Testimony of Southern California Edison Company Regarding … · 2017-12-22 · Witnesses: P. Gautam B. Kopec Y. Liang J. Lim L. Miller E. Molnar A. Ramirez D. Snow (U 338-E) Testimony

Application No. A.17-12-012 Exhibit No.: SCE-01 Witnesses: P. Gautam B. Kopec Y. Liang J. Lim L. Miller E. Molnar A. Ramirez D. Snow

(U 338-E)

Testimony of Southern California Edison Company Regarding Implementation of Residential Default Time-of-Use Rates

Before the Public Utilities Commission of the State of California

Rosemead, California December 21, 2017

SCE-01: TESTIMONY OF SOUTHERN CALIFORNIA EDISON COMPANY REGARDING IMPLEMENTATION OF RESIDENTIAL DEFAULT TIME-OF-USE RATES

Table Of Contents

Section Page Witness

-i-

I. INTRODUCTION AND SUMMARY ..............................................................1 A. Ramirez

A. Summary of SCE’s Default TOU Proposal ...........................................2

1. Authorization to Begin Residential Initial Default TOU Migration in October 2020 ...............................................2

2. Proposed 15-Month Initial Default TOU Migration Period ........................................................................2

3. Proposed Default TOU Rate Structures and Default TOU Rate Selection Process .........................................3

4. Eligibility for Default TOU Rates ..............................................4

5. Bill Protection ............................................................................4

B. Seasonal Tiered Rate Proposal ...............................................................5

C. CARE/FERA Line Item Bill Presentation .............................................5

D. Estimated Costs and Cost Recovery ......................................................6

E. Integrated Timeline ................................................................................6

II. CUSTOMER SERVICE RE-PLATFORM (CSRP) ..........................................8 L. Miller

A. Background ............................................................................................8

B. Benefits of CSRP ...................................................................................9

C. CSRP Event Timeline ..........................................................................10

D. The Effect of CSRP Implementation on Timing and Rollout of Default TOU .......................................................................10

III. TIMELINE AND ORDER OF TRANSITION TO DEFAULT TOU .................................................................................................................12 E. Molnar

A. Timeline ...............................................................................................12

B. Order of Transition ..............................................................................13

IV. DEFAULT TOU RATE DESIGN PROPOSAL ..............................................16 A. Ramirez


Table Of Contents (Continued)


-ii-

A. Attributes of SCE’s Proposed Default TOU Rates ..............................16

B. SCE’s Default Rates Comply with Commission Guidance and Are Designed Consistent with SCE’s Experience for the Transition of Non-Residential Customers to TOU Rates .....................................................................................................20

V. DEFAULT TOU ELIGIBILITY ......................................................................23 E. Molnar

A. Senior Citizens and Economically Vulnerable Customers In Hot Climate Zones (Section 745(c)(2), and Section 745(d))..................................................................................................23

1. Senior Citizens in Hot Climate Zones .....................................24

2. Economically Vulnerable Customers in Hot Climate Zones ..........................................................................24

B. Identification of FERA-Eligible Customers ........................................25

C. Customers Lacking Twelve Months of Interval Usage Data and Associated Education (Section 745(c)(4)) ............................26

D. Customers Excluded From Default TOU Unless They Provide Affirmative Consent (Section 745(c)(1)) ...............................27

E. Complex NEM Tariffed Customers .....................................................27

VI. TOU PILOT STUDIES THAT INFLUENCE DEFAULT TOU ROLLOUT .......................................................................................................29 P. Gautam

A. Opt-In TOU Pilot .................................................................................29

B. Default TOU Pilot Surveys ..................................................................31

VII. FORECAST GHG REDUCTIONS AND COST SAVINGS RESULTING FROM DEFAULT TOU ..........................................................34 Y. Liang

VIII. COMMUNITY CHOICE AGGREGATION CUSTOMERS .........................38 E. Molnar

A. Background ..........................................................................................38

B. CCA Participation in Default TOU......................................................39

C. Topics to Address with CCAs..............................................................39




-iii-

1. Fundamental TOU Implementation Questions ........................40

2. Customer Experience ...............................................................40

a) Communication to CCA Customers ............................40

b) Rate Comparison ..........................................................41

c) Bill Presentation ...........................................................41

D. Continued Collaboration with CCAs ...................................................41

IX. BILL PROTECTION .......................................................................................43

X. PROPOSED RATE CHANGES ......................................................................47 A. Ramirez

A. Seasonally Differentiated Tiered Rates ...............................................47

1. Current Structure of Schedule D Tiered Rate ..........................47

2. Proposed Structure of Seasonally Differentiated Tiered Rates .............................................................................48

3. ME&O Related to Seasonal Tiered Rates ................................51 B. Kopec

B. CARE and FERA Line Item Discount Proposal ..................................52 A. Ramirez

1. Current CARE and FERA Discount Methodologies and Bill Presentments .....................................53

a) CARE and FERA Tiered Rate Discount Methodologies..............................................................53

b) Current Bill Presentment for SCE’s Tiered Rate Schedules .............................................................54

c) Current Bill Presentment for SCE’s TOU Tariffs and Rate Discount Methods .............................56

2. Creating a Consistent Single Line Item Discount for CARE and FERA Customer Bills ......................................57

3. Implementation ........................................................................58

C. Potential Removal of the High Usage Charge (HUC) .........................59




-iv-

XI. CUSTOMER BILL IMPACTS FROM SCE’S PROPOSED DEFAULT TOU RATES ................................................................................61

A. Current Tiered Rate to Seasonal Tiered Rate .....................................62

B. Current Tiered Rate to TOU-D-4-9PM or TOU-D-5-8PM .................71

C. Seasonal Tiered Rate to TOU .............................................................79

D. Comparing TOU Rates to Tiered and Seasonal Tiered Rates .....................................................................................................83

E. Example Bill Impact Journey ...............................................................86

F. Energy Burdens ....................................................................................87

G. Bill Protection and Revenue Deficiencies ...........................................88

XII. CUSTOMER EXPERIENCE ..........................................................................90 B. Kopec

A. Customer Awareness of TOU ..............................................................90

B. Default TOU Marketing, Education and Outreach ..............................91

C. Awareness and Understanding Phase ..................................................92

D. Action Phase ........................................................................................93

1. Direct Communications to Customers .....................................94

2. Outbound Call Communications to Extreme Non-Benefiters .................................................................................94

E. Retention Phase ....................................................................................95

F. Community Based Organizations ........................................................97

G. Customer Specific Messaging ..............................................................98

H. Incorporation of Learnings ..................................................................98

I. Bill Comparison Mailers ......................................................................99

J. Online Rate Comparison Tool .............................................................99 J. Lim

K. Channels to Opt-Out ............................................................................99 E. Molnar




-v-

L. Bill Redesign ......................................................................................100

M. SCE.com ............................................................................................101 B. Kopec

1. Default TOU and Rate Choice/Options Webpage .................101

2. Online Rate Change ...............................................................102 E. Molnar

3. Appliance Energy Use Cost Estimator Webpage ..................102

N. New Customer Engagement Strategy ................................................102

O. TOU Text Alert Reminders ...............................................................104

P. Available Programs and Tools to Help Limit Bill Impacts ...............104

1. Demand Response Programs .................................................104

2. NEST Time of Savings Pilot..................................................104

3. Level Pay Plan Program.........................................................105

Q. Marketing Cost Estimates ..................................................................105 B. Kopec

XIII. OPERATIONS ...............................................................................................109 E. Molnar

A. Customer Contact Center ...................................................................109

1. Additional CCC Personnel .....................................................110

2. Additional Training for CSRs ................................................110

3. CCC Estimated Costs .............................................................110

B. Billing Operations Cost Estimates .....................................................111

C. IT Cost Estimates ...............................................................................111

XIV. BUDGET .......................................................................................................114 J. Lim

XV. COST RECOVERY .......................................................................................116 D. Snow

XVI. GOVERNANCE AND CONTROLS ............................................................119 E. Molnar

A. Operational Metrics ...........................................................................119




-vi-

B. IT-Related Metrics .............................................................................120 L. Miller

APPENDIX A WITNESS QUALIFICATIONS

APPENDIX B METRICS SCORECARD

APPENDIX C 2020 TIERED TO SEASONAL TIERED BILL COMPARISONS AND IMPACTS

APPENDIX D 2020 TIERED TO TOU-D-4-9PM BILL COMPARISONS AND IMPACTS

APPENDIX E 2020 TIERED TO TOU-D-5-8PM BILL COMPARISONS AND IMPACTS

APPENDIX F 2020 SEASONAL TIERED TO TOU-D-4-9PM BILL COMPARISONS AND IMPACTS

APPENDIX G 2020 SEASONAL TIERED TO TOU-D-5-8PM BILL COMPARISONS AND IMPACTS

APPENDIX H ESTIMATED ELIGIBLE IDTM POPULATION

1

I. 1

INTRODUCTION AND SUMMARY 2

In this Exhibit SCE-01, Southern California Edison Company (SCE) provides support for 3

its request for California Public Utilities Commission (CPUC or Commission) approval of SCE’s 4

proposal to implement default time-of-use (TOU) rates1 for eligible residential customers 5

beginning in October 2020.2 Specifically, SCE proposes: 6

(1) To transition eligible residential customers to default TOU rates starting in October 7

