8. Modifications to Voluntary Critical Peak Pricing Tariffs

Because we do not adopt a new default critical peak pricing tariff, we make modifications to the existing voluntary CPP tariffs for PG&E (E-CPP), SCE (GS2-TOU-CPP, TOU8-CPP), and SDG&E (EECC-CPP). Under the existing rates, PG&E and SCE participants are charged on-peak energy rates that are approximately five times higher than what they would pay on their otherwise applicable tariff. SDG&E customer have a differential that is 10 times higher. In return, PG&E and SDG&E participants pay lower on-peak and partial-peak rates for the remainder of the summer. SCE customers pay lower on-peak and partial-peak rates for the remainder of the year. Critical peak rates are in effect a maximum of 12 times or `events' during the summer. Currently, a CPP event is triggered when the utility forecasts high market prices, system constraints or high temperatures. The customer is notified at 5:00 p.m. when the next day is a CPP event. In 2004, the utilities showed 26 MW enrolled. With the changes that they proposed in their 2005 program plans in R.02-06-001, they expected to enroll an additional 21 MW, bringing the total MW enrolled to 47.

The modifications we consider today were proposed by the utilities in either their 2005 program plan filings in R.02-06-001 (October 15, 2004) or in these applications. As a general matter, we approve most of the changes proposed and in some cases direct that all three utilities implement the change, rather than just the utility that proposed it. We also note that in D.05-03-022 (SCE Phase 2) the Commission approved an optional CPP rate (CPP-GCCD) for SCE customers 500 kW and above. That tariff will remain available without change, but the modifications we discuss below will apply to the optional SCE rate offered to customers 200 kW and above.⁴³

8.1 Eligibility Changes

SDG&E proposes that all customers with an interval meter be eligible to participate in the voluntary CPP. SDG&E proposes to promote CPP to small and medium-size business customers as long as they already have an interval meter installed. Given that D.01-05-032 authorized SDG&E to install interval meters for customers 100 kW and above, it is prudent to expand eligibility for the voluntary CPP tariff to all customers with metering technology that allows their participation. Therefore, we approve SDG&E's request to expand the eligible participation in its voluntary CPP program.

8.2 Notification Changes

PG&E proposes that the notification time be adjusted from 5:00 pm to 3:00 p.m. This modification would allow customers two additional hours to modify their operation for the next day and we approve this change for all three utilities.

In 2004, SCE was authorized to provide customers with a two-day notification period, on a trial basis. SCE states that temperatures fluctuate significantly within a two-day timeframe, thus a CPP event could be called that may not be needed. SCE believes going back to a one-day notification is for the better. We approve this modification.

8.3 Trigger Changes

SDG&E proposes to modify the trigger conditions by lowering the weather forecast to 84 degrees but requiring a specific SDG&E system condition of 3,620 MWs to also occur before an event is triggered. SDG&E also would trigger the program if there is a grid operations emergency. SDG&E would eliminate the market price trigger. SDG&E claims that combining the weather forecast and system conditions into a single trigger is a more accurate trigger for the program than the weather forecast alone. This is the same trigger SDG&E recommended for its proposed default tariff. Several parties commented approvingly on combining system conditions and load to establish a trigger for an event. We agree that this change is reasonable and adopt it for SDG&E. All of SDG&E's proposed changes to its voluntary CPP rates are approved.

PG&E also recommends more ability to adjust the temperature trigger, specifically to be able to move from a monthly to bi-monthly adjustment so that the program is called up to its maximum of 12 times each season. Currently PG&E adjusts the temperature trigger downward by 2 degrees at the beginning of each month if the program is not being triggered due to cooler weather. Because this program remains voluntary, we believe that it is appropriate to call it as close to the 12 event maximum as possible, in order to provide additional research and exposure to the program. Therefore, we will approve this change for all three utilities, so that they may modify the temperature trigger on a bi-monthly basis if needed. PG&E also proposes a technical adjustment to its algorithm for calculating the average temperature for Zone 2. We adopt the proposed change or PG&E. PG&E's proposed changes to its temperature trigger and algorithm are approved.

