C. Petitions for Modification

With the continued potential for severe electricity shortages this summer, parties to this rulemaking proceeding have filed eight separate petitions for modification (petition) of D.01-04-006, as of May 4, 2001. These petitions were filed to resolve apparent inconsistencies in the decision and to clarify adopted improvements to the interruptible tariffs and rotating outage programs.

This order addresses four of these eight petitions. Each of the four petitions being addressed in this order seeks a modification to the OBMC program, a program which exempts customers from Stage 3 rotating outages in exchange for partial load curtailments during every rotating outage period. These petitions were filed by USS POSCO (UPI) on April 17, 2001; the California Industrial Users Group (CIU) on May 3, 2001; jointly by the California Steel Industries, Inc. and TAMCO Steel (CSI and TAMCO) on May 4, 2001; and jointly by Air Liquide America Corporation, Air Products and Chemicals, Inc., BOC Gases, Inc., and Praxair, Inc. (California Industrial Gas Companies or Companies) on May 4, 2001.

Notice of the UPI petition appeared in the Commission's Daily Calendar on April 18, 2001. Pursuant to an April 19, 2001 Administrative Law Judge (ALJ) Ruling, the response time to UPI's petition was reduced to seven days from the date of the ALJ ruling, April 26, 2001. The California Large Energy Consumers Association (CLECA), the University of California and California State University (UC/CSU), the California Independent System Operator (ISO), PG&E, SCE, and SDG&E filed responses to the petition of UPI. UPI filed a reply to these responses on May 3, 2001.

Notice of the CSI and TAMCO petition appeared in the Commission's Daily Calendar on May 7, 2001. Notice of the CIU and California Industrial Users Group petitions appeared on the Commission's Daily Calendar on May 8, 2001. There has been no filed response to these petitions as on May 18, 2001.

Pursuant to Rule 47(h) of the Commission's Rules of Practice and Procedure the Commission may modify the decision as requested, modify the affected portion of the decision in some other way consistent with the requested modification, summarily deny the petition on the ground that the Commission is not persuaded to modify the decision, or take other appropriate action.

Although the petitions filed after the UPI petition are not identical to the UPI petition, they are similar in that each petition seeks to expand the OBMC program to permit customers participating in a capacity interruptible program to also participate in the OBMC program. These petitions coupled with the petition of UPI and responses to the UPI petition provide us with the necessary information to decide whether the OBMC program should be expanded to permit customers participating in a capacity interruptible program to also participate in the OBMC program. Hence, there is no reason to delay resolution of these petitions.

1. USS POSCO Industries (UPI)

UPI seeks to modify D.01-04-006, which prohibits a customer from participating in both the Commission-authorized OBMC program and the ISO Demand Relief Program (DRP).¹

UPI asserts that the Commission should recognize that the OBMC program is not a demand reduction incentive program like the DRP, which promotes reduction in energy consumption through monetary incentives. Rather, the OBMC program is the functional equivalent of rotating outages, developed to provide a very limited and carefully monitored alternative for large customers that would be severely damaged by rotating outages. In other words, OBMC is an emergency load-shedding program that encourages participation and related demand reduction by offering customers the option of avoiding a catastrophic outage of service during assigned rotating outage periods in exchange for commitment to reduce demand by a specific amount during all periods of rotating outages.

UPI concludes that the OBMC program and the ISO's DRP are not in competition with one another and that the prohibition of participating in both programs serves no useful purpose. Hence, UPI seeks to eliminate the D.01-04-006 prohibition of customer participation in both the OBMC program and the ISO's DRP conditioned upon a requirement that demand during any concurrent OBMC/DRP event must be reduced below the DRP baseline less curtailed rate.

a. Responses to UPI's Petition

CLECA, UC/CSU, ISO, PG&E, SCE, and SDG&E filed responses to UPI's petition for modification of D.01-04-006. Of these respondents, all but PG&E support UPI's petition for modification of D.01-04-006. Each of the respondents in favor of UPI's proposed modification of the OBMC program have recommended additional changes to eliminate inequities between the OBMC program and DRP and to ensure that the OBMC program is workable administratively.