2020, and to resolve other important aspects of this application for the successful implementation 8

of residential default TOU rates, such as determination of customer eligibility, customer 9

education and outreach, and bill protection;3 10

(2) To replace current tiered, non-TOU rates with seasonally differentiated tiered rates in 11

October 2020, as one of several other rate options for customers who opt-out from default TOU 12

or who are not eligible for default TOU; and 13

(3) To implement a consistent California Alternate Rates for Energy (CARE) and Family 14

Electric Rate Assistance (FERA) line item discount on monthly bills for tiered and TOU 15

customers beginning January 1, 2020. 16

1 Commission Decision (D.) 15-07-001, p. 9, defines the default rate to be “the rate the customer is

automatically put on if the customer does not affirmatively choose a different tariff. For residential customers, this is a voluntary (not mandatory) rate.”

2 Exhibit SCE-02 provides SCE’s proposal to increase SCE’s current residential fixed charges for non-CARE and CARE customers beginning in October 2021, consistent with the guidance provided by D.15-07-001 and D.17-09-035 and one year after the commencement of the rollout of default TOU rates in October 2020.

3 Because relevant results from SCE’s Default TOU Pilot will not be available until Third Quarter 2018, SCE proposes to provide supplemental information and testimony as soon as that information becomes available.

2

A. Summary of SCE’s Default TOU Proposal 1

1. Authorization to Begin Residential Initial Default TOU Migration in October 2

2020 3

SCE respectfully requests authorization to begin defaulting eligible residential 4

customers to default TOU in October 2020 and conclude the transition to default TOU 5

approximately fifteen months later, a period defined as the initial default TOU migration, or 6

IDTM period. SCE’s default TOU implementation timeline accounts for risks associated with 7

replacing its obsolete information technology (IT) billing and customer care system, known as 8

the Customer Service System (CSS), with a more modern, stable, and agile customer technology 9

platform, through the Customer Service Re-Platform (CSRP) project.4 10

In Chapters II and III, respectively, SCE explains how CSRP directly affects the 11

feasibility and timing of residential default TOU rates because the initial development of CSRP, 12

its launch, and its stabilization process will cause SCE to avoid major new transactions, such as 13

default TOU rates for residential customers during the period from Q2 2019 through Q3 2020. 14

Given this system restriction, SCE cannot reasonably commence a default TOU transition 15

program for residential customers in 2019. SCE proposes to defer implementation of default 16

TOU for all eligible residential customers until October 2020, after CSRP has launched and 17

completed its stabilization period. 18

2. Proposed 15-Month Initial Default TOU Migration Period 19

In Chapter III, SCE proposes a 15-month IDTM period beginning in October 20

2020 and ending December 2021.5 The October 2020 start of the IDTM period is predicated on 21

two factors: 1) necessary coordination with the implementation schedule of CSRP; and 2) the 22

preference to avoid defaulting customers to TOU rates during the hotter weather months when 23

customer bills are likely to be higher than winter bills for many customers. 24

4 The CSRP project is part of SCE’s 2018 General Rate Case (GRC) Application (A.) 16-09-001. 5 D.17-09-036, p.52, Finding of Fact (FOF) 18 defines the IDTM “as the period of time starting on the

date the specific IOU begins migrating customers to default TOU and ending one year later.”

3

During the IDTM period, SCE plans to apply default TOU rates to approximately 1

3.3 million eligible residential customers, the majority of which would be subject to a default 2

TOU rate during the six-month period from October 2020 through March 2021. SCE will then 3

pause default TOU migration during the hotter weather months of April 2021 through September 4

2021. However, during this paused portion of the IDTM period, new customers that turn-on or 5

transfer service will generally be placed on the TOU standard rate unless they choose another 6

rate, or it is determined they would not qualify for a standard TOU rate as described in Chapter 7

V. SCE will resume defaulting eligible customers in October 2021 with the transition to default 8

TOU concluding by the end of 2021. This second round of customers eligible for default TOU 9

will include those customers that turned on service just prior to the start of the ITDM period and 10

who became eligible for default TOU by having access to at least 12 months of metered interval 11

data during the summer months of 2021. 12

3. Proposed Default TOU Rate Structures and Default TOU Rate Selection 13

Process 14

In Chapter IV, SCE seeks approval of two default TOU rates, TOU-D-4-9PM and 15

TOU-D-5-8PM. Both of these TOU rates are considered “TOU Lite” rates, and were approved 16

for SCE’s Default TOU Pilot in Resolution E-4847.6 Among other features, these rate structures 17

have TOU on-peak time periods consistent with the guidance provided by D.17-01-006, in the 18

TOU Order Instituting Rulemaking (OIR) 15-12-012. Schedule TOU-D-4-9PM reflects the 19

same TOU time periods, seasons, and weekday/weekend definitions that SCE proposed for all of 20

its non-residential customers which, if approved by the Commission, are expected to be 21

implemented in February 2019.7 Schedule TOU-D-5-8PM is similar to TOU-D-4-9PM, but 22

6 In A.17-06-030, SCE’s GRC Phase 2, SCE proposed to time-differentiate distribution energy charges

for current and proposed residential TOU rates, including the Default TOU Pilot rates. SCE’s GRC Phase 2 rate proposals are expected to be effective February 2019, prior to the implementation of default TOU in October 2020. Rate levels and bill impacts considered in this application include the proposed GRC Phase 2 rate treatments.

7 SCE’s non-residential TOU rate proposal is pending in its 2016 RDW Application, A.16-09-003.

4

includes a three hour on-peak period of 5:00 pm to 8:00 pm, instead of the five hour 4:00 pm to 1

9:00 pm on-peak period SCE proposed for non-residential customers. 2

SCE requests authorization to retain both default TOU rates, to transition eligible 3

customers to the “lowest cost” default TOU rate during the IDTM. Based on initial findings 4

from its March 2018 Default TOU Pilot, SCE also intends to select one of the two default TOU 5

rates as the standard default TOU rate for all customers turning on or transferring service. SCE 6

proposes to inform the Commission by Q3 2018 of its initial Default TOU Pilot findings and 7

final recommendation for selecting the standard default TOU rate. 8

4. Eligibility for Default TOU Rates 9

Chapter V describes how, before commencing the IDTM period, SCE will have 10

determined which customers are eligible for default TOU and which customers must be excluded 11

from default TOU. SCE will exclude from default TOU those customers subject to restrictions 12

under California Public Utilities Code Sections 745(c)(2) and 745(d), as interpreted by D.17-09-13

036.8 SCE will exclude CARE- and FERA-eligible customers in SCE’s baseline zones 10, 13, 14

14, and 15 from transitioning to a default TOU rate. Consistent with D.17-09-036, SCE will 15

continue to monitor studies from the Opt-in and Default TOU Pilots related to the impacts of 16

TOU on customers and inform the Commission of any important findings that may warrant 17

reconsideration of this exclusion approach. However, SCE does not anticipate these studies will 18

provide findings that might justify changing the Commission’s prior determination, in D.17-09-19

036, that CARE-and FERA-eligible customers in hot climate zones should be excluded from 20

default TOU rates. 21

5. Bill Protection 22

Chapter IX describes SCE’s proposed bill protection plan and Chapter XI 23

provides estimated costs of bill protection credits. SCE proposes to modify Resolution E-4847 24

and D.17-09-036 with respect to extending the bill protection rules applied to its Default TOU 25 8 All subsequent section number references are to the California Public Utilities Code, unless otherwise

indicated.

