8. Assignment of Proceeding
Michael R. Peevey is the assigned Commissioner and Timothy J. Sullivan is the assigned ALJ in this proceeding.
1. Resolution ALJ 176-3258 categorized this proceeding as ratesetting.
2. In the current SDP, SCE curtails energy usage during periods designated as emergencies by the CAISO. The SDP can be invoked between June 1 and September 30. Currently, there are two program options available: a base program, in which curtailments are limited to 15 events per summer, and an enhanced program, in which there is no limit to the number of curtailments in a summer. All curtailments are limited to six hours per day.
3. In the current SDP, participants have three options for load control - 100% cycling (or full interruption of the air conditioner operation); 67% cycling (the air conditioner operates one-third of the time during the event) or 50% cycling (the air condition operates half the time during the event). The load control switch is under SCE's direct load control.
4. In the current SDP, in return for participating in its programs, customers receive an annual payment. For those in the enhanced, 100% cycling option, the current payment is $198 if the customer has a 4.5 ton central air conditioning unit. The exact customer credit varies with the size of the air conditioning unit. SCE applies to the participants' summer bill statements as a daily credit.
5. Currently, 73% of the program participants have chosen to maximize the incentives that they receive by choosing the enhanced program and electing 100% cycling.
6. The current program interrupts service rarely. The SDP program had two service territory disruptions in 2010, none in 2009, 2008, 2007 or 2006, but three in 2005.
7. Currently, 330,000 residential customers participate in SCE's SDP.
8. In the revised SDP proposed by SCE, a service interruption can be called at any time throughout the year, but with a maximum of 90 event-hours during a calendar year (the new program would not be just for the summer). There would be a single program for customers to select (unlike today where customers can choose an "enhanced" or "base" plan), with specific options within the program. During the course of a day, there could be multiple events, but the total interruptions in a single day will be capped at six hours.
9. In the revised SDP proposed by SCE, the customer would have a choice between a switch that gives utility control over the air conditioner (the case today) or the choice of a switch with an override capability that would allow customers who press a button to opt-out of a particular event. Under the proposed SDP, a customer who elects the opt-out plan could opt out of five events per year. Customers who choose the switch with the override button will receive fewer benefits.
10. The revised SDP proposed by SCE would have two cycling options - 50% cycling, or 100% (total shutdown) - instead of the three options in the current plan.
11. In the revised SDP proposed by SCE, the size of the incentive payments to customers would depend on the cooling capacity of their air conditioner (i.e. the size of the air conditioner), the cycling strategy, and the customer's choice of an override switch. For those with a 4.5 ton air conditioner who elect 100% cycling with no override, the incentive plan would provide a payment of $198.
12. In the revised SDP proposed by SCE, SCE plans to submit bids into the CAISO market on days where the price of energy will be high. If the price bid by SCE is reached, the CAISO will call on SCE's DR program to reduce demand, and SCE will interrupt electric service to air conditioners.
13. In the revised SDP proposed by SCE, instead of interrupting service only in emergency situations - which have occurred only five times in the last six years on a system-wide basis - a goal of this new program would be to avoid the cost of buying high-priced energy in periods of high demand. As a consequence, the program managers expect to interrupt air conditioning service several times each year.
14. The revised SDP proposed by SCE will change the SDP from one in which customers had little expectation of service disruption to one in which customers will expect service disruptions and will experience several a year.
15. The proposed changes to the SDP listed in Findings of Fact 12 through 18 are reasonable because the changes maintain incentive at the levels that customers currently receive as service curtailments become more common, because they enable SCE to use the SDP as a price-sensitive DR resource, and because they eliminate the need for the CAISO to purchase additional RA functionality to avoid emergency conditions.
16. The proposed changes to the SDP listed in Findings of Fact 12 through 18 create a DR resource to manage grid loads and energy costs via service curtailments throughout the year.
17. The changes to the terms of the SDP are just and reasonable because they result in a program that provides benefits to those who participate, result in a DR resource of use to California, and result in benefits to all ratepayers, including those who do not participate in the program.
18. The changes to the terms of the SDP result in a revised service that enables SCE to first meet it unmet resource need through a demand reduction resource that is cost effective, reliable and feasible.
19. The changes to the terms of the SDP maintain the current scale of this program because the new terms maintain incentives to program participants at current levels.
20. The proposed changes to the SDP - the deployment of a switch with an override button and new marketing and educational activities - will add $8,298,160 in incremental costs for 2009-2011 and require $18,301,160 to extend the program for the year 2012.
21. SCE, in assessing the costs and benefits of the revised SDP, followed the guidance and methodology provided in an August 27, 2010 ruling in R.07-01-041. The methodology demonstrated that the TRC benefit-to-cost ratio of the revised SDP is 1.02.
22. Because the revised SDP maintains benefits in excess of costs, the incremental costs of $8,298,160 for 2009-2011, and $18,301,160 for the year 2012 are reasonable.
