The purpose of this paper is to establish a framework for considering
the necessity to phase eligibility for direct access. Technical
rationales have been acknowledged by the CPUC in D.96-01-006 as
the only basis for restricting eligibility. There may be additional
rationales influencing phasing or control of eligibility concerned
with equity or better performance of direct access programs that
should also be considered. The Direct Access Working Group is
in the process of assessing the existence and extent of any such
rationales. This paper provides a status report concerning what
is known as of this point and establishes a framework for resolving
whether phasing is required.
There are technical and policy reasons for considering limiting
eligibility to direct access. Limiting eligibility results in
phased introduction of direct access, such as the five-year 1998
to 2003 phase-in identified in CPUC D.95-12-063 and re-characterized
as a slowest possible phase-in schedule in D.96-01-006.
Technical rationales limit the feasibility of introducing direct
access any faster because some requirements essential for it cannot
be made available except in initially limited capacities that
can be augmented through time until the entire customer population
can be served.
A much softer consideration for limiting eligibility are rationales
based on a desire to "guarantee success" for those consumers
who do wish to pursue direct access. One can theorize that in
an immature industry, the capability to handle the entire customer
base successfully might be fully possible in the first or even
second years. Thus, for these rationales it might be feasible,
but not desirable, to permit full eligibility.
Finally, a third category of rationales for limiting access are
ones that address equity concerns. For example, CPUC D.95-12-063
requires that all customers classes benefit from direct access,
rather than restricting direct access eligibility to economic
sectors or by customer size. Equity concerns have also been identified
about providing DA to single firms in industries with limited
competition among otherwise similarly situated firms.
There are three proposed technical rationales for limiting eligibility
to direct access based on technical considerations. These technical
considerations emphasize what is feasible, as opposed to what
might be desirable from various perspectives.
The hypothesized technical rationales are:
1. data processing capabilities required to compute
settlement of ISO imbalance costs in a fair and equitable manner
will not be in place in sufficient volume at allow unlimited eligibility.
2. metering and communication systems essential to provide
the information required for settlement cannot be installed in
sufficient volumes to allow unlimited eligibility.
3. existing UDC billing systems for small customers have
limited capabilities to handle the computations and bill display
requirements of direct access, and new systems will not have sufficient
capacity to allow unlimited eligibility.
Unlike the technical considerations that constrain the eligibility
for direct access, this second category of rationales suggest
limiting eligibility because it would be "unwise" to
allow full eligibility, since to do so might jeopardize successful
implementation. For example, the opportunities for millions of
residential and small commercial customers to obtain direct access
by a limited number of providers who do not now have any legal
standing or retail customer service networks could result in far
more customer contacts than can possibly be handled. This would
result in unsatisfactory service, disappointment, and disillusionment
with the prospects of direct access. Thus to "guarantee success"
for introduction of direct access, a limitation on eligibility
of customers would be introduced. Clearly the process of selecting
the customers that would be offered the opportunity would be accused
of being unfair, but the explanation of "having to wait your
turn" may be more palatable than a free for all in which
many customer are unserved.
Examples of customer service rationales include:
1. immature industry customer service constraints result
in difficulties of new firms staffing up to handle millions of
small residential and commercial customers who will have many
questions about general issues of restructuring as well as specific
questions about individual company offers.
2. necessity to use both 1997/98 for testing protocols
recognizes that various customer education/notification of eligibility
protocols have to be developed to allow successful marketing strategies
that appeal to all customers given broad disparities of education,
language, familiarity with contracts, and other issues.
CPUC D.95-12-063 clearly requires that all customer classes participate
in, and benefit from, direct access.[1] This decision was clearly
responsive to consumer protection group concerns that only large
customers would benefit from direct access. Such a requirement
imposes a policy decision on the mix of customers that will be
allowed to participate. Extending this equity concern may be appropriate
in other ways that restrict which customer may choose to participate
in order to maintain parity among competing firms within an industry.
Examples of equity rationales include:
1. participation of all customer classes to ensure
broadly distributed benefits to all ratepayers.
2. restriction on size of direct access loads to distribute
the numbers of participants in initial or early years of direct
access programs.
3. restrictions on participation to maintain parity in
energy costs among similarly situated firms competing within a
given industry.
The following information attempts to identify the current status
of efforts to assess a particular rationale, the DAWG technical
committee addressing the issue (if any), and the next steps required
to resolve the concern.
Current Status: Lack of clear understanding of the scheduling
coordinator is impeding resolution of information requirements,
hence metering and communication data needed for imbalance settlements,
hence data processing issues for either ISO or the SCs.