5

Pilot for the period from the end of the Default TOU Pilot until the commencement of the IDTM 1

period in October 2020 and with respect to existing TOU customers who choose to opt-in to 2

either of SCE’s proposed default TOU rates during the IDTM period. 3

B. Seasonal Tiered Rate Proposal 4

In Chapter X, SCE proposes to implement seasonally differentiated tiered rates 5

concurrently with the start of the IDTM period, in October 2020. SCE’s proposal is consistent 6

with the Commission’s directive in D.15-07-001 that the IOUs explore these rates for the future 7

and consider proposing them in the next applicable GRC Phase 2 or RDW.9 As explained in 8

Chapter XI, seasonal tiered rates will provide more accurate price signals to all customers, as 9

they have a greater relation to actual costs to serve than current, non-seasonally differentiated 10

tiered rates. SCE, also designed the seasonal tiered rates to feature a moderated seasonal price 11

signal similar to the seasonal signal provided by SCE’s TOU rate structures. 12

C. CARE/FERA Line Item Bill Presentation 13

In Chapter X, SCE also proposes to change the calculation methodology and tiered bill 14

presentments of its CARE and FERA discounts to a single line item discount applicable to all 15

CARE and FERA residential customers, whether they are enrolled on a TOU rate or optional 16

tiered rate. SCE proposes to implement a single CARE and FERA line item discount effective 17

with the CSRP “go-live” date, estimated to be January 1, 2020. SCE makes this proposal ahead 18

of the Commission’s directive for the IOUs to investigate CARE program changes,10 and to 19

assist customer understanding and ability to replicate the calculation of their CARE bills. 20

This proposal will not alter the average overall discount rate of 32.5% that CARE customers 21

9 D.15-07-001, p. 121. 10 Id., p. 298 “Next Steps” stated that as part of Phase 3 of R.12-06-013, the Commission would

consider CARE restructuring under AB 327. The October 15, 2015 Scoping Memorandum established an initial schedule for Phase 3 of R.12-06-013, which was modified by the June 23, 2017 ALJ Ruling that directs the Working Group to provide consensus CARE restructuring recommendations submitted as a supplement to the 2018 RDW filings by January 31, 2018. On December 13, 2017, at the request of ED staff, SCE submitted a motion on behalf of the Working Group requesting the assigned ALJs to suspend the CARE restructuring track schedule due to delays.

6

receive, or the 12% average overall discount rate that FERA customers receive, it will only alter 1

the rate design, processing, and bill presentations, which will provide a standardized structure to 2

compare non-CARE/FERA and CARE/FERA tiered rates against non-CARE/FERA and 3

CARE/FERA TOU rates. 4

D. Estimated Costs and Cost Recovery 5

SCE’s forecasted costs are included in Chapter XIV, and total approximately $112 6

million. Of these total cost components, bill protection credits are the largest at an estimated $63 7

million. In Chapter XV, SCE also requests Commission confirmation that the Residential Rate 8

Implementation Memorandum Account (RRIMA) can be used to record the incremental costs 9

associated with the implementation of residential default to TOU rates through the period 10

covered by SCE’s 2018 GRC with annual recovery of such costs in the Energy Resource 11

Recovery Account (ERRA) Review proceedings. Thereafter, such costs will be identified and 12

recovered through SCE’s future GRCs (i.e. 2021). As also described in Chapter XV, consistent 13

with Resolution E4847, SCE proposes to record and recover bill protection credits for the Opt-in 14

TOU Pilot, the Default TOU Pilot, and the October 2020 default through the generation and 15

distribution subaccounts of SCE’s Base Revenue Requirement Balancing Account (BRRBA). 16

Generation revenue shortfalls will be recovered from all of SCE’s residential generation 17

customers and distribution revenue shortfalls will be recovered from all of SCE’s residential 18

distribution customers. 19

E. Integrated Timeline 20

Figure I-1 depicts SCE’s integrated timeline for this application, and includes key default 21

TOU, related research, ME&O, and rate design implementation events that occur between 2017 22

and 2021. The Default TOU Timeline “swim lane” shows SCE-specific regulatory events 23

related to this application. The customer research swim lane shows the timing of the customer 24

surveys that may affect such things as the confirmation of the standard default TOU rate as well 25

as ME&O tactics. The ME&O swim lane illustrates when default TOU related communications 26

are scheduled to occur. The rate design implementation swim lane shows the timing of when 27

7

rate design proposals made in this application are proposed to become effective. Lastly, the red 1

band illustrates the start of the CSRP-related freeze that will limit SCE’s ability to make 2

customer systems and operational changes. 3

Figure I-1 Default TOU Integrated Timeline

8

II. 1

CUSTOMER SERVICE RE-PLATFORM (CSRP) 2

As part of SCE’s 2018 GRC Application 16-09-001 (Exhibit SCE-04, Volume 3), SCE is 3

planning to replace its obsolete CSS with a more modern, stable and agile customer technology 4

platform, i.e., the CSRP. The CSRP will directly impact the feasibility and timing of the rollout 5

of residential default TOU rates because the initial development of the CSRP and its stabilization 6

process will cause SCE to avoid major new transactions, such as defaulting customers to TOU 7

rates from Q2 2019 through Q3 2020. Given this system restriction, SCE cannot commence 8

default TOU rates for residential customers in 2019. SCE is therefore proposing to delay the 9

implementation of default TOU rates for residential customers until October 2020. 10

A. Background 11

The CSRP project will implement a new customer relationship and billing system that 12

will perform several critical customer-service-related functions, such as generating customer 13

bills and providing account management, overall customer care, credit and collections and 14

account receivables. The CSRP is needed to meet changing customer needs and to replace 15

legacy systems that are outdated, costly to maintain, and have increasing risk of failure. 16

This project will lead to the retirement of SCE’s legacy mainframe-based CSS, originally 17

designed and built beginning in the 1980s which now uses out-of-date technology that performs 18

essential customer-service-related functions including customer account management, credit and 19

collections, and accounts receivable services for our five million customers. The risk of failure 20

of CSS has increased as the legacy systems have become outdated and obsolete. In August 2015, 21

SCE requested that Infosys, SCE’s current application systems maintenance provider, assess the 22

feasibility of sustaining CSS. The assessment concluded that SCE should transition to a more 23

modern and agile customer technology platform no later than 2020. 24

To mitigate the potential systems failure risks, SCE plans to maintain CSS until CSRP is 25

operational in early 2020, when nearly 60 percent of SCE’s existing Customer Service 26

9

technology portfolio will be replaced with an integrated and more efficient system that will 1

provide greater flexibility to adapt to changing business needs using modernized technology. 2

B. Benefits of CSRP 3

The major benefits of the CSRP include: 4

Decommissioning of the obsolete, mainframe-based CSS and related subsystems 5

following implementation of the new system in early 2020; 6

Alleviating system failure risks and avoiding upgrade and maintenance costs 7

associated with continued use of CSS and aging infrastructure; 8

Reducing the rate and impact of customer system incidents; 9

Providing more efficient ways for customers to interact with the company; 10

Lowering operating costs; 11

Integrating with the company’s SAP system, which is the platform SCE uses for 12

finance, human resources, supply chain, work management, and governance; and 13

Reducing dependency on a scarce few resources to maintain a proprietary system and 14

dated technology. 15

Public policy continues to encourage more options for customers to participate in energy 16

solutions. As more choices become available for customers to participate in energy production, 17

storage, and demand-side management programs, SCE has developed a customer service strategy 18

that will allow SCE to support its customers in an efficient manner. A key component of this 19

strategy is modernizing the existing Customer Service technology portfolio to deliver simple and 20

efficient solutions to address increasing customer needs and expectations. 21

To support these goals, it is critical that SCE invest in the CSRP to replace the majority 22

of SCE’s current Customer Service technology portfolio to mitigate the failure risk and to 23

improve the integration of the proposed Customer Service software projects, e.g., SCE.com 24

Strategic Upgrade/Stabilization, Digital Customer Self-Service, and Alerts and Notifications. 25

10

C. CSRP Event Timeline 1

The CSRP is estimated to take 31 months to implement, excluding the early planning 2

assessment phase. The 31-month period is comprised of six distinct phases as shown in Figure 3

II-2 below, including a critical testing and rollout period that will take place in 2019 and is 4

discussed more fully in the next section of this testimony. 5

Figure II-2 CSRP Project Timing

D. The Effect of CSRP Implementation on Timing and Rollout of Default TOU 6

During the period from late 2018 through 2021, SCE needs to transition to a new 7

customer technology platform, decommission its CSS legacy system, and commence the 8

transition of residential customers to default TOU rates. In order to successfully manage these 9

initiatives while avoiding default TOU rollout during the CSRP stabilization period, SCE 10

proposes to delay the default TOU schedule until October 2020. 11

In 2019, the initial build of the CSRP is expected to have been completed and the new 12

system will be in the testing and deployment phases, and completing data migration, all of which 13

require a stable technical environment to ensure the accuracy and effectiveness of the build. 14

Additionally, once the CSRP is implemented in early 2020, a stabilization period is required to 15

ensure that the new system is working as expected and to safeguard against potential negative 16

impacts to operations when temporary increases in work volumes and average handle times are 17