23. Since Pub. Util. Code § 454.5(b)(9)(C) creates a preference for DR resources, it is reasonable to approve a DR program when benefits exceed costs.
24. It is fair and reasonable that those customers who permit the disruption of their service in order to reduce peak demands should receive the bulk of the benefits from their action.
25. A major element of the costs of the revised SDP is incentive payment to each program participant.
26. A DR program that seeks to maximize the savings distributed will necessarily have a benefit-to-cost ratio close to 1.
27. If the costs and benefits realized by the SDP fail to follow those forecast, it is possible to alter incentive payments in ways that produce that benefits exceed costs. This enables the Commission to ensure that ratepayers who do not participate in SDP do not bear costs for those who do participate.
28. It is reasonable for SCE to implement the revisions to its SDP as soon as practical.
29. It is prudent to require that SCE file in the fourth quarter of 2012 updated information concerning its SDP based on its experience in the summer of 2012.
30. The changes to the SDP proposed by SCE are reasonable. SCE has demonstrated that the incremental increases in revenue requirement and resulting charges are just and reasonable. SCE has shown that its changes in rates and program terms and conditions are justified.
1. Decision 10-06-034 adopted a settlement that called for SCE to move its air conditioning SDP from a program that was triggered only in emergencies to one that was bid into the CAISO's market redesign and technical update system for dispatching this resource like other price-responsive DR programs.
2. On July 26, 2010, SCE submitted a filing that demonstrates that SCE has complied with Rules 3.2(b) and 3.2(c), which require that any applicant for an increase in rates provide notification to certain public agencies and to the general public via a notice in a "newspaper of general circulation."
3. On August 13, 2010, SCE submitted a filing that demonstrated compliance with Rule 3.2(d), which requires that applicants for an increase in rates provide notification to their customers through either a direct mailing or a bill insert.
4. The changes to the SDP proposed by SCE enhance and maintain a demand response resource as envisioned in Pub. Util. Code § 454.5(b)(9)(C).
5. Requiring the SDP to meet a benefit-to-cost hurdle much greater than 1.0 is not consistent with Pub. Util. Code § 454.5(b)(9)(C), which seeks to maximize the use of demand side resources.
6. The changes to the SDP requested by SCE are consistent with the Public Utilities Code and prior decisions of this Commission.
7. The changes to the SDP set forth in the order below should be adopted.
IT IS ORDERED that:
1. The Southern California Edison Company (SCE) is authorized to revise its Summer Discount Plan (SDP) as proposed in this application. Specifically, the SCE is authorized to offer the SDP for residential customers without an override option and with an override option that permits the customer to override up to five curtailment events.
(a) The program without override will be available with either 50% cycling or with full curtailment. Customers without the override feature choosing the 50% cycling option will, for a typical application, receive an incentive payment of $99. Customers without the override feature who permit full curtailment of air conditioning will, for a typical application, receive an incentive payment of $198.
(b) The program with the override feature will be available with either 50% cycling or with full curtailment. Customers with the override feature choosing the 50% cycling option will, for a typical application, receive an incentive payment of $49. Customers with the override feature who choose the full curtailment option will, for a typical application, receive an incentive payment of $99.
SCE is authorized to incorporate into its SDP both economic and emergency triggers and is authorized to manage the program to produce multiple curtailments each year. SCE is authorized to have multiple curtailment events in a single day with varying durations, but no customer will be interrupted for more than six hours in a single day. The specific size of the incentives are determined based on the size of the customer's air conditioning load and are determined based on an incentive of $.36/ton/day for a 100% cycling option, with discounts applicable based on the override and cycling features selected.
2. The Southern California Edison Company is authorized to file a Tier 1 with the Commission's Energy Division implementing tariffs consistent with the changes authorized at any time within six months of the mailing of this decision.
3. The Southern California Edison Company is authorized incremental funding for 2011 and 2012 totaling up to $26.6 million for this transition. The $26.6 million are reasonable costs for this transition and may be recorded in the Demand Response Balancing Account for eventual recovery.
4. The Southern California Edison Company shall update its Demand Response Application Cycle Funding Request for 2013-2014 in the fourth quarter of 2012 using information obtained from the operation of the revised Summer Discount Plan. Such information shall include, but not be limited to, the number of eligible SDP customers who have chosen the override option and an analysis of their behavior during ach event called during 2011-2012. Additionally, the updated application should explicitly require that SCE take into account the effect of SDP's override option on its ex ante load impact estimate for 2013-2014 for evaluating SDP's cost effectiveness.
5. Application 10-06-017 is closed.
This order is effective today.
Dated November 10, 2011, at San Francisco, California.
MICHAEL R. PEEVEY
President
TIMOTHY ALAN SIMON
MICHEL PETER FLORIO
CATHERINE J.K. SANDOVAL
MARK J. FERRON
Commissioners
I reserve the right to file a concurrence.
/s/ TIMOTHY ALAN SIMON
Commissioner
