III. Preliminary Scoping Memo

A. Scope of Issues

The issues that we consider to be within the scope of this proceeding at this time are as follows:

1. Load Impact Estimation

This rulemaking will use the draft load impact protocols developed by staff (see Background) as a starting point toward the development of a final load impact protocol for DR programs. The protocols will be useful not only as input in measuring program cost-effectiveness, but also will assist in resource planning and long-term forecasting. A sound method of estimating load impacts will also improve the CAISO's implementation of MRTU. For example, the CAISO may be able to more confidently rely on demand response as a "day-ahead" resource if the reliability of that resource is better defined.

Measuring load impacts is not a simple exercise. DR programs motivate different ways of reducing load by different types of customers. Program impacts may differ in their timing and nature, in the extent to which they improve reliability, and in their costs, for example. These and other program characteristics may vary according to the circumstances of the event, such as temperature, day of the week, time of day, location, and type of system emergency. Accordingly, DR programs may be most appropriately dispatched according to the circumstances and the cost-effectiveness may be affected by the circumstances at hand. These matters should be recognized in future protocols.

The load impact of a DR program is defined as the difference between the customer's load (in response to a DR request) and the customer's expected load absent the DR request, which is also called the customer's "baseline". Consequently, estimating the baseline is critical. The CEC's study on customer baseline estimations3 assessed various methods of baseline calculation such as load averaging of recent similar days, using regression analysis or making adjustments to reflect certain factors, like weather. Each method presents advantages and disadvantages, as the CEC's report states. These baseline estimation methods, along with any other viable method, will need to be considered as part of the load impact protocol development. The Commission must also consider whether to estimate program-wide impacts or customer-specific effects.

Currently, dispatchable DR is considered to be a supply-side resource for purposes of calculating resource adequacy requirements, while non-dispatchable DR is considered to be a reduction from load forecasts. R.05-12-013 is exploring improvements to forecasting mechanisms related to DR resources. The load impact protocols we develop here may resolve some of the concerns raised with regard to the measurement of DR effects for purposes of promoting resource adequacy. We expect to incorporate the protocols developed here in our resource adequacy rules and will coordinate our efforts here with the Resource Adequacy proceeding, R.05-012-013.

2. Cost-Effectiveness Methods

In Application (A.) 05-06-006 we approved $262 million for DR programs for the years 2006-2008 (D.06-03-024). In the same proceeding we recently authorized augmentations and expansions to the DR programs for the purpose of increasing DR as a resource for summer 2007 (D.06-11-049). Some parties to this proceeding expressed concern that DR programs may not be cost-effective, considering the level of incentives and administrative costs authorized for these programs. It is our intent to adopt methodologies so that the utilities' DR programs are cost-effective.

The California Standard Practice Manual (SPM), which was derived as a cost-effectiveness protocol for energy efficiency programs, appears to be a valid starting point for designing a suitable cost-effectiveness methodology for DR programs. The SPM provides a variety of tools for developing cost-effectiveness methodologies for DR programs as well as identifying cost and benefit components. We encourage stakeholders to provide meaningful input on how to best refine the SPM so that it can more accurately reflect the value of DR programs. We will coordinate this effort with Commission proceedings where the value of avoided costs for DR as well as other resources is being calculated. We focus our efforts here on the costs of DR programs and DR benefits not captured by avoided costs. We also intend to coordinate our work here with the energy efficiency rulemaking and our efforts there to establish measurement and evaluation protocols.

3. Demand Response Participation Goals

D.03-06-032 adopted the following goals for price responsive, day-ahead demand response programs:

Table 1

Year

Pacific Gas and Electric Company (PG&E)

Southern California Edison Company (Edison)

San Diego Gas & Electric Company (SDG&E)

2003

150 MW

150 MW

30 MW

2004

400 MW

400 MW

80 MW

2005

3% of annual system peak demand

2006

4% of annual system peak demand

2007

5% of annual system peak demand

Currently, there are no similar goals set for reliability programs and participation in those programs does not count toward meeting the goals shown in Table 1.

Parties in A.05-06-006 raised concerns about the existing goals, such as the exclusion of reliability programs in meeting the goals. D.06-11-049 discussed how certain circumstances have changed since the Commission set the goals in 2003 and the need to reassess the goals for 2008 and beyond. We are concerned with realistic participation goals in addition to resolving whether participation in reliability programs should be included in DR goals. We also recognize the need to provide clearer "counting rules" for MW goal attainment so that the utilities can plan more effectively and that we can better monitor their progress.

4. CAISO's MRTU

We plan to coordinate our efforts here with the CAISO so that DR resources are efficiently incorporated in the CAISO's wholesale markets. The CAISO plans to implement the day-ahead market of its MRTU during the first quarter of 2008, which could affect or be affected by DR efforts. As stated earlier, we have recommended that the CAISO account for existing demand response in a way that does not promote procurement of redundant supply-side resources. A key to resolving this issue is identifying where there are disconnects or gaps between existing retail DR programs and the CAISO's operational needs for the wholesale market, both currently and when MRTU is implemented.

The stakeholder process envisioned by the CAISO could result in recommendations to modify the existing DR programs and such recommendations would be considered in this rulemaking. Our Energy Division will participate in the CAISO's DR stakeholder group to assure the agencies are communicating on this work.

