III. IOUs' Proposed 2005 LIEE Programs

The following table presents an overview of the large IOUs' LIEE proposals.

We summarize each of the utilities' 2005 LIEE program and funding proposals below. After each summary, we discuss ORA's concerns, and then provide the outcome we deem appropriate.

A. SCE's LIEE Program Proposal

1. SCE's Proposal

a) Budget

SCE proposes a total LIEE program budget of approximately $27,400,000 for 2005 (including administrative costs). Additionally, SCE has $1.5 million of carryover funds from previous years. SCE proposes to increase the number of customers it serves from approximately 20,000 in 2004 to approximately 49,000 in 2005, an increase of more than 100 percent. SCE reaches its $27.4 million budget projection by estimating that it will serve 49,000 homes at an average cost of $560 per home.

The following is a more detailed summary of SCE's proposed 2005 LIEE budget:

From this budget, SCE estimates it will install 196 window/wall air conditioners, 2401 evaporative coolers, 29,302 refrigerators, 210,210 compact florescent lamps (CFL), and 637 porch light fixtures; weatherize 1,127 homes; and provide 49,000 homes with energy education services.

b) Rate Increase

SCE is the only large IOU that proposes a significant increase in its LIEE budget in 2005 over its 2004 budget. It seeks a revenue increase of $13.4 million, or 0.14 percent, in 2005. In notices sent to residential customers and appended to its application, SCE indicated that the Commission would hold hearings on this rate increase. As we discuss below, we have determined that such hearings are not necessary.

On October 7, 2004, SCE responded to an ALJ data request, explaining the reasons for the proposed increase. First, it explained that in 2001 its contractors installed a "barrage" (275,000) of low cost energy efficient light bulbs (CFLs). However, only 1,600 of SCE's customers received more expensive measures (caulking, weatherstripping, attic insulation and minor home repairs) in that year. Thus, SCE's earlier programs emphasized low-cost measures.

We took note of this situation in D.02-12-019, where we stated, "While the statistics above indicate that 92% of SCE's eligible homes have been treated over the past 10 years, as SCE acknowledges, many of these homes were offered only limited measures . . . (e.g., CFLs). Accordingly, SCE plans to evaluate the need to revisit those homes to provide more comprehensive treatment."² In its application, SCE acknowledges that, "SCE's review of LIEE expenditures and budgets for the dual-fueled utilities (PG&E and SDG&E) indicates that comprehensive delivery of LIEE services involves higher cost measures for electric appliances such as room air conditioners and refrigerators, thus requiring more budgeted resources for electric measures than for gas appliance measures."³

SCE states that it has since surveyed its customers and ramped up a contractor-training program designed to provide comprehensive LIEE services to its customers. While it expects to serve 49,000 customers in 2005 (versus 80,000 in 2001), the measures the customers receive will be far more comprehensive than light bulbs. Customers will receive all feasible measures, including weatherization services and more expensive electric measures such as refrigeration and room air conditioners. This change will require an increase in the overall budget, and cause SCE's per-customer cost to rise.

Moreover, while SCE, an electric utility, has provided services to SoCalGas customers in past years, it found in late 2003 and early 2004 that its LIEE funding was insufficient to provide comprehensive services to those customers. Consequently, "SCE developed its proposed service and funding level [for] 2005 to make sure that every SCE customer touched by SoCalGas is also touched by SCE." SCE's 2005 funding request "will allow customers located in the joint SCE and SoCalGas service area to receive the same measures as customers receiving electric and gas services from [dual gas/electric utilities] PG&E or SDG&E."⁴ SCE also attributes the increase in cost and offered measures to the Commission's addition of measures to the mix in D.01-05-033 and D.03-11-020.

c) Ratemaking Treatment

SCE proposes no change to its currently approved LIEE ratemaking.⁵ We approve continuation of the status quo.

d) Cool Centers

SCE proposes to spend up to $475,000 to administer "Cool Centers" for 2005.⁶ As the Assigned Commissioner and ALJ set forth in the Scoping Memo for this proceeding:

"Cool Centers" are programs to subsidize air conditioning bills at locations where seniors and low-income persons congregate, such as senior centers and community centers. Subsidies for such persons do not fit precisely under the LIEE or CARE rubric, since they are not energy efficient appliances and measures (LIEE) or direct rate assistance to utility customers (CARE). However, the total statewide IOU budgets for these programs have not exceeded $1 million, and it therefore makes sense to deal with funding for cool centers here [in R.04-01-006] rather than swallowing the funding up in the IOUs' general rate cases or opening a separate proceeding to consider their funding. We will therefore require the IOUs who seek cool center funding in 2005 to do so with their 2005 applications, due on July 1, 2004. The utilities shall work together with ORA and submit their proposals for cool centers using consistent treatment and funding proposals.⁷

SCE proposes ratemaking treatment for the 2005 Cool Center program that is similar to the currently authorized ratemaking for LIEE,⁸ but does not suggest paying for Cool Centers out of the LIEE budget. Rather, it proposes to carve out a new portion of the public purpose program charge to cover its Cool Center budget.

