Background

Edison presently has a number of interruptible rate schedules, which provide customers under these rate schedules a discount in their electric service rates in exchange for subjecting their loads to the possibility of being interrupted pursuant to specific capacity shortage criteria, which is administered by Edison system operators. The present criteria provide two complementary interruption thresholds.

An interruption notification can be initiated:

1. When Edison is ready to start its next to the last peaking generator and there is insufficient time to look for alternative resources; or
2. When Edison's spinning reserve is projected to drop below 5% and the price of replacement power that is available to Edison exceeds 7¢.

Under either of these two criteria, the Edison system operator is able to initiate a load interruption for some or all of the load which is served under the interruptible schedules. Once an interruption notification is provided, customers have up to 30 minutes to curtail load pursuant to their contractual commitments. Failure to curtail may result in financial penalties. Furthermore, use of the interruptible rate program is limited to no more than 25 curtailments in a calendar year, with each curtailment lasting no longer than 6 hours.

Under the new operating structure of the Independent System Operator (ISO), it is necessary to translate the existing Edison interruption criteria into criteria which can be administered by the ISO so as to provide to Edison's retail customers the same benefits of curtailable load as they presently receive, and to provide the ISO with the same level of load curtailment capability that Edison's operators presently retain.

Discussion of Present Criteria:

1. The first curtailment trigger, start-up of Edison's next to the last peaking generating unit, describes a capacity shortage situation in terms of system capacity availability wherein Edison's operators have exhausted all but their last two major physical resources available to serve the load and maintain adequate levels of spinning reserve (meet the WSCC minimum operating reliability criteria).
2. The second part of the present criteria, spinning reserve forecast to drop below 5% plus replacement power price exceeding 7¢ has the combined effect of providing Edison's system operators with the opportunity to acquire, when there is sufficient time, replacement reserves from non-Edison generating units (other utilities) at a cost not to exceed 7¢, when the spinning reserve is projected to drop below 5% (the California Power Pool minimum criteria), which is also an indication of a capacity shortage. (Under the California Power Pool, Edison can allow its spinning reserve to drop to 5% during the current operating day and has the opportunity to call on spinning reserve support from the other California Power Pool utilities, such that the WSCC criteria is met). Taken together, these two criteria are complementary and provide the system operator with the opportunity to use the load curtailments as part of an integrated approach to respond to capacity shortage situations during real-time operation.

Proposed Curtailment Criteria for Independent System Operator

To achieve comparable benefits and exposure under the interruptible rate program when operation is turned over to the ISO, it is proposed to modify the interruption criteria which presently exists in the Edison interruptible tariffs to the following.

The ISO would issue an interruption notification to Edison's interruptible customers when:

1. Capacity remaining in the ISO's "replacement capacity" portfolio has dropped to 1.5% of forecast load for the next hour, and
2. The ISO forecasts that there is an imminent need to utilize some or all of the remaining 1.5% of replacement reserves capacity in order to meet the WSCC operating criteria, and
3. The real-time spot market price for electricity is expected to exceed 7¢ per kWh.

The present limits of 25 curtailments per year and up to 6 hours per curtailment would be retained in the new criteria.

Discussion

When Edison's operators start their next to the last peaker, they are in essence dipping into the last 1.5% of generating capacity resources available on the Edison grid. Using a 1.5% criteria for the ISO in its "replacement capacity" portfolio is equivalent to the unused generating capacity available to the operators to start at their discretion. It should be noted that with the ISO having dispatch responsibility for an electric grid which is nearly 2.5 times the size of the Edison grid, 1.5% of system load will equate to substantially greater quantities of generating capacity than Edison's next to the last peaker, which is equivalent to approximately 250 MW remaining.

