could lead to customers receiving negative demand charges.
SCE considers Critical Peak Pricing to be a capacity-based program, and would permit dual participation in Critical Peak Pricing and energy-based programs only. CDRC argues that Critical Peak Pricing is an energy-based program, because it provides incentives in the form of lower energy rates during off-peak hours.217 SDG&E and CLECA reached an agreement regarding the interaction of the summer saver program and peak time rebate programs. The settlement incorporates different triggers for each program and establishes a tracking system for Peak Time Rebate payments to identify any possible instances of an overlap in payments between the two programs. The settlement recognizes the SDG&E General Rate Case Phase 2 proceeding as the place to adjust incentives and decide cost allocation issues.218 This settlement, described in Exhibit 131, is adopted by this decision.
18.3. Discussion of Dual Program Participation
Current Commission policy supports increasing the amount of cost effective demand response available and the flexibility of demand response programs to reduce electricity load during declared energy emergencies or at times of high electricity prices. It is reasonable to evaluate the possibility of concurrent participation in dual programs to determine whether it has the potential to expand the current level of demand response while minimizing ratepayer costs.
Participation in more than one demand response program may provide flexibility to customers and expand their ability to respond to the varying conditions that trigger demand response. However, guidelines must be adopted that prevent double payment for a single load drop when that load drop is made by a customer enrolled in two programs with simultaneously called events.
These guidelines will also prevent double counting of load drop for participants in multiple programs, to maintain accurate load drop estimates for resource adequacy purposes. As the utilities implement dynamic pricing tariffs and further develop the CAISO's new market mechanisms, additional opportunities may emerge for dual demand response program participation. This is an appropriate time to establish guidelines to facilitate growth in demand response through dual program participation while safeguarding ratepayers from excessive or duplicative payments.
Parties agree in theory that dual program participation may further the goal of increasing both customer choice and potential for demand reductions, but many disagree on how dual program participation should be implemented. Most parties distinguish between programs which offer capacity payments and those which offer energy payments. There seems to be broad agreement among parties on the following points:
· Customers should not be allowed to participate in more than one program that offers capacity payments. No utilities permit concurrent participation in more than one program that provides capacity payments, such as the Base Interruptible Program, Capacity Bidding Program and the various air conditioner cycling programs.
· It may be reasonable to permit customers to participate in more than one program that offers energy payments, as long as a customer only receives payment through one program for a given load drop. This allows for the possibility that a customer could enroll in and be paid under two energy payment programs, as long as those programs do not have a simultaneous events or the customer receives payment under only one program if simultaneous events do occur.
· It may be reasonable to permit customers to participate concurrently in a program that offers capacity payments and a program that offers energy payments. However, in the case of simultaneous events, customers should receive payment from only one program.
Parties disagree on the following issues:
· If customers are enrolled in two programs, one of which provides energy payments and the other capacity payments, and these programs have simultaneous events, should the customer receive the payment for the energy program or the capacity program? PG&E and SCE allow Demand Bidding Program (which pays only energy incentives) customers to participate in capacity payment programs and in the case of simultaneous events customers do not receive the Demand Bidding Program energy payment. However, the recent settlement agreement discussed in Section 19, below, among DRA, SCE, and aggregators EnerNoc and AER, allows dual participation by taking the opposite approach. The settlement states that in the case of simultaneous events, customers who participate in these aggregator contracts (which are capacity payment programs) and the Demand Bidding Program would receive Demand Bidding Program energy payments, but their load drop would not be counted towards the aggregator's load reductions.
· Which programs should be considered energy payment programs, and which programs should be considered capacity payment programs? For some programs, the classification is fairly clear: all parties agree that the air conditioner cycling programs, and the Base Interruptible Program, which offer customers monthly incentives based on a willingness to reduce load if called upon, offer only capacity payments. However, PG&E and SCE consider Critical Peak Pricing programs, which are dynamic rate programs, to be capacity payment programs, whereas SDG&E and the various aggregators suggest that Critical Peak Pricing should be considered an energy payment program. As a result, PG&E and SCE do not allow dual participation in Critical Peak Pricing and programs such as air conditioner cycling, the Base Interruptible Program, or the Capacity Bidding Program, whereas SDG&E does allow Critical Peak Pricing customers to participate in capacity payment programs.
· Should customers be allowed to participate concurrently in both a utility-administered program and one run by an aggregator? PG&E and SCE do not allow customers enrolled in their programs to also participate in the aggregator contracts, with the exception of the recent SCE settlement agreement mentioned above. SDG&E allows dual participation of customers on Capacity Bidding Program, a program in which the all customers are enrolled through aggregators, and in certain other programs.
One last concern raised by the possibility of concurrent customer participation in dual demand response programs is that customers could attempt to "game" the system if the energy use charges associated with some events are less than the penalties associated with failure to perform under another program; this could be the case for Critical Peak Pricing when combined with the Base Interruptible Program. A customer could, with careful planning and a lot of luck, avoid reducing demand to the Firm Service Level during a simultaneous Base Interruptible Program/Critical Peak Pricing event and avoid the usual penalty.
