Mattson Interim Opinion on Interruptible Programs and Curtailment Priorities

4. Curtailment Priorities

The second core area involves modifications to existing curtailment priorities.

4.1. Hospitals With Fewer Than 100 Beds

Issue: What is the effect of including hospitals with fewer than 100 beds on the list of essential customers, including the effect on the number of circuits and megawatts that are available for rotating outage. (D.01-04-006, Ordering Paragraph 12, as renumbered by D.01-04-009.)

Hospitals with fewer than 100 beds are now included in essential customer Category C. (D.01-04-006.) As a result, all hospitals are normally excluded from rotating outages. On doing this, we said:

"...we have little specific information on the effect of this change. We order this change because we are persuaded by the limited information we now have that rural hospitals have an immediate need for protection during the crisis we face for Summer 2001. We will revisit this issue in Phase 2, however. We direct that respondent utilities submit specific information in Phase 2 on the effect this change has had on mandatory curtailments, and the effect on the number of circuits and megawatts that are available for rotating outage." (D.01-04-006, mimeo., page 64.)

Utilities report that including hospitals with fewer than 100 beds in Category C has had the following effects:

Reduction In System Resources Available

For Rotating Outage By Including Hospitals

With Fewer Than 100 Beds In Category C


Line No	Utility	Reduction in Load Available for Rotating Outage (MW) (From %) (To %)			Reduction in Number of Circuits
1	PG&E	915	51.0	46.4	107 [1]
2	SCE	1,269	55.4	49.7	191 [2]
3	SDG&E	0	remains above 40%		0

Note: These results are based on assuming all customers conditionally awarded Category M status (D.01-09-020) submit their Statement of Authenticity and become fully included in Category M.

[1] Approximately 135 circuits are involved, of which about 28 also serve at least one other essential customer that is not a small hospital. Thus, a net of 107 circuits are removed from rotating outage.

[2] Approximately 382 circuits are involved, of which about 191 also serve at least one other essential customer that is not a small hospital. Thus, a net 191 circuits are removed from rotating outage.

We have previously determined that each utility must maintain at least 40% of its load available for rotating outage to avoid involuntary load shedding and general system collapse. (D.82-06-021, D.01-04-006, D.01-06-085, D.01-09-020.) We continue to apply that criterion here. The evidence shows that including hospitals with fewer than 100 beds in Category C does not jeopardize the 40% limit for any utility. Thus, we retain the inclusion of hospitals with fewer than 100 beds in Category C.

ORA suggests that essential customers in sparsely populated areas, such as small hospitals, should install backup generation, renewable self-generation, or energy conservation measures to cut peak demand by 20% (e.g., weatherization, lighting improvements, energy efficiency appliances). ORA argues that it is not equitable to other `non-essential' ratepayers to exclude a limited subset of non-essential customers from rotating outages simply because they share a circuit with a small hospital. ORA says its suggestions will improve equity. We are not convinced.

We recently clarified that an exemption from rotating outages for a hospital is not dependent upon the status of backup or standby generation. (D.01-04-006, mimeo., page 65.) Nothing suggested by ORA convinces us to revisit this issue now. Further, nothing suggested by ORA convinces us that there should be a different standard for hospitals in rural compared to urban areas.

The fact is that non-essential customers enjoy an exemption from rotating outages when they share a circuit with an essential customer. There is no distinction in this result based on the type of essential customer (e.g., hospital, police station, fire station), or location (e.g., densely or sparsely populated area). To the extent there is an equity effect, PG&E points out that in many, if not most, instances the number of customers on each circuit located in remote areas is less than the number on each circuit in densely populated areas. Therefore, the number of non-essential customers obtaining an exemption from rotating outages by sharing a circuit with an essential customer is likely to be larger in the more densely populated areas, and the equity effect, if any, may be more acute in urban than rural areas. Nothing advanced by ORA convinces us to make a distinction for hospitals based on population density, or size of hospital.

Moreover, respondent utilities are reconfiguring circuits to narrow exempted load to more nearly match exemptions with essential customer status. These projects are being undertaken where cost-effective and reasonable, and may include reconfigurations affecting rural hospitals.¹⁸ (D.01-04-006, mimeo., pages 45 and 65; also Ordering Paragraphs 4, and 5.) Circuit reconfiguration for small hospitals is a better approach to addressing the concerns of non-essential customers enjoying exemptions from rotating outages, increasing the pool of available customers for rotating outages, and equity than is the creation of additional requirements for small hospitals regarding backup generation, renewable self-generation, or energy conservation measures.¹⁹

4.2. Skilled Nursing Facilities

Issue: What is the effect of including skilled nursing facilities on the list of essential customers normally excluded from rotating outages. (D.01-04-006, Ordering Paragraph 13, as renumbered by D.01-04-009.)