11

expected. The original anticipated schedule to default all residential customers to TOU 1

beginning in March 2019 would directly coincide with the CSRP testing, deployment, and 2

stabilization and introduce unacceptable risk to both the successful implementation of CSRP and 3

successful TOU default. 4

If new requirements or significant changes are introduced during the testing or 5

deployment phases, the build out of the new system could be compromised and could require 6

additional rework which can significantly impact the scope, schedule and budget for the CSRP. 7

During 2018, SCE will establish the testing environment in order to prepare for the more 8

resource intensive testing work to be conducted beginning in Q2 2019. 9

SCE anticipates that additional lessons will be learned during the Default TOU Pilot that 10

may require CSRP system and design changes. If default TOU rates were applied to residential 11

customers beginning in March 2019 instead of October 2020, it would occur during the critical 12

activities for CSRP test and deployment phases when SCE resources need to be focused on 13

system testing, employee training and change management efforts. Such changes would 14

jeopardize the successful and timely implementation of the CSRP. During the CSRP freeze 15

period SCE will lock the CSRP code base and provide a stable test environment with available 16

resources to prepare for deployment. With the adjusted schedule, SCE anticipates that any 17

findings made during or at the close of the Default TOU Pilot in February 2019 that require 18

CSRP changes can be timely integrated into the CSRP in advance of the Q4 transition to default 19

TOU rates. 20

SCE’s proposed schedule allows SCE to focus on TOU defaults outside the critical 21

testing, deployment and stabilization activities for CSRP, thus reducing risk associated with 22

concurrent implementations and providing appropriate timing and focus that enables a higher 23

probability of successful implementation of both CSRP and residential TOU defaults. 24

12

III. 1

TIMELINE AND ORDER OF TRANSITION TO DEFAULT TOU 2

A. Timeline 3

SCE proposes a 15-month IDTM period beginning in October 2020 and continuing until 4

December 2021. As discussed in Chapter II, SCE proposes to begin the default TOU transition 5

in October 2020 to avoid an overlap of the default TOU rollout period with the freeze and 6

stabilization phases of the CSRP project. The proposed 15-month IDTM period also avoids 7

defaulting customers during summer months when electricity bills are typically highest and 8

allows time to consider the results of the Default TOU Pilot. Although SCE proposes TOU Lite 9

rates, these TOU rates may increase some customer bills over what they would have paid on the 10

prior tiered or seasonal tiered rates. SCE seeks to avoid summer transitions as it anticipates that 11

customers defaulted to TOU rates during the higher-bill summer months are more likely to 12

attribute the bill increase to the new TOU rate rather than any change in their consumption. 13

Deferring the start of the IDTM period to October 2020 not only accommodates the CSRP 14

freeze, it also helps to avoid this potential confusion and could reduce customer backlash against 15

the default TOU rate. For this reason, SCE proposes to pause default TOU transitions during the 16

period from April 2021 through September 2021, but to resume and conclude default TOU 17

transitions during the period from October 2021 through December 2021. 18

SCE’s proposal ensures that all customers eligible for default TOU at the outset of the 19

IDTM period, as well as existing customers, i.e., customers served at a residence prior to October 20

2020 who later become eligible for default TOU before October 2021, are included in the default 21

TOU rollout. It also allows operational flexibility during a period when large numbers of 22

customers are subject to default TOU transition on SCE’s new customer billing system.11 23

Section 745(c)(4) requires that customers served on the tiered, non-TOU rate must have access to 24

11 New customer accounts established during the IDTM period are not subject to default TOU, but the

standard TOU rate will then have become effective for residential customers at the time service commences on the new account.

13

12 months of interval usage data before being defaulted to a TOU rate. Given the October 2020 1

start date of the IDTM period, customers who open or transfer service during the period from 2

April 2020 through September 2020 will not be eligible for default TOU until at least April 2021 3

because they will not have 12 months of usage data. Moreover, because SCE proposes to pause 4

the defaulting of eligible customers during the period from April 2021 through September 2021, 5

these existing customers will all be eligible for default TOU by October 2021 when SCE 6

proposes to resume the transition process to default TOU. 7

B. Order of Transition 8

Over the first six months of the IDTM period, October 2020 through March 2021, SCE 9

plans to transition approximately 2.7 million of its customers who are eligible for default TOU 10

during this period. During this period, SCE proposes to transition groups of customers to default 11

TOU on a monthly basis within established districts in SCE’s service area.12 The sequencing of 12

districts will be based on the average difference between summer and winter bills on the standard 13

TOU rate for all eligible customers within a district. Customers in districts that have the highest 14

average seasonal bill difference on the standard TOU rate will be placed in the first transition 15

group, beginning in October 2020, while districts with the lowest average seasonal bill difference 16

will be placed in a later transition group in 2021. Districts with average seasonal bill differences 17

between the two extremes will be placed in sequence in the middle months. 18

This transition plan is intended to facilitate customer understanding and acceptance of 19

default TOU rates, especially among customers whose bills are expected to increase the most 20

during the summer months. It provides customers more time to learn about and to acclimate to 21

monthly bills on the TOU rates before summer arrives. It should also provide these customers 22

with a more positive transition because they will experience the benefits of lower winter bills on 23

a TOU rate compared to the tiered non-TOU rate for the longest possible time period. 24

12 Districts are geographical areas defined by SCE used to apportion Field Service Reps across SCE’s

service area. There are 35 districts in all with every customer having an assigned district in the customer database.

14

Grouping customers by district also allows customers residing in the same CCA to be 1

transitioned at or about the same time or in consecutive groups if it is a large CCA. SCE may 2

adjust the sequencing of customer segments based on the results of its Default TOU Pilot, 3

particularly in light of any adverse customer reactions that might be concentrated in a particular 4

district. 5

Figure III-3 shows the timing of default TOU communications and transition to the 6

default TOU rate for each respective group during the IDTM period. 7

Figure III-3 IDTM Period Timeline For Group Transitions

The initial migration groups may start off relatively slow, in order to account for an 8

expected “learning curve” associated with the new customer billing system. SCE plans to 9

increase the size of the migration groups, targeting an average of 456,000 customers being 10

defaulted to a TOU rate per month. The actual number of customers that transition to a default 11

TOU rate per month is expected to be less than 456,000 as some percentage of customers will 12

choose to stay on their tiered rate or choose a TOU rate other than the default TOU rate. These 13

Jul Aug Sept Oct Nov Dec Jan Feb Mar Apr ‐ Jun Jul Aug Sept Oct Nov Dec

Group A90 day 60 day 30 day Default

Group B90 day 60 day 30 day Default

Group C90 day 60 day 30 day Default

Group D90 day 60 day 30 day Default

Group E90 day 60 day 30 day Default

Group F90 day 60 day 30 day Default

Group G90 day 60 day 30 day Default

Group H90 day 60 day 30 day Default

Group I90 day 60 day 30 day Default

20212020

Pre‐default Communication

Customer transition to TOU

15

forecast numbers of customers are estimates based on current assumptions of several factors 1

including the eligible population and churn rates as shown in Appendix H. 2

The first group of eligible customers will be targeted for October 2020 implementation 3

with pre-default communications starting in July 2020. These customers will default to the TOU 4

rate on their October bill cycle date and will receive their first TOU bill in November 2020. 5

The next five months will repeat this process with each group having its own pre-default 6

communication beginning 90 days in advance of the customer’s respective default date until the 7

end of March 2021. Then, after the pause period from April 2021 through September 2021 ends, 8

an average of approximately 190,000 customers will default each month from October 2021 9

through December 2021. 10

Figure III-4, below, shows an integrated default TOU timeline, including volume of 11

customers, being defaulted as part of the Default TOU Pilot and during the IDTM period. 12

Figure III-4 Default TOU Transition and CSRP Timeline

16

IV. 1

DEFAULT TOU RATE DESIGN PROPOSAL 2

In this Chapter, SCE proposes to implement two default TOU rates in October 2020 at the 3

commencement of the IDTM period. These two TOU rates are identical to SCE’s Default TOU 4

Pilot Rates (TOU-D-4-9PM and TOU-D-5-8PM) approved by Resolution E-4847 for SCE’s 5

Default TOU Pilot.13 Resolution E-4847 approved SCE’s recommendation that both Default 6

TOU Pilot Rates be made available as optional TOU rates for all of SCE residential customers 7

beginning January 1, 2018, two months before SCE’s Default TOU Pilot is scheduled to 8

commence in March 2018. Following the conclusion of the Default TOU Pilot at the end of 9

February 2019, both default TOU pilot rates will continue to remain available as optional rates 10

for all residential customers. 11

During the IDTM period, SCE will inform customers of the default TOU rate that will 12

provide the customer a lower annual bill when transitioning to default TOU, or other optional 13

rate that would provide the customer a lower annual bill. SCE also proposes to select one of 14

these two default TOU rates as the standard rate for new customers who do not select a particular 15

rate at the time of service turn on. The selection of the standard TOU rate will be based on 16

information that will be obtained during the Default TOU Pilot, including survey results obtained 17

from Default TOU Pilot participants that, among other things, will assess customers’ preferences 18

for either one of the two default TOU rates. 19

A. Attributes of SCE’s Proposed Default TOU Rates 20

SCE’s two proposed default TOU rates are similar with respect to their defined TOU 21

periods and seasons, except for the duration of the on-peak period. TOU-D-4-9PM has a five-22

hour weekday on-peak period from 4:00 pm to 9:00 pm, while TOU-D-5-8PM has a three-hour 23

weekday on-peak period from 5:00 pm to 8:00 pm. Both default TOU rates have the same 24

definition of summer and winter months, the same number of TOU periods in summer and 25 13 In Advice 3531-E, the default TOU rates are referred to as Default Rate 1 (i.e., TOU-D-4-9PM) and

Default Rate 2 (i.e., TOU-D-5-8PM).

