2. Background

The Commission opened this rulemaking on January 25, 2007 as part of a "continuing effort to develop effective demand response (DR) programs" and identified consideration of "modifications to DR programs needed to support the California Independent System Operator's efforts to incorporate DR into market design protocols" as an objective of the rulemaking.3

Phases 1 and 2 were initiated to address DR program cost-effectiveness, load impacts, and goals. One specific issue that arose in Phase 2 was whether existing emergency-triggered DR programs should be modified to facilitate their integration into the California Independent System Operator's (CAISO or ISO) Market Redesign and Technology Upgrade (MRTU). A ruling issued in this proceeding requested comments on this issue, with the CAISO's comments due on June 25, 2008 and other parties' comments due on July 9, 2008.4

In response to this ruling, the CAISO provided its rationale for reducing the amount of emergency-triggered DR in the service areas of the three largest investor-owned utilities (IOU).5 The IOUs and other parties6 provided comments on the CAISO analysis of emergency-triggered DR.

On July 18, 2008, the Commission initiated Phase 3 of this rulemaking to address the "operation of the investor-owned utilities' emergency-triggered DR programs in the future electricity wholesale market."7 Parties were asked to file prehearing statements on nine questions regarding the emergency-triggered DR programs.

Pre-hearing statements were filed on July 27, 2008, and a prehearing conference (PHC) was held on August 20, 2008, during which the CAISO, the IOUs and other parties largely reiterated their positions as stated in their filings on July 9 and July 27, 2008.

Thereafter, Phase 3 was delayed pending the implementation of the MRTU by the CAISO. Subsequently, the IOUs, working in collaboration with the CAISO and other stakeholders, proposed to modify their Base Interruptible Programs (BIP) by adding a new trigger condition to the program: a warning notice issued by the CAISO along with a determination by the CAISO that a Stage 1 emergency is imminent, consistent with CAISO operating procedure E-508B. The IOUs, the CAISO and other stakeholders agreed to continue to pursue efforts to voluntarily transition emergency-based DR program participants to price-responsive DR. The proposed modifications were approved in Resolution E-4220 on January 29, 2009.

Subsequently, in Application (A.) 08-06-001 et al. (regarding the IOUs' 2009-2011 DR program portfolios), the Commission adopted Decision (D.) 09-08-027 on August 20, 2009, imposing interim caps on the IOUs' emergency-triggered DR programs. D.09-08-027 reasoned:

In recognition of the ongoing examination of the appropriate size and role of emergency programs in R.07-01-041 Phase 3, we decline to expand existing emergency-triggered programs or adopt new emergency programs with similarly limited triggers. Instead, we cap these programs at their current enrollment (in megawatts) and funding levels pending the resolution of R.07-01-041 Phase 3, with a limited exception for the PG&E SmartACTM program.8

With the implementation of the MRTU, Phase 3 was re-activated on July 8, 2009 to hold workshops on the emergency-triggered DR programs.9 Three workshops were scheduled to examine the optimal size of the emergency-triggered DR programs, consider alternatives to the emergency-triggered DR programs, and address implementation and transition issues for any alternatives identified in Workshop 2.

Workshop 1 was held on August 10, 2009, and addressed the optimal size for emergency-triggered DR programs in each IOU's service area to maintain grid reliability. Stakeholders participated in panels to discuss positions and address questions. As documented in the Workshop Report and the post-Workshop comments, filed August 20, 2009 and August 27, 2009, respectively, parties engaged in vigorous debate on whether the emergency-triggered DR programs should be reduced from their current size, and little party consensus was achieved.