4.2.1. Background

By Assigned Commissioner's Ruling (ACR) dated March 23, 2001, SNFs were not included in Category C (hospitals), or otherwise included in the list of essential customers normally excluded from rotating outage. This result was based on the lack of information regarding the effect of maintaining at least 40% of available load for rotating outage. We affirmed this result in April 2001. (D.01-04-006, mimeo., page 65.) Nonetheless, we directed utilities:

"to provide specific information no later than in Phase 2 on the effect of extending this exemption [from rotating outages] to skilled nursing facilities, including the number of circuits and megawatts removed from rotating outages. The evaluation will include an estimate of the resulting effect, if any, on mandatory curtailments, and the 40% criterion. Finally, respondent utilities must also consider circuit reconfigurations in Phase 2 that would narrow exempted load by isolating skilled nursing facilities." (D.01-04-006, mimeo., page 66; Ordering Paragraph 13, as renumbered by D.01-04-009.)

We later established essential customer Category M.²⁰ We received and considered nearly 10,000 applications for Category M, including many from SNFs. We found that we could not include all SNF applicants in Category M, but were able to grant that status to 88 SNFs. (D.01-09-020, mimeo., page 18.)

The Commission's consultant in the Category M process (Exponent) recommended that we give further consideration to investigating the feasibility of exempting all SNFs. We adopted that recommendation, noting we were concerned:

"that the population within SNFs...is among the most vulnerable in our society. Some of these patients would have been in acute care hospitals a few years ago, but are now discharged to SNFs..." (D.01-09-020, mimeo., page 19.)

We stated that we might later be able to include all SNFs in the list of essential customers. (Id.)

4.2.2. Data

Respondent utilities submitted data in compliance with D.01-04-006. The data generally shows that including SNFs in the list of essential customers is feasible.

Respondent utilities report these results using slightly different bases for determining eligible SNFs. PG&E used a list provided by the California Association of Health Facilities (CAHF), while SCE and SDG&E used Standard Industrial Classification Code (SIC) 8051. Utilities urge that the Commission select a single, objective, uniform source for identifying SNFs if the Commission includes SNFs as essential customers. Utilities point out that the California Department of Health Services oversees licensing of SNFs, and propose that the Commission rely on DHS certification for this purpose.

Utilities submitted revised data based on DHS licensed facilities. The data shows that including SNFs in the list of essential customers would have the following effects:

Reduction In System Resources

Available For Rotating Outage By Including SNFs

In The List Of Essential Customers


Line No	Utility	Reduction in Load Available for Rotating Outage (MW) (From %) (To %)			Reduction in Number of Circuits
1	PG&E	1,150	46.4	40.6	130 [1]
2	SCE	648	49	46	63 [2]
3	SDG&E	211	54	49	31 [3]

Note: These results are based on assuming all customers conditionally awarded Category M status (D.01-09-020) submit their Statement of Authenticity and become fully included in Category M.

[1] Approximately 320 circuits are involved, of which about 190 also serve at least one other essential customer. Thus, a net of 130 circuits are removed from rotating outage.

[2] Approximately 303 circuits are involved, of which about 240 also serve at least one other essential customer. Thus, a net of 63 circuits are removed from rotating outage.

[3] Approximately 68 circuits are involved, of which about 37 also serve at least one other essential customer. Thus, a net of 31 circuits are removed from rotating outage.

Utilities state that they each need an additional 60 to 90 days to determine which circuit reconfiguration options, if any, are available.

4.2.3. DHS Certification and Category C

We agree with respondent utilities that a common basis should be used to identify eligible SNFs. Utilities propose reliance on DHS certification. No other party opposes this basis, or offers an alternative. Use of a CAHF list or SICs is not as precise as DHS licensure, since there may be an element of self-identification in the use of SICs or other methods that is removed by the DHS certification and license process. We adopt respondent utilities' proposal to use DHS certification and licensure as the basis by which a SNF may be eligible for essential customer status.

Based on the available data we may expand Category C to include DHS licensed SNFs while maintaining our 40% criterion. Therefore, we include SNFs in Category C. We modify Category C to state: "hospitals and skilled nursing facilities." The 88 SNFs included in Category M are transferred to Category C.