Next Steps: (1) clarify SC role and information flows
(2) determine information requirements for imbalance settlements
(3) provide info requirements to M/C Committee
(4) obtain M/C options for metering and communication data flows
(5) evaluate data processing by SC and ISO and determine if bottlenecks
are possible
Current Status: Installation assessment has to wait until
after Metering Workshop on June 21
Next Steps: (1) develop metering/communication systems
options compatible with information requirements
(2) resolve issue of UDC versus other entity installation
(3) resolve/identify options for UDC investment recovery for metering/communication
systems
(4) develop understanding of industry rampup capabilities
(5) develop understanding of installation of communication systems
issues
(6) evaluate issues concerning data flow into billing systems,
including: different data, volume of data, data distribution to
multiple entities, bill payments forwarded to multiple entities,
and new system development and shakeout timelines
(7) integrate all considerations into fastest possible rampup
installation schedule and forward to Implementation Committee
DAWG Committee(s): None, at least at this time this issue
is before the Unbundling/Rate Design/PBR Working Group (URDWG)
which has no explicit assignment to assess this issue or to report
its conclusions to DAWG/Implementation.
Current Status: Issue was first raised at May 9, 1996 URDWG
meeting in presentations from utility billing system experts.
SCE and PG&E asserted they can handle up to 100,000 customers
only with C/I systems adapted to serve DA billing purposes. SDG&E
believes a new system coming online in mid-1997 can handle direct
access requirements. Ambiguities exist about whether virtual direct
access billing requirements similarly impact emergent C/I billing
systems, and whether info requirements can be addressed in a common
system
Next Steps: (1) determine whether URDWG will sponsor this
assessment in a timely manner, or whether DAWG needs to address
it
(2) obtain evaluation of detailed data flow characterization for
III.B (step 6), and: (1) identify extent to which C/I data processing
systems can handle DA requirements, and (2) identify timelines
for online dates of new billing systems, their modularity to expand
through time, and associated customer support revisions to utilize
multiple billing systems
(3) evaluate differential billing system requirements for physical
versus virtual direct access, and the billing systems required
to support either or both
(4) identify maximum numbers of customers feasible for DA (either
physical or virtual) and forward to Implementation Committee
Current Status: This hypothesized constraint has not yet
been acknowledged or discussed in public setting. Quality of service
might be included in rules for market participants.
Next Steps: This topic needs to be legitimized by the group
prior to substantive DAWG activities to evaluate it.
Current Status: Testing through the use of pilots has just
emerged as a topic that the Implementation Committee has to address
in its scope of work. Whether the concerns about consumer education
and reductions of those concerns are sufficient to delay full
eligibility in order to reduce these concerns has not yet been
established.
Next Steps: This topic needs to be assessed more fully
to determine whether intensive program testing, especially for
small commercial and residential customers, can measurably improve
protocols of notification, educational materials, and other facets
critical to successful experiences with direct access selection.
Current Status: CP/E has established a schedule to examine
fair, non-discriminatory market access, but has not gotten to
this issue.
Next Steps: (1) identify what customer groups or classes
must be used for determining eligibility
(2) determine how to allocate MW of peak demand (capacity) or
numbers of participants among customer classes
Current Status: Not yet addressed
Next Steps: (1) determine whether CPUC load constraints
refer to minimum size to reduce ISO burdens or maximum size to
increase participation
(2) clarify whether a common load constraint for bilateral contracts
and aggregation is appropriate
(3) hand off size limits for computation of customer participation
levels
Current Status: not yet acknowledged as a DAWG issue
Next Steps: (1) determine whether any industries merit
specific efforts to maintain parity based on access to energy
suppliers
(2) determine which industries ought to have eligibility controlled
(3) develop mechanisms to ensure "all or none" for targeted
industries
(4) develop customer notification and selection protocols to implement
"all or nothing" selection in targeted industries
CPUC D.95-12-063 and D.96-01-006 describe phase-in of direct access,
if necessary, in terms of megawatts of customer peak load demand.
This is not necessarily the only, or even the best, descriptor
related to phase-in.
There are at least two options for describing how direct access
can be phased in:
1. peak demand or energy consumption of the customers who
participate; and
2. numbers of customers that may participate, either in the aggregate
or by various customer classes.
All of the hypothesized rationales for phase-in of eligibility
have in common the difficulties of dealing with numbers of customers,
rather than the size of the load that these customers represent.
For example, ten 500 kW commercial customers are at least ten
times more complex to deal with than a single 5 MW industrial
customer, due to all of the customer service, data processing,
metering and communication system infrastructure, contractual
agreement paperwork and other elements of a transaction that takes
place of a per customer basis, not on a peak demand of the customer
basis. This is in sharp contrast to current CPUC policy decisions.
This commonality of the hypothesized rationales suggests that
the CPUC policy decision needs to be revised to state eligibility
in terms of numbers of customers, rather than megawatts of peak
demand or capacity represented by these customers.
[1] D.95-12-063, p. 69. states that "...eligibility in the initial phase of direct access will be open to a representative number of customers from all customer groups. We view the MOU's suggestion of an 8 MW threshold limit applied to individual customers and aggregated customer groups for the initial phase as a reasonable eligibility parameter...We direct utilities to confer with parties and recommend eligibility parameters in the initial phase of direct access."