17

winter, and a baseline credit. In addition, both default TOU rates were designed with the goal of 1

minimizing bill impacts and seasonal volatility, while subscribing to the rate design principles 2

adopted in D.15-07-001. As proposed in SCE’s GRC Phase 2 proceeding, A.17-06-030, SCE 3

expects to accomplish rate differentiation for TOU periods through its generation rate component 4

and delivery charges.14 Figure IV-5 and Figure IV-6, below, show the defined seasons, weekday 5

and weekend rates (with the exception of SCE’s current fixed charges), and TOU periods for 6

TOU-D-4-9PM and TOU-D-5-8PM.15 7

14 As discussed in Exhibits SCE-02 and SCE-03 of A.17-06-030, SCE proposed to bifurcate its

distribution design demand marginal costs by incorporating a two-part allocation: a grid-related component and a peak-related component that is time-variant. For residential customers on TOU rates, the grid-related component will continue to be collected via a flat cents-per-kWh distribution energy charge. However, the peak-related portion, which is allocated to various time periods using the PLRF methodology, will be recovered via time differentiated distribution energy charges. As such, for residential customers on TOU rates, the total distribution energy rate is comprised of the flat grid-related kWh charge, plus a time-differentiated peak related kWh charge that varies by TOU period.

15 These rate structures were originally filed in AL 3531-E. The rate levels shown here have been updated to balance to estimated January 2018 rate levels. Actual rates will be updated consistent with authorized revenues, along with other residential rates when such rate changes are authorized.

18

Figure IV-5 TOU Periods, Seasons and Projected Rates for Schedule TOU-D-4-9PM16

16 All rates shown in Figures IV-5 and IV-6 are in cents per kWh of usage and exclude any baseline

credit described in Section B of this Chapter.

1a 2a 3a 4a 5a 6a 7a 8a 9a 10a 11a 12p 1p 2p 3p 4p 5p 6p 7p 8p 9p 10p 11p 12aJanFebMarAprMayJunJulAugSepOctNovDec


Weekdays

Win

ter Mid-Peak

4p-9p29.2₵

Off-Peak9p-8a27.8₵


Weekends

Sum

mer

Mid-Peak4p-9p26.7₵

Off-Peak9p-4p22.3₵





Super Off-Peak8a-4p17.0₵




Win

ter


On-Peak4p-9p41.3₵



Win

ter

Sum

mer

Win

ter






19

Figure IV-6 TOU Periods, Seasons and Projected Rates for Schedule TOU-D-5-8PM

Because customers may choose to opt-out of either default TOU rate to the seasonal 1

tiered, non-TOU rate or other optional TOU rate during the IDTM period, it is important to 2

provide customers with other TOU rate options that have TOU time periods that will be stable 3

for a reasonable period of time. In addition to the two default TOU rates, TOU-D-4-9PM and 4

TOU-D-5-8PM, SCE proposes in its GRC Phase 2, A.17-06-030, to have one additional TOU 5

rate, TOU-D-C, available for enrollment at the time of the IDTM.17 When IDTM 6

communications begin in August 2020, SCE will provide eligible default TOU customers with 7

bill comparisons to the to be implemented seasonal tiered rate schedule and other available TOU 8

rate options in order to provide relevant and useful comparisons to rate options that customers 9

will likely believe should continue to be available without significant changes over a reasonable 10

time period. 11 17 TOU-D-C mirrors the cost-based structure of the current TOU-D-B (which is proposed to be closed to

new enrollments February 2019), but includes an updated 4 p.m. to 9 p.m. on-peak period, while retaining the fixed charge of approximately $16 per month and does not have a baseline credit. The proposed TOU-D-C serves as an optional rate intended to provide choice and possible bill reductions to higher-usage customers, including those with electric vehicles.



Sum

mer

Win

ter Off-Peak

8p-8a28.7₵

WeekdaysW

inte

r Off-Peak8p-8a28.7₵






On-Peak5p-8p48.9₵

Sum

mer

Win

ter Off-Peak

8p-8a28.7₵


Weekends

Win

ter Off-Peak

8p-8a28.7₵












20

B. SCE’s Default Rates Comply with Commission Guidance and Are Designed 1

Consistent with SCE’s Experience for the Transition of Non-Residential Customers 2

to TOU Rates 3

While the TOU periods for TOU-D-4-9PM are identical to the Base TOU periods SCE 4

proposed in A.16-09-003 for non-residential customers, the TOU periods for TOU-D-5-8PM 5

differ slightly and include two fewer on-peak hours. D.17-01-006 adopted guidelines that 6

mandate consideration of customer understanding and acceptance and other factors that may 7

justify modification of the Base TOU time periods.18 To achieve the overall goal of customer 8

satisfaction and acceptance of the TOU rates, SCE moderated the on-peak TOU rates for both 9

TOU-D-4-9PM and TOU-D-5-8PM by recovering revenue in the winter season that would 10

otherwise be collected during the summer season. The purpose of this design is to reduce bill 11

volatility and bill increases in the summer.19 Additionally, SCE’s proposal in Chapter X.A to 12

seasonally differentiate its tiered rate structures will further help to limit the impact that both 13

TOU-D-4-9PM and TOU-D-5-8PM will have on customers who transition to a TOU rate during 14

the IDTM period.20 15

Examining on- to off-peak price ratios and rates for TOU periods is a method 16

traditionally used to compare rate and bill volatility and generally determine expected load 17 18 D.17-01-006 at p. 36 states that “[a]lthough the primary input for TOU rates should be the time

periods identified through the marginal cost analysis, rate design must take into account customer understanding and acceptance. Any resulting modifications should not stray far from the Base TOU periods and cost of service principles.” D.17-01-006 at p. 37, states “[w]e recognize the importance of promoting customer understanding and acceptance as an essential element in the success of TOU rates in motivating customer to shift energy usage.”

19 These structures are consistent with what the Commission has deemed “TOU-Lite rates” where the TOU tariff “is intended to be revenue neutral with other tariffs for the same customer class and has on and off peak rates set to a specified differential instead of attempting to reflect actual difference in the cost of energy by time period. The purpose of this mild differential is to be an introductory rate that allows for customers to learn and understand the new rate structure before they are subject to differentials that could produce significant rate shock for the unaware.” D.15-07-001, at p. 135.

20 In the Default TOU Pilot welcome kit, SCE will promote its Level Payment Plan (LPP) program to a subset of income-constrained customers who are expected to experience greater monthly bill volatility under TOU. As directed in Resolution E-4847, if a sufficient sample size enrolls in LPP, SCE will assess whether LPP assists in limiting load impacts and bill volatility.

21

response to TOU rates. By comparing the relative difference between on-, off-, or super-off peak 1

rate levels in Table IV-1, the Default TOU rates are shown to have slightly flatter, or have less 2

of a difference, than SCE’s Opt-In TOU Pilot Rates 2 and 3. 3

Table IV-1 Summer Ratios of Opt-In Pilot Rates and Proposed Default Rates

When designing the default TOU rates, SCE set out to preserve the relatively cost based 4

price ratios and moderated the seasonal impacts by removing cost based revenues from the 5

summer period to increase the chances that customers would accept and ultimately retain the 6

TOU rates. To accomplish this, SCE adjusted the rate design by moving various levels of 7

revenue from the summer to the winter to suppress average summer bill impacts for most 8

customers to 10% or less. Research conducted as part of Phase 1 of R.12-06-013 found that 9

most customers do not want to risk bill increases above 10% for the possibility of greater 10

savings.21 The bill impacts provided in Chapter XI are consistent with that goal. 11

Although the prior research did not consider absolute bill increases or seasonal increases 12

that could be offset by lower winter bills, SCE considered these results when designing TOU 13

rates to reduce seasonal bill volatility. SCE, other parties and Commission staff discussed this 14

issue at length as being a possible risk to the acceptance of default TOU rates.22 15

21 RROIR Customer Survey Key Findings. Hiner and Partners, April 16, 2013. “Willingness to Risk

Bill Impacts,” slide 31. This evaluation was conducted by parties in Phase 1 of this proceeding and can be provided upon request.