4.2.4. Circuit Reconfiguration Studies

Including SNFs reduces the PG&E load available for rotating outage precariously close to the 40% limit.²¹ While it is acceptable to move close to the 40% limit, we seek to preserve the largest reasonable percentage possible on each utility's system. We do this since each percentage reduction otherwise places the burden of rotating outages on a smaller base of remaining ratepayers. We also want to maintain the largest reasonable percentage to permit essential customer status for other customers as may be needed over time (e.g., additional rapid rail transit systems or portions thereof).

We direct each respondent utility to complete the circuit reconfiguration report on SNFs contemplated in our April 2001 order, and file and serve that report within 60 days. (D.01-04-006, Ordering Paragraph 13, as renumbered by D.01-04-009.) We use the process already adopted in D.01-04-006 for the filing and service of each report, as well as the filing and service of comments, responses or protests. (D.01-04-006, Attachment D.) Further, just as already determined in D.01-04-006, we reaffirm that the Energy Division Director may authorize respondent utilities to implement cost-effective, reasonable circuit reconfiguration projects, including those for SNFs, to isolate essential from non-essential customers up to a cumulative total of $5 million for PG&E, $5 million for SCE, and $1 million for SDG&E.²² (D.01-04-006, Ordering Paragraph 5.)

4.2.5. Other Conditions

To promote equity, ORA recommends that SNFs, just as small hospitals, be required to install backup generation, renewable self-generation, or energy conservation measures to cut peak demand by 20%. We decline to adopt ORA's recommendation here for the same reasons we decline to adopt the recommendation above for small hospitals.

Moreover, regarding conservation measures, we are not convinced that there is any basis to impose a different requirement on SNFs than we do on other customers. That is, we do not require police or fire stations, whether in urban or rural areas, to implement energy conservation measures to maintain eligibility for essential customer status. Similarly, we do not do so for SNFs.

We also foresee difficult administrative issues with ORA's proposal. For example, it would be problematic to find a SNF, police station or fire station to be essential if it meets a 20% conservation standard, but to be non-essential if it only succeeds in reaching 19% conservation. Even if this is reasonable, which we find it is not, ORA fails to propose a basis for measuring the 20%. Thus, we are not convinced by ORA, and decline to burden parties further by requiring implementation proposals and recommendations.

4.2.6. Self-Generation

Finally, SDG&E states that the Commission should reject ORA's recommendation to tie exemption from rotating outages to self-generation. SDG&E argues that either the customer is or is not essential. According to SDG&E, that determination does not depend upon whether the customer installs self-generation.

Essential customer classification is not dependent upon whether or not the customer has self-generation. That is, each customer is or is not essential based on the customer's service to the community as determined by our essential customer categories (e.g., police, fire, prison, national defense, hospitals), or other factors which result in essential customer status (e.g., areas served by networks, transmission level customers, OBMC participants). We remind utilities, however, that they are required to assess the adequacy of an essential customer's backup or standby generation, and consider removing that customer from the essential customer list, with the exception of hospitals. (D.01-04-006, mimeo., pages 65-66; D.01-06-085, mimeo., pages 13-14.)

We clarify that by adding SNFs to Category C, we do not require that utilities consider the adequacy of backup or standby generation for SNFs, just as they need not do so for hospitals. The patient population in SNFs is among the most vulnerable in our society, just as is the population within hospitals. The basis for excluding consideration of backup or standby generation for hospitals was that the applicable regulations of the Office of Statewide Planning and Development regarding minimum backup generation for hospitals do not result in sufficiently safe and reliable electricity to satisfy the Commission's definition of essential uses for hospitals. (D.01-04-006, mimeo., page 65.) Any similar regulations for SNFs are just as likely not to satisfy our expectation of essential uses for SNFs. Thus, we do not require utilities to consider removing a SNF from Category C based on an assessment of the adequacy of the SNF's backup or standby generation.

4.3. Category M

Issue: What procedures, if any, should be adopted to consider continuing the essential customer status for those customers granted Category M status in D.01-09-020 past September 6, 2003.

Issue: What procedures, if any, should be adopted to consider additions to, or subtractions from, the list of Category M customers adopted in D.01-09-020 for the period after September 6, 2003.

Absent a specific order to the contrary, the Category M essential customer status now awarded to 405 customers expires on September 6, 2003. (D.01-09-020, mimeo., page 25, Ordering Paragraph 9; D.01-12-007.) Parties recommend various approaches for the continuation or termination of Category M.

