The Staff Proposal recommends a single administrative structure, namely the CSI Thermal Program, to administer all SWH incentives, whether for systems that displace electricity or those that displace natural gas. The Staff Proposal envisions that the CSI Thermal Program would be administered by the same administrators as the general market CSI program, namely PG&E, SCE, and CCSE in the SDG&E territory. In addition, SoCalGas would administer the CSI Thermal Program in its territory for its gas customers.
Specifically, PG&E and SDG&E, in coordination with its program administrator, CCSE, will disburse incentives to both electric and gas ratepayers who install eligible SWH systems in their territories. SCE will disburse incentives through the CSI Thermal Program to customers who install electric-displacing SWH. SoCalGas will disburse incentives to customers in its territory who install gas-displacing SWH.
In comments on the Staff Proposal, Environment California disagrees with staff's proposal to use the utilities and CCSE, instead recommending that the SWH program should be administered by a single non-profit entity in order to minimize confusion for consumers interested in solar power. PG&E, SCE, and SDG&E/SoCalGas oppose Environment California's suggestion for centralized, third-party administration. PG&E comments it has a proven track record of rolling out incentive programs in its service area in a timely and efficient manner and it can leverage its existing outreach programs for CSI, demand response, and energy efficiency to administer an SWH program. SCE contends that since the four investor-owned utilities (IOUs) and CCSE are successfully implementing the largest and most accomplished statewide Energy Efficiency (EE) and solar programs in the nation, they have the experience and infrastructure to introduce a new SWH program seamlessly. SDG&E/SoCalGas claim that centralizing program administration, as suggested by Environment California, would distance the administrator from customers and could lead to poorer customer service and more confusion. SDG&E/SoCalGas contend local administration of an SWH program will be more effective.
We will adopt the proposal by staff to use the current CSI administrators plus SoCalGas. We agree with the utilities' comments that they have a proven track record of implementing incentive programs such as CSI, and its subsidiary programs Multifamily Affordable Solar Homes (MASH) and Single-Family Affordable Solar Homes (SASH), and SGIP. We are confident that PG&E, SCE, CCSE, and SoCalGas have the experience from these other incentive programs to initiate the CSI Thermal Program quickly. Plus, customers may be familiar with the programs currently offered by the utilities and CCSE and SWH incentives will simply be a new product offering from a familiar source of information.
Environment California does not convince us that centralized administration will indeed be less confusing to customers. Also, we are concerned that the time to issue a Request for Proposals (RFP) and select a centralized third-party administrator, as suggested by Environment California, will delay the program launch.
PG&E, SCE and SDG&E/SoCalGas propose that rather than the administrative structure proposed by staff, which takes the mandate of AB 1470 and creates a stand-alone CSI Thermal program, incentives for SWH should be made available as part of the Commission's EE programs. These parties note that this could be accomplished by eliminating a rule in the EE proceeding requiring SWH to be cost-effective on a stand-alone basis, rather than as part of a portfolio. CCSE, CALSEIA, and SOLID oppose this approach.
SCE requests that SWH incentives be delivered as part of its EE portfolio, consistent with Commission decisions D.05-04-051 and D.07-11-004 which found that SWH is a qualified EE measure. SCE claims that since energy savings from SWH were built into the foundational goals set for SCE and the other IOUs, the Commission should enable the IOUs to include this measure within the EE portfolio. According to SCE, disallowing SWH savings to count toward established EE goals is inconsistent with the precedent set by the Commission and impedes the IOUs' abilities to meet previously established Commission goals.
PG&E essentially agrees with SCE that if SWH is found to be cost-effective using the tools used to evaluate other EE measures, it should be included as an EE program, rather than as a separate CSI program. PG&E endorses a change to the EE Policy Manual so that SWH systems do not have to be cost-effective on a stand-alone basis. Likewise, SDG&E/SoCalGas urge removal of what they consider a barrier to implementation of SWH as an EE measure, i.e., requiring SWH to be cost-effective on a stand-alone basis. They claim the Commission should allow SWH to be treated the same as all other EE measures and included in the EE portfolio. According to SDG&E/SoCalGas, this could create administrative efficiencies and advance the EE Strategic Plan objective of offering a more comprehensive, "whole-house" approach to residential customers.
CCSE, on the other hand, argues that offering SWH incentives through the EE portfolios would be inferior to a stand-alone program as a means of promoting the technology, and could violate AB 1470 requirements to not divert any funds from existing EE programs. CCSE supports creation of a stand-alone solar thermal program because a stand-alone program can encompass all solar thermal technologies, not just SWH, and best fulfill the intent of AB 1470. CCSE argues that managing incentives for various solar thermal technologies under one program structure will reduce confusion in the marketplace and enable broad participation.
CALSEIA also opposes the IOUs' recommendations to administer SWH incentives through EE programs, stating its belief that that an SWH program is more similar to the general market CSI program than energy efficiency. Nonetheless, it proposes the utilities be allowed to receive credit for SWH installations toward EE program goals. In addition, CALSEIA recommends that the Commission convene a working group of PAs to suggest ways to strengthen linkages and coordination between energy efficiency and solar programs.
TURN agrees with SCE and SDG&E/SoCalGas that the Commission should simply include SWH with the EE portfolios, and that it would be appropriate to eliminate the stand-alone test for SWH only in the case of a "measure" which results in the replacement of electricity or natural gas with a completely renewable fuel used solely for SWH. TURN states that such a change would allow SWH systems to qualify as any other EE measure and facilitate a "whole-house" approach to EE retrofits, resulting in administrative cost savings.