In comments on the proposed decision, SCE states that dual participation in BIP and CPP would result in a negative demand charge of approximately $13.74 per kilowatt, as shown in the table below, excerpted from SCE's opening comments on the PD filed July 20, 2009:
However, the bill impacts depicted by SCE would only occur under specific circumstances. First, the BIP on-peak credit (Line 2 in the table above) also depends on the customers' firm service level. This credit is determined by multiplying the $19.74 by the customer's average on-peak demand minus the customer's firm service level, whereas the CPP credit and the on-peak generation demand charge are based on a customer's peak demand (including the customer's firm service level). Hence, a customer would face a negative per kilowatt demand charge of $13.47 only if its maximum on-peak demand were equal to its average peak demand (e.g., a customer with a load factor of 100%, or a flat load profile) and it had a firm service level of zero. There are likely to be very few, if any, customers in this situation.
In addition, SCE's table does not include the facilities-related demand charge of $11.60, which is assessed on a customer's maximum demand, regardless of period. Since any customer's maximum demand will either occur during the on-peak period, or be greater than the customer's maximum demand during the on-peak period, the maximum $13.74 per kilowatt demand credit will be reduced by $11.60 to $1.87. When the generation and facilities demand charges faced by the customer are considered together, the likelihood that the total demand charge will be negative is extremely unlikely, and would only occur if a customer has both a flat load profile and a firm service level of zero. In addition, customers also face additional charges which may include monthly meter charge, the per kWh energy charges (of up to $1.36 per kWh during CPP events), and other miscellaneous charges.
SCE is correct in that dually-enrolled BIP and CPP customers would receive large reductions in their bills, but whether a customer sees a negative demand charge depends on the firm service level and load characteristics of the customer, and the chances of this occurring are further reduced when the facilities demand charge is considered.
18.4. Requirements for Dual Program Participation
We conclude that it is reasonable and consistent with the Commission's policy of encouraging cost effective demand response activities to allow customers to participate concurrently in two demand response activities and programs, as long as duplicative payments for a single instance of load drop can be avoided. One way to accomplish this that is supported by most parties to this proceeding is to allow customers to participate concurrently in one program that provides an energy payment and one that provides a capacity payment. This also appears to be a relatively simple way to categorize programs to maintain consistent rules across the different utilities' service territories. We direct that the utilities develop rules and procedures allowing customers in two programs, one providing capacity payments and one providing energy payments. In addition, we direct that these rules will prohibit participation in two day-ahead programs or two day-of programs.
Critical Peak Pricing has elements of both a capacity payment program and an energy payment program. Critical Peak Pricing acts as an energy payment program to the extent that a customer's bill savings is determined by the amount by which the customer reduces its peak electricity consumption. At the same time, Critical Peak Pricing acts as a capacity program in that it rewards a customer all the time for its willingness and readiness to reduce demand when an event is called. In order to further our goal of increasing the amount of demand response available at times of peak load, it is reasonable to consider Critical Peak Pricing to be an energy payment program. It is not consistent with Commission priorities to limit customers' ability to reduce peak demand simply because it might result in some customer overpayment in certain rare circumstances. To the extent that this policy may create apparent conflicts with existing or proposed rate designs for certain combinations of programs, procedures exist for examining and, if appropriate, modifying the rate designs to address those issues. For the purpose of demand response dual participation rules in 2009-2011, we will consider Critical Peak Pricing to be an energy payment program in which customers may participate concurrently with capacity payment programs such as the Capacity Bidding Program.
These decisions introduce a small possibility of double payment for load drop under particular circumstances, and rules are necessary to minimize this undesirable outcome. Towards that end, we require that in the case of simultaneous or overlapping events called in two programs, a single customer enrolled in two programs will receive payment only under the capacity program, not for the simultaneous event for the energy program. Customers enrolled in Critical Peak Pricing and a capacity payment program will be charged the higher Critical Peak Pricing rates during called events, and will receive payment for the event under the capacity program. In all dual participation situations, the capacity payment program will be credited with participants' load drop during any called events. This is consistent with the principle of a capacity program, under which customers are rewarded for their constant readiness to reduce load. In addition, the customer's baseline for both programs will be calculated based on days in which no events are called in either program. These rules will be applied statewide in order ensure that customers throughout the state are treated similarly and fairly. These rules will also apply regardless of whether the customer is enrolled in a utility-administered program or one administered by a third-party aggregator. To implement these rules, each utility is ordered to file a Tier 2 advice letter within 90 days of this decision, specifying which programs it considers to be energy programs and capacity payment programs, and describing its plan for educating customers on the interactions of various programs to ensure that participants can make informed choices about program enrollment. This Tier 2 advice letter will also state the specific permissible combinations of programs, with Critical Peak Pricing programs generally compatible with programs offering capacity payments. We intend for these new rules to go into effect on January 1, 2010, or upon Energy Division approval of the advice letters, whichever is later.