B. CEC Collaboration

In the past few years the CEC has participated in some Commission rulemakings in a collaborative fashion rather than as a party. We invite the CEC to join us in this proceeding by continuing the collaborative approach that both agencies pursued in the development of DR policy and programs in R.02-06-001 and in other DR proceedings. The collaborative approach has been an effective tool to ensure that state agencies are able to communicate and effectuate our joint policy goals.

C. Category of Proceeding

Pursuant to Rule 7.1(d) of our Rules of Practice and Procedure (Rules), this rulemaking is preliminarily categorized as "ratesetting" as that term is defined in Rule 1.3(e). Our intention is to conduct this proceeding by written comments from the parties, workshops, and possibly limited evidentiary hearings on technical issues. Objections to the preliminary categorization of this rulemaking as "ratesetting" shall be filed no later than 10 days after the issuance of this rulemaking. (See Rule 7.6(a).)

D. Schedule

This proceeding will initially emphasize issues relating to load impact protocols and cost-effectiveness. Coordination with the CAISO on integrating the DR programs with wholesale energy markets and MRTU will be added to schedule as that process becomes better defined at a later date.

The preliminary schedule for these initial issues is as follows:

On the basis of the discussion at the prehearing conference, the assigned Commissioner may provide a more detailed schedule, and may modify this schedule as necessary to assure the efficient and effective conduct of this rulemaking. The assigned Commissioner or assigned Administrative Law Judge (ALJ) may modify the schedule as necessary. The Commission anticipates that this proceeding will be completed within 18 months, consistent with Pub. Util. Code § 1701.5.

E. Parties and Service List

PG&E, SDG&E, and Edison are named as respondents to this rulemaking. We serve this order on parties to R.02-06-001, R.06-02-013, R.05-12-013,
A.05-06-006, A.05-03-015, A.05-06-028, A.06-12-026, R.06-04-010, R.04-04-025 and the informal "DR cost-effectiveness service list" that staff initiated with its draft load protocols.

The official service list will be established at the first prehearing conference. We invite broad participation in this proceeding. Those who seek party status or wish to monitor this proceeding who cannot attend the prehearing conference may do so by informing the Commission's ALJ Process Office (process_office@cpuc.ca.gov) of his or her intent to participate and providing the following information no later than the date of the first prehearing conference:

1. Name and organization represented, if any

2. Address

3. Telephone number

4. E-mail address

After the service list is established following the first prehearing conference, persons may be added as parties as directed by the assigned ALJ.

All filings in this proceeding may be made electronically according to Resolution ALJ-188 and served consistent with Rule 1.10.  Consistent with those rules, a hard copy of all pleadings shall be concurrently served on the assigned ALJ.

F. Public Advisor

Any person or entity interested in participating in this rulemaking who is unfamiliar with the Commission's procedures should contact the Commission's Public Advisor in Los Angeles at (213) 576-7055 or (866) 849-8391, or e-mail public.advisor.la@cpuc.ca.gov; or in San Francisco at (415) 703-2074 or
(866) 849-8390 or e-mail public.advisor@cpuc.ca.gov. The TYY number is
(866) 836-7825.

G. Ex Parte Communications

Pursuant to Rule 8.4(b), ex parte communications are governed by Rules 8.2(c) and 8.3.

ORDER

Therefore, IT IS ORDERED that:

1. A rulemaking is instituted on the Commission's own motion to establish a set of protocols for estimating the load impacts of demand response programs, establish methodologies to determine the cost-effectiveness of demand response programs, set demand response goals for 2008 and beyond, and develop rules on goal attainment, and consider modifications to demand response programs needed to support the California Independent System Operator's efforts to incorporate demand response into market design protocols as discussed herein.

2. Pacific Gas and Electric Company, San Diego Gas & Electric Company, and Southern California Edison Company are made respondents to this proceeding.

3. The Executive Director shall cause this Order Instituting Rulemaking to be served on the respondents, the Executive Director of the California Energy Commission and on the parties to Rulemaking (R.) 02-06-001, R.06-02-013,
R.05-12-013, Application (A.) 05-06-006, A.05-03-015, A.05-06-028, A.06-12-026, R.06-04-010, R.04-04-025 and the informal "demand response cost-effectiveness service list" that staff initiated with its draft load protocols.

4. The category of this rulemaking is preliminarily determined to be "ratesetting" as that term is defined in Rule 1.3(e) of the Commission's Rules of Practice and Procedure. Any person objecting to the preliminary categorization of this rulemaking as "ratesetting" shall file the objection no later than 10 days after the issuance of this rulemaking.

5. The assigned Administrative Law Judge (ALJ), in consultation with the assigned Commissioner, may make any necessary adjustments to the schedule for this proceeding.

6. The Commission hereby schedules a prehearing conference in this proceeding for the purpose of discussing the management of this docket. The prehearing conference will take place at 10:00 a.m. on March 13, 2007 in the Commission Courtroom, State Office Building, 505 Van Ness Avenue, San Francisco, California 94102.

This order is effective today.

Dated January 25, 2007, at San Francisco, California.

3 Protocols Development for Demand Response Calculation - Findings and Recommendations, February 2003.

http://www.energy.ca.gov/reports/2003-03-10_400-02-017F.PDF

Previous PageTop Of PageGo To First Page