DRA agrees that the Commission consider including SWH in EE programs and consider removal of the stand-alone test for SWH before it qualifies for EE. At the same time, DRA cautions that any change to this requirement should be undertaken in the EE proceeding (Application (A.) 08-07-021 and consolidated cases) and not this proceeding. DRA lists advantages to a "whole-building" approach to EE and SWH to increase the number of installations and minimize duplicative administration costs of separate programs. DRA suggests the Commission determine the best method of program delivery, and then determine which organization is most capable of delivering the program effectively at the lowest cost.
SOLID opposes the classification of SWH as an EE measure, arguing that SWH systems are not comparable to energy efficiency because they generate energy by producing thermal energy to displace fossil fuel or electricity usage.
While we understand the logic of integrating solar water heating program delivery with EE program administration, we find it more reasonable to establish a stand-alone solar program that can integrate both solar PV and SWH choices faced by end-users. We reach this conclusion for several reasons.
First, we expect that market transformation in the SWH market is most likely to occur when solar solutions providers offer their customers options of both solar PV and SWH. In our view, integrating solar technology options into an already long menu of energy efficiency technologies will dilute the message and could impede solar market transformation.
Second, since both solar PV and SWH systems are commonly installed on rooftops, we think it is important that we foster a market where providers offer both choices and counsel a home or business owner on how to allocate space on their roofs between these two technologies, taking into consideration the relative space needed by each and the economic tradeoffs involved with generating electricity versus heating water.
Third, the stand-alone solar PV program, CSI, has involved program administration costs of no more than 10% of program funds, including application and incentive processing, marketing, and program evaluation. We note from D.09-09-047 in our EE proceeding that the combination of expenditures for these three areas in energy efficiency has typically amounted to approximately 20% of total funds. We find it a better use of ratepayer dollars to choose a stand-alone program where a higher proportion of funds can be devoted to direct customer incentives and activities that will directly develop the market.
In D.09-09-047 in the EE proceeding, we endorsed the concept of organizing EE programs around whole-house or whole-building retrofit approaches, and we stated our continued support for integrated demand side management solutions. Still, we are persuaded by the counter argument that the SWH industry is more akin to the solar PV industry. We agree with CALSEIA that program coordination between CSI Thermal and EE programs should be possible. Therefore, we direct the staff and PAs to determine convenient ways for customers to make a combined application for efficiency and solar measures, if that is what the customer seeks. However, we clarify that customers cannot receive SWH incentives from a utility energy efficiency program and the CSI Thermal program for the same SWH system.
We also acknowledge that had we chosen to integrate SWH with the utilities' EE programs, this would have meant that SDG&E would be administering the SWH program in the San Diego area, while CCSE would continue to administer the CSI (solar PV) program. This is a suboptimal outcome and we prefer that CCSE administer both solar technology programs in the San Diego area.
With regard to the utilities' requests to change EE policy rules, we reiterate that it is outside the scope of this rulemaking to change the EE policy rules that we established in EE proceedings. Thus, we will not address parties' comments that we reassess the cost-effectiveness threshold necessary for solar water heating technologies to be included in EE program portfolios.
The issue raised by SCE of how our CSI Thermal Program might affect utility energy efficiency goal setting is complex, and is housed in the EE proceeding. We do not have an adequate record on the technical or policy issues in this docket to make a determination as to whether SWH energy benefits were or were not included in the EE proceeding and should or should not be "credited" toward the utility EE goals. Furthermore, we made a deliberate decision in D.09-09-047 to balance the costs of the EE portfolios against the expected EE savings in authorizing a balanced portfolio of programs and ratepayer expenditures for the period 2010-2012. We are not in a position to know how the addition of $250 million plus in gas expenditures and a reallocation of $100 million of electric funds now included in the CSI program, along with their estimated energy production levels over the next eight years, would alter the EE portfolio balance and its cost-effectiveness.
It is plausible that some amount of EE savings may have been expected to come from water heating, either from SWH systems themselves, or from efficiency measures applied to the water heating process. These savings might no longer be available at all or in the same quantities if SWH systems are installed. This issue is more appropriately considered in the EE proceeding (A.08-07-021 and consolidated cases). We defer to that assigned Commissioner and ALJ to determine whether and how to either give the utilities "credit" for solar water heating benefits, and/or if it is not appropriate to consider such "credit," to consider modifying the EE goals to reflect the reduced potential for EE as the solar water heating market develops.
The Staff Proposal recommends the CSI Thermal Program administrators submit detailed budget estimates in advance of the launch of the CSI Thermal Program, and submit semi-annual expense reports on February 15th and August 15th of each year, that include data through December 31st and June 30th of each year. The expense reports should include disclosure of expenditures separated by direct and indirect expenses, labor and non-labor, for all of the major categories: including administration, market facilitation, evaluation, and incentives. We agree with this element of the Staff Proposal and adopt it. In order to launch this program in early 2010, the PAs shall each submit their first year administrative budget estimates to Energy Division with their Program Handbook advice letter, as discussed further in Section 14.
The Staff Proposal recommends quarterly forums to obtain input from the public and interested parties on how the program is operating. CALSEIA supports this idea, but recommends these forums be coordinated with forums in the general market CSI program. We agree and direct the PAs to coordinate the forums.
PG&E asks for a mechanism to recover program development costs to meet the January 1, 2010 program launch timeline. We discuss the program implementation timeline in more detail in Section 14 below. As to PG&E's request, we will not approve a specific cost recovery mechanism, preferring that any program implementation costs are absorbed within the $15 million administrative budget we have set for the program. This approach has worked in implementing the general market CSI, and the MASH and SASH programs within CSI, and is appropriate here as well.