6. Load Forecasting and Compliance Year

6.1. Quarterly Forecasting Protocols

The RA program relies on the load forecasts supplied to and checked by the CEC as the foundation for each LSE's RAR. In order to establish the System RAR, CEC reviews the load forecast submitted by each LSE, reconciles the aggregate of those load forecast against its own forecast for each IOU service territory, and generates an individual load forecast for each LSE for each month of the year. LSEs currently submit a year-ahead load forecast for System RAR and then submit monthly load forecasts two months in advance of the applicable month to allow for load migration.

The Energy Division staff raised an issue in the Track 1 workshops based on concerns with the accuracy of load forecasting and load migration it has observed in its RA compliance reviews. The timing of the two-month-ahead load forecast can make it difficult to account for new customers or actual retention rates of existing customers when significant changes occur. Staff also noted that LSEs frequently have load migration that is stable from month-to-month and that ESPs generally forecast their load by accounting for known and expected load retention, but not new accounts.

Energy Division and CEC staff proposed a quarterly load forecast protocol that would replace the monthly load forecast approach. The objectives are to increase the accuracy of load forecasting, support the development of quantitative forecast accuracy standards, reduce the amount of load that is unaccounted for in the current RA program, provide flexibility for LSEs in making monthly load forecasting adjustments, and eliminate unnecessary filings.

The workshop participants expressed concerns about the after-the-fact review of load forecasts to actual loads, Commission enforcement of accuracy provisions, and penalty mechanisms for excessive error that were not clearly defined. No consensus was reached regarding the quarterly forecast approach.

The comments and replies reveal a substantial lack of support for adopting this proposal for the 2008 compliance year, and it is apparent that a number of questions regarding its efficacy remain unresolved. We urge the staff and the stakeholders to continue to evaluate alternatives for achieving the important objectives identified by the staff.

6.2. Redefining the Compliance Year

The Energy Division staff suggested an approach for better coordinating the RA compliance year with the annual load forecasting process by the CEC. Specifically, the RA program year would be May through April instead of January through December. Staff noted that system operators elsewhere follow this approach. Staff believes that significant benefits would include enabling LSEs to adjust their procurement to meet their RA requirements and incorporating the CEC's updated, post-summer load forecast that becomes available in the fall of every year.

While the workshop participants were generally open to this proposal, it was not sufficiently refined to warrant approval for 2008. Several parties expressed the need to review a complete proposal in order to evaluate the feasibility of a changed RA compliance year. Staff intends to develop a draft proposal for 2009 that would be more aligned with the CEC's load forecasting process and to provide the proposal to public stakeholders for review and further discussion. We encourage the staff to pursue this approach, while also considering and balancing the stated need for regulatory stability in the RA program.