CLECA points out that approval of UPI's petition will require PG&E to modify its Advice Letter 2099-E-A and SCE to modify it's Advice Letter 1530-E, both of which contain a prohibition on participation in the OBMC and any capacity interruptible program. Further, UC/CSU, ISO, and SDG&E believe that the program performance evaluation should be assessed individually, with the demand reduction in effect at a particular time credited first toward the OBMC obligation with the remaining demand reduction then credited toward the DRP. UC/CSU also believe that DRP curtailment calls should be excluded from the 10-day baseline measurement of a particular OBMC performance during simultaneous participation to prevent an artificially and inappropriately low 10-day baseline for measurement of a customer's OBMC performance. SCE also seeks to extend UPI's proposed modification to allow participants in SCE's interruptible program and the new Base Interruptible Program (BIP) to participate in the OBMC program.

Although SDG&E concurs with the proposed modification to the OBMC program, it recommends that the Commission provide the parties additional time to propose solutions to accounting, allocating and tracking of separate, simultaneous load reductions, and reconciliation of different definitions of "baselines." For example, the DRP baseline is based on the average consumption for a given hour from the 10 prior days excluding DRP curtailments and days with rotating outages (OBMC days). The OBMC baseline is based on the average consumption for a given hour from the 10 prior days excluding only OBMC days.

PG&E opposes UPI's petition because it believes that permitting OBMC customers to participate in the DRP would create inequities between those customers who can and cannot participate in both programs. This is because of apparent inequities from the capacity and curtailed energy payments DRP participants receive that enables them to be paid for OBMC load curtailment. PG&E points out that this practice is in conflict with the OBMC program structure that precludes OBMC customers from receiving any payment, as discussed on page 37 of the decision. PG&E further emphasizes its inequity concern by reiterating a March 22, 2001 ISO technical workshop response to a question on the effect on payment of a Firm Curtailment during a DRP call. The ISO responded that it was the ISO's intent to pay loads for a DRP curtailment even if they are impacted at the same time by a rotating outage.

PG&E also opposes the proposed modification on the basis that any change at this time would create unmanageable complications for the OBMC baseline calculation, compliance validation, and program implementation.

PG&E concludes that any modification of the decision that authorizes participation in both the OBMC program and DRP requires the resolution of several other issues. These issues include whether DRP operation days are to be excluded from baseline calculations, whether the calculated OBMC program baseline should be adjusted up or down for DRP contracted load, whether OBMC program participants would be permitted to enroll in other interruptible programs, and whether dependable demand relief available under the OBMC program would be compromised by double counting load reductions under DRP and OBMC.

2. California Industrial Users Group (CIU)

CIU seeks to modify D.01-04-006 by eliminating the prohibition of interruptible program customers from participating in the OBMC program, as set forth in Section 2.4.9 of Appendix A. CIU seeks this modification because it believes that the prohibition on participating in both the interruptible program and the OBMC program is inconsistent with the OBMC program discussion in the decision, the Ordering Paragraphs, and the Adopted Priority System for Rotating Outages set forth in Appendix C.

For example, CIU believes that the Commission expressly acknowledges at pages 36 through 38 of the decision the role that the OBMC program could play in terms of offering non-exempt customers an opportunity to safely shed load during rotating outages, presenting a viable choice for as many customers as possible. That discussion also identifies the benefits of the OBMC program to include maximizing partial load curtailments by participating customers during every rotating outage period, and protecting large customers against significant harm and reducing the threat to public health and safety during rotating outages. CIU finds no discussion that participation in an interruptible program and the OBMC program are mutually exclusive.

