4. Discussion

4.1 Exponent's Methodology

Exponent applied a rational and objective methodology to determine relative risk between applicants. First, Exponent developed a risk index formula based on Exponent's experience with risk assessment. Weighting factors were compared to published factors used in other studies to assess reasonableness. The algorithm was tested before Category M applications were received. Second, the limitation of relying solely on the calculated risk index score was addressed by follow-up interviews with outlier applicants, along with use of a panel group and an expert panel review. Third, applicants who could reasonably qualify for essential customer status in a category other than Category M were removed from consideration to focus the limited available exemptions here on those without another course of relief. Finally, the top 2,000 applications ranked by adjusted calculated risk index score were individually reviewed, and 17 screening criteria were applied to further narrow the list.

The approach was thorough and complete. It applied the consultant's expertise, tested against published information. It utilized verification of data from outliers, assessment based on panel groups, elimination of customers otherwise eligible under other criteria, and screening based on 17 factors.

The 17 factors reasonably apply the results of the panel group, and criteria we endorse. For example, applicants (other than verified outliers) are relatively less risky if they are in a business group ranked low in priority by the panel group (e.g., automobile repair shops, financial institutions, convenience stores, grocery stores, manufacturing plants, office complexes, churches). We agree with the perception of the panel group that these applicants present relatively less risk to public health and safety than do other applicants.

Applicants were found relatively less risky if they have an alternative source of electrical supply (i.e., backup generation) that would cover 100% of an applicant's critical health and safety needs for more than 2 hours. We agree with this criterion. There is little or no need for all ratepayers collectively to protect these customers from rotating outage when these customers can reasonably protect themselves. As such, these applicants present relatively less risk to public health and safety than do other applicants.

Applicants were ranked lower if they are restaurants or food processing plants whose concerns pertain to food contamination. We agree, since applicable health codes prohibit the marketing of spoiled or contaminated foods, and methods exist to reasonably assess the risk of foods being spoiled or contaminated (e.g., monitoring of refrigeration temperatures).

Applicants were ranked lower if they are either a water district or water company. We agree. Absent a particular entity being a justified outlier, these entities have backup generators or storage facilities, and backflow protection systems, to reasonably mitigate danger to public health and safety from rotating outages of moderate duration.

Applicants were found relatively less risky if they do not provide a time-critical or unique service. We agree. For example, customers may be reasonably expected to wait a few hours to have a prescription filled at a pharmacy if the pharmacy is experiencing a rotating outage of up to two hours, or, if urgent, have the prescription filled at another pharmacy or a hospital. As such, these applicants present relatively less risk to public health and safety than do other applicants.

Applicants were ranked lower if the request is based on traffic control that can be mitigated by following standard traffic safety rules. We agree. Not only must citizens be expected to reasonably obey the law in such circumstances, but also utilities are under both Commissioner Ruling and Governor Executive Order to provide data to public safety agencies as necessary for the agency to plan its response to rotating outages.⁶ As such, cities can get reasonable information regarding forthcoming outages to dispatch police and other traffic safety personnel to control traffic.

Applicants were found relatively less risky if the danger to public health and safety as represented in the application could be reasonably mitigated by applicant following health codes and Occupational Safety and Health Administration regulations. We agree. We expect each business to honor all applicable laws, codes and regulations. We decline to exempt a customer from rotating outage if that customer is operating outside the law, or could on its own mitigate danger to public health and safety by reasonable application of existing public health and safety provisions in the law. As such, these applicants present relatively less risk to public health and safety than do other applicants.

The methodology employed by Exponent is reasonable in achieving the desired result. That result is a list of applicants ranked in order of presenting relative danger or jeopardy to public health and safety if the customer is not classified as an essential customer normally exempt from rotating outage.

4.2 Electric Generators

Early in its analysis, Exponent removed 41 electric generator applicants from further consideration for Category M. We agree. These applicants do not present the danger to public health and safety contemplated for successful Category M customers. Rather, their applications are better analyzed in the context of whether or not they make a positive (or at least neutral) contribution to the system if they are not subject to rotating outages. Each application must be viewed individually to make that assessment.

For example, a 1 MW generator may be on a circuit that can serve 5 MW. In this case, all other customers are better off if the entire circuit is subject to rotating outage, with 5 MW available for the rotating outage pool, rather than exclude the 5 MW from rotating outages in order to secure generation of 1 MW. That is, an exemption from rotating outage for an electric generator is reasonable for all other customers only if the generator can at least meet the needs of the circuit.

Similarly, there are cases where multiple circuits are involved. Small electric generator applicants may make a neutral or net positive contribution to their individual circuit, but ancillary services may be on another circuit (e.g., control room facilities). When viewed as a whole on the involved circuits, the generator may or may not make a neutral or positive contribution to the combined circuits, and therefore the grid.

Further, whether these 41 generators are at transmission or distribution level voltage, the load analysis must be consistent with existing treatment of transmission level customers. That is, we already permit essential customer status for customers served at transmission level voltage when they supply power to the grid in excess of their load at the time of the rotating outage, or their inclusion in rotating outages would jeopardize system integrity. (Category K of the essential customer list; see D.01-04-006, Attachment C.)

