4. Discussion

The settlement, as described above, makes reliability-triggered DR programs more useful to the CAISO and more economic to ratepayers. Furthermore, the Settlement transitions programs from reliability-triggered to price-responsive (which is consistent with overall Commission policy objectives). Finally, the Settlement reduces the overall size of the reliability-triggered power counting for RA.

As a result, the Settlement either answers or renders moot the questions and concerns that gave rise to Phase 3 of this proceeding.

The Settling Parties contend (quoting directly from the Joint Motion) that:

· The Settlement establishes a process for the development of a wholesale product that will allow for the participation of reliability-based DR in the wholesale market and maintain an appropriate level of reliability-based DR for grid reliability and RA purposes. The RDRP product design reasonably recognizes the value of service of the participating reliability-based DR MW and the need to trigger such resources after conventional supply-side resources. RDRP enables all DR providers to bid in capacity, with no limits on the amount of RDRP capacity (limits are on the amount of RDRP capacity that can count for RA), and allows the IOUs to continue to use the RDRP capacity for local transmission and distribution needs.

· The Settlement limits the amount of reliability-based DR that will count for RA, and reasonably commits the IOUs to implement and promote price-responsive options for reliability-based DR program participants, while appropriately mitigating concerns over removal of customers from reliability-based DR programs in the absence of reasonable alternatives and sufficient transition time. The Settlement provides adequate time and incentive for the IOUs to implement price-responsive transition efforts to effectively reduce reliability-based DR participation to the 2% limit by 2014, and for creation of remedial measures for failure to do so. The final 2% limit on the reliability-based DR sufficiently addresses the ISO's concerns over the level of statewide emergency DR MW, while accommodating the current IOU BIP enrollment of large interruptible customers for whom price-responsive options may not be feasible.

· The Settlement provides a reasonable measure of stability to BIP participants and mitigates the uncertainty that they have faced in the last several years about the continued nature of the BIP program. The Settlement reasonably resolves a variety of transitional issues for the reliability-based DR programs during a period of considerable change in the DR landscape, including the installation of advanced metering and implementation of dynamic pricing for residential and small commercial customers; the integration and operation of DR into the new wholesale market design; and the development of scarcity pricing. The Settlement provides a reasonable means of addressing the reliability-based DR programs while DR developments are in flux and until advanced metering, dynamic pricing, and scarcity pricing are in place.

· The Settlement advances the Commission's objectives for expanding use of price-responsive DR by committing SCE to introduce a price-responsive option in its A/C Cycling program, the largest such program in the State; and by using the Commission's rules on dual participation to help maximize participation on price-responsive DR options. Specifically to the latter point, the Settlement does not limit reliability-based MW that dual-participate in a price-responsive program/option as long as the dual MWs can be identified and measured in accordance with the DR load impact protocols established by the Commission in D.08-04-050. The current caps on the reliability-based DR programs preclude any MWs above the caps irrespective of whether such MWs dual-participate in a price-responsive program/option.

· The Settlement provides a reasonable process for modifying the reliability-based DR programs while seeking to preserve existing participation levels in the IOU DR programs.

We agree.

The Settlement successfully integrates the operation of the IOUs' emergency-triggered DR programs into the wholesale electricity market. The Settling Parties are reflective of the affected interests in Phase 3 of this proceeding. The CAISO represents wholesale market interests; DRA and TURN represent bundled ratepayer interests, including residential and small business customers; CLECA represents the interests of large customers participating in the IOUs' emergency-triggered DR programs; EnerNOC represents the interests of third-party DR providers; and PG&E, SCE and SDG&E represent their interests as IOUs offering DR programs to their customers.

As noted in the procedural history, the record in this proceeding is quite extensive and provides support for the Settlement. Thus, the Settlement is reasonable in light of the entire record.

The Settlement is consistent with the law and prior Commission decisions. First, the Settling Parties reached agreement in accordance with Rule 12.1. The Settling Parties noticed the convention of a settlement conference on January 20, 2010, and convened a settlement conference on January 29, 2010 in San Francisco to describe and discuss the terms of the Settlement. The settlement conference was attended by representatives of Settling Parties as well as by AReM. The Settlement was executed after the settlement conference held on January 29, 2010.

Second, the Settlement is consistent with the Commission's and the State's objectives to encourage participation in preferred price-responsive DR programs, and integrate DR into the wholesale electricity markets to promote cost-effective DR as a priority resource, as articulated in numerous prior Commission decisions issued in various DR-related proceedings.

The Settlement is in the public interest because it enables the integration and operation of the IOUs' reliability-based DR programs in the wholesale electricity market in a manner that ensures the continued availability of reliability-based DR for grid reliability and RA purposes while encouraging the transition of IOU customers to preferred price-responsive DR options and a more-efficient reliability-based DR product.

In addition, the Settlement is a reasonable compromise of the Settling Parties' respective positions. Furthermore, the adoption of this Settlement will reduce the Commission resources needed to resolve Phase 3 of this proceeding.

The Settlement is not opposed by any active party in this proceeding. Although AReM did not sign the Settlement, it has indicated that it does not oppose the Settlement.

Based on our review and the discussion above, the Commission finds the Settlement to be reasonable in light of the whole record, consistent with the law, and in the public interest. Therefore, we adopt the Settlement.

As recognized by the Settlement, the Commission retains full authority to "determine the appropriate action to take with regards to the `oversupply' of reliability-based DR ..."22

A goal of the Commission has been to ensure that ratepayer funds do not subsidize the reliability-based DR in amounts that exceed what the CAISO can use. This provision of the settlement (as well as the capon the amount of MW for reliability-triggered DR that counts for RA) is consistent with the Commission's overall policy goals.

To facilitate the Commission in determining the "appropriate action concerning `oversupply'"23 in order to ensure that ratepayer funds do not subsidize reliability-triggered DR in amounts that exceed the settlement caps, the Commission needs further information. For this reason, we will require that in the filing of the 2011 DR applications, each utility will propose in its application a plan as to how it will limit enrollment in reliability-triggered DR programs in accordance with the settlement caps as well as a regulatory mechanism that ensures that ratepayer funds will not subsidize the tariff provision of reliability-triggered DR if an oversupply is determined.

21 Id. at 14-15.

22 Settlement at 9.

23 Id.

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