According to CIU, the ordering paragraphs of D.01-04006 contain no prohibition or restriction of interruptible customers participating in the OBMC program. Likewise, CIU could find no such prohibition or restriction in the adopted priority system for rotating outages set forth in Appendix C to the decision. CIU concludes that the prohibition of interruptible program customers from participating in the OBMC program set forth in Section 2.4.9 of Appendix A is neither supported by nor consistent with the decision text, the ordering paragraphs, or Appendix C. Hence, CIU seeks a modification of Appendix A to clarify that customers who participate in existing interruptible programs or the new BIP may also participate in the OBMC program.

CIU also seeks to modify the 15% total required energy reduction against the prior year's usage for the same month, average peak, to include the ability to adjust prior year's usage to reflect reductions due to business conditions or plant operating conditions.

Finally, CIU seeks a modification to clarify that a customer's participation in the OBMC program shall be limited to rotating outages in the territory of the utility from which it obtains service. This means that customers in PG&E's service territory should not be required to shed load during outages in SCE's service territory.

3. CSI and TAMCO

CSI and TAMCO filed a joint petition to modify D.01-04-006 so that, as transmission level interruptible customers of SCE, they may participate in the OBMC program. These companies contend that they have certain critical loads that must be protected from interruption and can only be shut down in a very deliberate and time-consuming process.

CSI and TAMCO acknowledge that the decision provides categorical exclusions from rotating outages to essential use customers, those participating in the OBMC program, and net power supplies to the grid. However, they believe that the decision is incomplete because it does not provide an expedited appeal process on the basis of health and safety to customers that do not fall within one of the categorical exemptions from rotating outages. CSI and TAMCO conclude that the decision should be modified with the following ordering paragraph:

"Transmission level industrial customers for whom exposure to rotating outages would create health and safety problems for employees and/or members of the public, or for whom rotating outages would cause significant damage to production equipment, may submit requests to the head of the Energy Division requesting an exemption, either partial or complete, from rotating outages. Their request shall include an explanation of all measures taken and/or evaluated for resolution of the health and safety problem short of exemption from rotating outages. The head of the Division shall rule on each application within 5 working days of receipt and shall immediately inform both the customer and the serving utility of the determination in writing."

As an alternative, CSI and TAMCO seek to modify the decision to clarify that interruptible customers may participate in the OBMC program.

4. California Industrial Gas Companies

California Industrial Gas Companies, or Companies, filed a joint petition to modify D.01-04-006 so that they may participate in both the interruptible program and in the OBMC program. These Companies produce a wide range of industrial gases used by various entities in their production of critical products and provision of critical services to the public. These gases include oxygen, hydrogen, and nitrogen

The California Industrial Gas Companies would participate in the OBMC program if permitted to do so. However, Section 2.4.9 of Attachment A to the decision prohibits OBMC program participants from also participating in capacity interruptible programs. The Companies believe that this prohibition prevents them and their customers from protection against exposure to unlimited rotating outages.

While the Companies acknowledge that their industrial gas plants can shut down quickly, they explain that it takes up to ten hours after restart to produce usable industrial gas products. Because of this ten-hour restart period, even a couple of rotating outages close in time will significantly disrupt production and quickly deplete inventories of critical gases and expose the Companies' customers to the potential of a disruption in supply.

The California Industrial Gas Companies seek a modification of D.01-04-006 that exempts them from rotating outages provided they reduce usage by at least 15% when the utility implements rotating outages in their service territories. This 15% reduction would be measured by comparison to the average demand for the previous ten similar non-event dates, which is identical to the reduction requirement set forth in the OBMC program. In the alternative, the Companies seek a modification to the decision to prohibit industrial gas facilities from experiencing more than three rotating outages in a seven-day period. If in a given seven-day period interruptions are called in addition to rotating outages, the interruptions should count toward the three-event limit for rotating outages. For example, if an industrial gas company is interrupted twice in a seven-day period under its interruptible contract, it could only be subject to one rotating outage during the remainder of that period.