California Statewide Pricing Pilot Lessons Learned Roger Levy Demand Response Research Center NARUC Joint Meeting Committee on Energy Resources and the Environment Committee on Electricity

August 2, 2006 No more rotating outages – EVER ! 1 Efficiency and demand response fully integrated under a unified default tariff / incentive structure.  Demand response is a condition of service.  All customers, all load participates. 2  Major appliances come “DR Ready” from the factory.  All buildings are “DR Enabled”. 3 Full automated system integration between the ISO, utilities and customers. 4 Demand Response – the Vision

August 2, 2006 California Statewide Pricing Pilot

August 2, 2006 State Demand Response Objectives  Integrate energy efficiency with demand response  Economic Response – Let the customer decide.  Reliability Response – Provide the utility with control.  All customers – not just a select few.

August 2, 2006 Summary Conclusions Residential CPP rates can, within five years of deployment reduce California’s peak load by 1,500 to over 3,000 MW. System Impacts Dynamic rates encourage greater conservation and peak demand impacts than conventional inverted tier or time-of-use rates. Conservation and Peak Load Impacts Residential and small to medium commercial and industrial customers understand and overwhelmingly prefer dynamic rates to existing inverted tier rates. Customer Acceptance

August 2, 2006 Source: Statewide Pricing Pilot Summer 2003 Impact Analysis, Charles Rivers Associates, August 9, 2004, Table 1-3, 1-4,. Time of Use TOU Critical Peak Impacts By Rate Treatment 0% 10% 20% 30% 40% 50% Peak Load Reduction Critical Peak Fixed CPP-F 4.1% Critical Peak Variable With Automated Controls CPP-V 34.5% 12.5% Critical Peak Variable With Automated Controls CPP-V 47.4% Average Critical Peak Day – Year 1 Hottest Critical Peak Day * Residential Load Impacts Rate and Technology

August 2, 2006 Time of Use TOU 0% 10% 20% 30% 40% 50% Peak Load Reduction Critical Peak Fixed CPP-F 0.6% Critical Peak Variable With Automated Controls CPP-V 27.2% 13.1% Critical Weekday – Inner Summer Year 2 Critical Peak Impacts By Rate Treatment Residential Load Impacts Rate and Technology Source: Impact Evaluation of the California Statewide Pricing Pilot, CRA, March 16, 2005, Table 1-1, 4-3.

August 2, 2006 Residential SPP Impacts Source: 1.Statewide Pricing Pilot Summer 2003 Impact Analysis, Charles River Associates, Table 1-3, 1-4, August 9, Hottest day impacts on page Private communication, residential pilot study, May Results of the Pilot Residential Advanced Energy Management System, Gulf Power, November Levy Associates case study report, July % 10% 20% 30% 40% 50% Peak Load Reduction Three Tier TOU with Dispatched CPP Midwest Pilot Three Tier TOU with Dispatched CPP 35.0% Two Tier TOU with Dispatched CPP Gulf Power Pilot California Pilot %34.8% Average Critical Peak Day Two Tier TOU with Dispatched CPP 47.4% Hottest Critical Peak Day * California Pilot Three Tier TOU with Dispatched CPP AEP Pilot % Consistency

August 2, 2006 Residential SPP Impacts Incentives

August 2, 2006 Residential SPP Impacts Source: Statewide Pricing Pilot, Summer 2003 Impact Analysis, CRA, August 9, 2004, Table 5-9, p.90 Percent Reduction in Peak Period Usage (CPP-F) Year Percent Reduction 12 High vs. Low User 200% Average Use 50% Average Use 17.2% 9.79% Central AC Ownership YES NO 12.8% 12.3% Pool Ownership YES NO 19.2% 12.1% Income > $100,000 < $40, % 12.1% Single vs. Multi-Family Single Family Multi-family 13.5% 9.8% State-wide Average 12.5% Demographics

August 2, 2006 Source: Statewide Pricing Pilot, Summer 2003 Impact Analysis, CRA, August 9, 2004, Table 5-9, p.90 Percent Reduction in Peak Period Usage (CPP-F) Year Percent Reduction 12 High vs. Low User 200% Average Use 50% Average Use 14.7% 12.2% Central AC Ownership YES NO 17.4% 8.1% Pool Ownership YES NO 15.8% 13.0% Income > $100,000 < $40, % 10.9% Single vs. Multi-Family Single Family Multi-family 14.0% 11.8% State-wide Average 13.1% Residential SPP Impacts Demographics

August 2, Percent Reduction 12 Small C/I Load Impacts Rate and Technology Critical Peak ImpactsEnabling Technology Impacts With Technology < 20 kW 0.8% 13.2% No Technology With Technology > 20 kW 4.9% 9.6% < 20 kW 6.6% > 20 kW 5.5%

August 2, 2006 SPP – Customer Rate Preferences Original Inverted Tier Rate Pilot Rates Residential CPP-V CPP-F TOU 80% 81% 20% 23% 19% Commercial CPP-V TOU 77% 71% 70% % 29% 060

August 2, 2006 Contact Information Demand Response Research Center (DRRC) Mary Ann Piette, Director Phone: Roger Levy Program Development and Outreach Phone:

August 2, 2006 Demand Response Defined. 1.Demand Response applies rate designs, incentives and technology to induce changes in customer demand. 1 2.Demand Response is the action taken to reduce load in response to: 2 a)Contingencies that threaten the supply- demand balance and/or b)Market conditions that raise supply costs. 1.CPUC definition, Demand Response Settlement, Draft Decision , March Demand Response Research Center, presentation, December 2005.

August 2, 2006 CPP Tariff- (high)TOU Tariff- (high) $ $ $ Cents per kWh Existing Rates Avg. Summer Price ¢/kWh $ $ :00-7:00pm Weekdays Other Weekday & Weekend hours 2:00-7:00pm Weekdays Other Weekday & Weekend hours Dispatched 2:00-7:00pm 1,500 hrs/yr7,260 hrs/yr Maximum 75 hrs/yr 1,425 hrs/yr7,260 hrs/yr Critical Peak Summer Peak Summer Off-Peak Residential SPP RatesRate Design

August 2, 2006 CPPVCPPFTOUInfo Only Participants (%) 71.1%73.7%70.0%79.0% Average Monthly Savings (%) 5.1%5.5%4.5%5.4% Average Monthly Savings ($) $53$35$29$19 CPPVTOU 80.3%58.2% 12.2%9.6% $1,521$869 Participants (%) 28.9%26.3%30.0%21.0% Average Monthly Increase (%) 4.0%6.2%3.0%10.0% Average Monthly Increase ($) $39$44$30$9 19.7%41.8% 5.0%10.0% $224$600 Residential Commercial / Industrial Bill Savings Bill Increases Source: Statewide Pricing Pilot, Shadow Bill Results, WG3 report, June 9, SPP Bill Impacts Average Bill Impacts (summer / winter 2003)