All 41 applications were examined on this basis, and many are found to make reasonable contributions to their circuit, or local combination of circuits, and merit exemption. On this basis, we grant these applicants essential customer status normally exempt from rotating outage. These customers are included as essential customers in Category F when at distribution level (i.e., "electric utility facilities...critical to continuity of electric power system operation"), and in Category K when at transmission level. These customers are listed in Attachment A.

Load and resource analysis continues on a few applicants, as noted in Attachment A. Each utility shall submit a report within 30 days stating the final load and resource assessment of these remaining few customers. The report shall be filed, served on the remaining few electric generator customers at issue, and served on a limited list at the Commission composed of Commissioner Wood, Administrative Law Judge (ALJ) Mattson, ALJ Galvin, Jonathan Lakritz, and Laura Martin. Parties may file and serve comments on the report within 10 days, with service on the respondent utility, plus the same service list as used for the report.

4.3 Police, Fire, Prisons

Exponent recommends that 51 Category M applicants who are police, fire and high security prison customers not already in Category A be given the highest priority for exemption, since, according to Exponent, the Commission currently grants exemptions to many similar facilities. We generally agree, but believe these applicants, if essential customers, should be included in Category A.⁷

Respondent utilities must already classify qualified police, fire and prison customers as essential customers in Category A, unless a particular customer has adequate backup or standby generation. (D.82-06-021 (June 2,1982), D.01-04-006, mimeo. page 65.) We have insufficient information to determine whether or not these Category M applicants previously requested Category A status, but are not included in Category A based on an evaluation by the utility regarding the adequacy of backup or standby generation. Nonetheless, results reported by Exponent show that several of these customers have backup generation capable of meeting 100% of the customer's critical health and safety needs for more than 4 hours. This is adequate backup generation to eliminate each such customer from Category A, absent a particularly compelling reason to the contrary in any specific case.

If these customers are qualified police, fire and high security prisons without adequate standby or backup generation, they should be included in Category A. If they do not qualify for Category A, however, we are not persuaded that they present sufficient imminent jeopardy or danger to public health and safety if exposed to rotating outages to qualify for Category M.

By ACR dated August 17, 2001, respondent utilities were directed to treat these 51 Category M applications as applications for Category A. We approve and confirm that ACR. (Pub. Util. Code Section 310.) Respondent utilities should include these 51 customers in Category A to the extent they are police, fire or prison customers without adequate backup or standby generation. (See Table 7-1 of the Exponent report for a list of the 51 police, fire and high security prison applicants.)

4.4 Exponent List Ranked by Public Health and Safety Risk

Exponent recommends that the Commission exempt as many of the 404 customers as possible of those ranked by Exponent in order of relative risk to public health and safety. We agree. Exponent's list represents a reasonable relative ranking of customers presenting imminent danger or jeopardy to public health and safety if exposed to rotating outages. We are persuaded that these customers present sufficient relative risk to merit inclusion in Category M to the fullest extent possible.

We have previously determined that each utility must maintain at least 40% of its load available for rotating outages to avoid involuntary load shedding and general system collapse. (D.82-06-021, D.01-04-006, D.01-06-085.) We continue to apply this criterion here.

Respondent utilities and Commission staff analyzed the effect on load and resources of exempting up to the full list of 404 customers. The analysis shows that all 404 customers are able to be included in Category M without jeopardizing the 40% limit for each utility. Customers whose applications for Category M status are granted are listed in Attachment B. As discussed more below, applicants who have not yet submitted a Statement of Authenticity are granted Category M status conditioned upon their submitting a Statement within 60 days.

A few applications remain for further consideration based on processing difficulties. For example, some applicants appear to have transposed utility account numbers, or used a gas account number rather than an electricity account number. Staff is working with each respondent utility to determine whether each such applicant is a valid customer, or that the correct account number or other information is available to ensure an applicant granted Category M status can be properly included by the utility. Those applicants are identified within Attachment B, and are included in Category M conditioned upon successful resolution of these processing difficulties. Staff and utilities should complete that effort within 30 days.

If the status of any applicant is unresolved at the end of 30 days, the respondent utility should file and serve a report. The report should state the customer name, unresolved issue, estimated time to resolve the issue, and the utility's recommendation. The report should be served on the involved customer, and the following persons at the Commission: Commissioner Wood, ALJ Mattson, ALJ Galvin, Jonathan Lakritz, and Laura Martin. Comments on the report may be filed and served within 10 days of the date of the report. Service should be on the respondent utility, and the same persons identified above at the Commission.

4.5 Skilled Nursing Facilities and Dialysis Treatment Centers

Exponent recommends that the Commission further investigate the feasibility of exempting all SNFs and dialysis treatment centers. We adopt this recommendation.

