The primary obligation of this group is to ensure that the phase-in of direct access is successful. Success means the assurance that California will continue to receive safe and reliable electric power to support the viability of business, the quality of life of the residents and the preservation of the environment. The worst outcome of this process for California's customers, its IOU's and even the new energy providers poised to enter the market would be an effort which falters mid-way for lack of thoughtful planning. Once the process of direct access is begun it cannot be undone or completely redone and California will be limited to whatever path it has taken.
For that reason Edison supports a five year phase-in of direct access with a check-point at the end of the third year to evaluate adjustments which need to be made and to decide whether the final two years of phase-in are necessary.
The rationales set forth in the Jaske/Yates paper on "Considerations Influencing Phasing of Direct Access" (the "Position Paper") are among the reasons a multi-year phase-in is necessary. Edison has the following immediate comments and additions to the Position Paper. We will certainly have additional comments as the work in this area progresses.
I. Rationales for Limiting Initial Eligibility
Edison generally agrees with the positions taken in the Position Paper but there are a few corrections which need to be made. Two are at the beginning, in the discussion of the purpose of the paper.
The first clarification involves the Commission's policy regarding the phase-in of direct access. It is not the case that this group is to recommend whether phasing is required at all. The Restructuring Decision states that: "Parties should carefully consider whether our minimum phase-in schedule is necessary or whether eligibility can be held open to all electricity consumers after the twelve-month initial phase." D.95-12-063, as modified by D.96-01-009, p. 69 (emphasis added). As the Commission further explained in the Roadmap Decision (D.96-03-022, p. 23):
We ask that the Direct Access Working Group address the following issues, at a minimum, in the filing due August 30, 1996:
a. A specific plan for the initial twelve-month initial phase of direct access that determines participation in the initial phase of direct access beginning no later than January 1, 1998. . . . .
b. A specific eligibility plan for direct access which addresses whether a phase-in schedule is necessary or whether eligibility can be held open to all consumers after the twelve month initial phase.
1. The plan should identify any technological barriers or any other concerns to offering direct access to all electric consumers after the initial phase and identify options to reduce or eliminate the barriers.
2. If a phase-in of eligibility beyond the initial phase is proposed, the Working Group plan should consider the Commission's phase-in schedule for direct access and propose alternatives, if any, to that schedule. (See p. 66 of D.95-12-063.)
There is no question that the Commission has ordered an initial twelve-month phase of direct access and is looking to the DAWG to propose a specific plan for that phase. In addition this group is to propose a second plan which addresses the need for a further phase-in schedule and what that schedule would be.
Second, the Commission's position on the rationales for phase-in beyond the first year should be clearly stated. It recognized that there are restrictions necessary due to technical constraints and that parties may have additional concerns (D.95-12-063, as modified by D.96-01-009, p. 69) and, as set forth above, "[t]he plan should identify any technological barriers or any other concerns" (D.96-03-022, p. 23, emphasis added). Edison believes there are a number of other concerns, some of which are listed in the Position Paper, which need to be assessed. Edison also believes that those concerns are of equal importance to the technical barriers and ought not to be characterized as "much softer" than the technical issues.
A. Technical Rationales
This is an area where Edison personnel may be very helpful in explaining what is technically feasible today and where technology needs to be developed. We would appreciate hearing from the DAWG whether and when such presentations would be useful. The following are simply general comments on each of the rationales set forth in the Position Paper.
1. data processing capabilities -- Here we need to work with the WEPEX team to get their estimates on the settlement and billing needs and initial capabilities of the system they're contemplating. They are still working on what is needed for functioning of the Power Exchange and the ISO. Attached are copies of drafts of the team's developing "ISO Functional Business Systems Overview" and "PX Functional Business Systems Overview." Our understanding is that these charts are being developed for use in an RFP, yet to be drafted, for computer hardware and software systems. The complexities of this system would seem to require that bugs be worked out gradually and some experimentation may be necessary for the first few years of operation.
2. metering and communication systems -- Edison believes that the full benefits of direct access cannot be achieved without the installation of an RTP or TOU meter for each customer, as was the case in Great Britain. The numbers of meters/extent of metering systems required limits the timing of eligibility. Edison believes a realistic schedule was set forth in D.95-12-063 for meter installation for customers other than those who are categorized within the Domestic, GS-1 and TC-1 customer groups. A schedule needs to be developed for all customers after determination is made of what information flow is needed, what the capabilities are of various metering systems and the capacity of the industry to provide those systems.
If the Commission ultimately concludes that alternative metering systems can be implemented (e.g. load profiling) which adequately protect the interests of all involved, time will be needed to develop, test and implement such systems.
