Re: AB31X - Response Needed

From: Harry Kingerski@ENRON on 03/06/2001 09:02 AM
To: Susan J Mara/NA/Enron@ENRON, Jeff Dasovich/NA/Enron@Enron, James D
Steffes/NA/Enron@Enron, Paul Kaufman/PDX/ECT@ECT
cc: Fred L Kelly/ENRON_DEVELOPMENT@ENRON_DEVELOPMENt, Dave
Roberts/HOU/EES@EES, Gary Weiss/HOU/EES@EES, Scott Stoness/HOU/EES@EES,
Jubran Whalan/HOU/EES@EES, Neil Bresnan/HOU/EES@EES, Leslie
Lawner/NA/Enron@Enron, Robert Frank/NA/Enron@Enron, Scott Gahn/HOU/EES@EES
Subject: AB31X - Response Needed

Mike Day left me a message saying in discussions yesterday on AB 31X
(Wright's load curtailment bill), the utilities were making the point that
31x should only address bundled customers since the utilities were making the
incentive payments out of funds that would otherwise go to pay DWR (in
effect, the curtailments are reducing the utility net short position). They
were ok with having ESPs aggregate the loads of bundled customers (which will
be a very significant win, if we get it). They think DA customers can get
curtailment benefits through existing (and new) ISO programs.

The dilemmas are:
the ISO programs may or may not be finalized for this summer and may or may
not give incentives that are as beneficial as AB31X the utility plan
discriminates against DA ( The ISO program definitely does not sound as
beneficial as AB31X. I have a call into the ISO, the last I heard was that
the Demand Relief Program was the closest product they had to being finalized
)
preferably, the ISO would administer the programs described by AB31X for all
customers but that puts the ISO in the position of having to get approvals
from FERC for a CA-legislated program (they will have to do this anyway)
(nearly) all of our customers will be bundled this summer anyway, so there's
no immediate loss from going with the utility's position

We owe Mike an answer today. Any thoughts? My suggestion at this point is
to stick with the high road and argue for non-discriminatory treatment with
equal incentives paid to bundled and DA customers. At this point a
non-discriminatory treatment with equal incentives is the only way you are
going to get participation.

Background: AB31X would give $500/mwh incentives for day ahead curtailment,
$750/mwh incentives for day-of curtailments, and incentives to be determined
for scheduled load reductions. The ISO would invoke the programs based on
system conditions. These prices seem reasonably priced and should definitely
persuaded customers to participate.

The ISO so far has put in place the equivalent of a scheduled load reduction
program, with specific payments, but has not finalized any day ahead or day
of programs. The current proposed ISO Programs outlined Below

Program 1)

Demand Relief Program

The customer will curtail prior to stage 3 rotating blackout. Loads without
back-up generators can be curtailed up to 24 hours per month and loads with
back-up generators can be curtailed a total of 21 hours for the duration of
the program. The duration of the program is scheduled for June 1 through
September 30.

There will be a fixed monthly capacity reservation payment, adjusted based on
actual average monthly performance, and a performance energy payment that
will be made for each curtailment. The performance energy provides incentives
for over performance and penalties for under performance. Additionally, loads
that don't perform will be penalized through loss of a portion of their
capacity payment. Settlement will occur through SC's/Aggregators separately
from the normal retail billing process. The reservation price is preset at
$20,000 per MW-month and the curtailment performance payment is $500 per MWh.

Eligibility for this program is still being worked out. Currently loads that
were served under an interruptible tariff in 2000 were not allowed to
participate in the February 6 submittal for the Summer 2001 program. ISO
management may open, subject to board approval, the Demand Response Program
to a subsequent bids from PG&E and possibly SCE interruptiple customers that
have exhausted their required 2001 curtailments, pending CPUC rulemaking on
interruptibles.

As soon as the board approves in the program, which is expected in days, the
ISO will initiate a major activity immediately to have all participants ready
by May 15 to establish the 10 day baseline for performance measurement.

Program 2)

ISO Discretionary Load Program

Intent of this program is to attract significant voluntary curtailments
before the ISO enters emergency conditions. This program provides a set
energy-only payment of $250/MWh. This provides the ISO a Known curtailment
comminment.

Notifications will be sent to SC's/Aggregators when the ISO issues warnings
and anticipates a stage 1 emergency, typically early morning. There will be
60 to 90 minutes for the SC's/Aggregators to issue their voluntary
curtailment notices and firm-up the actual block of curtailment available to
the ISO. This Program will operate through March 2002. ISO plans to accept
proposals from aggregators starting on February 28-March 7th.

Payment will be based on an as-delivered basis with a preset payment per
MW-hour. ISO is considering several options on where to set there price
range. One proposal is $250MWh-$500MWh. There is no capacity or reservation
payment.

Program 3)

ISO Participating Ancillary Services Load Program

This allows loads to bid into the A/S and supplemental energy market. The
program allows loads to participate as price-responsive demand in the ISO A/S
market and Supplemental markets. This market has been extended indefinitely
as part of the semi-annually filing to FERC in the ISO tariff.
As an amendment to the tariff the ISO is making the following changes. The
telemetry requirement has also been relaxed some for loads bidding into the
supplemental energy market. Loads bidding into the Non-spinning and spinning
reserve will still require telemetry. Loads can bid in above the $150 cap but
must have cost justification for bids selected above the cap.

Jubran