4. Implementation Issues (Staff Report III.)

The Scoping Memo provided that certain RAR "implementation issues" could be taken up in Phase 1. These are "program gaps or deficiencies" that were identified during the initial implementation activities for System RAR earlier this year (both for "year-ahead" and for "month-ahead" System RAR) and which require Commission resolution as soon as possible, and in particular before LSEs' compliance filings for 2007 are due.

4.1. Filing Guide and Templates
(Staff Report III.A.; V.)

The Staff Report invited parties to comment on the Energy Division's recently issued RAR filing guides, associated templates, frequently asked questions, and errata for the 2006 year-ahead and month-ahead compliance filings. These materials were attached to the Staff Report as appendices.

PG&E suggests that the templates be modified to provide the ability to specify or highlight limitations associated with legacy contracts. PG&E is concerned that inclusion of a resource on a particular spreadsheet tab that does not fit the resource well may lead to misunderstanding. Our Energy Division informs us that the reporting requirements can and will be modified to address this concern.

SCE notes that the templates require LSEs' officers to certify that (a) they have responsibility for the activities reflected in the filings; (b) they have reviewed the compliance filing; (c) based on their knowledge, the filing does not contain any untrue statements; and (d) based on their knowledge, the filing contains all of the information required to be provided by Commission orders and regulations. Since compliance filings can be lengthy, SCE believes some modification is necessary to reflect the concern that officers cannot, based on their own knowledge, reasonably attest to every element of the factual information in the filing. SCE proposes the following modifications to Statements 2, 3, and 4 of the verification, which we hereby approve and adopt as being consistent with Rule 2.4 of our Rules of Practice and Procedure.

2. I have reviewed, or have caused to be reviewed, this compliance filing.

3. Based on my knowledge, information, or belief, this filing does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements true.

4. Based on my knowledge, information, or belief, this [filing] contains all of the information required to be provided by Commission orders, rules, and regulations.

With the revisions described above, we approve the RAR filing guides and templates and instructions developed by the Energy Division as representing the appropriate implementation of our RAR decisions to date. We further authorize the Energy Division to modify those templates and instructions and promulgate additional filing procedures and instructions as necessary for the orderly implementation of the adopted RAR program, both for system and for local requirements, and the changing needs of the program. We clarify here that failure of an LSE to submit a compliance filing in accordance with the filing instructions and reporting templates promulgated by the Energy Division may be deemed a violation of a Commission order.

4.2. Maximum Cumulative Capacity
(Staff Report III.B.)

SCE's March 13, 2006 comments requested that we adjust the year-ahead templates so that the Maximum Cumulative Capacity (MCC) calculation would be 103.5% (90% of 115%) of the peak hour load of an LSE's load forecast. In addition, SCE suggested that the MCC's should be based upon 115% of peak hour load for both year-ahead and month-ahead for consistency. In the Staff Report, the Energy Division suggested that, going forward, the calculation of the LSE obligation for each resource category, for both year-ahead and monthly RAR showing, should be based on the LSE's RAR (115% of forecast load). We approve this uncontested adjustment.

Constellation requests a clarification with respect to adjustments for load migration for Local RAR. However, in our recent decision on Local RAR we determined that monthly filings would not be required for the local program component.

4.3. Accounting for Transmission Losses
(Staff Report III.C.)

The current method for dealing with transmission losses uses the simplifying assumption of increasing an LSE's load forecast by a flat 3%. In its March 13 comments, SCE requests that for the 2007 RAR showing, transmission losses be incorporated through the application of loss factors to resources and that all resources and loads be adjusted to a common reference point-the CAISO grid. SCE notes that its method would encourage LSEs to contract with resources located near their load. Since the current approach effectively assigns a common loss factor that does not consider the actual transmission losses associated with a particular resource, an LSE that has contracted with a resource that is close to its load is treated the same as a similarly situated LSE that has contracted with a resource that is outside the state even though the latter resource incurs higher transmission losses than the local resource to deliver energy to the LSE. SCE maintains this is not efficient and results in unfair subsidies.

Constellation and the CAISO point out that SCE's approach would add administrative complexity to the RAR program. Constellation also notes that because the RAR capacity is unbundled from the energy deliveries, and because the CAISO may dispatch one LSE's RAR capacity to cover system conditions triggered by another LSE's loads, the perceived benefits of efficiency and fairness are not clear.

Resolving this issue requires a balancing of the objectives of administrative simplicity and accuracy in resource counting protocols. Since the net benefits of SCE's proposed approach are unclear, but it is clear that it would add administrative complexity that could be costly for participants as well as the Commission and the CAISO to administer, we choose not to approve this approach at this time.

4.4. Process for Resolving Discrepancies
(Staff Report III.D.)

In its Interim Reliability Requirements (IRR) tariff filing with the FERC, the CAISO, in response to stakeholder comments, has proposed parameters of the role it would assume in resolving discrepancies between the CAISO's Monthly Supply Plan submitted by generators and the LSE's monthly showings. Key to this process would be the CAISO's contact with the Scheduling Coordinator of each entity and attempt to resolve the discrepancy before reporting any LSE deficiency to the Commission.

In comments submitted on March 13, Alliance for Retail Energy Markets requests that the Commission determine a process for resolving such discrepancies. No party has identified a need, or submitted a proposal to address any such need, for this Commission to establish a dispute resolution process at this time that would specifically address disputes not resolved through the process proposed in the CAISO's IRR tariff. We therefore defer any action on this topic at this time. We note that our staff is working with the CAISO to resolve discrepancies.