Summary first, comments second.
 
Short read of SDGE proposal:

Plan establishes procurement and recovery strategy for SDGE as standard offer provider post Jan 1, 2003.  Procurement plan would be submitted annually for PUC approval with ongoing discussions to allow modifications to plan as needed. 
Supply side of plan comes from URG (SONGS, QFs, PGE and other bilateral contracts - about 1/4 of total requirement), state resources (DWR and CPA), and market purchases (short and long term, fixed and variable, peaking) in that order.  -     SDGE takes no responsibility for administering state-owned resources.  Takes only what is needed and not obligated to take anyting more.  Long term products procured through RFPs. 
-    Most details of portfolio kept confidential, except load forecast and RFP process. 
Demand side of plan is load forecast, net of DA load. 
-     DA load is identified through 90 day open enrollment period that starts 180 days before procurement plan is submitted.  Over 20 kW customers commit to 5 year departure.  Smaller customers commit to 1 year departure.  
-    Departing customers pay exit fee for DWR and URG costs.  Premature returns pay re-entry fee and spot pricing.
-    Departures not official until PUC rules on the procurement plan. 
Cost recovery through a PCAM (Procurement Cost Adjustment Mechanism).  Two components - energy (including ancillary services), and a balancing account adjustment component.
-    each component is adjusted monthly. 
Other policy gems thrown out for discussion:
-    State must maintain strong procurement role; e.g. administer DWR contracts, consider combining generating assets under State portfolio management
-    PA-style auction of standard offer, with departing customers treated the same as DA.

Direction of comments (through AReM would seem fine):

Departure should not be limited to open enrollment periods.  During open enrollment, certain amount of load, at least amount that would be supplied by market purchases, should be designated as fee-less.  During other times, departure is permitted with appropriate exit fee. 
Appropriate exit fee must be based on truly unavoidable costs and have not already been recovered through AB 1890 CTCs. 
Re-entry fee should only be required if returning customer wants PCAM.  Otherwise, customer gets spot price and there is no fee. 
5-yr and 1-yr commitment periods mean nothing and should be eliminated.  Returning customers get spot price or buy their way into PCAM. 
Pricing data used for PCAM should not be confidential.  Customers should know their risk exposure when buying PCAM - what's the portfolio, term of contracts, pricing volatility, etc.  Otherwise customer is kept in dark, not knowing pay they are paying for. 
Long term solution is auction or similar disposition of customers to market.  Solution is not for state to take over power plant management.

Sue - let's you and I talk first.  Is AReM going to comment?

 
 
 

-----Original Message-----
From: Steffes, James D. 
Sent: Monday, August 27, 2001 1:24 PM
To: Dasovich, Jeff; Kingerski, Harry; Mara, Susan
Subject: RE: IMPORTANT ! : Motion of San Diego Gas & Electric Company (U 902-E) for Adoption of an Electric Procurement Cost Recovery Mechanism and for Order Shortening Time


Harry -- Can you please review and provide input on comments?  Especially as it relates to keeping open the San Diego market.
 
Jim

-----Original Message-----
From: Dasovich, Jeff 
Sent: Monday, August 27, 2001 9:41 AM
To: Kingerski, Harry; Steffes, James D.; Mara, Susan
Subject: FW: IMPORTANT ! : Motion of San Diego Gas & Electric Company (U 902-E) for Adoption of an Electric Procurement Cost Recovery Mechanism and for Order Shortening Time


FYI.  We should discuss.
 
Best,
Jeff
-----Original Message-----
From: Dan Douglass [mailto:douglass@energyattorney.com]
Sent: Saturday, August 25, 2001 2:14 PM
To: Vicki Sandler; Tamara Johnson; Mara, Susan; Steve Huhman; Roger Pelote; Rob Nichol; Randy Hickok; Nam Nguyen; Jim Crossen; Dasovich, Jeff; Janie Mollon; Jack Pigott; Greg Blue; George Vaughn; Gary Ackerman; Ed Cazalet; Denice Cazalet Purdum; Curtis Kebler; Curt Hatton; Corby Gardiner; Charles Miessner; Carolyn Baker; Bill Ross; Karen Shea; Max Bulk
Subject: IMPORTANT ! : Motion of San Diego Gas & Electric Company (U 902-E) for Adoption of an Electric Procurement Cost Recovery Mechanism and for Order Shortening Time


Yesterday, SDG&E filed a motion for adoption of an electric procurement cost recovery mechanism and for an order shortening time for parties to file comments on the mechanism.  The attached email from SDG&E contains the motion, an executive summary, and a detailed summary of  their proposals and recommendations governing procurement of the net short energy requirements for SDG&E's customers.  The utility requests a 15-day comment period, which means comments would have to be filed by September 10 (September 8 is a Saturday).  Reply comments would be filed 10 days later.

