2. Background
EnerNOC is a publicly traded company which, among other things, operates a demand response (DR) program for utilities and businesses. This program provides firm capacity to utilities by reducing peak demand in targeted geographic areas through the use of energy management expertise, technology and communications networks. SDG&E filed this application to request approval of a DR capacity contract with EnerNOC (EnerNOC Agreement).
Pursuant to the EnerNOC Agreement, EnerNOC commits to provide up to 25 MWs of dispatchable load reduction during the 2010 capacity delivery season, which will increase to 35 MWs during the 2011 capacity delivery season and finally to 40 MWs starting with the 2012 capacity delivery season until the end of the contract term (the EnerNOC agreement is effective through December 31, 2024, unless terminated earlier pursuant to the terms of the agreement). A capacity delivery season is May 1 through October 31 of a calendar year. SDG&E will be limited to dispatching a maximum of 50 total hours of load reduction during any capacity delivery season.
On an annual basis from 2010 to 2012,1 the original EnerNOC Agreement would result in contract costs and SDG&E administrative costs to be recovered in rates of approximately $2.565 million in 2010, $3.588 million in 2011, and
$4.089 million in 2012.2 Throughout the remainder of the 15-year contract life, costs will escalate by up to 3% per year over the 2012 amount. Costs for any particular year would be recovered in the subsequent year (i.e., costs recovery in 2011 would be for costs incurred in 2010.) Based on a cost-effectiveness analysis, costs will be more than offset by the supply related benefits3 associated with the contracted DR.
A protest to the application was filed by the Division of Ratepayer Advocates (DRA) on April 13, 2009. SDG&E filed a reply to the protest on
April 23, 2009. The prehearing conference (PHC) was held on May 8, 2009. Parties to the proceeding include SDG&E, DRA, and EnerNOC.
At the PHC, SDG&E indicated that discovery by DRA was ongoing, there have been informal meet and confer sessions with DRA on some of the issues, and, in their opinion, outstanding issues were likely to be resolved. DRA also stated that it was working with EnerNOC and SDG&E to possibly settle the proceeding.
Following the PHC, DRA and EnerNOC engaged in a series of discussions regarding a few of the terms of the original EnerNOC Agreement. Pursuant to these discussions, EnerNOC agreed to make the following changes, which were incorporated into an Amended and Restated EnerNOC Agreement executed by both EnerNOC and SDG&E:4
1. So as to clarify how the agreement will conform with the California Independent System Operator's (CAISO's) Market Redesign and Technology Upgrade (MRTU), Article 2.4 was amended to specify that, if necessary, the agreement would be changed to conform to the "CAISO tariff, Business Practice Manuals, Operating Procedures and other relevant requirements, as updated by CAISO from time to time, to preserve all performance attributes under the agreement."5 Because the CAISO is still in the process of finalizing the processes necessary to fully implement the MRTU, the 45-day deadline following implementation of the MRTU was deleted from the agreement.
2. So as to strengthen the protection to ratepayers in case of an EnerNOC default, a new default provision was added to
Article 10.1 to specify that EnerNOC would be in default if it failed to achieve an hourly delivery capacity ratio of at least 0.5 for each of three separate program events during the term of the agreement (however, subsequent to the first performance failure, only those performance failures occurring 30 days after the prior performance failure shall count for purposes of this new default provision). This default provision is consistent with similar provisions in other investor-owned utility DR capacity contracts approved by the Commission.
3. So as to reduce the cost to ratepayers, a new and lowered DR capacity price per MW/year was included in Table 1 of the Amended and Restated EnerNOC Agreement.
In its Amended Application, SDG&E requests that the Commission rule that:
· SDG&E's bundled customers need the DR resource that is the subject of the Amended and Restated EnerNOC Agreement;
· the prices and terms of the Amended and Restated EnerNOC Agreement are just and reasonable;
· full cost recovery in rates, as requested by SDG&E, should be granted; and
· such other relief as is necessary and proper.
On July 10, 2009, DRA responded to the Amended Application, stating that it has no objections to the Amended and Restated EnerNOC Agreement.
1 While the EnerNOC Agreement will likely begin in 2010, costs for any particular year would be recovered in the subsequent year (i.e., costs recovery in 2011 would be for costs incurred in 2010).
2 Costs are as stated in SDG&E's newspaper publication of the proposed rate increase (San Diego Gas & Electric Company's Rule 3.2(c) Notice Regarding Proof of Newspaper Publication, dated March 26, 2009).
3 Benefits include avoided supply costs, the reduction in transmission, distribution, generation and capacity costs valued at marginal costs for the periods when there is load reduction.
4 On July 9, 2009, SDG&E filed an Amendment to the Application that reflected the terms and conditions of the Amended and Restated EnerNOC Agreement.
5 Supplement Attachment 12 to the Request for Offers (RFO) Template (Amended and Restated Agreement with EnerNOC) at Article 2.4.