Respondent utilities recommend a self-identification process with submission of evidence on public health and safety, similar to the process used in June 2001. CMTA proposes that existing Category M customers be allowed to re-certify their status for an additional two years (to September 6, 2005) upon a showing that there has been no material change in the nature of the customer's essential status. ORA asserts that Category M status should not be extended beyond September 6, 2003, and recommends that Category M customers be directed to install backup or self-generation by September 6, 2003. In the alternative, ORA suggests that a Category M customer may maintain that status upon completion of building weatherization appropriate for their geographic area, and passing an energy audit or achieving energy conservation of 15% to 20%.

4.3.1. Expiration on September 6, 2003

We decline to continue the award of Category M status beyond September 6, 2003. The status should expire as planned, and no replacement process should be adopted. We base this on the same reasons that applied when we first determined that Category M should expire on September 6, 2003. (D.01-09-020, mimeo., pages 23-25.) Nothing presented in Phase 2 changes our conclusion.

First, the conditions that led the Governor to declare a State of Emergency on January 17, 2001 are not expected to remain indefinitely. Rather, we expect the electricity market to reasonably soon return to one that operates efficiently and equitably without extraordinary measures.

Second, customers change as economic conditions evolve and time passes. The award of Category M status was not intended to be a government benefit that accrues indefinitely to only a select group of individually named customers. The status was intended to address relative risk for some customers during a temporary State of Emergency.

Third, the Category M process was expensive and burdensome on customers, parties and the Commission. The process was reasonable given the State of Emergency, but it is unlikely that a similar level of cost and burden will need to be repeated.

Fourth, we do not want Category M status to forever remove incentives for customers to make health and safety modifications to their operations. It was reasonable in the particularly difficult and troubled recent past to protect public health and safety by excusing some customers from rotating outages. In the long run, however, we want each business to be exposed to the risk it places on the community, and have the incentive to take whatever steps are reasonable to mitigate or eliminate that risk.

Fifth, to the extent Stage 3 events occur in the future, rotating outage notification procedures are in place and we expect that they will improve with experience. Adequate notification will reduce, if not eliminate, the need for the total exemption awarded Category M customers.

Finally, we expect each customer awarded Category M status to not only have the right incentives, but to take the necessary, appropriate and reasonable steps to reduce or eliminate any significant risk to public health and safety when that customer is exposed to an outage. The outage may be from any cause, including weather, accidents, or supply shortages. Steps a customer might take include changing its production process or technology, updating equipment, instituting new safety procedures and measures, or installing self-generation. Reasonable measures, as necessary, should be in place by September 6, 2003.

4.3.2. Backup or Self-Generation

ORA recommends that Category M customers be directed to install backup or self-generation. While we agree with ORA that customers must be prepared for outages, we decline to adopt ORA's proposal.

Each customer should make the necessary evaluations and implement reasonable solutions on its own. Self-generation may or may not be the only, or the best, solution. Part of the customer's assessment may include whether or not the customer faces exposure to liability if the customer fails to take necessary and reasonable precautions that result in harm to individuals and the community upon the occurrence of an electricity outage. We are comfortable letting customers make those decisions.

4.3.3. Energy Efficiency Alternatives

ORA recommends a Category M customer might maintain that status upon completion of building weatherization, and passing an energy audit or achieving energy conservation of 15% to 20%. We do not adopt this approach.

Linking exempt status to implementation of weatherization, audits, and energy conservation measures would fail to comprehensively consider public health and safety, to the extent that remains the driving criterion. Further, implementation of such measures would require adoption of criteria and standards. None are proposed, and we are not inclined to craft our own.

4.3.4. Eliminate Category M

We also remove Category M from the list of essential customers effective September 7, 2003. We previously said that we would not eliminate Category M since use of the category may continue to be necessary at intermittent times. The problem with continuing Category M is that there will be an on-going expectation of its use. We decline to foster that expectation. Further, there will be no procedure in effect for processing applications. Thus, there is no need to continue Category M.

4.3.5. Reminder of Notice

Finally, we remind respondent utilities to notify by August 7, 2003 each customer granted Category M essential customer status that the customer's essential customer status will expire on September 6, 2003. (D.01-09-020, mimeo., page 35.) In addition, that notice should state that there is no procedure for the continuation of Category M status. A draft notice should be provided to the Commission's Public Advisor no later than 30 days before the notice is mailed, and utilities should incorporate changes recommended by the Public Advisor.

4.4. Water and Sewer Utilities

Issue: What additional measures, if any, should the Commission adopt for normally exempting water and sewer utilities from rotating outages based on public health and safety.

For the reasons explained below, we adopt a test of Category H notification and emergency restoration procedures, decline to order installation of backup generation, decline to amend Category H, and direct respondent utilities to address specific matters in subsequent reports.

