The Commission's Energy Division held a workshop yesterday (May 21st) with
the stated objective of "developing a viable program for real time pricing
options which will attract sufficient customer participation to have a
meaningful impact starting July 1, 2001."

In short, the workshop provided the California Energy Commission (CEC) a
forum to push the proposal it advanced in the SCE/PG&E rate design
proceeding (which has now been fleshed out more through proposed tariff
language, attached).  The Energy Division is taking the view that the CEC
proposal is the "point of departure."  In other words, that's what's going
to be adopted unless changes are made in this workshop process. The UDCs are
taking the view that there is no way they can implement the CEC's proposal
by July 1.

The hang up, from the UDCs' end, appears to be the "two part" nature of the
proposal.  Basically, the CEC has proposed (based on the program currently
being used by Georgia Power) that a customer pays for baseline level of
usage at standard tariff prices and differences in usage from the baseline
are billed at RTP prices. The UDCs state that they could have their billing
systems ready in a month to bill customers at market prices for entire
consumption, but it would take four to six months to have the billing
systems ready to administer the two part proposal.  The CEC is insistent
that given the fact that the RTP program will be voluntary, the number of
customers that will be on the program initially will not be large and the
UDCs should, at minimum, be able to establish a manual system to bill these
customers.  The UDCs, in return, state that it makes no sense to waste the
time and effort to establish a manual system if you are working toward
greater participation --i.e., start working toward an automated system.  The
result of the discussions was that the UDCs, CEC and the Energy Division are
suppose to get together in a smaller working group to see what can be done
about the billing constraints so that something can be in place on July 1.
On possible solution discussed is the decoupling of the standard tariff
piece of the customer's bill from the real time piece for a few months until
the billing constraints are worked out.  I think the idea is that the
customer would be billed at the standard tariff price for all usage with a
true up later on for the real time pricing on the incremental portion  of
the usage.

Other points of interest arising from the workshop:

The CEC's proposal calls for "RTP Values" to be prepared by DWR and the ISO
for each of the 24 hours of the following day. These prices will be posted
on the ISO and DWR websites. DWR is concerned, however, about the market
having too much information about its procurement practices.  Therefore DWR
will use information readily obtainable in the market (e.g., Platts index
that publishes next day prices for on and off peak).  DWR, however, will
make certain adjustments to these published prices.  It was not clear
exactly what adjustments would be made.  There was concern from participants
at the workshop that the DWR price would not be transparent.

A lot of discussion ensued as to whether the $35 million authorized by AB
29X will be sufficient to pay for all the meters (the plan is to put an
interval meter in place for all customers over 200 kW).  SCE has taken the
position that the $1400 per meter which is being allocated is not
sufficient.  SCE will not start installing meters until it receives
clarification from the Commission that it will be allowed to track the costs
in  a memorandum account for potential future recovery (SCE plans to file an
advice letter on this point this week).  There is also concern about what
the $1400 buys you. Apparently the meters will have the capability to
provide a customers pricing data as frequently as they wants it, but if the
customer wants to access that data on a more frequent data than daily, it
will have to buy additional software (about $1000).

At the tail end of the day there was some discussion on how real time
pricing would interact with other rates and demand responsiveness programs.
An analysis was prepared by John Flory (private consultant working for the
CEC on this) which sets forth "his best shot" on how real time pricing can
supplement several other demand responsiveness options  to provide
additional demand cost reduction benefits. For example, a customer on both
the Scheduled Load Reduction Program and on RTP could, during his non-SLRP
hours respond to RTP prices.  Mr. Flory prepared a chart which highlights
which programs he believes could work together and which will not.  A copy
of this material will be faxed to Sue Mara (SF) and Harry Kingerski
(Houston).

The process from here on out is not clear.  The Energy Division will write
up a brief report on the workshop (without recommendations).  The small
working group referenced above will convene and furnish a report back by the
end of next week.  After that it gets kind of fuzzy as to how something will
be implemented by July 1.

If you have any additional questions about the workshop, please call.


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Jeanne Bennett





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