Table of Contents Chapter 1: Policy Overview - William B. Marcus ....................................................7 I. Introduction .......................................................................................................7 II. SDG&E’s AMI Program Is Not Cost-Effective............................................8 I. How SDG&E’s AMI Program Is Worse than the PG&E Program that the Commission Previously Approved.......................................................15 II. Policy Issue: Dysfunctional or Disintegrated Resource Planning Can Lead to a Poor Outcome.................................................................................17 III. UCAN’s Recommendations to Address Peak Loads Without SDG&E’s AMI Program ...................................................................................................22 Chapter 2: SDG&E’s Business Case Analysis and Operational Cost Effectiveness Issues Jeff Nahigian ..............................................................26 I. Summary of Findings.....................................................................................26 II. SDG&E’s Business Case Analysis...............................................................27 A. SDG&E’s 34-Year Evaluation Period is Not Appropriate .......................................27 B. This The Commission Approved PG&E’s AMI Without Concern For A Terminal Value................................................................................................................29 C. SDG&E’s AMI Cost Effectiveness Under The Commission’s Required Framework for AMI Business Case Analysis............................................................30 III. Benefits That Should Be Excluded From SDG&E’s Business Case Analysis.............................................................................................................33 A. Avoided Demand Response Programs ......................................................................33 1. Avoided Demand Response Benefits Constitute the Second Largest Single Operational Benefit to SDG&E’s AMI Business Case...................................................33 2. The Commission’s Requirements on a Framework For AMI Business Case Analysis Do Not Recognize Avoided Demand Response Programs As An AMI Benefit ........................................................................................................................34 3. If The Commission Does Not Entirely Exclude This Benefit From The Business Case Analysis, Dollar Values Should Be Adjusted Downward To Reflect Recorded Program Expenditures .......................................................................35 4. SDG&E’s Forecast of 2008 Demand Response From Its Demand Response Programs Provides More Demand Response Than SDG&E Forecasts To Achieve From its Advanced Meter Deployment By 2038............................................37 B. The Commission Should Reject SDG&E Attempts to Quantify Benefits Associated With Reduced Electric and Gas Theft, Improved Meter Accuracy and Other Billing Exceptions........................................................................................40 1. Energy Theft and OBR Benefits .......................................................................................41 2. The Commission’s Framework for Business Case Analysis Classifies Energy Theft Benefits Non Quantifiable ........................................................................41 UCAN SDG&E AMI Testimony iii 3. SDG&E’s presentation in this case ignores the earlier framework and now proposes to quantify energy theft which is classified by the Commission as a “non quantifiable” benefit.............................................................................................42 4. Current Utility Revenue Requirements Include a Component for Recovering Energy Theft ..................................................................................................42 5. AMI’s Ability to Eliminate Or Materially Reduce Energy Theft is Not Well Understood........................................................................................................................42 6. Southern California Edison’s Preliminary Business Case Analysis Found That AMI Would Make It Harder To Identify Energy Theft.......................................45 7. The Commission’s Authorization of PG&E’s AMI Deployment Did Not Consider Energy Theft Benefits.......................................................................................46 8. SDG&E Expresses Considerable Uncertainty That Energy Theft Benefits May Not Be Positive..........................................................................................................46 C. If The Commission Approves SDG&E’s Recommendation to Quantify Meter Accuracy Benefits It Should Adjust That Benefit Calculation Downward.........47 1. Classification of Meter Accuracy Benefits is Unclear ...................................................48 2. Meter Accuracy and Energy Theft Benefits Are Based On Outdated Data...............49 3. SDG&E’s Calculation of Meter Accuracy Benefits........................................................50 D. Exclude SB-3 Gas Benefits For Energy Theft and Gas Meter Error.......................51 E. The Commission Should Exclude Benefits Associated With Billing Exceptions That SDG&E’s Testimony Treats As A Non-Quantifiable Benefit.......................52 F. Benefits Not Considered In The Commission’s Framework For AMI Business Case Analysis...................................................................................................................52 G. Demand Response Benefits From Customers Larger than 200 kW Must Be Excluded From This Proceeding...................................................................................55 IV. SDG&E’s Summer Air Conditioner Saver Program ................................57 1. Background on the Comverge Contract.........................................................................57 2. The Commission Should Reject SDG&E’s Proposal To Significantly Reduce the Cost Effectiveness of its Summer AC Saver Program............................................59 Chapter 3: Analysis of Demand Response from Residential Customers -- Gayatri M. Schilberg ......................................................................................61 I. Introduction and Summary...........................................................................61 II. Residential Demand Response is Dramatically Overestimated............65 A. Long-Term Participation is Overestimated................................................................65 1. Lack of Consent to Participate .........................................................................................65 2. Small Financial Savings will Not Sustain Participation ...............................................69 3. Other Notification Issues..................................................................................................79 4. SDG&E’s Demand Response Participation will not be Double that of PG&E..........80 B. Quantification of Demand Response is Overestimated..........................................81 1. Duplication with the A/C Saver Program.....................................................................81 2. Reference Level Methodology is Undefined and Unworkable...................................83 3. The SPP Methodology is Inappropriate to Estimate Demand Response for SDG&E’s Program.............................................................................................................90 4. Inner Summer Elasticities.................................................................................................97 5. Persistance ..........................................................................................................................98 6. Impact on Demand Response of Lower Avoided Capacity Costs..............................99 C. Summary of Quantification ........................................................................................101 UCAN SDG&E AMI Testimony iv D. Partial Deployment.......................................................................................................102 III. Transmission and Distribution Benefits..................................................104 A. The Context: Residential Load Shape .......................................................................104 B. Lower T&D Benefits.....................................................................................................106 1. Exclusion of Large C&I...................................................................................................107 2. Downward Adjustment of Residential Demand Response.......................................107 3. Adding to the Distribution Peak ...................................................................................107 Chapter 4: Economic Analysis of Demand Response William Marcus...........109 I. Avoided Capacity Costs...............................................................................110 A. Why It Is Critical to Net Out Energy Savings from the Cost of a Combustion Turbine Powerplant......................................................................................................110 B. Combustion Turbine Costs .........................................................................................114 A. Implications of Lower Capacity Value .....................................................................117 II. Reserve Savings Are Uncertain..................................................................117 III. Inconsistencies Between SDG&E’s Cost-Effectiveness Analysis and the Standard Practice Manual.....................................................................119 A. Cost Effectiveness Test Structure...............................................................................119 Qualifications ................................................................................................................... i I. William B. Marcus ...........................................................................................ii II. Gayatri Schilberg ........................................................................................... iii III. Jeffrey A. Nahigian.........................................................................................iv Attachments ...................................................................................................................... i I. Attachment 1A: Comparison of PG&E and SDG&E AMI Programs ....ii I. Attachment 2A – San Diego Gas and Electic Company’s December 2005 Report on Interruptible and Outage Programs .................................. i II. Attachment 2B - Evaluation of the California Statewide 20/20 Demand Reduction Programs ........................................................................................ii III. Attachment 2C -OFGEM CONSULTATION ON DOMESTIC METERING INNOVATION....................................................................... iii IV. Attachment 2D – SDG&E Comments on BCA..........................................iv V. Attachment 4A – PG&E Phase 2 Testimony ............................................... v Appendix – Data Responses Relied Upon ................................................................vi I. Responses to DRA Data requests ................................................................vi II. Responses to UCAN Data Requests............................................................vi
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