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Enron Mail |
Dorothy:
Thanks very much for the meeting yesterday. From my perspective it was ver= y=20 useful. Per yesterday's conversation. More (much) to follow (soon). This is what = we=20 gave the Govenor, Hertzberg, Burton, Brulte, etc., about 2 months ago (i.e.= ,=20 prior to Davis' 20-20 announcement, etc.) You know how to get a hold of me. Best, Jeff ***************************************************************************= *** ***** Proposal to Alleviate California=01,s Electricity Shortage Through Incentives to Reduce Demand Objective =06=15 Provide consumers with financial incentives to reduce demand in=20 anticipation of Summer 2001 electricity demand Proposal =06=15 The California PUC should require the utilities to immediately condu= ct=20 on-line auctions for demand reductions totaling at least 2,000 MWs =06=15 Alternatively, DWR could run the auction and implement the buy-down= =20 program. However, if it is determined that DWR requires additional authori= ty=20 to execute the auction, the State should avoid any further delays and direc= t=20 the CPUC to order the utilities to implement the buy-down program immediate= ly. The Auction Process (assuming the utilities implement the program) =06=15 Businesses and large consumers willing to commit to sustained reduct= ions=20 through November 1, 2001 would submit bids indicating the price they would = be=20 willing to receive for a given quantity of permanent reduction=20 =06=15 If the =01&supply=018 of available reductions offered in the auction= exceeds=20 2,000 MWs, the utility should accept them, or explain to the Commission why= =20 they chose not to accept them=20 =06=15 Businesses should be permitted to include in their bids the continue= d=20 payment of wages to compensate employees for hours of employment foregone d= ue=20 to demand reductions A Single Price Approach =06=15 A single price approach to a demand buy down program has two key=20 disadvantages: =06=15 First, customers who would be willing to reduce demand for a lesser = price=20 will be overpaid, much in the same way the single price auction in the PC= =20 overpaid lower cost generators. The state would overpay for reduced demand= =20 under the single price approach. =06=15 Second, the single price may not attract sufficient demand reduction= s. =06=15 Further, the single price approach does not provide greater certaint= y=20 regarding the cost of demand reductions. By conducting an auction the stat= e=20 will be able to observe all bids and pay on an as bid basis, starting with= =20 the lowest bids necessary to provide the required demand reductions up to t= he=20 cost the state is willing to pay. =06=15 A single price approach, however, could work if targeted at customer= s who=20 would not participate in an auction, i.e. residential customers. A well=20 publicized program of rebates to residential customers who use less than la= st=20 year would further reduce demand in the state. Thus the auction and the=20 single price could be structured in a complimentary fashion. =06=15 The costs of the incentive program should be paid for by all consume= rs,=20 since all consumers will benefit from the decreased risk of service=20 interruptions caused by the demand reductions =06=15 If DWR implements the program, DWR=01, would recover its costs throu= gh rates,=20 similar to the cost recovery mechanism used to recover power purchase costs= . =06=15 If the utilities implement the program, the California PUC would inc= lude=20 program costs in rates collected from customers =06=15 The auction should be conducted online which will increase transpare= ncy and=20 reduce the time required to complete the process Hazards to Avoid =06=15 Avoid allowing lengthy utility and/or PUC review to delay implementa= tion of=20 the reductions _ Any unnecessary delay increases the chance that California will fail to= =20 achieve the reductions needed to help avoid severe shortages in Summer 2001 _ There are numerous firms offering moderately-priced on-line auction=20 services that can quickly provide auction services to the utility _ The utility should immediately contract for on-line services and present= =20 the contract to the California PUC for prompt approval _ The utilities should also include in their submittal to the PUC a simple,= =20 streamlined set of pre-qualification criteria that would apply to bidders _ The pre-qualification criteria should be designed with the goal of making= =20 participation as easy and expansive as possible _ Pre-qualification will encourage legitimate offers and reduce transaction= =20 time _ Once the PUC has approved the auction process, the PUC should not apply a= ny=20 additional review to the auction results _ Auction =01&pre-approval=018 will ensure that the utilities are actively = and=20 constructively engaged Actions =06=15 Governor=01,s office directs PUC to initiate auction and residential= program =06=15 CPUC directs utility to submit auction proposal within 30 days _ Establish abbreviated schedule _ Provide parties with abbreviated opportunity to comment _ Finalize decision approving auction proposal within 15 days of utility=20 submission =06=15 CPUC rules in advance that results of auction are prudent, and utili= ties=20 conduct auction by May 1
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