Mike Jaske, CEC/Ed Yates, CLFP
June 17, 1996
The purpose of this paper is to establish a framework
for evaluation of phasing of eligibility for direct access. Technical
rationales have been acknowledged by the CPUC in D.96-01-006 as
the primary basis for restricting eligibility, but there may be
additional rationales influencing phasing or control of eligibility.
It is implicit that these concerns involve equity or better performance
of direct access programs. The CPUC provides an opportunity for
other concerns to be addressed by the Direct Access Working Group
(DAWG). The DAWG Implementation Committee is in the process of
assessing the existence and extent of any such rationales. This
paper is a second draft that describes various hypothesized rationales,
describes what is known about them, identifies the need to clarify
how phasing is described, and enumerates known phasing proposals
of parties.
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,
but which can be remedied through time until the entire customer
population can be served.
Additional considerations 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 not 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
in one or two years.
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 (of the UDC,
scheduling coordinator, ISO, and aggregator) required to compute
settlement of ISO imbalance costs in a fair and equitable manner
will not be in place in sufficient volume to 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.
4. demonstration of integrated system performance
involves determinations that the combination of hardware/software
identified above are successfully integrated into new systems
that perform to specifications.
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 customers are unserved. In addition, there may be opportunities
to permit customers with different risk tolerance to participate
in the early stages, while delaying lower risk tolerant customers
later in the phase-in queue.
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. These questions will
burden both UDC customers service organizations as well as new
energy providers.
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.
3. coordination of data/information flows
recognizes that many data handling activities will be different,
that complex systems to notify customers and process their responses
have to be developed and implemented, and protocols have to be
developed and implemented to ensure that basic billing continues
to occur when direct access begins.
CPUC D.95-12-063 clearly requires that all customer
classes participate in, and benefit from, direct access.[1] The
SCE MOU parties initiated agreement on this issue.[2] The CPUC's
decision was clearly responsive to consumer protection group concerns
that only large customers would benefit from direct access, and
to the SCE MOU's willingness to address this small customer concern.
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.
This section reviews various issues of eligibility
which may be elements of the various proposals summarized in section
V, but are not intrinsic to the phase-in option.
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.
We conclude that the commonality of the hypothesized
rationales supports revision to the descriptor to describe phase-in
of eligibility in terms of numbers of customers, rather than megawatts
of peak demand or capacity represented by these customers.
If an energy or peak demand descriptor were to be
used to limit customer participation, energy is a superior unit
than peak demand because peak demand penalizes seasonal customers.
Seasonal customers operating a few months of the year will have
a measured peak demand very high in comparison to their annual
energy. Annual energy, or allowing customers with offsetting peak
demands to be considered as a unit is a more fair method of addressing
specific customers within peak demand-limited phase-in schemes.
The SCE MOU recommended that aggregation be limited
to 8 MW per aggregator, at least in the original year. Is this
limitation justified by the technical issues now better understood
about implementation of direct access? Isolation of the ISO from
any individual customer data because of the scheduling coordinator
concept appears to have removed any reason for aggregator limits.
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.
Responsible Organization
WEPEX's Dispatch Integration and System Infrastructure
(DISI) Team and DAWG's Implementation and Metering/Communication
committees.
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 and energy
billing in general, hence data processing issues for either ISO
or the SCs. The WEPEX DISI Team had a proposed RFP for system
development work, but the schedule is already behind goals. DAWG
Coordinating Committee is submitting a written set of concerns
to WEPEX, and this topic is included.
Next Steps
(1) obtain a joint WEPEX/DAWG statement which clarifies
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
Responsible Organization
DAWG Metering/Communication Systems committee
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
Responsible Organization
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. All IOUs
agreed legacy billing systems for residential customers were inadequate,
as were some commercial/industrial systems. SCE and PG&E asserted
they can handle up to 100,000 customers only with emerging systems
adapted to serve DA billing purposes. SDG&E asserted its 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.
Recent information from PG&E and SCE assert they can handle
the phase-in schedule for direct access contained in D.95-12-063.
Next Steps
(1) determine whether URDWG will sponsor this assessment
in a timely manner, or whether DAWG needs to address it as part
of the August 30 report
(2) obtain evaluation of detailed data flow characterization
for V.B (step 6), and: (1) identify extent to which existing 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
Responsible Organization
This would most logically be the responsibility of
DAWG Implementation Committee.