California has more than 1,200 SNFs. (Reporter's Transcript, March 22, 2001, Volume 3, page 399.) These facilities are located throughout the state. Each SNF is located on a circuit different from the circuit serving another SNF, with few, if any, exceptions. Exempting more than 1,200 SNFs would exempt nearly, if not exactly, that same number of circuits, along with the load of other customers on the same circuit as the SNF.⁸ Retaining at least 40% of load for rotating outages does not allow including all SNFs in Category M at this time.⁹

From the total candidate population of these two customer types, we received Category M applications from 568 SNFs and 220 dialysis treatment centers. Exponent's list of 404 customers recommended for Category M includes 88 SNFs and 29 dialysis treatment centers. Granting Category M to the 404 (including 88 SNFs and 29 dialysis treatment centers) leaves 671 applicants from these two customer types. We are unable to grant Category M status for these 671 applicants, since there is insufficient margin left to exempt another 671 customers in addition to the 404 (i.e., expanding the number of exempt customers by 166%, from 404 to 1075).

Nonetheless, 88 SNFs and 29 dialysis treatment center are given Category M status as part of the 404. Even with some self-reporting bias, we think SNF and dialysis treatment center applicants generally reported risk relative to other SNFs and dialysis treatment centers that allowed Exponent to reasonably rank these applicants relative to each other, and relative to the other applicants within the group of 404.

We are concerned, however, that the population within SNFs and dialysis treatment centers is among the most vulnerable in our society. Some of these patients would have been in acute care hospitals a few years ago, but are now discharged to SNFs and outpatient treatment centers.

We must for now maintain the pool of at least 40% of load from which to draw for rotating outage to prevent widespread and generalized system collapse. We do this for the good of all electricity customers, including SNFs and dialysis treatment centers, and for the overall public health and safety.

We may, however, have the opportunity to later explore other options to address risks from rotating outages. This may include application of a rotating outage pool percentage lower than 40%, given changes in technology and risk assessment. Further, utilities are rewiring some circuits to make more circuits available for rotating outage. This may in the future allow exemption of additional customers not now exempt. Also, we may subsequently take the initiative to re-examine customers now identified as essential in Categories A-L, and N. For example, we may re-examine application of the backup and standby generation criterion, resulting in removal of some customers now classified as essential. We may also evaluate the ability of some customers now classified as essential to withstand outages caused by accidents, earthquakes and other natural disasters. If certain customers are able to reasonably withstand such events, we may conclude that they can withstand temporary electricity outages from rotating outages. This may allow exemption of additional customers not now exempt.

4.6 Statement of Authenticity

We have received a Statement of Authenticity, where necessary, from many, but not all, applicants.¹⁰ We consider denying the applications of those who have failed to provide this Statement by the date due, but decline to do so. Rather, we think it reasonable to grant applicants a limited amount of additional time to comply with this administrative detail.

Attachments A and B show whether Statements of Authenticity have or have not been received from those applicants to whom we grant essential customer status. Where a Statement has not yet been received, we grant that applicant essential customer status conditioned upon that applicant submitting a Statement within 60 days.

A period of 60 days is a reasonable amount of time for this administrative-but important-detail to be resolved, while providing some finality to the process. We authorize the Assigned Commissioner or the ALJ to permit deviations from the 60-day time limit for good cause in an individual case, but the threshold to justify a deviation must be very high. That is, we expect any deviations to be limited to truly exceptional situations, and that this portion of the process will be concluded without unreasonable delay.

Although not previously addressed, we recognize that a business being granted a Category M exemption by this order may have undergone a change in ownership and not yet submitted a Statement of Authenticity. In such an instance, we will accept either (1) a statement of authenticity from the original applicant authenticating that the application responses were true when made, or (2) a statement of authenticity from the new owner verifying that what the original owner stated in the application is still true and correct.

4.7 Incomplete or Late Applications

Only complete applications submitted by 5:00 p.m. on June 4, 2001 are considered for Category M in this decision. Incomplete applications, or applications submitted after the 5:00 p.m. June 4, 2001 deadline, are not considered at this time. We are unable to consider incomplete or late applications due to the large number of applications; limited resources available to process applications; limited resources to do follow-up interviews on applications generally; inability to do follow-up interviews on incomplete applications due to limited resources, with very few exceptions (e.g., transposed account number on the final list of 404 customers); and the limited time for reaching a decision for Summer 2001.

We further clarify that we will not devote resources to consideration of any incomplete applications. The burden reasonably rested with applicants to submit a complete application by 5:00 p.m. on June 4, or late by June 15. A toll-free telephone number was available for applicants to call with questions. The application could be completed in parts, with answers updated or modified, until the application was complete. In fact, electronic submission was permitted only when the form was complete. Applicants submitting their form by fax or mail could review their form to ensure that was complete, accurate and fully representative of their situation before its submission. On balance, the best use of resources while meeting the goal of promoting public health and safety does not justify consideration of any incomplete applications.

While we will not consider incomplete applications, we may later consider complete applications received after 5:00 p.m. on June 4, 2001, but before June 15, 2001.¹¹ Subsequent consideration of late applications, if any, however, will depend upon the availability of Commission resources to process and consider late applications, and whether or not the electric system permits additional exemptions (e.g., at least 40% of system load remains available for rotating outage). Further, it will depend upon whether or not the electricity crisis continues, with a reasonably high probability of rotating outages, thereby necessitating continuation of the Category M process.