III. Statewide Demand Response Vision and Goals

Early on during WG1 meetings, the Principals endorsed the idea of developing a long-term "vision" and set of goals for demand response to help guide the efforts of participants in this proceeding. The aim was not to prejudge issues but instead to provide a framework and set of goals within the context of which activities in this proceeding would be set. Interagency staff supporting WG1 set out to develop this vision. An initial presentation was made during the WG1 meeting of September 16, 2002¹² with follow-up discussions during the October 15 and December 4 WG1 meetings. Revisions were made to an evolving vision statement after each WG1 meeting, and parties were asked to comment on each version in response to rulings following each WG1 meeting. Thus, there were three rounds of comment opportunities on the vision statement.¹³ Numerous changes were made to the original vision statement as a result of those comments. The most current version of the vision statement is attached to this decision as Attachment A.

The vision statement provides a definition and simple statement of a goal, followed by objectives (reliability, lower power costs, and environmental protection), goals and principles (customer service, optionality, technology issues, IOU issues, coordination) and a timeframe (phases for proof-of-concept, phased implementation for large customers, and residential implementation).

While we do not seek formal Commission adoption of the entire vision statement in this decision, since we view it as an evolving document and work-in-progress at all times, there are several aspects of the vision that we do believe require explicit Commission endorsement in order to help direct the activities of IOUs and other parties.

In particular, since the vision statement sets a goal of meeting IOU capacity needs of five percent of system peak demand by 2007 through demand response,¹⁴ we believe it is important to set interim megawatt (MW) targets in pursuit of that goal. We also wish to make explicit the linkage between these targets and the utilities' procurement-related obligations to be included in their procurement plans to be filed in R.01-10-024.

In order to facilitate the setting of concrete goals for demand response, during the February 7, 2003 meeting of WG1, interagency staff presented a set of proposed targets. These represent roughly an increase in 1% of demand response achieved between 2003 and 2007, and are summarized in the table below.

Table 1. Demand response goals

Year	PG&E	Edison	SDG&E
2003	150 MW	150 MW	30 MW
2004	400 MW	400 MW	80 MW
2005	3% of the annual system peak demand
2006	4% of the annual system peak demand
2007	5% of the annual system peak demand

In their verbal comments at the February 7 WG1 meeting, the utilities responded that these targets could be a stretch, but are achievable.¹⁵ Interagency staff further recommended that the utilities be required to include these targets in their procurement plans to be filed in R.01-10-024. To the extent that this decision is adopted after those plans are filed, the utilities should supplement or augment their filings to reflect this requirement. In particular, each utility should include the numeric targets given in the table above, along with documentation of:

· The amount of demand response (price-triggered) to be achieved by July 1 of each calendar year

· Which programs and/or tariffs the utility will rely upon to achieve the targets

· A contingency plan for covering capacity needs should the utility fall short of meeting the demand response goals

This means that the utilities should not contract for the equivalent amounts of generation resources and should instead rely upon demand response resources to serve load. Utilities should dispatch the tariffs and programs when they are cost-effective relative to the marginal generation costs avoidable through demand response as the utilities make short-run commitments. To the extent that the actual reliable demand response resources fall short of the goals, the utilities should be allowed and able to supplement their short-term purchases.

We expect that during the early years, most of the demand response goals will be met by programs and tariffs for large customers, such as those we authorize in the following sections of this decision. Based on the outcome of the pilot for small customers we authorized in D.03-03-036, the utilities should eventually be able to meet more of their goals reliably through programs and tariffs for smaller customers, including air-conditioner cycling programs which we will address in phase 2 of this proceeding.

Thus, we explicitly link the tariffs and programs being developed on an ongoing basis in this proceeding with procurement planning in R.01-10-024. While in R.01-10-024 utilities will estimate their resource needs and how those needs will be met from which type of resource, in this proceeding we will continue to focus our attention on how to meet those needs through various programmatic and tariff approaches. In this early stage, we will authorize specific budget expenditures for demand response programs in this proceeding (and in this decision).