3. Discussion

We grant the emergency petition for modification. As a result, we authorize respondent utilities to withdraw their VDRP tariffs. Respondent utilities should notify VDRP participants as soon as possible that VDRP will be withdrawn, and invite their participation in the replacement DBP.

As described by petitioners, DBP will offer day ahead incentives to bundled customers for reducing energy consumption and demand during high net short periods.¹ This program will be available five days a week, during non-holiday weekdays. The need to employ DBP will be determined by ISO and DWR. Eligible participants may submit bids, which will be aggregated by respondent utilities. ISO, however, is not obligated to accept bids if the price is not attractive to DWR and ISO compared to purchases in the market, or if the number of blocks exceeds load requirements.

Operational features of the program are contained in Attachment A. Pursuant to EO D-39-01 and the Governor's June 25, 2001 letter, program costs will be financed by DWR.

We make four changes to the operational features recommended by petitioners. First, petitioners propose price tiers in cents per kW. (Emergency Petition, page 4, "The Offer," Item 4.) Respondent utilities list prices in their draft tariffs as cents per kWh. We understand the intent is cents per kWh, and we make that change. (See Attachment A, Item 2.6.1.4.)

Second, petitioners propose: "UDCs [utility distribution companies] will distribute incentive amounts due to individual participants to the extent reimbursed concurrently by the DWR." (Emergency Petition, page 5, "DBP Performance Verification and Payment," Item 2.) This provision gives customers inadequate assurance of when payment will be made. The draft tariff of at least one respondent utility provides that the incentive payment will be made within 90 days of the DBP event. (SCE June 28, 2001 Draft Tariff, Sheet 1, "Rates.") Further, we do not think it reasonable to make distribution of incentive amounts to participants contingent upon the timing of payment to respondent utilities by DWR. As a result, tariffs filed in conformance with this order shall specify that each participating customer's bill will be credited with DBP inventive payments within 90 days of the DBP event, and payment to participating customers shall not be contingent upon payment from DWR. (See Attachment A, Item 2.6.3.2.)

Third, petitioners do not address payment if the DBP event is cancelled part way through a four-hour time block. We think payment should be made for actual performance even if the event is cancelled during the four-hour block. Tariffs filed in conformance with this order shall include this provision. (See Attachment A, Item 2.6.3.8.)

Fourth, petitioners propose that participants may not be enrolled in the ISO's Demand Relief Program (DRP). (Emergency Petition, page 6, "Participation Requirements," Item 3.) We apply this same restriction to the ISO's Participating Load Program, also known as the Ancillary Services Load Program. (D.01-04-006, mimeo., page 42.) We do this for the same reasons stated in D.01-04-006. That is, there is no net benefit to California to have similar programs compete for subscribers. (D.01-04-006, mimeo., page 41.) Tariffs filed in conformance with this order shall include this restriction. (See Attachment A, Item 2.6.4.3.)

ISO responds to the petition stating that petitioners fail to provide a framework for communication by petitioners to ISO and the California Energy Resources Scheduling (CERS) Division of DWR. That is, DBP participants must submit bids to petitioners by 1:00 p.m., and DWR must accept or reject bids by 4:00 p.m. ISO suggests a 2:00 p.m. deadline for petitioners to submit all bids, thereby allowing CERS two hours to determine which bids to accept. Further, ISO states its willingness to continue working with CERS and petitioners to implement DBP.

We agree that a deadline for respondent utilities to aggregate and submit bids to ISO and CERS is reasonable. The deadline, however, need not be stated in each tariff. Rather, we are confident that respondent utilities, ISO and CERS will agree on an acceptable and reasonable time limit. Allowing these parties to determine their own timeframe permits flexibility, and an increased facility to quickly respond to changing conditions, not otherwise available if the deadline is fixed by tariff. Any party may bring this issue back to the Commission if it becomes necessary or desirable for the Commission to establish the deadline.

PU Consultants responds to the petition stating that more time is needed to fully consider all aspects of the DBP, its interrelationship with other programs, and its costs. We do not disagree that more time would be desirable. Time is of the essence, however. We allowed parties a limited, but reasonable, amount of time to file and serve responses, which we consider in our adoption of the program on an accelerated, but reasonable, schedule. We may consider modifications to the program in Phase II.

PU Consultants also states that honoring the commitment to ISO DRP participants makes sense, and may make DBP unnecessary. We are not convinced. The ISO DRP is a program beyond the scope of our authority. We cannot direct or control whether or not that program is implemented or effective. The record here does not persuade us that the ISO DRP conflicts with the DBP. Moreover, the record does not convince us that we should deny the petition for modification in favor of supporting the ISO's DRP. In fact, PU Consultants does not recommend this result. In its response to the petition, ISO does not ask that we deny the petition, or take any action with respect to DBP as it relates to ISO's DRP. We are not persuaded by PU Consultants to do otherwise.

In response to a request from the Administrative Law Judge that parties consider and comment on the issue, ORA proposes that the Commission reduce the total program cost cap adopted in D.01-04-006. In reply, respondent utilities assert that retaining the present cost cap does not disadvantage ratepayers. We agree with respondent utilities, and retain current MW and cost limits.

The DBP replaces the VDRP. As a result, and just as respondent utilities say, the MWs and costs of the DBP can be included within the existing annual MW and program cost limits specified in D.01-04-006. Those limits provide necessary and reasonable ratepayer protections, with DBP MWs and costs included toward the total MWs and costs authorized for each utility. (D.01-04-006, Ordering Paragraph 16, as renumbered by D.01-04-009.)

Separate accounting is required of each program, including VDRP, and now DBP. (D.01-04-006, Ordering Paragraph 15, as renumbered by D.01-04-009.) The accounting must separately include revenues, and, in this case, include the revenues collected from DWR. (Id.) The separate accounting will ensure that DBP costs and revenues are properly tracked, and not assessed against ratepayers more than once (e.g., once through the mechanism to recovery costs incurred by DWR, and again through recovery of memorandum account balances).

Respondent utilities filed and served draft tariffs on June 28, 2001. The speed with which this was accomplished resulted in some inconsistent language with the program described and adopted in Attachment A, and among utilities. Therefore, we direct each respondent utility to work with Energy Division to prepare final tariff language that is consistent with the orders herein, and reasonably consistent among utilities.