UNITED STATES OF AMERICA

BEFORE THE

FEDERAL ENERGY REGULATORY COMMISSION

California Independent System	)	Docket No. ER98-1499-000, et al.
	Operator Corporation	)	

PREPARED SUPPLEMENTAL DIRECT TESTIMONY OF
DEBORAH A. LE VINE
ON BEHALF OF THE
CALIFORNIA INDEPENDENT SYSTEM
OPERATOR CORPORATION

Q.	PLEASE STATE YOUR NAME, TITLE, AND BUSINESS ADDRESS.
A.	My name is Deborah A. Le Vine and I am the Director of Contracts & Compliance for the California Independent System Operator Corporation (ISO).  My business address is 151 Blue Ravine Road, Folsom, California 95630.

Q.	HAVE YOU TESTIFIED PREVIOUSLY IN THIS MATTER?
A.	Yes. I previously provided prepared Direct Testimony.  A description of my background, including my responsibilities with the ISO, is contained in that testimony.

Q.	WHAT WAS THE PURPOSE OF YOUR DIRECT TESTIMONY?
A.	The purpose of my Direct Testimony was to describe to the Commission the role of the ISO’s Meter Service Agreement for Scheduling Coordinators (MSA/SC) and the Meter Service Agreement for ISO Metered Entities (MSA/ISOME) in the restructuring of the electric utility industry in California and certain significant aspects of the agreements as they relate to the restructuring and the ISO Tariff.  In my Direct Testimony, I also described certain revisions the ISO was willing to make to the pro forma  MSA/SC and MSA/ISOME to accommodate concerns expressed by intervenors in this proceeding.

Q.	WHAT IS THE PURPOSE OF YOUR SUPPLEMENTAL DIRECT TESTIMONY?
A.	Of the numerous parties that have intervened in this proceeding, including the City and County of San Francisco; The Metropolitan Water District of Southern California; the Modesto Irrigation District; Southern California Edison Company; the Transmission Agency of Northern California; the Western Area Power Administration; San Diego Gas & Electric Company; the City of Redding, California; the Sacramento Municipal Utility District; Long Beach Generating, LLC; El Segundo Power, LLC; the City of Anaheim, California; Electric Clearinghouse, Inc.; Enova Energy, Inc.; and the Northern California Power Agency, all but one were apparently satisfied with the revised pro forma agreements contained in Exhibit Nos. ISO-6 and ISO-7.  The one participant to submit answering testimony was the Cogeneration Association of California (CAC).  CAC does not appear to take issue with respect to the reasonableness of the revised MSA/SC and MSA/ISOME as applied to “merchant plants”; however, CAC claims that these agreements “do not adequately address the considerations of operational Qualifying Facilities.”

The Commission Trial Staff requested that the ISO file supplemental testimony explaining its position on the issues raised by CAC.  The purpose of my Supplemental Direct Testimony and the Direct Testimony of Mr. Mark Morosky is to address the issues raised by Mr. James A. Ross on behalf of CAC. 

Q.	DOES THE ISO AGREE THAT THE PRO FORMA MSA/SC and MSA/ISOME NEED TO BE MODIFIED FOR QUALIFYING FACILITIES (QFs)?  
A.	No.  At the outset, I would note that the purpose of this proceeding is twofold:  (1) to assess the reasonableness of the MSA/SC and MSA/ISOME as pro forma agreements, and (2) to assess the reasonableness of the specific agreements filed in these consolidated dockets.
The ISO prepared the pro forma agreements as a means of simplifying the process of access to the ISO Controlled Grid and participation in the ISO markets.  The thought was that standardized “pre-approved” agreements would ensure non-discriminatory participation and expedite Commission approval of new market entrants. 

It is also important to remember that the ISO’s metering requirements are, as described by Mr. Morosky, defined by the ISO Tariff, including the Metering Protocols.  These requirements were all filed at the Commission and have been the subject of other proceedings.