4.4.1. Background

Water and sewer treatment utilities are essential customers in Category H. (See Attachment B for the list of essential customers.) They may request partial or complete rotating outage exemption based on an emergency. The requested exemption may be before a rotating outage begins or, if during a rotating outage, to seek partial or complete service restoration.

We first reached this result in April 1980 (D.91548, 3 CPUC2d 510). We determined that we should not grant a blanket exemption from rotating outages to all water and sewer utilities. We were persuaded by staff that in many cases automatic exemption would preclude electric utilities from implementing rotating outage plans, since so many circuits would be excluded.²³ (D.92315 (October 8, 1980), 1980 Cal. PUC LEXIS 842.) Failure to successfully implement rotating outage plans could result in automatic under-frequency load shedding, and lead to general system failure.

We clarified, however, that discretion was not left to the utility. Rather, if a water or sewage facility makes a good faith request (i.e., refraining from an exemption request unless absolutely required to ensure the public's health and safety), "we fully expect the utility to grant it." (D.92315, 1980 Cal. PUC LEXIS 842.)

The issue resurfaced in Phase 1. We there declined requests to modify Category H to provide complete exemption from rotating outages for water and sewer utilities, noting that these entities generally have backup generation, or other capacity for operation and storage during power interruption. (D.01-04-006, mimeo., pages 67-69.) We stated we are confident that water and sewer utilities can, and will, communicate clearly with respondent utilities during emergencies. We balanced the competing interests of granting more exemptions against the detrimental effect this has on remaining non-essential customers, and concluded that a blanket exemption should not be given.

Many water companies subsequently applied for Category M essential customer status, based on their individual circumstances. Our consultant, Exponent, ranked these applicants lower relative to other applicants. This lower ranking was based on most of these entities having backup generation or storage facilities, and backflow protection systems, thereby reasonably mitigating danger to public health and safety from rotating outages of moderate duration. We agreed with that ranking. (D.01-09-020, mimeo., page 11.)

Several entities questioned the ranking and, as a result, we directed Water Division to prepare a Report. (D.01-09-020, mimeo., pages 30-31.) Water Division reports that adequate protection systems are in place, but recommends that emergency restoration procedures contemplated by Category H be tested to minimize adverse effects on public health and safety. Water Division also recommends that water and sewer companies be excluded from Category M. Finally, in the instances where some additional protection is needed, Water Division proposes that "water companies with pressurized systems and sewer companies install backup generators on wells with the largest pumping capacity or the lead wells" to ensure system integrity. (Water Division Report, September 28, 2001, page 3.)

Various Phase 2 pleadings support or oppose Water Division's recommendations. LAC initially recommended in its comments and reply comments that (1) electric utilities be required to certify all water companies have been notified of Category H, (2) SCE implement testing of the communication procedures expected in Category H, and (3) 16 specific water agencies with inadequate backup generation or supplies, but who are in areas of high risk for fire in Los Angeles county, be granted blanket exemption from rotating outages. LAC and SCE ("joint parties") continued to consider this issue, and subsequently filed joint supplemental comments. Joint parties agree that LAC's concerns can be met without creating permanent exemption for some water agencies by amending the language of Category H.

4.4.2. Notification and Testing of Category H Procedures

Water Division, LAC, utilities and several parties propose that each respondent utility notify each of its water and sewage treatment customers of Category H, and test the emergency restoration procedures. No party opposes this plan. We adopt this recommendation.

In particular, each respondent utility should notify²⁴ each of its water and sewer customers²⁵ of Category H. Similar to the procedure adopted in other orders, utilities should serve a copy of the draft notice on the Commission's Public Advisor, and incorporate changes recommended by the Public Advisor. (D.01-04-006, Attachment E.) Notification to water and sewer customers should be completed within 45 days of the date of this order. Finally, each respondent utility should file and serve a verified statement certifying that the notice was completed, with a copy of the notice attached to the statement. (Rule 2.4 of the Commission's Rules of Practice and Procedure.) The statement should include any other relevant information necessary to reasonably inform the Commission about completion of notice.

Each respondent utility should also conduct a test of the emergency exemption or restoration procedure permitted in Category H. The test includes not only the utility, but some or all of its water and sewer entity customers, and may potentially include some or all of hundreds of fire departments, districts and agencies. PG&E states that it is not opposed to the testing of service restoration procedures, but believes fire departments need to coordinate with their serving water agencies in such tests. We generally agree, but direct that each utility take the lead responsibility to develop, conduct, and analyze the test, plus report the results to participants and the Commission.

