Update on Real Time Pricing

An update on Real Time Pricing for the SVMG Energy Committee:

The CEC has received $35 million through recently-enacted legislation to
install interval meters on loads < 200 kW and upgrade those existing
real-time meters for communication that require it. They are working with
Roger Levy, a consultant, to finalize contracts with the utilities to begin
installing meters in May. The CEC's contact at PG&E is Tom Smith.

To implement required billing changes, Roger Levy reports that the utilities
seem open to outsourcing if necessary. Several vendors have been identified
and the CEC and the utilities are evaluating them. The need to outsource and
the scope depends on the RTP rate design.

John Wilson at the CEC is charged with heading up rate design. He is in
contact with the PUC's energy director if RTP is to be implemented through
utility rates and a CPUC process. As an alternative, DWR itself could bill
for power it purchases using RTP, effectively functioning as an Energy
Service Provider.

Art Rosenfeld briefed the Governor and received a supportive reaction last
Thursday.

To reiterate, Real Time Pricing is the only initative currently in
discussion that would create an incentive to reduce demand precisely during
those periods when actual supply is shortest relative to demand (and prices
are highest). It is essential to avoid blackouts that demand reductions
occur when they are most needed, given current projections of thousands of
MW of shortfall. Current demand reduction programs are not projected to
cover the anticipated shortfall, and rates designed with higher prices
during certain time periods cannot deliver a customer demand response to
actual conditions.

Since this affects all SVMG members either directly or indirectly, I believe
we need to give consideration to how to establish the historical use basis
against which deviations subject to real time pricing would be measured, and
also whether participation should be mandatory or voluntary, and what the
alternatives would be.

Regards,

Peter Evans