Current Status
Integration of separate hardware/software systems
into systems demonstrated to work properly has been identified
recently. DAWG has no work underway at this time to assess this
concern.
Next Steps
(1) develop a task force of DAWG, DISI, and other
parties to: (1) develop a better understanding of the potential
data flows between various organizations, (2) understand the technical
parameters of these potential data and the communication systems
exchanging data
(2) develop an understanding of the hardware specifications
to permit this data exchange to occur
(3) identify the decision mechanisms required to
ensure that multiple organizations understand and will conform
to a standard for data exchange
(4) identify the need for hardware/software shakedowns
to ensure data communication works properly
Responsible Organization
DAWG Market Rules may be most appropriate, but this
subject is not on this committee's list of activities.
Current Status
This hypothesized constraint was discussed for the
first time at the June 5 DAWG Implementation Committee meeting.
Quality of service might be included in rules for market participants.
Next Steps
(1) develop guesstimates of the proportion of small
customers that might be willing to participate in year 1 and year
2
(2) evaluate the number of customer contacts, amount
of paperwork, and any necessary hardware purchases/installation
to accommodate direct access
(3) determine whether the capabilities of IOUs and
market providers could handle this volume of customer contact
(4) identify upper limits of customer contacts to
ensure satisfactory performance by IOU in 1997, UDC in 1998, and
market providers in both years
Responsible Organization
DAWG Implementation and Consumer Protection and Education
committees would be the most logical.
Current Status
Testing through the use of pilots emerged as a topic
that the Implementation Committee could address in its scope of
work, but DAWG recently agreed to postpone development of pilot
or testing programs beyond the August 30 WG report. 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 will be postponed beyond August 30. It
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.
Responsible Organization
DAWG Implementation committee would be logical.
Current Status
This topic is implicit in discussions of the hardware
aspects of DISI Team development of ISO settlement hardware/protocols,
DAWG Implementation Committee discussions of mandated participation
of residential and small commercial customers, but SCE suggests
it be highlighted in its right.
Next Steps
Once a clearer image of scheduling coordinator roles
and responsibilities, and the interface between the UDC and generation
service marketers emerges, it will be possible to develop protocols
to determine how data changes hands, and to conduct an assessment
of possible constraints.
Responsible Organization
DAWG Consumer Protection/Education and Implementation
committees
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
(3) identify appropriate notification and consumer consent protocols for use in the implementation stage of DA during 1997
Responsible Organization
DAWG Implementation Committee
Current Status
The parties to the "SCE MOU" provided their
understanding of minimum individual bilateral contact sizes and
maximum aggregation of loads by a single aggregator for various
years of the direct access phase-in included in that settlement.
Next Steps
(1) review rationale SCE MOU parties used for their
agreement
(2) determine what maximum and/or minimum direct
access participation would imply for the balance of a specific
customer's loads and its supply by the UDC
(3) determine what maximum and minimum limits DAWG
wishes to endorse for each year of a phase-in program
(4) hand off size limits for computation of customer
participation levels
Responsible Organization
The DAWG Implementation Committee is the logical
choice, since the industry consumers affected are not the residential
and small commercial consumers addressed by the Consumer Protection/Education
Committee.
Current Status
CLFP and CIU have expressed support for this concept,
but DAWG has not yet agreed that it should be assessed in depth
as part of the August 30 report.
Next Steps
(1) determine whether any industries merit specific
efforts to maintain parity based on access to energy suppliers
(2) identify representatives of these industries,
contact them, and determine whether the industry can develop feasible
options
(3) for those industries where voluntary solutions
cannot be identified, 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
Five specific direct access phase-in proposals have
been sponsored by various parties. These include: (1) SCE MOU
and D.95-12-063, (2) SCE, and (3) PG&E.
The Parties to the SCE MOU included a specific proposal
for phasing direct access and enumerated various eligibility parameters.
The CPUC D.95-12-063 endorsed the aggregate levels of peak demand
participation, but not the other parameters of the SCE MOU proposal.
These are summarized below.