The test may involve mapping hydrants to water suppliers and service accounts, identifying sewer pumping service accounts, linking those service accounts to electricity distribution circuits, correlating those circuits to rotating outage implementation plans, and assessing the feasibility of fire agencies notifying the utility as part of engine dispatch procedures when responding to a fire. The test need not, however, include all water and sewer customers, nor all fire departments, districts and agencies. Rather, utilities should identify a reasonable sample of water and sewer customers, and fire departments, districts or agencies, for the purpose of the test. The utility should take the lead responsibility in designing the test, and accommodate input from entities that will participate in the test.

The test should be conducted within 120 days of the date this order is mailed. Each respondent utility should file and serve a report on the test and its results within 60 days of the date the test is completed. The report should be served not only on the Phase 2 service list, but also on each entity that participates in the test. Except for service on the Commission, each respondent utility may serve a Notice of Availability on the service list, even if the report is less than 75 pages (unless a party has previously informed respondent utility of its desire to receive a complete copy).²⁶

4.4.3. Backup Generation

We decline to adopt Water Division's recommendation to direct water and sewer utilities to install backup generation. As LAC points out, this is not necessarily a viable alternative without further information about (1) cost; (2) agency or utility budgets; (3) economics of this investment, particularly for small entities; (4) methods of financing this investment, particularly for small entities; (5) permitting and installation limitations, if any; and (6) our authority to order entities we do not regulate to make a particular, specific investment.

4.4.4. LAC and SCE Proposed Language

Joint parties state that LAC's concerns can be met without creating permanent exemptions for certain specifically named water agencies by amending the language of Category H to read:

"Water and sewage treatment utilities or firefighting entities may request immediate partial or complete rotating outage exemption from electric utilities in times of emergency identified as requiring their service, such as [fire] fighting fires." (Additions underlined, deletion in brackets.)

We decline to adopt the joint proposal of LAC and SCE.

4.4.4.1. "Firefighting Entities"

Joint parties assert that the first proposed addition (i.e., to add "or firefighting entities") will give firefighting entities standing with the electric utility. With standing, joint parties assert that the entity may directly request partial or complete exemption on behalf of the water agency whose facilities are needed to fight a fire without having to go through the water agency.

This first modification is not necessary. We have already clarified that all authorities with emergency powers have such standing. The item is of sufficient importance that we address it again.

The issue was discussed in the decision creating Category M. (D.01-05-089.) SDG&E there asked that the Commission explicitly recognize a respondent utility's ability to comply with directives of local authorities, such as police or fire, to override a circuit exemption, or order that power be restored during an outage, as needed for public health and safety. We stated our agreement, but clarified that this action must be coordinated with the CAISO, to the extent reasonable and necessary, to prevent widespread system collapse. We concluded that no amendment to the list of essential customers was necessary.

Specifically, we said:

"Respondent utilities should comply with valid orders of responsible police or fire authorities, and other authorities with emergency powers, to exempt a circuit from outage, or order a circuit re-energized, based on public health and safety. To the extent such orders are implemented, however, they must be executed to the extent reasonable and necessary in coordination with, and with the agreement and approval of, the California Independent System Operator (CAISO). The CAISO must be involved as necessary so that such action will not jeopardize a widespread system collapse.

"Respondent utility must coordinate as needed with the CAISO since a local emergency official cannot be expected to know and consider the status of the entire statewide electrical system. When properly coordinated and approved with the CAISO as needed, however, respondent utility should comply with valid orders of responsible local emergency officials.

"...we agree with SDG&E...that respondent utilities may implement a valid order from responsible police, fire, or similar authority with emergency powers, for immediate protection of public health and safety when jeopardy or danger is imminent, to the extent properly coordinated with the CAISO, as needed.

While we make this clarification at SDG&E's request, we decline to modify the list of essential customers. SDG&E does not allege that it lacks the authority to respond to a proper order of responsible local authority with emergency powers, and we are not convinced that respondent utilities lack that authority. To prevent any possible confusion, we clarify that respondent utilities may do so when properly coordinated with the CAISO. We are not convinced, however, that this must be explicitly stated in an amendment to the list of essential customers in the Priority System for Rotating Outages." (D.01-05-089, mimeo., pages 5-7.)

The same reasoning applies to joint parties' first proposed modification. Even if we would consider this modification (which we do not), we would decline to limit standing to firefighting entities. That is, all authorities with emergency powers already have standing to make requests to electric utilities in the furtherance of public health and safety. If we list one, we would need to list all. We are not persuaded that we must complicate the description of Category H by including an exhaustive list.