The ISO believes that metering requirements should be applied, to the extent feasible, in a uniform, non-discriminatory manner.  The MSA/ISOME allows the ISO to directly poll the meter.  The MSA/SC requires the Scheduling Coordinator to validate, edit, and estimate the data so that settlement quality data are supplied to the ISO.  Such an approach facilitates the automation of the ISO’s settlement and billing process.  Automation of the meter data prevents shifting of administrative costs to participants that comply with the ISO’s metering requirements from those facilities that do not.  If the unit does not supply settlement quality data to the ISO or allow for direct polling in accordance with the ISO’s metering standards, it causes the ISO to perform manual “work arounds” which are time consuming and resource intensive.  The pro forma MSA/SC and MSA/ISOME are reasonable for all market participants, including QFs.  Neither Midway Sunset Cogeneration Company nor Texaco’s North Midway project have demonstrated specific circumstances that would warrant modifying the pro forma provisions.

Q.	CAN YOU PLEASE SUMMARIZE THE ISSUES IN DISPUTE BETWEEN CAC AND THE ISO.
A.	The actual issues in dispute between the ISO and CAC appear to be rather narrow.  Mr. Ross states that application of the ISO’s metering requirements should be subject to case-by-case evaluation based on factors such as the facility’s location, size, and metering configuration, and that any dispute be subject to resolution through an alternative dispute resolution (ADR) process. 

The ISO agrees that applicability of the metering requirements can be reviewed on a case-by-case basis subject to ADR.  As Mr. Morosky explains, Section 13 of the Metering Protocol of the ISO Tariff permits exemptions from the ISO Tariff based on the specific circumstances of the facility.  The operating procedure for obtaining metering extensions is posted on the ISO web site.  Moreover, the ISO’s determination of whether or not to grant an exemption is subject to ADR in accordance with Article 13 of the ISO Tariff.  

The main area of disagreement appears to be one of presumption.  The ISO Tariff presumes that generating facilities will comply with the ISO’s metering requirements, unless the facility can demonstrate that specific circumstances warrant an exemption.  On behalf of CAC, Mr. Ross advocates an approach where the presumption would be that a QF would  not have to comply with the ISO’s metering requirements unless it voluntarily agreed to do so or unless the ISO prevails through an ADR process.  

Moreover, based on his testimony Mr. Ross would apparently apply this presumption only to a certain class of QFs:  those that have satisfied the metering and interconnection standards of the Utility Distribution Company’s (such as the Pacific Gas & Electric Company; Southern California Edison Company, or San Diego Gas and Electric Company) power purchase agreement, do not provide Ancillary Services, and whose operational characteristics do not materially change.  While Mr. Ross testifies that his proposed modification to the MSA/SC and MSA/ISOME would only apply to QFs that meet the criteria just discussed, the specific recommended changes to the pro forma agreements he proposes do not contain this restriction.  Thus for consistency, Mr. Ross should, at a minimum, modify his recommendations for section 3.1.1 of the MSA/ISOME and section 3.1.1 of the MSA/SC so that they are limited to “a Qualifying Facility pursuant to 18 CFR 292 and operated in compliance with a power purchase agreement approved by the Local Regulatory Authority on the date this Agreement is made effective and which does not participate in the ISO’s Ancillary Services markets or materially change its operating characteristics shall not...”  The ISO, however, still believes that such a provision is neither necessary or appropriate.      

Q.	YOU STATE THAT THE METERING REQUIREMENTS ARE ESTABLISHED IN THE ISO TARIFF.  DOES THE ISO TARIFF PROVIDE FOR ANY SPECIAL METERING EXEMPTIONS FOR QFs?
A.	Yes.  As noted by Mr. Ross, Section 13.5.2(b)vi of the Metering Protocol of the ISO Tariff provides that:
If a QF sells all of its Energy (excluding any Energy consumed by auxiliary load equipment electrically connected to that QF at the same point or any Energy sold through “over the fence” arrangements as authorized by Section 218(b) of the California Public Utilities Code) and Ancillary Services to the U[tility] D[istribution] C[ompany] in whose Service Area it is located pursuant to an existing power purchase agreement (which is authorized under Section 218(b) of the California Public Utilities Code) and there is any inconsistency between that existing power purchase agreement and this Protocol, Section 10 of the ISO Tariff or Appendix J to the ISO Tariff, the existing power purchase agreement shall prevail to the extent that inconsistency for the term of the agreement.  In this context, an existing power purchase agreement shall mean an agreement which has been entered into and is effective as of December 20, 1995.        

