ALJ/MLC/hkr Mailed 11/23/2004

Decision 04-11-034 November 19, 2004

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Order Instituting Rulemaking on policies and practices for advanced metering, demand response, and dynamic pricing.

Rulemaking 02-06-001

(Filed June 6, 2002)

OPINION DIRECTING PG&E TO NEGOTIATE AN AGREEMENT
WITH THE CALIFORNIA POWER AUTHORITY FOR OPERATION
OF THE DEMAND RESERVES PARTNERSHIP PROGRAM

TABLE OF CONTENTS

Title Page

OPINION DIRECTING PG&E TO NEGOTIATE AN AGREEMENT
WITH THE CALIFORNIA POWER AUTHORITY FOR OPERATION
OF THE DEMAND RESERVES PARTNERSHIP PROGRAM 2 2

I. Summary 2 2

II. Background 2 2

A. Program Operation 2 2

B. The Commission Directed the DRP to Be Incorporated
Into the Utilities' Scheduling and Dispatch Functions 4 4

III. The CPA's Operating Budget Will Be Depleted by November 30, 2004 5 5

IV. Program Obligations, Funding and Costs 6 6

A. Contracts 6 6

1. Demand Reserves Purchase Agreement 7 7

2. Demand Reserve Provider Contracts 9 9

3. Demand Reserves Provider Contract With State Water Project 10 10

4. Demand Reserves Delivery Agreements 10 10

5. CPA - ISO Contract 11 11

6. CPA - APX Contract 11 11

7. Management and Administrative Contracts 12 12

B. Program Costs 12 12

1. Aggregator Payments 12 12

2. Administrative Costs 13 13

C. Program Funding 13 13

1. DWR 13 13

2. IOUs 15 15

D. Anticipated Costs and Revenue Post-2004 16 16

V. Ratepayer Benefits 17 17

VI. PG&E Is Directed to Negotiate an Agreement With the CPA 17 17

VII. Comments on Draft Decision 21 21

VIII. Assignment of Proceeding 22 22

Findings of Fact 22 22

Conclusions of Law 26 26

ORDER 27 27

OPINION DIRECTING PG&E TO NEGOTIATE AN AGREEMENT
WITH THE CALIFORNIA POWER AUTHORITY FOR OPERATION
OF THE DEMAND RESERVES PARTNERSHIP PROGRAM

I. Summary

This decision directs Pacific Gas and Electric Company (PG&E) to negotiate an agreement with the California Consumer Power and Conservation Financing Authority (CPA) for the future operation and management of the Demand Reserves Partnership (DRP) program and file and serve a term sheet containing the general principles it has agreed to with the California Power Authority by November 30, 2004, and a final agreement by February 1, 2005.