22 These structures are consistent with what the Commission has deemed “TOU-Lite rates” where the TOU tariff “is intended to be revenue neutral with other tariffs for the same customer class and has on and off peak rates set to a specified differential instead of attempting to reflect actual difference in the cost of energy by time period. The purpose of this mild differential is to be an introductory rate that allows for customers to learn and understand the new rate structure before they are subject to differentials that could produce significant rate shock for the unaware.” D.15-07-001, at p.135.

22

In compliance with D.15-07-001, SCE’s TOU-D-4-9PM and TOU-D-5-8PM rates each 1

include a baseline credit.23 SCE calculates the baseline credit as the cent per kWh difference for 2

the tiered rate between the sum of the weighted average of the Tier 2 rate and the High Usage 3

Charge (HUC) minus the baseline rate. The baseline credit is intended to indirectly reflect the 4

benefit of the baseline allocation to lower-usage customers.24 This calculation is expected to 5

result in a credit of approximately 6.6 cents per kWh applied to customers’ usage up to the 6

baseline allowances for summer and winter seasons in each climate zone. SCE proposes to 7

include the baseline credit under the distribution component of its proposed default TOU rates, 8

consistent with tiered rates. 9

Assuming that SCE’s rate design proposals in SCE’s GRC Phase 2, A.17-06-030, are 10

implemented in February 2019, Schedule TOU-D-4-9PM and Schedule TOU-D-5-8PM will 11

have time-differentiated distribution energy charges. Participating CARE customers will receive 12

a discount of approximately 32.5 percent on these rate schedules compared to non-CARE rates. 13

Pursuant to D.17-09-036, eligible default TOU customers who elect to take service on 14

either default TOU rate during the IDTM period would be eligible to receive up to one year of 15

bill protection. Additionally, both proposed default TOU rates will remain available for 16

customers after the close of the IDTM period regardless of which one is selected as the standard 17

TOU rate for service turn-ons.18

23 D.15-07-001, p. 331, Conclusion of Law (COL) 45, “We should adopt a baseline credit on any default

TOU rate and on at least one available TOU optional rate, as well as any TOU pilot rates.” 24 This calculated baseline credit uses assumed 2018 tiered rates balanced to January 2017 revenue

requirement levels, and is subject to future revisions as the tiered rates or structure change.

23

V. 1

DEFAULT TOU ELIGIBILITY 2

In this Chapter, SCE discusses certain residential customer segments that will be included 3

or excluded from default TOU during the IDTM period pursuant to Section 745 and the 4

Commission’s recent decisions in the “Section 745 Track” of the Residential Rate Reform OIR, 5

D.16-09-016 and D.17-09-036. 6

A. Senior Citizens and Economically Vulnerable Customers In Hot Climate Zones 7

(Section 745(c)(2), and Section 745(d)) 8

Section 745(c)(2) and Section 745(d)25 require the Commission to assess the potential 9

hardship that default TOU rates may have on senior citizens and economically vulnerable 10

customers in hot climate zones. D.16-09-016 interpreted specific terms within Section 745(c)(2) 11

and Section 745(d) as follows: (1) “economically vulnerable” customers are customers who are 12

eligible for SCE’s CARE or FERA programs; (2) “senior citizens” are persons 65 years of age 13

and older residing permanently in a household; (3) “hot climate zones” and “hot inland areas” for 14

SCE are baseline regions 13, 14, and 15; and (4) based on temperature criterion adopted by 15

D.16-09-016, SCE’s baseline region 10 is an area with “hot summer weather” where summer is 16

defined as the months of June, July, August and September, along with baseline regions 13, 14, 17

and 15.26 D.17-09-036 further determined that customers residing in SCE’s baseline region 10 18

25 Section 745(c)(2) states that “the commission shall ensure that any time-of-use rate schedule does not

cause unreasonable hardship for senior citizens or economically vulnerable customers in hot climate zones.” Section 745(d) requires that “The Commission shall not require or authorize an electrical corporation to employ default time-of-use rates for residential customers unless it has first explicitly considered evidence addressing the extent to which hardship will be caused on either of the following: (1) Customers located in hot, inland areas, assuming no changes in overall usage by those customers during peak periods; (2) Residential customers living in areas with hot summer weather, as a result of seasonal bill volatility, assuming no change in summertime usage or in usage during peak periods.”

26 D.16-09-016, pp. 7- 19.

24

have similar baseline quantities and bills27 compared to SCE’s baseline regions 13, 14 and 15 1

and should therefore be considered a “hot climate zone” for purposes of default TOU rollout. 2

1. Senior Citizens in Hot Climate Zones 3

In D.17-09-036, the Commission assessed the initial results of the IOUs’ Opt-in 4

TOU Pilots and determined that households with seniors that are located in SCE’s hot climate 5

zones: (1) did not experience unreasonable economic or health and safety hardship on TOU 6

rates; (2) shifted their usage at the same rate as the general population; and (3) had low TOU opt-7

out rates. Based on these findings, the Commission concluded that senior citizens in hot climate 8

zones should not be excluded from SCE’s Default TOU Pilot.28 SCE is therefore including 9

households with seniors that are located in SCE’s hot baseline regions in its Default TOU Pilot 10

and also intends to include these households in the full rollout of default TOU rates during the 11

IDTM. 12

2. Economically Vulnerable Customers in Hot Climate Zones 13

In D.17-09-036, the Commission determined that the Opt-in TOU Pilot results 14

provided insufficient evidence to conclude that economically vulnerable customers in hot climate 15

zones do not experience unreasonable economic and/or health and safety hardship due to TOU 16

rates.29 Therefore, to ensure that these customers do not experience unreasonable hardship on 17

default TOU rates, the Commission ordered that CARE and FERA eligible customers in hot 18

baseline regions be excluded from the IOUs’ Default TOU Pilots.30 The Commission further 19

determined that absent good cause for change, these customers will also be excluded from 20

default TOU rates.31 21

27 See D.17-09-036, p. 51, COL 2. 28 D.17-09-036, COL 1. 29 D.17-09-036, pp. 17 and 19. 30 D.17-09-036, p. 22. 31 D.17-09-036, p. 55, Ordering Paragraph 2.

25

Accordingly, SCE plans to exclude CARE/FERA-eligible customers in baseline 1

regions 10, 13, 14, and 15 from default TOU during the IDTM period. Upon turn-on or transfer 2

of service, customers who are currently CARE/FERA, or who self-identify as CARE/FERA 3

eligible, will be placed on the tiered rate if a TOU rate is not selected by the customer. 4

As discussed further in Chapter VI, SCE will continue to monitor results from the Opt-in and 5

Default TOU Pilots and will advise the Commission of any additional evidence that may present 6

good cause for revisiting this determination. 7

B. Identification of FERA-Eligible Customers 8

The Commission in D.17-09-036 also ordered the IOUs to propose a method for 9

identifying FERA-eligible customers for the mass roll-out of default TOU in their respective 10

RDW applications. This is to be followed by a TOU Working Group (WG) workshop that is to 11

be held no later than January 2018 to further explore whether there are feasible methods the 12

utilities could employ to more effectively identify FERA eligible, but not enrolled, customers. 13

To prepare for the TOU WG workshop, SCE proposes to use data provided by Athens 14

Research32 to identify FERA-eligible customers. The research method uses a multivariate 15

propensity model for FERA, similar to that employed for the CARE acquisition campaign that 16

would identify residential customers most likely to be approved for the FERA program. 17

This propensity model will utilize information on such socioeconomic and demographic 18

variables as household income, household size, number of children, number of adults, and age of 19

the service account holder to obtain a unique configuration of these characteristics that profiles 20

the average FERA customer. SCE plans to discuss this proposal with the TOU WG workshop 21

and looks forward to hearing about other potential methods or specific campaigns that may be 22

conducted to increase enrollment in the FERA program. 23

32 Athens Research is a contractor that supports the IOUs for their low income filings.

26

C. Customers Lacking Twelve Months of Interval Usage Data and Associated 1

Education (Section 745(c)(4)) 2

Section 745(c)(4) provides that “residential customers shall not be subject to a default 3

