Southern California Edison must take immediate steps to pump up its system reliability via shaving peak demand and increasing utility supplies by next year's hot season. Under an August 16 ruling by California Public Utilities Commission president Mike Peevey, Edison has to expand its air conditioning cycling program to create 300 additional negawatts and develop 250 MW of utility-owned peaking supplies that will be on line by the summer of 2007. "Despite the Commission's ongoing efforts to ensure that adequate operating reserves are made available to the [California Independent System Operator] at the time and places the CAISO needs those resources for electric grid operations, it is critical that we continually monitor system developments and be prepared to act as necessary," Peevey wrote. "We already have begun work on how we might reach the heightened generation and demand-response goals" that the ruling outlined, Al Fohrer, Edison's chief executive officer, stated August 17. The utility said it will strive to increase participation of its residential ratepayers in its air conditioning cycling program. That program offers rate discounts in exchange for air conditioning curtailments at critical times. Fohrer added that the utility plans to work with "local government officials regarding potential sites for up to five peaker units each capable of generating up to 45 MW." The late-July heat wave was estimated to have created demand 12 percent higher than the forecast worst-case summer weather scenario. It, along with calls for urgent action by the grid operator, were the momentum for the ruling. "It is not too soon to begin planning for next year, which we know will likely be an even greater challenge, especially in Southern California," wrote Yakout Mansour, CAISO chief executive officer, in an August 9 letter to Peevey. The ruling specified that the new utility-owned generation must not interfere with the utility's request for offers for long-term deals from other sources. "To avoid undue impacts on the ongoing RFO process, Edison should not pursue more than five non-RFO generation units," stated Peevey. Edison was also directed to file an advice letter on how it will account for the associated costs of the demand-response air conditioning program and the new generation. In addition, Peevey directed Pacific Gas & Electric and San Diego Gas & Electric to file reports 15 days after the ruling on the status of their air conditioning cycling and other efforts to increase negawatts through demand response.