5. Discussion

The Commission's concern is that essential customers have adequate and sufficient emergency generation for their essential load. We define minimal essential uses for hospitals to include:

"critical facilities such as operating room, emergency room, intensive care, life-support machines, diagnostic machines, refrigeration for medicines, communications, and minimal lighting for health and safety." (D.91548, Appendix B.)

SCE may not have unreasonably tried to apply an objective standard, and concluded that the OSHPD requirements meet Commission orders. The uncontroverted testimony here, however, shows that the minimal backup generation required by OSHPD regulations does not satisfy Commission requirements for adequate and sufficient backup generation to meet essential uses.

Similarly, PG&E may not have unreasonably tried to implement Commission orders, and concluded that its process for screening hospitals with backup generation complies with Commission directions. The evidence shows, however, that PG&E and hospital customers have not clearly communicated on the ability of each hospital's backup generation to satisfy the Commission's definition of essential uses for hospitals.

PG&E and SCE each represent that granting these motions will not compromise their ability to meet the Commission's requirement of having at least 40% of their load available for rotating outages. This factor is an important consideration, since granting the motions means other customers face a greater probability of more frequent, and potentially longer, outages as a result. The Commission has generally balanced these competing interests, however, and determined that maintenance of least 40% of available load for rotating outages is reasonable. Today's ruling does not disturb or compromise that determination.

Therefore, the MHS and CHW motions are granted in part. The motions ask for the exemption of all hospitals from rotating outages. Existing Commission orders, however, define as essential only those hospitals with 100 beds or more. The motions are granted for hospitals with 100 beds or more.

Whether or not to expand routine exemption from rotating outages to all hospitals is currently before the Commission.³⁶ I will not prejudge the outcome of the Commission's deliberations. Thus, I decline to extend this ruling to cover all hospitals. If, however, the Commission modifies the definition of essential customer to include all hospitals, PG&E and SCE shall comply with such order, including the determination herein that hospitals shall not be excluded from the essential customer category based on backup generation.

PG&E reports that it may take weeks to implement this ruling, but on further examination may be able to implement this ruling in as soon as 5 days. The urgency of this matter requires that each utility implement this order without delay.

As a result, each utility should immediately modify its rotating outage implementation plan to exclude each hospital in its service area with 100 beds or more from all rotating outages. This exclusion should be implemented no later than 5 days from today. If either utility is unable to implement this ruling within 5 days, that utility should, within 4 days from today, file and serve a motion requesting an extension, with a detailed statement of its plan for implementing this ruling.

This ruling does not go beyond the instant motions. That is, it does not disturb any Commission order regarding other essential customers, including consideration of backup generation. Moreover, it does not disturb utility implementation of those orders. Rather, this ruling applies to utility interpretation and implementation of Commission orders regarding hospitals with 100 beds or more.

The record does not show whether or not extending the exemption to skilled nursing facilities will jeopardize each utility's ability to meet the Commission's requirement of having at least 40% of load available for rotating outages. CAHF presents no evidence in support of its request regarding the effect on other customers. Extending the exclusion to skilled nursing facilities will exclude many more circuits from rotating outages, including all customers who share the excluded circuit with a skill nursing facility. As the pool of customers available for rotating outage declines, all remaining non-essential customers face an increased probability of more frequent, and longer, outages. Without evidence regarding the effect on other customers, this ruling is limited to the specific motions and evidence presented here.

IT IS RULED that the March 20, 2001 and March 21, 2001 emergency motions of Memorial Health Services and Catholic Healthcare West are granted in part. Southern California Edison Company and Pacific Gas & Electric Company shall immediately classify all hospitals with 100 beds or more as essential customers exempt from rotating outages regardless of the status of backup or standby generation. These hospitals shall be exempt from rotating outages within 5 days of today. If unable to exempt such hospitals from rotating outages within 5 days from today, each such utility shall, within 4 days of today, file and serve a motion requesting an extension, with a detailed statement of its plan for implementing this ruling.

Dated March 23, 2001, at San Francisco, California.

		/s/ CARL WOOD
		Carl Wood Presiding Officer Assigned Commissioner

(END OF ATTACHMENT F.)

R.00-10-002

D.01-04-006

Commissioner Henry M. Duque, concurring:

There is no dispute that the programs are essential for our energy survival this summer. The programs will generate a positive demand response to the negative supply situation we are facing in the coming months. It is therefore critical that these programs succeed.

The final version of Item 6 contains many thoughtful programmatic changes in response to comments. Yet it does not contain a current funding mechanism for the programs. Because of their importance to the State of California, there should be immediate funding, through a surcharge, so that the utilities can implement these vital load curtailment programs.

There is also no dispute that the utilities will incur costs to implement the new load curtailment programs. Through a lack of immediacy, Item 6 fails to acknowledge that the utilities must have some current funding sources to pay for the programs. My alternate decision, Item 6a, would have provided a means for the utilities to pay for these programs and give customers more information about the kinds of energy procurement options available. Perhaps, customers would rather pay themselves by forming interruptible circuit groups. I think customers would be more likely to participate in these programs if they were able to see the contribution this effort makes in a separately identified surcharge. My alternate decision did not prevail, however.

For these reasons, I remain concerned over the creditworthiness of the utilities. Without other default provider options, it is necessary to restore the utilities financial health, so that they can provide safe and reliable electric service. The interruptible program costs adopted today will be added to the already-huge undercollections. For SDG&E alone, the program costs are estimated to be one-half a billion dollars annually. While we may not agree with their estimate, the fact is that the programs costs will now be added to SDG&E's more than $447 million undercollection.

As for PG&E, it is reporting to its bondholders that it expects to take a $4.1 billion after-tax charge for the past undercollected costs. And, PG&E is also reporting that, if it were current in payments to creditors, its cash balance would be a negative $1.8 billion. On top of that, we just ordered the utilities to pay their QF and DWR bills. For PG&E, this equates to a $1.5 billion obligation that is due between now and April 30^th. My read of Edison's March 20th 8K filing paints an equally bleak picture.

So, is there enough money within the 3 cent surcharge we adopted on March 27th to pay for all these energy and energy management programs? As I asked in the rate increase vote, is 3 cents enough? I still don't know. The record here yields no answer. I do know there is no mechanism for the utilities to recover their mounting costs. The financial situation of the utilities can only worsen, and the programs may not come to fruition.

/s/ HENRY M. DUQUE

Henry M. Duque

Commissioner

April 3, 2001

San Francisco