4.4.4.2. "Immediate"

Joint parties argue that the second proposed addition (i.e., to add "immediate") conveys the urgency with which service must be restored. According to joint parties, firefighting efforts could otherwise be greatly hindered by delay in executing the request. We are not convinced.

Water and sewer utilities, as well as authorities with emergency powers, may request anything with regard to partial or complete rotating outage exemption. The request may be for immediate exemption or restoration. Alternatively, it may be a conditional request (e.g., restoration conditioned upon a downed line first being removed to protect firefighters, police, other personnel, or the public from danger). Category H need not qualify or limit the type of request that may be made. We expect utilities to respond appropriately to all reasonable requests made in good faith.

We clarify that the request must be reasonable and that we expect the utility to grant all reasonable requests. In determining whether a request is reasonable, the utility may need to coordinate with the CAISO. For example, a request from a firefighting entity might be reasonable based on limited information available to that entity, but be unreasonable if the CAISO determines that re-energizing the circuit would result in collapse of the electricity grid throughout the entire state. Similarly, a request from a firefighting entity for immediate restoration may at first appear reasonable, but in fact be unreasonable until the utility has communicated with the water agency to determine that re-energization can be done safely. The utility must balance all necessary public health and safety considerations. We expect the utility to do so, and respond appropriately.

This discussion is not intended to give utilities unreasonable discretion in deciding whether and when to grant a request for rotating outage exemption from a water or sewer utility, or an appropriate authority with emergency powers. Rather, it is to clarify that we fully expect each utility to respond appropriately to all reasonable requests made in good faith. That means to immediately re-energize a circuit, if that is what is reasonable.

4.4.4.3. "Fighting Fires"

Joint parties state that their third proposed modification (i.e., to replace "fire fighting" with "fighting fires") seeks to clarify that dispatching fire resources to a reported fire incident constitutes an emergency justifying an exemption, but a firefighting agency may not request an exemption merely under the guise of its "general firefighting" responsibilities. For example, joint parties state that high fire danger conditions themselves are not the type of identified emergency for which an exemption should be ordinarily granted.

We agree with this distinction, but decline to authorize revised language. Category H applies "in times of emergency...such as fire fighting." The fire fighting example is the action and activity of fire fighting. It is not the generalized condition of a fire department being poised in an emergency mode 24 hours per day to engage in "fighting fires." We are not convinced that the proposed language of "fighting fires" provides any more clarity than the existing language of "fire fighting."

4.4.4.4. Effort of Joint Parties

While we do not adopt joint parties' proposal, we appreciate the effort that they undertook. In particular, LAC states that it devoted substantial time and resources that were exceptional for its size and budget.²⁷ These efforts have served a good purpose. For over 20 years, Category H has contemplated communication during an emergency. The efficiency of that communication depends upon knowledgeable participants making reasonable and timely requests to the right entity, and responsible individuals acting appropriately.

LAC worked with the LAC Fire Department and SCE to identify a Very High Fire Hazard Severity Zone, potentially vulnerable water companies, and methods to address their concerns. LAC and SCE have identified circuits that serve high risk areas, examined how geographic information systems (GIS) data can be shared, and have agreed to a test identifying accounts and circuits. They have also agreed to coordination between the LAC Fire Department and various water agencies to notify SCE when fire engines are dispatched to a fire in a Very High Fire Hazard Area. We applaud their efforts, and are confident that this will permit effective and efficient communication if the Category H procedures must be used.

4.4.4.5. Decline Limited Permanent Exemption

Joint parties' amended language was proposed in place of permanent exemption for 16 water agencies in areas of high fire risk. While we decline to adopt joint parties' proposed rewording of Category H, we are not persuaded to provide permanent exemption for these 16 agencies as an alternative.

Current Category H language reasonably meets the needs expressed by joint parties. Utilities will conduct a test of Category H procedures. We expect joint parties, and other parties as appropriate, to continue to work closely to address any reasonable concerns. Thus, neither revised language nor permanent exemption is needed.

4.4.5. Amount of Time for Service Restoration

Parties raise another concern regarding "immediate." PG&E states that it "uses best efforts to restore service as soon as practical once a request is obtained..." (PG&E Response, January 4, 2002, page 2.) According to PG&E, there is always a certain amount of time that is required before service can be restored, and neither the Commission, parties, customers nor the public should expect the level of response to be "immediate." PG&E says that an individual may be required to travel to the substation to activate a switch and re-energize a circuit if the circuit is not SCADA controlled.²⁸ Thus, even if the request is for immediate restoration, that may not be possible, according to PG&E.

