2. Interruptible Tariffs Background

2.1 Description of Utility Programs

PG&E, SCE and SDG&E have operated interruptible programs since the mid-1980's. These programs generally operate by paying customers to reduce their electricity use during times when demand is high. Customers willing to interrupt their use, or be interrupted by the utility, are compensated for participation through fixed payments (i.e., dollars per month), a discount off their electricity rate, or on a pay-per-event basis.

Interruptible programs are not inexpensive, however, and in some cases can cost the same or more than the prices currently charged for energy in today's dysfunctional wholesale market.¹ For example, a customer on PG&E's interruptible program, even if curtailed for the maximum limit of 100 hours, receives $0.84/kWh. If curtailed for only 10 hours, the price is $8.40/kWh. A customer on SCE's system curtailed for the program limit of 150 hours would receive between $0.50/kWh and $0.80 per kWh, with higher prices for less hours of interruption. Current interruptible programs cost about $220 million per year for about 2,200 megawatts (MW) of available interruptible load.

Respondent utilities currently operate three types of interruptible programs: traditional, air conditioner cycling, and demand responsive.

2.1.1 Traditional

Traditional interruptible tariffs are targeted toward industrial and large commercial customers. Traditional programs require that the customer have a meter that records usage over time (to verify compliance), advanced telecommunications equipment (to notify of interruptions), and large loads (to be cost-effective).

Participating customers receive a discount off of their electricity rates of about 15%. In exchange, they agree to interrupt service 80 to 150 hours per year (depending upon the serving utility). Customers have 30 minutes to reduce load once notified. Customers who fail to comply are subject to significant penalties, thereby providing an incentive so that a successful program permits utilities and the California Independent System Operation (ISO) to maintain system reliability and minimize rolling blackouts.²

SDG&E's program differs slightly from that of PG&E and SCE by providing discounts for rate periods when interruptions are not called, and setting higher rates when interruptions are called. Further, SDG&E's Schedule RTP-2 provides participants with 24-hours notice before an interruption is to take effect.

Table 1 shows the amount of traditional interruptible load during Summer 2000 for respondent utilities and the ISO, including cost, penalties, and program limits.

TABLE 1

Summer 2000 Interruptible Load in Traditional Tariffs

ENTITY	INTERRUPTIBLE LOAD (MW) [1]	AVERAGE COST PER KW	PENALTY PER KWH	LIMITS
PG&E	500	$84	$4.20 to $8.40	30 events 100 hours
SCE	1,800	$86 to $118	$7.00	25 events 150 hours
SDG&E	40	$73	$1.76	80 hours
ISO	63	$124	$0	120 hours
Total	2403

[1] Approximate available interruptible load at peak.

Source: Energy Division Report, page 24.

2.1.2 Air Conditioner Cycling

SCE is the only investor-owned utility to offer an air conditioner cycling program. Under its program, the air conditioner unit is connected to the utility by radio. The utility transmits a radio signal to the customer's air conditioner when demand is high. The signal either turns the unit off for a specific amount of time, or cycles the air conditioner on and off over time (e.g., 10 minutes on and 20 minutes off).

The customer receives a rate discount for participating in the program. SCE's program is limited to 15 interruptions during the summer, with each interruption no more than 6 hours. SCE has approximately 282 MW of load subscribed to this program (245 MW residential, 37 MW commercial).

SCE also offers an agricultural and pumping program which functions similarly to SCE's air conditioner program. SCE has approximately 46 MW of load enrolled in this program.

2.1.3 Demand Responsive Programs

These programs pay customers per interruption event rather than by rate discount. Participating customers are notified in advance when prices are expected to exceed specific levels. Customers may interrupt at least 20% of their load from a baseline set by the previous day's usage.

2.2 Experience

PG&E required its customers to join its traditional program for a minimum of 3 years, after which the commitment became year-to-year. Relatively abundant supply resulted in the Commission limiting PG&E's programs to only new customers beginning in 1993. That is, only new customers locating in the service area were allowed to enroll.

SCE required its customers to give 5-years notice before leaving its traditional program. The Commission limited SCE's program to only new customers beginning in 1996. SDG&E only required its customers to enroll in its program for one year at a time.

In 1998, with the start of electric restructuring, the Commission relaxed the 5-year notice requirement, and allowed both PG&E and SCE program participants to leave the programs during an annual "opt-out" period in November of each year. In October 2000, the Commission temporarily suspended SCE's opt-out provision given concerns over limited supplies. (D.00-10-066.)

At their request, we authorized both PG&E and SCE to reopen their programs for Summer 2000, with limited conditions. SCE reopened its program, and subscribed an additional 135 MW. PG&E declined to accept the conditions, however, and did not reopen its program. Further, about 124 MW opted-out of PG&E's program in November 2000. Table 2 summarizes available interruptible load in traditional programs as of January 1, 2001.

TABLE 2

JANUARY 1, 2001 INTERUPTIBLE LOAD

UTILITY	INTERRUPTIBLE LOAD (MW)
PG&E	383
SCE	1,828
SDG&E	79
Total	2290

Source: Energy Division Report, page 31.

Energy shortages resulted in extensive use of the traditional interruptible programs in January 2001, thereby successfully avoiding many rolling blackouts. As a result, however, PG&E has nearly exhausted its 383 MW program for 2001, and SCE has used about half of its program.

2.3 ISO Interruptible Programs

The ISO offered two programs in 2000. The first is the ISO's Demand Relief Program (DRP). DRP is similar to the utilities' traditional interruptible programs, and compensates participants with both a flat monthly commitment fee, and a price for each kWh reduced. It is designed to attract new load not participating in any other program. Participants received an average payment of $124.00/kW and $2.50/kWh.

The second program is the ISO's Ancillary Services Load Program (ASLP). ASLP allows participants to bid their interruptible load into a market that may result in participants reducing load if operating reserves fall. The Commission prohibits participants of utility programs from also participating in the ISO's ASLP.

² The California ISO operates most of the state's electricity transmission system. The ISO is responsible for monitoring the state's generation operating reserve, and notifying market participants and state agencies when an emergency is likely, or is called.