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Enron Mail |
As you know, the SVMG Energy Committee plans to discuss variable pricing,
specifically Severin Borenstein's proposal, at its next meeting on Monday. A copy of his proposal is attached. As I indicated at last week's meeting, I believe the SVMG should consider endorsing the proposal, with certain conditions, for the following reasons: - It provides the broadest, most transparent incentive to reduce consumption precisely during hours of shortage, thereby reducing the chances of involuntary curtailments (blackouts). - It creates a demand response to high prices, thereby reducing the market power enjoyed by power sellers. This may be one of the only factors contributing to a more reasonable, stable wholesale price environment if there is no federal intervention. - It offers a financial opportunity for those users who are able to reduce their demand overall or shift their demand to off-peak periods. The following is a "strawman" draft of an endorsement by SVMG for discussion Monday. I would point out that the strawman is silent on the question of whether customers who choose to opt out of variable pricing must be interruptible, an issue of concern to some. Also, I hope to have additional input from Barbara Barkovich before Monday's meeting. Thanks. Peter Evans ____________________________ Power prices paid by customers must create the incentive to reduce demand during specific hours of supply shortage (and high prices). This gives the greates possibility of getting through this summer without running up a staggering DWR bill and suffering through frequent blackouts. Getting people to reduce demand in response to higher prices would also reduce the market power of sellers. We therefore endorse the proposal to price power use above historical levels (and rebate for power use reductions below historical levels) at the real-time energy price. Our support for this concept includes the following conditions: 1. Historical consumption levels, which would be served under regulated rates, would be based on last year's use, taking into account the customer's historical load profile. Adjustments would be made for increases/decreases in number of employees or number of square feet per electrical meter to account for changes in business volume. Historical consumption served under regulated rates could be adjusted by a ratio (say 75% to 95%) to build in some expectation of conservation. 2. Participation All customer classes would participate. In the absence of real time load data (i.e. residential customers), monthly consumption deviations from historical levels would be priced at the monthly average spot price. 3. Alternatives for Above-Baseline Use It must be explicitly clear that customers have completely unfettered ability to procure power for their above-historical power requirements on their own if they choose to. This could include self-generation, bilateral forward purchases, or purchasing at the spot price from the DWR. 4. Sunset This approach should automatically terminate at the end of 2001, requiring government or regulatory action to extend it. - RTP proposal 32901.doc
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