3. existing UDC billing systems for small customers -- Edison's existing system is not limited as indicated in the Position Paper (at p. 4). The 100,000 customers number is far too low and is not an accurate number. However, it is the case that our system will have to be adapted to serve direct access purposes and, again, the bugs will need to be worked out and perhaps some time allowed for experimentation. It is difficult to estimate the time needed at this point to accommodate unlimited eligibility, but the experience gained from the initial phases of direct access will be essential in resolving this question.
B. "Success Guarantee" Rationales
It is hard even to come up with a list which might be complete because California is the first state to attempt direct access on this scale. We heard presentations last week on the experiences in New Hampshire and Illinois, but both projects are just pilots, with very little prior planning. That lack of planning doesn't really matter since New Hampshire involves only 3 percent of the retail load (only about 50 MW), and the CILCO project involves only 8 industrial customers, 4 commercial customers and 3 very small communities, and CILCO only has 190,000 customers total. California is probably more analogous to Great Britain's experience where phase-in has taken eight years thus far, due, in part, to a multitude of unexpected problems.
Edison agrees with the Position Paper that "1. immature industry customer service constraints" and "2. necessity to use both 1997/98 for testing protocols" are two good examples of the reasons direct access must proceed at a measured pace. There are certainly a number of other areas which also present such problems. Two examples which should be added to the list are:
3. need for massive coordination of data flows, settlements, etc. involves more than simply the technical capability for exchange of information and computation of settlements, but a testing and adjusting period to make sure the process runs smoothly and most efficiently, as well as evaluation at some point or points of the efficacy of the hardware and software systems.
4. consumer protection monitoring needs to be part of direct access and can only work efficiently if the party or parties responsible can effectively gather the information they need over time as the market develops, a process which will of necessity be gradual.
C. Equity Concerns
The signatories to the MOU set forth the following principle: "Members of all customer classes, including agricultural, educational, small commercial and residential customer accounts shall have a fair opportunity to participate in each year of the direct access program phase-in schedule." Edison remains committed to that principle and believes all the other DAWG participants are too. The main issue remains the definition of "fair" opportunity. Given that the above technical and "success guarantee" problems require a phase-in of some sort we need to ensure that there is parity of participation and the bearing of costs between customer classes and within industries.
II. Edison's Proposed Phase-In Schedule
Edison has made clear since the filing of the MOU the parameters of phase-in it supports -- a five-year gradual schedule. The Commission adopted those parameters to the phase-in schedule in its Restructuring Decision (D.95-12-063, as modified by D.96-01-009, pp. 65-66):
An initial phase of direct access will last for a period of twelve months, after which we will make the direct access option available to all customers at that time and we expect all customers to have that option within five years.
Implementation of this initial phase of direct access provides a measured approach to this new competitive framework and allows the market to (1) address any operational issues, (2) measure the effectiveness of the program, and (3) improve the program in order to offer it to an increasing number of electricity consumers. During the initial phase, and as part of our continued effort to allow retail competition to all market participants, the Commission will evaluate these and other issues. Barring technical concerns, we fully anticipate that a majority, if not all, of California electricity consumers will have the opportunity to purchase generation services directly no later than five years from the implementation of the initial phase of direct access.
Edison also believes a mid-point checkpoint may be appropriate
to assess how direct access is working and to make adjustments.
RECOMMENDED DIRECT ACCESS PROGRAM PHASE-IN SCHEDULE
Eligibility Criteria 1998 1999 2000 2001 2002 2003 Threshold MW limit 8 2 0.5 *** *** *** for individual customer participant* MW for multiple ** ** ** *** *** *** customer aggregation participant Maximum number of ** ** ** *** *** *** accounts that can be aggregated in each multiple customer aggregation Total number of MW 1800 3,150 4,950 9,000 18,000 All available for remaining participation in load direct access program
* Either single site or single customer aggregated sites. Based upon annual peak billing demand.
** Initial aggregation program to be developed and approved by the CPUC. Aggregated loads are to be limited to 8 MW.
*** To be reevaluated based upon experience during the initial 3 years -- the checkpoint.
Edison proposes that after three years there be a complete evaluation of direct access as implemented thus far, that evaluation to be performed by the ISO. If there are major system problems with the phase-in, adjustments can be made. If, as we hope -- given the extent of the parties' planning -- all is flowing smoothly, then the rate of phase-in could be accelerated, concluding in four years or even at the three year checkpoint, rather than in five.
Edison hopes to make a specific proposal at the June 20 meeting as to how selection should be made of who participates in the initial phase of direct access and who participates each year thereafter -- how to divide participation by class and how to pick the particular participants within classes.
MSK:msk:LW961620.020
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