TOU rate unless that residential customer has been provided with not less than one year of 4

interval usage data from an advanced meter and associated customer education.” To comply 5

with this directive, SCE will first identify all customers that lack twelve continuous months of 6

interval usage data from an advanced meter at the same premise prior to the IDTM period. 7

These existing customers will not be defaulted during the IDTM period unless they have accrued 8

the required twelve months of interval usage and have been provided with a rate analysis at least 9

60 days in advance of scheduled default TOU for the customer. 10

Residential customer accounts open and close frequently due to routine customer 11

movement into and out of residences. Each year, about twenty percent of SCE’s more than four 12

million residential accounts will open or close. When customers relocate, their historical interval 13

data does not transfer to their new account and they are treated as “new customers.” 14

D.17-09-036 determined that “new customers,” including customers relocating within SCE’s 15

service area, will not be part of the transition to default TOU during the IDTM period and will 16

not receive bill protection or require one year of interval data to become subject to a standard 17

TOU rate at the time service commences.33 In fact, effective with the start of the IDTM period 18

and continuing thereafter, the IOUs were directed to engage new customers in making a rate 19

selection and that such customers will be placed on the standard TOU rate only if they decline to 20

make a rate selection. 21

33 D.17-09-036, p. 38.

27

D. Customers Excluded From Default TOU Unless They Provide Affirmative Consent 1

(Section 745(c)(1)) 2

Section 745(c)(1)34 provides that the following customers are not subject to default TOU 3

without their affirmative consent (such customers may affirmatively choose to opt-in to the 4

default TOU rate or other optional TOU rates if they so choose): 5

Customers who receive a medical baseline allowance(s) pursuant to subdivision (c) of 6

Section 739; 7

Customers who request third party notification pursuant to subdivision (c) of Section 8

779.1; and 9

Customers who cannot be disconnected from service without an in-person visit from a 10

utility representative. 11

Customers in these three categories are profiled in SCE’s Billing System and will be 12

excluded from the transition to default TOU. 13

E. Complex NEM Tariffed Customers 14

In Resolution E-4847, the Commission determined that customers taking service under 15

more complex NEM tariffs may be excluded from the default TOU pilot.35 These more complex 16

tariffs are: NEM Multiple Tariff Generating Facilities, NEM Aggregation, Schedule NEM-V 17

Generating Facilities (Multi-Tenant and Multi-Meter Properties) and NEM Paired Storage. 18

Additionally, SCE will also exclude customers participating in the complex Multifamily 19

Affordable Solar Housing (MASH) program because, as cited by E-4847, the incremental cost of 20

providing automated bill protection for this and other complex tariffs is not warranted given the 21

34 Section 745(c)(1) states “Residential customers receiving a medical baseline allowance pursuant to

subdivision (c) of Section 739, customers requesting third-party notification pursuant to subdivision (c) of Section 779.1, customers who the commission has ordered cannot be disconnected from service without an in-person visit from a utility representative (D.12-03-054 (March 22, 2012), Decision on Phase II Issues: Adoption of Practices to Reduce the Number of Gas and Electric Service Disconnections, Order 2 (b) at p. 55), and other customers designated by the Commission in its discretion shall not be subject to default time-of-use rates without their affirmative consent.”

35 Resolution E-4847, p. 16.

28

small number of customers taking service on these tariffs. Additionally, any customers receiving 1

permission to operate after July 31, 2017 are required to take service on TOU rates. 2

Consequently, SCE proposes to continue to exclude customers served on these tariffs from the 3

full rollout of default TOU. 4

A recently approved Decision in R.14-07-002 directs the IOUs to exclude customers in 5

the recently created Solar On Multifamily Affordable Housing (SOMAH) program from 6

mandatory TOU rates. In the spirit of that Decision and as bill protection can be costly and 7

intensive relative to the small number of SOMAH customers, SCE proposes to also exclude 8

these customers from default TOU.9

29

VI. 1

TOU PILOT STUDIES THAT INFLUENCE DEFAULT TOU ROLLOUT 2

D.17-07-001 directed the IOUs to design TOU pilots (Opt-in TOU Pilots in 2016 and 3

Default TOU Pilots in 2018) to investigate and evaluate Section 745 restrictions on default TOU 4

in preparation for widespread transition to default TOU. Additionally, the Default TOU Pilots 5

were intended to assess the IOUs’ operational readiness to implement default TOU. The 6

Commission approved SCE’s Opt-in TOU Pilot on March 30, 2016 in Resolution E-4761 and 7

approved SCE’s Default TOU Pilot on May 26, 2017 in Resolution E-4847. The Opt-in Pilot 8

launched on June 1, 2016 and will run through December 2017, and the Default TOU Pilot will 9

launch in March 2018 and run through February 2019 [12 months]. SCE reported the initial 10

results of its Opt-in TOU Pilot in the “Section 745 Track” of the Residential Rate OIR 11

proceeding and will continue to monitor and report on the results of these pilots to the 12

Commission and TOU Working Group as necessary. 13

A. Opt-In TOU Pilot 14

As discussed in Chapter V, the Commission decided in D.17-09-036 whether senior 15

citizens or economically vulnerable customers in hot climate zones would be excluded from 16

default TOU. The Commission noted that it would consider “new relevant data from the 17

remainder of the Opt-in Pilots and Default Pilots” as part of this RDW proceeding.36 18

SCE summarizes findings from the Second Interim Report, dated November 31, 2017, that was 19

prepared by Nexant, Inc., in collaboration with Research Into Action (RIA). The Second Interim 20

Report provides the load and bill impacts for winter of 2016 and spring of 2017 (November 21

2016- May 2017).37 These findings do not provide good cause for the Commission to revisit its 22

prior determination to exclude CARE/FERA eligible customers in hot climate zones from default 23

TOU. 24

36 D.17-09-036, p. 23. 37 The final Opt-in TOU Pilot report is expected in Q1 2018. SCE will provide supplemental analysis

on the final report in this RDW at a future date.

30

Although SCE’s proposed default TOU rates differ from the Opt-in TOU Pilot Rates 1, 2, 1

and 3, the preliminary results from the Opt-in TOU Pilot may reasonably estimate how SCE’s 2

customers may reduce peak usage under the proposed default TOU rates. Regarding peak load 3

impacts,38 Nexant’s Second Interim Report found that SCE’s Opt-in TOU Pilot Rate 1, with a 4

six-hour on-peak period from 2:00pm to 8:00pm, resulted in a 1.4% peak load reduction across 5

all customers. For Rate 2, with a three hour on-peak period from 5:00pm to 8:00pm, the peak 6

load reduction was 2%. For Rate 3, with a five hour peak period from 4:00pm to 9:00pm, the 7

peak load reduction was 3.2%. As a reminder, the First Interim Report observed average peak 8

load reductions of 4.4%, 4.2% and 2.7% for the summer season for Rates 1, 2, and 3, 9

respectively.39 10

Regarding economic hardship, the Second Interim Report40 found that customers on Opt-11

in TOU Pilot rates did not show economic hardship greater than those on the OAT on the three 12

rates. Similarly, regarding health index metrics,41 customers on all three Opt-in TOU Pilot rates 13

did not differ from customers on the OAT. As a reminder, the First Interim Report found largely 14

similar economic scores for Rates 1 and 2 and also found no differences in the health index 15

scores between customers on the Opt-in TOU Pilot Rate 2 and those on the OAT.42 16

38 See California Statewide Opt-in TOU Evaluation Second Interim Report, November 1, 2017,

prepared by Nexant pp. 105-136, available at https://public.3.basecamp.com/p/FAUVTYuXSGpn2e7C7M4vVr4o.

39 See California Statewide Opt in Time of Use Pricing Pilot, Interim Evaluation Report, April 11, 2017, prepared by Nexant and Research Into Action, pp. 212-239 available at http://www.cpuc.ca.gov/WorkArea/DownloadAsset.aspx?id=6442453144.

40 See Statewide Opt-in TOU Evaluation Second Interim Report – 2017 Customer Survey Results , pp. 125-140, available at https://public.3.basecamp.com/p/FAUVTYuXSGpn2e7C7M4vVr4o.

41 See Statewide Opt-in TOU Evaluation Second Interim Report – 2017 Customer Survey Results , pp. 125-140, available at https://researchintoaction.sharefile.com/d-s50338aa7d5f45b49.

42 See California Statewide Opt in Time of Use Pricing Pilot, Interim Evaluation Report, April 11, 2017, prepared by Nexant and Research Into Action, pp. 281-284 available at http://www.cpuc.ca.gov/WorkArea/DownloadAsset.aspx?id=6442453144.