The second part of the criteria, namely that the ISO anticipates the need to utilize some or all of the remaining replacement reserve capacity resources is equivalent to a forecast that the spinning reserve will drop below the minimum criteria. Today, Edison's operators have the opportunity to rely on the neighboring systems of PG&E and SDG&E to provide spinning reserve support and thus Edison's interruption criteria allow reserves to drop to 5% before initiating the load curtailment. However, because the ISO will already have operating control over the three systems, and because it is necessary to meet the WSCC minimum operating reliability criteria which requires a minimum 7% spinning reserve level ^[*] in the control area, the ISO performance criteria will be to maintain 7% spinning reserve at all times. Thus, a projected need to use the last 1.5% of remaining off-line reserves because of the capacity shortage is equivalent to projecting that reserves would drop below the minimum criteria if the remaining replacement reserves capacity is not started. These two together constitute an acceptable definition of a capacity shortage under the ISO-control paradigm.

The third part of the criteria, real time price expected to exceed 7¢, represents the same initial price threshold that is in Edison's current interruptible tariffs. This price threshold in the current tariff is intended to allow Edison's operators the discretion to buy replacement capacity up to the price that such replacement capacity exceeds the marginal value of utilization of the interruptible rate program. This price threshold can be translated directly to the real-time market clearing price that the ISO will see during the hour (or expects to see) during a capacity shortage situation.

The proposed ISO interruption criteria differs from the present Edison criteria in one other significant way - the Edison criteria has two parts, either of which may be satisfied in order to activate the program, whereas the ISO criteria has three parts, all three of which must be satisfied before the interruptible customers are interrupted.

Under the ISO protocols, in the day-ahead scheduling process, the ISO will arrange sufficient reserves to satisfy three criteria:

1. Arrange spinning reserve (on-line, synchronized generation which can be loaded within 10 minutes) equal to at least 3.5% (and not more than 7%) of the forecast load each hour; plus
2. Arrange additional non-spinning reserve (off-line, able to start and load within 10 minutes) to bring the total level of spinning and non-spinning reserve to not less than 7% of the forecast hourly load in the ISO-controlled system; plus
3. Arrange additional replacement reserves (off-line, capable of starting and loading in 60 minutes) to replace the expected amount of generation which is lost on a daily basis and/or to accommodate the average deviation in forecast load on the ISO-controlled grid (this level is estimated to be approximately 3% of the system peak load).

In real-time operation, when generating resources are lost, the ISO will first utilize non-spinning reserve to replace the 3.5% minimum spinning reserve requirement, and second utilize replacement reserves to restore the total of spinning plus non-spinning reserve level to the 7% minimum criteria. Thus, the use of replacement reserves is a direct measure of the capacity/load balance on the grid. Additionally, because the ISO can and will take bids from generators in the hour ahead market to supply additional replacement reserves and non-spinning reserves, it is expected that if generated capacity is lost, additional resources which were not pre-arranged in the day-ahead scheduling process will become available to the ISO, albeit likely at a higher price than the pre-arranged resources from the day-ahead scheduling process, thus providing the opportunity to restore replacement reserves. The three criteria taken together therefore provide a measure of the ISO's capacity shortage, including the ability to acquire replacement reserves at prices not to exceed 7¢ per kWh, before activating the interruptible rate program.

It should be noted that the program is not equivalent to bidding curtailable demand, which would be used as part of the ISO's replacement reserve capacity in the day ahead scheduling process. Bid curtailable demand would be curtailed solely on price as the ISO uses its replacement reserve capacity. The interruptible load would be curtailed on a combination of price plus identified capacity shortage, which is embodied in the three parts of the proposed ISO interruption criteria. Thus, the proposed ISO interruption criteria require that all three conditions be simultaneously satisfied before an interruption signal would be sent by the ISO.

PG&E also has an interruptible rate program. Their tariff embodies a temperature threshold criteria as an additional triggering element. At this time, the proposed ISO interruption criteria has not embodied any additional interruption criteria, such as may be required to incorporate the existing PG&E tariff. Additional work in this area may be necessary.