SCE proposes that the program be allowed to be triggered for reliability purposes, such as an ISO Alert or Warning. It is not clear what SCE is requesting given that the current program is triggered by ISO special alerts (among other things); therefore we do not make any additional change for SCE's trigger as a result of this proposal.

Under the current tariff, test events are allowed but the number of test events is not specified. PG&E and SCE propose to specify that four test events be allowed for evaluation purposes. We will approve this request for all three utilities and allow the utilities to determine when they want to trigger a test event. For example, PG&E plans to trigger a test event if temperatures are within five degrees of the trigger temperature. SCE would trigger a test event when it appears likely that no event may be called during a month. Test events should count against the event call limits.

8.4 Bill Protection Changes

All three utilities propose to extend the existing bill protection program for new program participants. PG&E also proposes to maintain the bill protection for existing participants beyond the current 14-month term. SCE would shorten the term of the bill protection to 12 months, from 14 months. We will not extend bill protection for existing customers beyond the currently authorized 14-month term. The rationale behind the protection is to allow customers additional exposure to a more dynamic tariff without risk, while they learned whether or not the tariff would work for their operations. After the initial protection period, the customer should decide whether it is able to work with the rate or not, and make a decision whether to remain on the rate or depart. The only advantage we see to PG&E's suggestion that bill protection be allowed indefinitely is to expand its program participation numbers without actually accomplishing any load reduction potential, an outcome we do not approve of. We do agree with SCE that the bill protection period should be shortened to 12 months and continued for new customers. Given the low levels of participation in this program in prior years, we believe that continuing a limited term period of bill protection is warranted to provide that additional level of comfort as customers explore their demand responsive capabilities. PG&E and SCE also recommended that customers be allowed to delay the 12-month bill protection period to allow customers to install technology or make operational changes to help them with their response. We do not see why there would be any advantage to a customer to go on the voluntary rate and pay the tariffed rates without protection and then begin the bill protection period after installing load management technology or making operational changes. In theory, it would be before those changes were made that bill protection was most useful to the customer, not after. Therefore, we do not adopt this change at this time.

8.5 Pricing Changes

SCE proposes to increase the CPP rate differentials so that customers can get higher savings. SCE would increase the partial peak rate under the CPP to $1.29/kWh (from a range of $0.19 - $0.23 per kWh) and increase the peak rate under the CPP to $1.75/kWh (from a range of $0.55 - $0.64 per kWh). Although the increased rate differential might provide additional bill reduction possibilities for customers whose load shapes make them structural winners under the tariff, we are concerned that SCE's customer account representatives are unlikely to direct customers on to this rate if it was apparent that the customer's load shape would require them to reduce load or be hit with the $1.75/kWh rate. SCE is correct that increasing the discounts for the tariff will attract more customers to it, but only if their load shapes are favorable, which will not really assist with demand response capability. Given that we are continuing with a voluntary tariff as this time, we prefer to encourage customers to enroll who are willing to explore seriously their demand reduction opportunities, rather than awarding structural winners with lower bills. Retaining the lower differential under SCE's current rate is appropriate.

8.6 Miscellaneous Changes

SDG&E proposes that the customer's maximum demand on CPP days be disregarded for purposes of determining the customer's monthly demand charge, as long as the customer's maximum demand occurs during non-event hours. SDG&E states that customers can be penalized for responding during a CPP event when they ramp up their operations after the event is over. Certain types of customers could be hit with a much higher demand charge when they respond than would have been assessed if they were not on the rate because demand charges are based on the customer's maximum demand for the month. In particular, this appears to be case for customers with large refrigeration or air conditioning load whose ramp up efforts after an event, even if staggered, create a higher than normal non-coincident peak. SDG&E argues that customers will shy away from CPP participation if there is the potential to incur additional demand charges when they increase their load back to normal capacity. SDG&E's proposal is a logical response to a potential barrier to participation and we approve it for all three utilities.