On September 23, 2009, Administrative Law Judge (ALJ) Sullivan issued a ruling summarizing parties' positions on the Workshop 1 issues, and providing additional guidance on Workshop 2. The ruling, in particular, noted that:

The Amended Scoping Memo ... explicitly states regarding the CAISO-proposed optimal size of emergency-triggered programs: "[i]f there are no alternatives submitted, then the Commission may assume that the recommendations made by CAISO are valid and proceed towards an emergency-triggered DR that resolves the issues raised by CAISO."10

While making no final determination regarding a cap on the emergency-triggered DR programs, the September 23, 2009 ruling directed parties to assume for purposes of Workshop 2 a cap on the emergency-triggered DR programs of 1,000 MW statewide, allocated based on the CAISO's Emergency Operating Procedure E-508A Load Shedding Guide.11

Pre-workshop comments were filed on October 12, 2009, and Workshop 2 was held on October 20, 2009 to examine alternatives to emergency-triggered DR programs. Parties discussed, among other issues, the merits of a 1,000 MW statewide cap and allocation as proposed by the CAISO; however little consensus was reached, as documented in the Workshop 2 Report, filed October 30, 2009.

At the conclusion of Workshop 2, parties requested additional time prior to Workshop 3 to work together to explore possible resolutions for proposal to the Commission. In a November 4, 2009 e-mail ruling, ALJ Sullivan granted the parties' request, removing Workshop 3 from the Commission's calendar to allow time for settlement discussions.12

On January 20, 2010, the Settling Parties provided "notice" of a settlement conference pursuant to Rule 12.1 of the Commission's Rules of Practice and Procedure (Rules). A settlement conference was subsequently convened on January 29, 2010. Participating parties were the Settling Parties and the Alliance for Retail Energy Markets (AReM).

On February 22, 2010, a joint motion asking for the adoption of a settlement was filed in the proceeding.13 The Joint Motion reports that subsequent to Workshop 2, the Settling Parties met on numerous occasions to explore a possible settlement and that these efforts eventually resulted in a settlement in principle among the Settling Parties.

The Joint Motion reports that after the settlement conference, the Settling Parties worked to finalize their settlement efforts and that this resulted in the Settlement, which is Attachment A to this decision. The Joint Motion reports that although AReM is not a party to the settlement, AReM does not oppose the settlement.

On March 3, 2010, an ALJ Ruling denied the Settling Parties' request for a shortening of time to comment on the Settlement and ordered the Settling Parties to serve by March 5, 2010, the Joint Motion on the service list in R.09-10-032, a proceeding addressing issues concerning Resource Adequacy (RA).

There were no comments filed on the Joint Motion and the Settlement.

3 Order Instituting Rulemaking (R.) 07-01-041 (January 25, 2007) at 1.

4 Administrative Law Judge's Ruling Requesting California Independent System Operator Information on Emergency-Triggered Demand Response, June 9, 2008.

5 Pacific Gas and Electric Company (PG&E), San Diego Gas & Electric Company (SDG&E), and Southern California Edison Company (SCE) are the three largest IOUs in California. Throughout this decision, when we refer to the "IOUs," unless otherwise noted, we mean these three utilities.

6 Commenters included the Division of Ratepayer Advocates (DRA); the California Large Energy Consumers Association (CLECA); Enernoc Inc., EnergyConnect, Inc., Converge, Inc., and Consumer Powerline (filing together as Joint Parties); and the California Manufacturers and Technology Association (CMTA).

7 Assigned Commissioner's and Administrative Law Judge's Amended Scoping Memo and Ruling, July 18, 2008, at 1.

8 D.09-08-027 at 33.

9 See Assigned Commissioner's Ruling Amending the Scoping Memo and the Schedule of Phase 3 of this Proceeding (Amended Scoping Memo), July 8, 2009.

10 ALJ's Ruling Regarding Workshop 2, September 23, 2009, at 9 (footnotes omitted).

11 Id. at 10.

12 This was accomplished by ALJ Sullivan's e-mail to all parties in the service list in this proceeding on November 4, 2009.

13 Joint Motion of California Independent System Operator Corporation, California Large Energy Consumers Association, Division of Ratepayer Advocates, Enernoc, Inc., Pacific Gas and Electric Company (U 39-E). San Diego Gas and Electric Company (U 902-E) and Southern California Edison Company (U 338-E) and The Utility Reform Network (Settling Parties) for Adoption of Settlement (Joint Motion); Settlement Attached (Settlement).

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