ALJ/LTC/jva DRAFT Agenda ID #1775

Ratesetting

3/13/03 Item #1

Decision DRAFT DECISION OF ALJ CAREW (Mailed 2/11/03)

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Order Instituting Rulemaking on policies and

practices for advanced metering, demand

response, and dynamic pricing.

Rulemaking 02-06-001

(Filed June 6, 2002)

INTERIM OPINION IN PHASE 1 ADOPTING PILOT PROGRAM FOR RESIDENTIAL AND SMALL COMMERICAL CUSTOMERS

Table of Contents

INTERIM OPINION IN PHASE 1 ADOPTING PILOT PROGRAM FOR RESIDENTIAL AND SMALL COMMERICAL CUSTOMERS 1 1

I. Summary 2 2

II. Background 2 2

A. Procedural History 2 2

B. Residential and Small Commercial Customer Demand Response 6 6

III. Working Group 3's Recommendations 7 7

A. Summary of the Statewide Pricing Pilot 9 9

1. Research Objectives 9 9

2. The Statewide Pricing Pilot's Basic Features 10 10

3. The Statewide Pricing Pilot Implementation Plan and Schedule 14 14

4. Statewide Pricing Pilot Costs 15 15

5. Market Research 15 15

6. Cost-Benefit Analysis of the Statewide Pricing Pilot 17 17

B. Alternative Pilots 17 17

1. The Invensys Pilot 17 17

2. The T&D Control Pilot 18 18

C. Dissenting Viewpoints 19 19

1. TURN's Concerns 20 20

2. ORA's Concerns 22 22

3. PG&E's Concerns About the Invensys Alternative Pilot Proposal 23 23

4. Edison's Concerns About Both Alternative Pilot Proposals 24 24

IV. Discussion 25 25

A. Modifications to the SPP's Basic Features 25 25

1. The Track B Pilot Proposed by SF Co-op 26 26

2. The Track C Pilot 28 28

3. Customer Participation in SPP 29 29

4. Information Treatments 30 30

5. Technology Treatment Issues 31 31

6. Adoption of the Alternative Pilots 31 31

7. SPP Timing Issues 33 33

B. Legislative Mandates 33 33

1. Public Utilities Code Section 393 34 34

2. Senate Bill 1976 37 37

3. Public Utilities Code Section 2774.6 37 37

C. Phase 1 Cost Recovery Issues 38 38

D. SPP Tariff Design Issues 42 42

V. Monitoring, Reporting, and Procedure for Refinements to Pilot 46 46

VI. Comments on Draft Decision 47 47

VII. Assignment of Proceeding 47 47

Findings of Fact 47 47

Conclusions of Law 51 51

ORDER 54 54
Attachment A, Attachment B, Attachment C and Attachment D

I. Summary

This decision, the first of two decisions to be rendered in Phase 1 of this demand response rulemaking, adopts, with some modifications, a near-consensus proposal of the parties to undertake a statewide pricing pilot (SPP) designed to test time-of-use and critical peak pricing tariffs for a representative sample of residential and small commercial customers on an opt-out basis. The adopted pilot is designed to test the impact of such dynamic pricing tariffs on the usage patterns of a small sample of such customers randomly selected statewide. The decision also adopts cost recovery mechanisms for authorized Phase 1 demand response programs, including the statewide pilot. Finally, the decision provides necessary guidance to the staff and parties about designing tariffs that will make the impacts of usage changes clear to customers participating in the pilot.