Q.	DID ANY PARTY CHALLENGE THE REASONABLENESS OF THIS PROVISION WHEN IT WAS FILED WITH THE COMMISSION? 
A.	No.  While the metering protocols (and other ISO protocols) were initially filed with the Commission “for informational purposes” in the Fall of 1997, the Commission in its December 17, 1997 Order required the ISO to file the protocols pursuant to Section 205 of the Federal Power Act, within sixty days of the start of ISO grid operation.  The ISO made this compliance filing on June 1, 1998.  Neither CAC nor any other participant protested this provision of the June 1998 filing.    

Q.	WHY SHOULD QFs EITHER SELLING POWER INTO THE ISO’S ANCILLARY SERVICE MARKETS OR TRANSMITTING POWER INTO OR THROUGH THE ISO CONTROLLED-GRID COMPLY WITH THE ISO’S METERING STANDARDS? 
A.	Power from QFs being sold into the ISO’s Ancillary Service markets or transmitted into or through the ISO Controlled Grid needs to be accounted for through the ISO metering and settlement systems. The ISO is not only the Control Area Operator ensuring grid reliability, but also performs billing and settlement activities for transactions utilizing and supporting the ISO Controlled Grid. 

Q.	WHY IS IT IMPORTANT FOR THE ISO TO IMPOSE UNIFORM METERING STANDARDS ON ALL GENERATORS?
A.	Scheduling Coordinators arrange for the generation dispatch, transmission reservation, delivery of energy, and provision of capacity for Market Participants.  They are also responsible for paying the ISO’s charges.  The ISO operates a real-time imbalance market (the spot market); an Ancillary Services Market with separate requirements for Regulation (Regulation up and Regulation down), Spinning Reserve, Non-Spinning Reserve, and Replacement Reserves; and a congestion management market.  Under the ISO Tariff, transmission and Ancillary Service sales are scheduled and settled on an hourly basis. 

Currently, the ISO processes almost 600,000 settlement line items per month for approximately 20 million MWH per month of transactions with gross billings of between $200 to $650 million.  The ISO has been working to automate settlement entries, including metering,  and the validation process.  Given the volume and complexity of the transactions and the need to ensure timely and accurate settlements, the ISO must require uniform standards for gathering and reporting of metering data.  
Q.	HOW ARE THE COMPUTERIZED METERING DATA USED BY THE ISO IN ITS SETTLEMENTS AND BILLING PROCESSES? 
A.	The ISO operates a computerized Meter Data Acquisition System (MDAS).  This system receives measured quantity data for each location for each trading interval for each settlement day, calculates settlements, and produces statements based on the data received and accepted.  Facilities, such as Midway Sunset Cogeneration Company, that are in compliance with the ISO’s metering requirements, have their data automatically entered into the MDAS system. 

Q.	PLEASE SUMMARIZE THE ISO’S POSITION WITH RESPECT TO THE ISSUES RAISED BY CAC.
A.	The ISO believes that its pro forma MSA/ISOME and MSA/SC and the specific MSA/ISOME’s executed by Midway Sunset Cogeneration Company and Texaco’s North Midway project are reasonable and should be approved with only the previously-agreed to changes specified in my Direct Testimony and as contained in Exhibit Nos. ISO-6 and ISO-7.  Obtaining meter data automatically is critical to the ISO’s settlements and billing systems.  The ISO also believes that, in accordance with the ISO Tariff, all Market Participants should comply with the ISO’s metering requirements, unless they request and receive an exemption.
Q.	THANK YOU.  I HAVE NO FURTHER QUESTIONS.