The filing provides the following discussion of direct access:


  _____  

"Developing the net short requirements of consumers depends on the extent to which they might be served instead by third party providers. The level of direct access will affect these net short requirements. At present, there is substantial uncertainty concerning the future disposition of direct access and third party supply of retail customers that jeopardizes creation of an optimal plan. This uncertainty has the potential for increasing costs to San Diego retail customers as a result of unnecessary over- or under commitments. To resolve this uncertainty, the Commission needs to coordinate direct access with resource planning, at least on an interim basis. SDG&E discusses below how to provide for this coordination. 

As the retail market matures, SDG&E expects that direct access elections will gain stability and will not be characterized by severe volatility. That stability will allow planners to make reasoned assumptions on direct access and rely on them in developing a procurement plan. However, today, direct access is subject to substantial uncertainty. Before the high prices of the summer of 2000, approximately 20% of SDG&E's retail load had elected direct access. By the beginning of 2001, direct access had reduced by nearly half. More recently, SDG&E has seen an increase in direct access, perhaps as a result of two factors: first, would direct access customers be able to avoid paying a share of CDWR contract costs, and second, would the state suspend direct access, as appears to be permitted under ABx-1 1. Furthermore, the legislature is considering legislation that would permit direct access, and other bills that would encourage municipal aggregation of load. The effect of this latter bill is similar to direct access, but it could cause large quantities of load to leave or return to the system quite abruptly. 

These events illustrate the need for added coordination between direct access and resource planning. The necessary coordination could come by using an open enrollment period each planning cycle under which direct access elections take place. During that enrollment period, the utility is provided information on the amount of load electing direct access (or municipal aggregation) and the length of the direct access commitment. This open enrollment period would last for 90 days and commence 180 days before SDG&E is scheduled to submit its procurement plan. Customers over 20kW would make commitments to service by suppliers other than SDG&E of at least 5 years. Smaller customers would make minimum one year commitments. These commitments and the use of a specific enrollment period would provide SDG&E with the information it needs to plan to meet net short requirements and minimize the risk of over- or under-commitment. 

In order to ensure an orderly process that protects consumers, change of service would not occur until the commission ruled on the procurement plan, and, to the extent that the commission determined that excessive direct access placed an unreasonable burden on utility customers, it could choose to limit direct access. Those electing to leave utility procurement would pay an exit fee to cover the costs of commitments made by CDWR and utility retained generation committed to those customers in order to protect remaining customers. As a result of this change, SDG&E would not plan to provide commodity service to departing customers. Customers returning from direct access prematurely would be subject to a re-entry fee and to spot energy pricing, again to protect those customers who did not elect to switch.
 
Coordinating direct access with the planning process, at least for a near-term period, is important to ensuring a reasonable procurement plan."

  _____  


The filing also briefly discusses competitive default supplier role:

  _____  

"When the State embarked on industry restructuring, one purpose was to take advantage of the benefits that competitive markets can provide. Although California's experience with markets has not been as anticipated, it is still possible that a disciplined application of the market with adequate regulatory oversight can offer advantages to consumers. In fact, some states have undertaken to use the competitive market to meet customers' net short requirements. For example, in parts of Pennsylvania, the State decided to auction off a piece of the procurement obligation to the competitive market. California may decide that it wants to do the same type of thing. If a portion of the net short is auctioned off in this manner, from a planning standpoint, it should be treated the same as direct access: SDG&E will need adequate notice and information to facilitate its planning for any net short position remaining to be served, and the same use of exit fees and re-entry fees should also apply."

  _____  


There are a number of issues here which I think WPTF may want to comment upon, as we have dealt with many of these issues in previous filings.  Please let me (and others) know if you agree.
 
Dan

Law Offices of Daniel W. Douglass
5959 Topanga Canyon Blvd.  Suite 244
Woodland Hills, CA 91367
Tel:   (818) 596-2201
Fax:  (818) 346-6502
douglass@energyattorney.com

----- Original Message ----- 
From: Evans, Darleen <mailto:DEvans@sempra.com> 
 
Sent: Friday, August 24, 2001 4:49 PM
Subject: Motion of San Diego Gas & Electric Company (U 902-E) for Adoption of an Electric Procurement Cost Recovery Mechanism and for Order Shortening Time




<<A.01-01-044 Procurement Plan(v1).DOC>> <<A.01-01-044 Exc. Summary(v1).DOC>> <<A.01-01-044 Motion(v1).DOC>> 


_________________________________

Darleen Evans

Sempra Energy - Law Department

619-699-5056

devans@sempra.com <mailto:devans@sempra.com>