3. Exponent Report and Results

Exponent submitted its report to the Commission on August 9, 2001. A copy of Exponent's report was attached to the draft decision of this order mailed on August 17, 2001, which is available in the Commission's Central File at Room 2002, State Building, 505 Van Ness Avenue, San Francisco, California and on the World Wide Web at http// www.cpuc.ca.gov/PUBLISHED/REPORT/ 9172.PDF for text, http// www.cpuc.ca.gov/PUBLISHED/REPORT/9173.PDF for Appendices, and www.cpuc.ca.gov/PUBLISHED/REPORT/9174.PDF for tables. The report explains in detail the application process, Exponent's analysis, and Exponent's recommendations.

3.1 Methodology and Analysis

Exponent applied several tools to rank applicants in order of risk to public health and safety, and identify customers which it recommends be considered for Category M. First, Exponent developed a numeric risk index score based on self-reported information by each applicant. The risk index score is based on three health outcome factors: (a) severity, (b) likelihood, and (c) affected population. These factors are assessed for two outage durations: (a) less than 2 hours, and (b) 2 to 4 hours. The values for each health outcome factor are multiplied by the outage duration probability to yield a quantitative risk index score.

Applicants were sorted into 42 business groups. Applicants already classified by their utility company as essential customers were identified and removed, since these applicants need not be considered further for Category M.⁴ Similarly, applications from electricity generators were identified and removed from further ranking, since these applications are primarily based on contribution to the electricity grid and only indirectly on potential health and safety impacts.

Initial results showed a large degree of variability. Outlier applicants (i.e., applicants with a risk index score greater than four standard deviations from the mean of their business group) were given follow-up interviews to assess whether or not their facilities faced risks substantially different from those of other applicants in their peer group. Absent individual justification for a high risk index score, each outlier applicant's score was adjusted to reflect the upper end of peer group results.

Second, a panel group study and an expert panel review were used to assess risk results. The panel group and expert review were used because of inherent limitations in relying solely on risk index scores. Individual applicants, for example, may have overestimated or underestimated adverse health and safety effects, resulting in risk index scores that are relatively too high or too low. Further, risk index scores rely on a somewhat narrow interpretation of risk. That is, applicants might make systematic judgments about the level of risk not strictly tied to objective measures. Instead, perceived (and self-reported) risk might differ from actual risk.

The panel group and expert panel review were used to correct for these limitations. The panel group was used to make broad judgments about a number of potentially risky situations, in contrast to each applicant judging only their own facility. Representatives of the various business groups that requested exemption from outages were invited to participate. Applicants for exemption were not invited. Thus, participants had knowledge of their industries, but no particular vested interest in the outcome.

An Exponent expert panel also reviewed a subset of application responses regarding reported hazards, and prepared a list summarizing hazards for each business group. This information was presented and reviewed during the panel group study. The panel group results were used to assess applicant bias, and tap a range of concerns that influence public attitudes about potential risks.

Third, Exponent identified 51 applicants from the list of 9,522 that are police departments, fire departments or high-security prisons but who are not currently exempt within existing essential customer categories. Exponent recommends that these applicants be treated independently of their risk index score.

Finally, Exponent individually reviewed the top 2,000 applicants based on calculated risk index scores, and applied 17 screening criteria to further narrow the list. (See pages 6-1 to 6-5 of the Exponent report attached to the draft decision of this order or the world wide web site identified in our prior Section 3 discussion of the Exponent report and results for the 17 screening factors.) From this review, 1,595 of the top 2,000 applicants were found to present relatively less risk to public health and safety. This leaves a list of 404 customers, ranked in order of relative risk to public health and safety.

3.2 Exponent's Recommendations

Based on its analysis, Exponent recommends that the 51 police, fire and prison applicants not already in an essential customer category be given the highest priority for exemption. Exponent makes this recommendation since, according to Exponent, the Commission currently grants exemptions to many similar facilities. Exponent points out, however, that many of these applicants have backup generation and may not need exemption, thereby preserving the number of potentially available exemptions for others.

Further, of the list of 404 customers, Exponent recommends that the Commission grant as many exemptions as possible. Exponent suggests the Commission base that determination on other influencing factors, such as circuit load analysis and compatibility with earlier Commission decisions. For example, exemptions should be compatible with prior decisions requiring the maintenance of at least 40% of load available for rotating outage to avoid involuntary load shedding and general system collapse.

Exponent points out that six customers are included in the list of 404 despite being in business groups considered low risk by the panel group (i.e., medical buildings, security, retail). Exponent includes these customers, however, because upon further analysis Exponent determined that they actually provide services such as outpatient surgery, or communication services to support vital law enforcement activities. Further, at least one presents a somewhat unique fire/explosion hazard because of a heat treatment manufacturing process. Exponent concludes that these risks are not easily mitigated by other means.

Finally, Exponent addresses skilled nursing facilities (SNFs) and dialysis treatment centers. Exponent points out that these two business types were ranked the highest by the panel study group based on their perception of a high likelihood of severe health effect or death in the event of a rotating outage. Only a few SNFs and dialysis treatment centers are within the list of 404 customers, however, because of low risk index scores based on self-reported information provided by each applicant. Exponent highlights these two business groups because of the high risk ranking given by the panel group, and the probable underreporting of potential risks.⁵ Exponent recommends that the Commission further investigate the feasibility of exempting these two business groups, despite their apparent low self-reported risk.