4. SCE's Proposal

SCE seeks approval of eight demand response resource purchase agreements with third party aggregators. The Contracts are estimated to cost $216 million⁴ and SCE expects them to provide firm, reliable price responsive demand response resources for up to five years beginning in 2008. A summary of the public portions of the Contracts is provided as Table 1, taken from SCE's Testimony Table III-1.

Table 1 (Continued) Summary of the Contracts
Seller	EnergyConnect, Inc.	Energy Curtailment Specialists, Inc.	EnerNOC, Inc.	North American Power Partners, LLC
DR Type	Dispatchable Demand Response (aggregated bundled, DA and CCA customer load)	Dispatchable Demand Response (aggregated bundled, DA and CCA customer load)	Dispatchable Demand Response (aggregated bundled, DA and CCA customer load)	Dispatchable Demand Response (aggregated bundled, DA and CCA customer load)
Size	Up to 20 MW by 2010	Up to 50 MW by 2012	Up to 160 MW by 2011	Up to 75 MW by 2012
Dispatch Notice	______ day ahead	______day ahead	_________day of	________day of
Trigger	________________	________________	________________	________________
Delivery Period	______________________________ ____	____ ________________________ _______	_______________________ __________	_______________________ __________
Duration per Event	______________________________	__________________________ _____	__________________________ _____	________________________ _____
Maximum Event	_______________________	___________________________	_________________________	_________..._______________
Capacity Credit Rate	___________________________ __________________________ _______	_________________________ _____________________________ _______________	___________________.______ ________________________ _______	__________.______________. ___________________________ ______
Baseline	Same as SCE's Capacity Bidding Program	Same as SCE's Capacity Bidding Program	Same as SCE's Capacity Bidding Program	Same as SCE's Capacity Bidding Program
Energy Credit Rate	______________	______________	_________	_________
Delivered Energy Payment Calculation	Same as SCE's Capacity Bidding Program	Same as SCE's Capacity Bidding Program	Same as SCE's Capacity Bidding Program	Same as SCE's Capacity Bidding Program
Delivered Capacity Payment Calculation	Same as SCE's Capacity Bidding Program	Same as SCE's Capacity Bidding Program	Same as SCE's Capacity Bidding Program	Same as SCE's Capacity Bidding Program
Penalties	Same as SCE's Capacity Bidding Program	Same as SCE's Capacity Bidding Program	Same as SCE's Capacity Bidding Program	Same as SCE's Capacity Bidding Program
Payment	No later than 60 days after Operating Month	No later than 60 days after Operating Month	No later than 60 days after Operating Month	No later than 60 days after Operating Month
On-Line Date	Upon Commission approval	Upon Commission approval	Upon Commission approval	Upon Commission approval
Term of Contract	4 Years	5 Years	5 Years	5 Years
Termination	If not approved by Commission by February 29, 2008; otherwise for cause	If not approved by Commission by February 29, 2008; otherwise for cause	If not approved by Commission by February 29, 2008; otherwise for cause	If not approved by Commission by February 29, 2008; otherwise for cause

The Contracts would become effective upon the Commission's final approval. However, to the extent final Commission approval has not been received by April 30, 2008, the Contracts would terminate under their own terms.⁵

SCE states that the Contracts in this Application are the final negotiated results of an open market Request For Offers (RFO) that initially procured seventeen indicative offers for demand response resources from nine third-party aggregators. Based on least cost/best fit principles and conformance with SCE's contract terms and conditions, SCE selected eight separate Contracts with six different third-party providers for inclusion in this Application.

The Contracts include a combination of demand response dispatchable products that SCE contends can deliver approximately 100 megawatts (MW) for summer 2008 and as much as 438 MW for the summer of 2011, on a firm contract basis with penalties to ensure performance. The Contracts are bilateral in nature, and the dispatch characteristics, terms and conditions are fixed for the term of the resource delivery through 2012. SCE opines that the demand response resources available from these Contracts will add significant price response to SCE's demand response portfolio next year and in the future, and will help SCE achieve its current price response goal of 5% of peak load. The Contracts provide either "day-of" DR resources (where dispatch occurs on the same day as the need for the load relief), or "day-ahead" DR resources (where dispatch occurs the day before the load curtailment is needed).

Key terms and conditions of the Contracts are as follows:

· SCE has the exclusive right to the capacity and energy for the delivery periods under the Contracts.

· The Contracts provide SCE with firm monthly capacity nominations of demand response load reductions at fixed capacity rates that typically increase during the critical summer months and decrease during the less critical winter months, depending on the resource provided. The monthly load reduction nominations from each of the counterparties are firm for the duration of the Contract, are not subject to temperature adjustment, and are mutually exclusive of other contracts and other SCE demand response programs. As such, the full nominated load reductions are available at the start of each operating month and can be dispatched according to the terms of the Contracts. The capacity payments are reservation payments, meaning that the payments are made for the availability of demand reduction capability even if the load reductions are not dispatched. Penalties apply if the Contract capacity is dispatched and less than the nominated load reduction is delivered.

· The Contracts also provide payments for reduced energy consumption during the dispatch at set prices. Similar to the capacity payments, there can be a penalty if full performance is not achieved and energy is not dispatched (shortfall energy) for which the counterparty is billed. If more than the contracted amount of load is dispatched, capacity payments are fixed at the contract amount, but energy can be reimbursed up to 150% of the contract load nomination, at the contract price.

· The determination of the reduced capacity and energy for the settlement process is made using the ten day baseline approach, similar to the SCE Capacity Bidding Program for aggregators. Ten similar days prior to the dispatch are used to develop the baseline hours for each resource under contract, and each aggregator nominates a group of customers into the aggregated resource five days before the operating month. The baseline is only developed for that nominated group for that specific month, not for the entire customer group. The baseline methodology is not adjusted for temperature or customer conditions, and is verified by SCE upon submittal for payment using individual customer interval meter data.

⁴ Not including energy payments, estimated at $47 million, based on expected scenario that all available hours of energy for each resource are dispatched every year at 100% of rated resource capacity during peak months. (SCE Exhibit 1, footnote 6.)

⁵ SCE's Application contained a termination date of February 29, 2008. In a report sent to the service list dated March 4, 2008, SCE indicated that it extended the termination date of the Contracts to April 30, 2008.