ALJ/KLM/hl2 Mailed 1/31/2007

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Order Instituting Rulemaking Regarding Policies and Protocols for Demand Response Load Impact Estimates, Cost-Effectiveness Methodologies, Megawatt Goals and Alignment with California Independent System Operator Market Design Protocols.

FILED PUBLIC UTILITIES COMMISSION JANUARY 25, 2007 SAN FRANCISCO OFFICE RULEMAKING 07-01-041

ORDER INSTITUTING RULEMAKING

I. Summary

This order initiates a Rulemaking as part of our continuing effort to develop effective demand response (DR) programs for our investor-owned utilities. This rulemaking will:

· Establish a comprehensive set of protocols for estimating the load impacts of DR programs;

· Establish methodologies to determine the
cost-effectiveness of DR programs;

· Set DR goals for 2008 and beyond, and develop rules on goal attainment; and

· Consider modifications to DR programs needed to support the California Independent System Operator's (CAISO) efforts to incorporate DR into market design protocols.

Our consideration of some of the issues in this rulemaking will build on the work begun in Rulemaking (R.) 02-06-001. We will coordinate the work in this rulemaking with efforts to measure and evaluate energy efficiency programs, forecast load for purposes of assuring resource adequacy, and calculate avoided costs.