February 19, 1998

The Honorable David P. Boergers
Acting Secretary
Federal Energy Regulatory Commission
888 First Street, N.E.
Washington, D.C. 20426 

Re:  	Pacific Gas and Electric Company, San Diego Gas & Electric Company and Southern California Edison Company, Docket Nos. EC96-19-___ and ER96-1663-___

Amendment No. 1 to the ISO Operating Agreement and Tariff and ISO Protocols

Relating to Minor Mismatches in Tariff Language and Actual Operations

Dear Secretary Boergers:

Pursuant to Section 205 of the Federal Power Act (“FPA”), 16 U.S.C. §824d, the California Independent System Operator Corporation (“ISO”) submits the first of four contemplated amendments (“Amendment No. 1”) to the ISO Operating Agreement and Tariff (“ISO Tariff”), including the ISO Protocols.  Amendment No. 1 resolves minor mismatches among the current ISO Tariff, the ISO Settlement and Billing Protocol and the ISO’s software.  Except where otherwise noted, all capitalized terms are as defined in the ISO Tariff. 

This amendment is being proposed after consultations with Market Participants and the ISO’s software suppliers.  These minor amendments must be made effective by the ISO Operations Date, to ensure that the ISO operates in accordance with the terms of the ISO Tariff, including the ISO Protocols.  Consequently, the ISO requests that Amendment No. 1 be accepted and made effective as of the ISO Operations Date.  As noted below, the ISO respectfully requests a waiver of the 60-day notice requirement.

Included with this submittal are:

•	the proposed Amendment No. 1 (providing only the revised excerpts from the ISO Tariff and Settlement and Billing Protocol, blacklined to indicate changes); and 

•	a notice suitable for publication in the Federal Register (hard copy and diskette).

I.	NOTICES

The following individuals should be placed on the Commission’s Official Service List for this submittal:

N. Beth Emery				         Fiona Woolf
Vice President and General Counsel		         Linda C. Ray
The California Independent System		         Bridget E.R. Shahan
  Operator Corporation		         Cameron McKenna LLP
151 Blue Ravine Road		         2000 Pennsylvania Ave., N.W.
Folsom, California  95630		         Suite 8550
Tele: 916-351-2334		         Washington, D.C. 20006
Fax:  916-351-2350		         Tele:  202-466-0060
			         Fax:   202-466-0077

II.	BACKGROUND

The ISO is aware of and extremely appreciative of the extraordinary effort made by the Commission and its Staff in the past few months to 

accommodate the California restructuring.  The ISO is mindful of the administrative burden being borne by the Commission and is committed to minimizing unnecessary filings and to the maximum extent practicable making filings within Commission-prescribed notice requirements.  The ISO, therefore, is making this filing, and the other amendments to be submitted shortly, with great reluctance.  The necessity for these amendments, however, is compelling.

The ISO and the stakeholders have themselves been engaged in an extraordinary level of effort to prepare for the ISO Operations Date.  As the Commission is aware, the ISO continues testing and preparing to initiate operations no later than March 31, 1998.  Amendment No. 1 reflects the results of one aspect of that preparation, namely the ISO's systematic review of its software capabilities against the provisions of the ISO Tariff, including the ISO Protocols.  As a result of that review, the ISO has found several minor problems that it seeks to correct with Amendment No. 1.

The changes proposed in Amendment No. 1 involve clarifying language.  Therefore, the ISO respectfully requests waiver of the filing requirements under Part 35 of the Commission’s rules.

Amendment No. 1 reflects changes to the ISO Tariff that the ISO has posted on its “Home Page" (“the ISO Tariff Compliance Posting”)  as required by the Commission's October 30 Order.  Pursuant to the Commission’s December 17 Order, the ISO must make a compliance filing of the ISO Tariff no later than 60 days after the ISO Operations Date.  It is the ISO Tariff Compliance Posting, not the Tariff filed with the Commission August 15, 1997, against which the ISO has black-lined the changes filed today.

III.	THE NATURE OF AMENDMENT NO. 1

Three issues are resolved by the ISO Tariff and Settlement and Billing Protocol amendments contained in this submittal: (1) allocation of Voltage Support and Black Start costs; (2) disbursement of Wheeling revenues; and (3) Imbalance Energy charges.

A.	Allocation of Voltage Support and Black Start Costs

The ISO Tariff allocation of the costs of Voltage Support and Black Start services under ISO contracts conflicts with the software assumptions.  Sections 2.5.28.5 and 2.5.28.6 of the ISO Tariff allocate the costs of these services to Scheduling Coordinators based on total “scheduled” Demand, while the ISO’s software allocates them based on total “metered” Demand.  This amendment conforms Sections 2.5.28.5 and 2.5.28.6 of the ISO Tariff, as well as sections G 3.8 and G 3.16 of Appendix G to the Settlement and Billing Protocol (now Appendix L to the ISO Tariff), to the system design by allocating these charges based on metered Demand.

This modification reflects the system design and ensures the more appropriate allocation of the costs of Voltage Support and Black Start services based on the actual Demand for these services.

This change has been discussed with the Scheduling Coordinators and has the support of the Scheduling Coordinator Users Group (“SCUG”).  It was authorized by the ISO Governing Board by vote at its January 21 Board meeting.

B.	Disbursement of Wheeling Revenues

Appendix F to the Settlement and Billing Protocol was written to disburse Wheeling Access Charges to Participating TOs based on each Participating TO's percentage of ownership/firm entitlements to transmission capacity at delivery points.  In contrast to this, ISO Tariff Section 7.1.4.3 disburses Wheeling Access Charges based on the ratio of each Participating TO's Transmission Revenue Requirement to the sum of all Participating TOs' Transmission Revenue Requirements.  