31

To evaluate peak load response relative to pricing, Table VI-2 lists the summer on-peak 1

period rate, peak load reductions as well as the price elasticities reported by Nexant.43 2

Table VI-2 Opt-in TOU Pilot Peak Period Pricing, Elasticity

and Peak Load Reduction Estimates by Rate

SCE Opt-in 1 SCE Opt-in 2 PG&E Opt-in 1 Peak Period Price (¢/kWh) 34.5 53.5 42.0

Elasticities Using Marginal Price Above Baseline Quantiles

0.09 0.02 0.10

Peak Load Reduction Estimate 4.4% 4.2% 5.8%

B. Default TOU Pilot Surveys 3

SCE proposes to monitor the following metrics and conduct the following analyses to 4

obtain additional information relevant to selecting the final standard default TOU rate and 5

informing other ME&O and operational decisions ahead of the full rollout of TOU: 6

Default TOU Pilot customer opt-outs and subsequent rate selection. 7

Overall initial satisfaction with the Default TOU Pilot experience. 8

Initial call volumes associated with the Default TOU Pilot. 9

Customer understanding and awareness of the default TOU transition, rates and 10

structures. 11

Comparative satisfaction for the Default TOU Pilot Rates 1 and 2. 12

Peak period load reductions for the Default TOU Pilot Rates 1 and 2. 13

Processing of rate changes after customers are transitioned. 14

Based on Default TOU Pilot survey findings scheduled for April and May 2018, attrition 15

levels, and customer satisfaction scores, SCE will determine how customers initially reacted to 16

being transitioned to either one of the two default TOU rates and whether particular ME&O 17

treatments were more effective at increasing awareness and engagement. SCE proposes to 18

43 Id.

32

update the TOU WG on these metrics and our progress towards implementing the IDTM. 1

Below is an overview of SCE’s planned surveys related to the Default TOU Pilot. 2

Survey 0 – Establishing A Baseline of Customer Awareness & Understanding: 3

Prior to any Default TOU Pilot communications, interviews began in November 2017 and will 4

be completed in early December 2017 with a representative group of 1,500+ residential 5

customers (not necessarily in the Pilot), with the purpose of serving as a baseline to understand 6

customers’ pre-Pilot level awareness and understanding of TOU (what it is, how it works, peak 7

time periods, etc.) and other rate options. With some revisions and additional questions designed 8

specifically for the pre-Pilot baseline, this survey is mostly comparable to the ME&O tracking 9

study conducted semi-annually to evaluate core customer-based metrics – and will function both 10

as the Fall 2017 ME&O tracker and the Survey 0 baseline. 11

Survey 1a - Inform full rollout pre-default communication strategy: Survey 1a will 12

be administered in March and April 2018 shortly after customers complete their transition to 13

default TOU rates. The survey will focus on the customers’ awareness and understanding of the 14

Default TOU Pilot and the concept of TOU, and will gauge the customers’ overall experience 15

during the pilot introduction and on-boarding period. The main purpose of Survey 1a is to 16

inform the full rollout pre-default communication strategy by learning the effectiveness of the 17

pilot communications and the messages and concepts that resonated most with customers. 18

Survey 1b - Welcome Kit and other tool feedback, initial 'feel' for the TOU rates: 19

Survey 1b will be administered in the months of May and June 2018 to customers that remained 20

on a default TOU rate, either by default or through their own selection. The survey will get a 21

sense of the customers’ understanding of TOU and their engagement with the rates. The survey 22

will also try to learn the customers’ initial feelings about or reactions to their TOU rate and any 23

reported behavior changes that adopting the rate has produced. The purpose of Survey 1b is to 24

get an assessment of the post-default communications including the Welcome Kit and seasonal 25

newsletter and the tools offered to customers to help them get the most out of TOU. The other 26

important purpose of Survey 1b is to understand if there is a preferred rate between TOU-D-4-27

33

9PM and TOU-D-5-8PM or if there are indications that customers who were defaulted to their 1

lowest default rate were more satisfied with the experience overall. 2

Survey 2 - Customer feedback on TOU rates, inform Lowest Rate decision: 3

Survey 2 implemented in the months of October and November 2018 will be targeted to Default 4

TOU Pilot customers who were transitioned to one of the default rates and will occur after the 5

customer has been on their rate for several months. The survey will assess customers’ overall 6

experience with, and acceptance of, default TOU rates based on their awareness, understanding, 7

and engagement. This survey will also look to include reactions and experiences with Energy 8

tools, Level Pay Plan, text alerts, and other program offerings. 9

Ad Hoc interviews with Opt-out customers, learn reasons for opt-out: Additional ad 10

hoc surveys will be conducted as needed to better understand why customers opt out, what could 11

be done to encourage customers to remain on a TOU rate and how messaging might be adjusted 12

to increase awareness and customer satisfaction. 13

34

VII. 1

FORECAST GHG REDUCTIONS AND COST SAVINGS RESULTING FROM 2

DEFAULT TOU 3

D.15-07-001 required each IOU to include studies on greenhouse gas (GHG) emissions 4

reductions in its 2018 RDW application.44 SCE’s analysis of the effect of residential default 5

TOU on GHG emissions is being provided in workpapers accompanying this testimony.45 6

This analysis is based on SCE’s proposed TOU-D-4-9PM rate. It begins with a forecast of 2021 7

average marginal heat rate per megawatt hour (MMBTU/MWh) for each of SCE’s proposed 8

TOU time periods. The Energy Division staff recommended that marginal heat rates should be 9

calculated using Itron’s 2016 SGIP Advanced Energy Storage Impact Evaluation as a guide. 10

Historical hourly heat rates for 2016 are computed via the same method used by Itron in 11

the SGIP report:46 12

HeatRate[h] = (MP[h] – VOM) / (GasPrice + EF * CO2Cost)47 13

Where: 14

MP is the hourly market price of energy 15

VOM is the variable O&M cost for a natural gas plant 16

GasPrice is the cost of natural gas delivered to an electric generator 17

CO2Cost is the $/tonne cost of CO2 18

EF is the emission factor for tonnes of CO2 per MMBTU of natural gas 19

These 2016 hourly historical marginal heat rates are then input into the latest version of 20

the Avoided Cost Calculator.48 SCE used the Avoided Cost Calculator and the 2016 marginal 21 44 D.15-07-001, p. 162 “direct[ed] the IOUs, as part of their 2018 Residential RDW application, to

prepare better studies of the potential for cost savings and GHG reduction.” 45 Please Refer to “Workpaper-SCE Residential Carbon Calculator.xlsx.” 46 See 2016 SGIP Advanced Energy Storage Impact Evaluation, August 31, 2017, prepared by Itron

[hereinafter “Itron SGIP Evaluation”], available at http://www.cpuc.ca.gov/General.aspx?id=7890. 47 Itron SGIP Evaluation, p. A-11, available at http://www.cpuc.ca.gov/General.aspx?id=7890. 48 Avoided Cost Calculator available at ftp://ftp.cpuc.ca.gov/gopher-

data/energy_division/EnergyEfficiency/CostEffectiveness/ACC_Model_v1.xlsm.

35

heat rates to forecast 2021’s hourly marginal heat rates. SCE chose 2021 because SCE proposed 1

to implement default TOU rates for residential customers beginning in October 2020. 2

The calculated 2021 hourly marginal heat rates can vary from less than zero during 3

incidences of over-supply or curtailment of renewable generators, to over 80 MMBTU/MWh 4

during extreme heat events or system emergencies. To calculate marginal GHG emissions that 5

correspond better to the fleet of natural gas generators that deliver energy in California, the 2021 6

historical hourly marginal heat rates were adjusted as follows: 7

First, hourly heat rates less than or equal to zero are set to zero. Heat rates with 8

values of zero imply non-dispatchable renewable generation sources such as solar and 9

wind are on the margin, and thus any marginal load increases will not increase 10

marginal thermal (fossil fuel) generation. 11

Second, SCE set all hourly heat rates that were above 11 MMBTU/MWh to a value of 12

11. As Itron describes in their 2016 SGIP Evaluation, heat rates above 11 13

MMBTU/MWh may not be realistic, as a marginal heat rate above that value “either 14

implies a combustion turbine with an extremely low capacity factor, or that high 15

startup costs have been included, which makes energy prices appear higher and 16

therefore inflate the calculated marginal heat rate value.” 49 17

Third, for heat rates calculated between zero and 5.5 MMBTU/MWh, SCE followed 18

Itron’s calculations and set the calculated heat rate to 5.5 MMBTU/MWh as an 19

effective lower bound based on the marginal heat

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