LAC and ACWA reply that, if PG&E cannot provide an "immediate" response upon request, then the Commission should order exempt status for water and sewer agencies on circuits which PG&E cannot immediately restore. We decline to adopt this recommendation.

LAC and ACWA present no information on the number of circuits, megawatts, or percentage of system load that would remain for rotating outage if their recommendation is adopted. We cannot balance the interests of water agencies against the interests of all other customers without further information. For the reasons discussed below, however, we are not inclined to order production of that data.

SDG&E states that if "immediate" means "instantly," then immediate is neither a feasible nor realistic expectation and, even if possible, it would not necessarily be safe (e.g., if there is a downed line that must first be removed). We agree. SDG&E asserts that it begins immediate processing of a request to allow implementation as soon as possible. This is reasonable.

Immediate processing is also what we understand is done by SCE when joint parties state:

"SCE and LAC are jointly developing an expedited notification process by which LAC can contact SCE at the time fire resources are dispatched, so that SCE can begin immediately processing the exemption request at the earliest opportunity after the fire emergency is identified." (Joint Supplemental Comments, December 21, 2001, page 4; emphasis added.)

This is also what we understand PG&E does when it undertakes "best efforts to restore service as soon as practical."

LAC further argues that if "PG&E cannot provide rapid restoration..." the Commission should order exempt status for the involved circuits. (LAC Reply, January 9, 2002, page 3; emphasis added.) LAC does not define "rapid." We are persuaded that PG&E's "best efforts" are consistent with "rapid."

We conclude that "immediate processing" and "best efforts" to restore service as soon as it is safe and practical are reasonable expectations in implementing an exemption or restoration request under Category H. The communication process must be efficient, and responsible persons must apply reasonable judgment during an emergency. LAC does not convince us that PG&E's description of its response requires that circuits on which water agencies are served be permanently exempted if they are manually, not SCADA, controlled.

Nonetheless, to promote a more complete understanding we direct each utility to address this matter in its report on the test of its Category H procedures. Specifically, each utility should discuss its "immediate processing," or "best efforts." The report should also address the amount of time before an employee can be at the site of a manually de-energized circuit if a restoration order is given.

¹⁸ The Energy Division Director has authorized the following circuit reconfiguration projects: 223 circuits representing 905 MW for PG&E, 169 circuits representing 575 MW for SCE, and 30 circuits representing 171 MW for SDG&E. This totals 422 circuits representing 1,651 MW. ¹⁹ With the exception of hospitals (essential customer Category C) and SNFs (which we address below), utilities must evaluate the adequacy of standby generating equipment for all essential use customers, and consider removing them from the list of essential customers. (D.82-06-021 (June 2, 1982), Findings of Fact 2 and 3, Cal. PUC LEXIS 537; D.01-04-006, mimeo., page 65.) ²⁰ Category M provides an opportunity for an individual customer to be classified as an essential customer (i.e., normally excluded from rotating outage). To qualify, the customer must show that inclusion of the customer in a rotating outage presents unacceptable jeopardy, or imminent danger, to public health and safety. The jeopardy or danger must be beyond economic harm or inconvenience to the customer. Rather, it must be jeopardy or danger to wider public health and safety. (D.01-05-089, mimeo., page 3.) ²¹ The 40.6% result for PG&E may be closer to about 43%, however. This is because PG&E has already been authorized by the Energy Division Director to complete circuit reconfiguration projects on 223 circuits totaling 905 MW, and not all of those reconfigurations are reflected in the 40.6% result. ²² This reaffirms but does not increase existing dollar limits. ²³ This is still the case today. SCE reports, for example, that it has nearly 9,000 water and wastewater service accounts, of which approximately 4,300 are subject to rotating outages, representing 7,000 MW, or 31% of SCE's load. ²⁴ In many, if not all, instances this is actually re-notification. For example, SDG&E points out that it has formal procedures in place for water utilities to use when a Category H exemption is required, and has already informed water utilities of these procedures. ²⁵ This includes public and privately owned utilities, agencies, districts, and any other water or sewer entity that is a customer of respondent utility. ²⁶ Rule 2.3 of the Commission's Rules of Practice and Procedure. ²⁷ LAC represents a large body of interests. According to LAC, the LAC Fire Department protects an area of 2,278 square miles with a population of 3.8 million people, of which a total of 998 square miles meets the criteria of Very High Fire Hazard Severity Zone, or Fire Zone 4. ²⁸ SCADA stands for Supervisory Control and Data Acquisition (SCADA). SCADA-controlled circuit switching devices are remotely controlled.