Features of SCE MOU Proposal
| Eligibility Criteria | 1998 | 1999 | 2000 | 2001 | 2002 | 2003 |
| Minimum MW limit for individual customer | 8 | 2 | 0.5 | * | * | * |
| Maximum MW limit for multiple customer aggregation | 8 | ** | ** | * | * | * |
| Maximum number of accounts aggregated | ** | ** | ** | * | * | * |
| SCE MWs eligible | 800 | 1400 | 2200 | 4000 | 8000 | all |
| PG&E MWs eligible | 800 | 1400 | 2200 | 4000 | 8000 | all |
| SDG&E MWs eligible | 200 | 350 | 550 | 1000 | 2000 | all |
* to be determined after year 3 review.
** to be determined by CPUC.
In its review comments on Draft #1 of this paper, SCE has proposed
a variation upon the original phase-in schedule included in its
September 1995 MOU. The three years of a megawatt-delimited peak
demand phase-in schedule described in the SCE MOU would be preserved,
but after year 3 a major review would be conducted to determine
whether to continue phasing, and if so on what schedule.
CMA has proposed the following steps:
1. peak demand and/or energy-based limits should be allocated
to each rate class on the basis of actual 1996 consumption;
2. an open season to identify interest would be held
3. if interest in a specific rate class is oversubscribed, customers
would be prorated their historic loads provided a customer was
interested in direct access serving a pre-specified minimum;
4. if interest in a specific rate schedule is less than that allocated,
then the excess would be allocated to other rate classes over
subscribed; and
5. customers with only partial loads served by DA would be entitled
to obtain the remainder of their energy needs from the UDC or
from a supplier that purchases directly from the PX.
In its review comments on Draft #1 of this paper, PG&E has
determined that it supports phase-in of direct access, beginning
with 1,800 MW (800 MW each for SCE and PG&E, 200 MW for SDG&E)
of eligibility in the first year, and subsequent-year increments
as laid out in the CPUC's D.95-12-063. PG&E recommends an
assessment of direct access implementation after the first three
years. this assessment could lead to an acceleration of the remaining
two years of phase-in eligibility if implementation has proceeded
in a satisfactory manner. PG&E has indicated to a number of
parties that direct access would be made available to all of its
customers not later than four years after the start of direct
access. PG&E also believes that eligibility based on a pro-rata
share of load or energy is a more equitable distribution of phase-in
eligibility across customer classes than an allocation based solely
on the number of customers per class.
In the Diablo Canyon Pricing/Customer Rate Freeze proceeding at
the CPUC, PG&E has recently entered into a settlement agreement
with numerous end-user customer groups, which includes aspects
of direct access proposals. The features of the settlement agreement
pertaining to direct access are summarized here.[3]
1. all customers would be eligible for direct access in the fourth
year (p. 11).
2. CTC is computed as the residual between the sum of all applicable
rate components and the current tariff rate as of 1/1/96 (p. 3).
3. direct access customers pay a tariff rate to PG&E computed
as the difference between the otherwise applicable bundled tariff
as of 1/1/96 and the power exchange price (p. 1).
The California League of Food Processors (CLFP) responded to Draft
#1 of this paper with some alternative proposals for phasing direct
access. Three of them are described below.
1. Beginning 1/1/98 - all account(s)/customer(s) with real time
meter(s), a scheduling coordinator, and communication systems
conforming to requirements. All virtual direct access customers
given priority based on date of request.
2. Customer loads, either individual or in aggregates, would be the basis for phasing in all customer wishing direct access:1/1/98all above 500 kW
1/1/99 all above 400 kW
1/1/2000 all above 300 kW
1/1/2001 all above 200 kW
1/1/2002 all above 100 kW
1/1/2003 all 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."
[2] The September 1995 restructuring MOU agreed to by SCE, IEP,
CMA, and CLECA specified a phasein schedule described in megawatts
of peak demand, established ceilings and floors of size of load
that could participate, and agreed to include representation from
all customer classes.
[3] Diablo Canyon Pricing/Rate Freeze Settlement Agreement conveyed
to the CPUC by a PG&E cover letter dated June 12, 1996.
[4] Comments on draft #1 were submitted by SCE, CMA, CIU, PG&E,
CFB, and CLFP.