ALJ/MSW/jt2 Date of Issuance 4/16/2008

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Order Instituting Rulemaking to Consider Revisions to the Planning Reserve Margin for Reliable and Cost-Effective Electric Service.

FILED
PUBLIC UTILITIES COMMISSION APRIL 10, 2008
SAN FRANCISCO OFFICE RULEMAKING 08-04-012

ORDER INSTITUTING RULEMAKING

Table of Contents

Title Page

ORDER INSTITUTING RULEMAKING 2 2

1. Summary 2 2

2. Background 2 2

2.1. Development of the PRM 2 2

2.2. Commission Implementation of and Commentary on the PRM 5 5

2.2.1. Forced Outages 5 5

2.2.2. Adverse Conditions and Variance from Forecasts 6 6

2.2.3. Demand Response and the PRM 7 7

2.3. Revisiting the PRM 7 7

2.4. Planning Reserves in Other Jurisdictions 8 8

3. Overview of Proceeding 8 8

4. Preliminary Scoping Memo 10 10

5. Proceeding Category and Need for Hearing 14 14

6. Prehearing Conference Statement, Preliminary Schedule 14 14

7. Parties and Service List 16 16

8. Public Advisor 17 17

9. Intervenor Compensation 17 17

10. Ex Parte Communications 17 17

Appendix A - Load Serving Entities

ORDER INSTITUTING RULEMAKING

1. Summary

We open this rulemaking to review, and modify to the extent found to be appropriate, the planning reserve margin (PRM) used for purposes of our Long-Term Procurement Planning (LTPP) and Resource Adequacy (RA) programs. We do so to bring greater policy clarity and certainty to California's electricity market and to ensure that our LTPP and RA programs are designed to yield the level of reliability that ratepayers demand. We will examine, among other things, the assumptions and methodology used to set the PRM, whether to recalibrate the PRM periodically, whether to establish a single PRM that applies throughout the service territories of utilities under our jurisdiction, whether to establish separate short-term and long-term PRMs, and how best to coordinate our PRM determinations with the needs of the California Independent System Operator (CAISO).

We provide for the filing of Prehearing Conference (PHC) statements on preliminary matters that pertain to the scope, schedule, and administration of the proceeding. PHC statements are due to be filed on April 25, 2008. A PHC will be scheduled thereafter.