ALJ/DMG/rbg Date of Issuance 3/19/2008

Decision 08-03-017 March 13, 2008

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Southern California Edison Company's (U338E) Application for Approval of Additional Demand Response Resource Purchase Agreements.

Application 07-10-013
(Filed October 17, 2007)

ORDER APPROVING FOUR SOUTHERN CALIFORNIA EDISON COMPANY DEMAND RESPONSE CONTRACTS

TABLE OF CONTENTS

Title Page

ORDER APPROVING FOUR SOUTHERN CALIFORNIA EDISON
COMPANY DEMAND RESPONSE CONTRACTS 2 2

1. Summary 2 2

2. Background 2 2

3. Scoping Ruling 4 4

4. SCE's Proposal 5 5

5. Intervenor Testimony 11 11

6. Discussion 11 11

6.1. Four Contracts Should be Approved 12 12

6.2. The Contracts Include Innovative Demand Response
Elements 14 14

6.3. The Contracts Help SCE Meet its 5% Goal of Price Responsive Demand Response, but this Goal Alone is Not a Sufficient Rationale for Approving all of the Contracts 16 16

6.4. Relationship of the Contracts to Long Term Procurement,
System Reliability Needs and the 2009-2011 Program
Proposals 19 19

6.5. Approval of Four Demand Response Contracts will further the Commission's Goal of Increasing Cost Effective Demand
Response While Balancing the Need to Guard Against
Shortages During Summer Peak Periods 23 23

6.6. Cost-Effectiveness Data Should be Used as Supporting
Evidence 25 25

6.7. There is Insufficient Evidence to Evaluate Environmental
Factors 31 31

6.8. Four of the Contracts Should Not be Approved at this Time 31 31

6.9. SCE's Cost Recovery Proposal is Reasonable 33 33

7. Categorization and Motions 34 34

8. Comments on Proposed Decision 34 34

9. Assignment of Proceeding 36 36

Findings of Fact 36 36

Conclusions of Law 37 37

ORDER 39 39

ORDER APPROVING FOUR SOUTHERN CALIFORNIA EDISON
COMPANY DEMAND RESPONSE CONTRACTS

1. Summary

Southern California Edison Company (SCE) proposes eight new third-party dispatchable demand response contracts (the Contracts). We approve four of the eight proposed Contracts, which are cost effective on a portfolio basis. These are the two Ancillary Service Coalition, LLC Contracts, one North American Power Partners, LLC Contract and the EnergyConnect, Inc. day ahead Contract, allowing for up to 190 MW of demand response. We note that the two Ancillary Services Coalition, LLC Contracts have the highest individual cost-effectiveness scores and are structured in a superior way to the other Contracts such that a greater portion of incentive monies earned is through program participation performance, as opposed to enrollment of capacity. In light of the currently developing rules for demand response that are being addressed in Rulemaking (R.) 07-01-041, SCE could consider submitting additional contracts in SCE's June 1, 2008 application for 2009 through 2011 demand response programs, taking into account cost-effectiveness and other standards now being developed in that rulemaking. In addition, nothing in this ruling prevents SCE from continuing bilateral negotiations in order to improve the cost effectiveness of the contracts we do not approve at this time. This decision also denies TURN's request for oral argument.