The ISO wishes to amend Appendix F to the Settlement and Billing Protocol to be consistent with ISO Tariff Section 7.1.4.3 and to reflect the intent of the system design. 

	C.	Imbalance Energy Charges

In the course of removing from the ISO Tariff provisions relating to staged features, as required by the October 30 Order, an inadvertent change was made to the equation for the calculation of import deviations at Scheduling Points, which is used in the calculation of the Imbalance Energy Charge.  Specifically, the component for imports of Ancillary Services was removed from the import deviations formula, because the ISO will not import Ancillary Services from interties in the first stage of operations.  There is, however, one exception to this, in that the ISO will import Ancillary Services from interties to the extent that such schedules are submitted pursuant to an Existing Contract.  Furthermore, the deleted Ancillary Services component included imports of Supplemental Energy, which will be part of the first stage of operations.  The proposed changes to Section 11.2.4.1 of the ISO Tariff and to Appendix D to the Settlement and Billing Protocol restore the Ancillary Services and the Supplemental Energy components that were deleted inadvertently, with a clarification as to their proper application.

IV.	EFFECTIVE DATE

The ISO respectfully requests that the Commission accept for filing Amendment No. 1 and allow it to become effective as of the ISO Operations Date. 

V.	REQUEST FOR WAIVER OF THE 60-DAY FILING REQUIREMENT

Pursuant to Section 35.11 of the Commission's regulations, the ISO respectfully moves for waiver of the 60-day notice requirement in respect of Amendment No. 1.  Good cause exists for the Commission to grant the ISO a waiver of the 60-day notice requirement.  Amendment No. 1 resolves for Market Participants certain technical problems involving settlements and billing.  These proposals must be allowed to become effective on the ISO Operations Date in order to ensure that some of the most crucial activities under the ISO Tariff, including the ISO Protocols, are optimally structured at the initiation of operations.  If they are not allowed to become effective on the ISO Operations Date, Scheduling Coordinators will have unnecessary scheduling and billing problems. 

The ISO is making this filing at the earliest practicable date.  These issues have only recently been discovered, and the ISO staff, in working to find solutions to each issue, have consulted with the affected parties, including the SCUG.  Because of this stakeholder process, there is not the need for a full 60-day notice period.  Moreover, by making the effectiveness as of the ISO Operations Date, all parties will have advance notice of effectiveness, because the Commission's December 23, 1997 order requires the ISO to provide the Commission and the parties 15 days’ prior notice of the ISO Operations Date. 

Wherefore, for the foregoing reasons, the ISO respectfully requests waiver of the 60-day notice requirement for Amendment No. 1 to allow the amendments to become effective as of the ISO Operations Date.

VI.	CONCLUSION

Wherefore, for the foregoing reasons, the California Independent System Operator Corporation respectfully requests that the Commission accept for filing Amendment No. 1 to the ISO Operating Agreement and Tariff and ISO Settlement and Billing Protocol and allow Amendment No. 1 to become effective as of the ISO Operations Date.

Respectfully submitted,

Fiona Woolf
Linda C. Ray
Counsel for the California Independent System Operator Corporation

CERTIFICATE OF SERVICE
I hereby certify I that have this day served the foregoing submittal upon each person designated on the Official Service List compiled by the Secretary in Docket Nos. EC96-19-003 and ER96-1663-003, in accordance with the requirements of Rule 2010 of the Commission’s Rules of Practice and Procedure, 18 C.F.R. § 385.2010.
Dated at Washington, D.C., this 19th day of February, 1998.

_____________________
Harry Dupre

Notice Suitable for Publication in the Federal Register

Pacific Gas and Electric Company, 
 San Diego Gas & Electric Company,          Docket Nos. EC96-19-___ and
 and Southern California Edison 	ER96-1663-___
 Company						

NOTICE OF FILING
Take notice that on February 19, 1998, the California Independent System Operator Corporation (ISO) filed for Commission acceptance in this docket, pursuant to Section 205 of the Federal Power Act, an application to amend the ISO Tariff and Settlement and Billing Protocol and a motion for waiver of the 60-day notice requirement.  The ISO requests that the proposed ISO Tariff and Settlement and Billing Protocol amendments be made effective as of the ISO Operations Date.

The ISO states that the proposed ISO Tariff and ISO Settlement and Billing Protocol amendments would revise the allocation of Voltage Support and Black Start services costs, revise Appendix F to the Settlement and Billing Protocol regarding the disbursement of Wheeling Revenues and correct an inadvertent change that was made in a previous filing to the equation for the calculation of import deviations at Scheduling Points, which is used in the calculation of the Imbalance Energy Charge. The ISO states that the proposed ISO Tariff and ISO Settlement and Billing Protocol amendments are necessary for the initial operations of the ISO.

Any person desiring to be heard or to protest said filing should file a petition to intervene or protest with the Federal Energy Regulatory Commission, 888 First Street, N.E., Washington, D.C.  20426, in accordance with 18 C.F.R. §§ 385.212 and 385.207.  All such petitions or protests should be filed on or before _________.  Protests will be considered by the Commission in determining the appropriate action to be take, but will not serve to make protestants parties to the proceeding.  Any person wishing to become a party must file a petition to intervene.  Copies of this application are on file with the Commission and available for public inspection.