In comments on the proposed decision, SCE identified rate design concerns created by allowing customers to participate in both Critical Peak Pricing and capacity based programs such as the Base Interruptible Program. If a utility believes that there are rate design issues that should be addressed prior to implementing our adopted dual participation policy, a utility may delay implementation of these new rules to as late as May 1, 2010. Any plans to delay implementation beyond January 1, 2010 must be explained in the Tier 2 advice letter on dual participation described above. We expect that allowing implementation of these rules in January 2010, with the possibility of a delay to as late as May 1, 2010, will provide utilities with sufficient time to determine any challenges they may face in tracking and billing or crediting customers enrolled concurrently in more than one demand response activity, and find ways to accommodate those customers' choices consistent with these new requirements.
We recognize that some contracts that have already been approved by this Commission, or are being approved in this decision, have concurrent program participation requirements that are not consistent with the rules adopted here. We do not require the alteration of existing contracts to make them consistent with these rules; however, we do encourage utilities and aggregators to consider these rules when negotiating new contracts or modifying contracts that have been previously approved.
While we share parties' concerns over the possibility of customer gaming, it is unlikely that many customers have the ability and the desire to enroll in two programs with the intention of underperforming in one while making up for the program penalties through participation in another. Simultaneous events in two programs such as the Base Interruptible Program and Critical Peak Pricing are rare, and that the total amount of money saved by a customer even if such an event occurs in unlikely to be large. Knowing this, it is reasonable to adopt the concurrent program participation rules described above. Still we expect utilities to be vigilant in watching for possible instances of gaming through 2010 and 2011, especially as some programs increase in size.
If necessary, the rules established here can be reassessed as programs develop and utilities gain experience with new programs and program interactions. We will reevaluate these rules to determine their effectiveness in promoting program participation, increasing available demand response load reductions, and avoiding instances of duplicative payments and gaming.
18.5. PG&E Partial Standby Metering Customers
CDRC proposes that customers on PG&E's partial standby metering rates should be able to participate in certain demand response activities for the load they purchase from PG&E. Partial standby customers can currently participate in the PG&E Demand Bidding Program, Business Energy Coalition, and Base Interruptible Program. PG&E notes that it has completed system modifications that allow the company to include partial standby customers in several other programs, including its Aggregator Managed Portfolio, Capacity Bidding Program, Critical Peak Pricing, and PeakChoice Program, and so does not oppose this request. It is reasonable to allow partial standby customers to participate in these demand response programs for the load they purchase from PG&E, and we approve this request.
189 Ibid.
190 Exhibit 2, p. 14.
191 Exhibit 2.
192 Exhibit 7, pp. 72-73.
193 Exhibit 7, pp. 72-73.
194 Exhibit 7, p. 76.
195 Exhibit 7, p. 76.
196 Exhibit 7, p. 75.
197 Exhibit 7, p. 75.
198 Exhibit 7, Appendix C.
199 Exhibit 201, Chapter 2, p. 23.
200 Exhibit 201, Chapter 2, p. 23.
201 Exhibit 201, Chapter 2, p. 25.
202 Protest of The Division of Ratepayer Advocates, filed July 9, 2008 in A.08-06-001 et al., p. 6.
203 DRA Protest of Amended Applications, filed September 29, 2008 in A.08-06-001 et al., p. 4.
204 Response of Consumer Power Line ("CPLN") to Applications, filed July 9, 2008 in A.08-06-001 et al., p. 2.
205 Response of Consumer Power Line to Applications, filed July 9, 2008 in A.08-06-001 et al., p. 5.
206 Comments of the Joint Parties, filed July 9, 2008 in A.08-06-001 et al., p. 2.
207 Comments of CLECA, July 9, 2008, p. 6.
208 Comments of CDRC on Amended Applications, filed September 29, 2008 in A.08-06-001 et al., p. 13.
209 CDRC Opening Brief, pp. 11, 12.
210 CDRC Opening Brief, pp. 8.
211 Reply of Pacific Gas and Electric Company (U 39-E) To Protests and Responses to Amended Application For Approval of 2009-2011 Demand Response Programs and Budgets pp. 6-7.
212 Ibid, p. 34.
213 Reply Brief of Pacific Gas and Electric Company, February 11, 2009, p. 33.
214 Reply Brief of Pacific Gas and Electric Company, February 11, 2009, p. 33.
215 Opening Brief of Pacific Gas and Electric Company (U 39-E), January 28, 2009, p. 25.
216 Ibid., p. 15.
217 Opening Brief of Southern California Edison Company (U 338-E), January 28, 2009, p. 14.
218 Exhibit 131, January 7, 2009, Agreement Regarding Interaction of Summer Saver and Peak Time Rebate Programs.