2. ORA's Comments on SCE's LIEE Proposal

ORA's comments focus on three issues. First, in the Scoping Memo for this proceeding, the Assigned Commissioner and ALJ asked parties to address the Low Income Oversight Board's (LIOB) request to add a new measure as a pilot program (service and maintenance of central air conditioning systems) to the mix of LIEE services the IOUs offer:

At the [prehearing conference], the LIOB representative noted that at a meeting held on May 17, 2004, the LIOB voted unanimously to have the Board request that the electric utilities consider conducting a pilot program or setting aside funds for service and maintenance on central air conditioning systems. The program would ensure that appliance pressures are correct and that appliances are clean so customers obtain optimal energy efficiency from their current appliances. The IOUs shall consult with the LIOB or an LIOB representative on this issue and address the feasibility of such a project in their July 1, 2004 LIEE program application filings.⁹

In its application, SCE suggested that the Commission first refer the LIOB's proposal to the Standardization Team. The Standardization Team consists of the IOUs and their technical consultants, and evaluates all proposals to add new measures to the mix of LIEE programs. The Team must obtain input from the public before submitting final recommendations to the Commission.

As its first comment on SCE's application, ORA expresses agreement with SCE's suggestion to submit the LIOB's proposed central air conditioning service and maintenance suggestion to the Team for analysis. As discussed below, we agree that the Team should first assess this proposed new measure.

Second, ORA supports an expansion of SCE's LIEE program, but expresses concern that the application does not demonstrate how SCE developed the estimates for its budget increase. ORA asks that SCE be directed to supplement its application with responses to data requests ORA served. In its reply comments, SCE supplemented the record with this information, and responded to the ALJ's questions about the budget increase. We are now satisfied that SCE's showing is adequate, as discussed below.

Third, ORA expresses concern about SCE's Cool Center proposal. ORA supports the concept of Cool Centers, and agrees that such programs, which are targeted toward elderly, disabled and other vulnerable populations, can benefit low-income customers. However, ORA notes that while many participants in the Cool Centers may be eligible for LIEE or CARE, it does not seem appropriate to take funds from other program activities to support this program without proof of income eligibility. It suggests that the Commission adopt Cool Centers "with funding from public purpose program surcharges under the umbrella of the low income programs, but separate from CARE and LIEE."¹⁰ ORA also suggests that the Commission require that program planning for future Cool Centers, including a discussion of Cool Center performance and accomplishments, be included in future low-income energy assistance applications.

SCE responds that it agrees with ORA that Cool Centers should be funded from the public goods charge but as a rate element apart from the LIEE and CARE programs. It does not oppose ORA's suggestion that the Commission require Cool Center program planning in future applications.

3. Discussion of SCE's LIEE Program Proposal

a) Rate Increase

We believe SCE adequately explains the rate increase and the increase in the numbers of low income customers it proposes to serve, with exceptions noted below. We therefore allow it the increase, but this allowance shall not be cited in future applications as a basis for further increases.

With regard to SCE's proposed overall program budget increase, we agree that in the past SCE's program centered on low-cost measures such as CFLs. In recent years, the Commission has required each IOU to offer each eligible low-income customer the full array of LIEE measures. With this change, SCE is reaching fewer customers than it reached in the past, and fewer customers than those served by the other IOUs, taking into consideration size differences. In addition, pursuant to Commission "leveraging" requirements, SoCalGas now refers many of its gas LIEE customers to SCE for electric measures. All of these changes necessitate a higher budget for SCE in order to ensure that customers in SCE's territory have parity with those in other large IOUs' territory.

We also find reasonable SCE's estimate of $560 as the average cost per home. By comparison, SoCalGas reports its 2004 cost per home ranging from an average of $567 for weatherized homes to $600 for treated homes. SDG&E's comparable 2004 figures are $850 and $809, respectively. Thus, SCE's proposed levels of service and cost compare favorably to those offered by the other large IOUs and should be approved.

We do question minor elements of the proposed increase, however, and disallow the following elements of SCE's budget proposal.

b) Cool Center Disallowances

In Resolution E-3885, dated August 19, 2004, the Commission conditionally approved SCE's Cool Center program as a pilot measure and indicated that for 2005, Cool Center programs would be evaluated with the IOUs' 2005 applications. The Commission stated that it would evaluate the value of Cool Center programs overall, in addition to the appropriate funding mechanisms, based on information gleaned from the pilot program. In addition, the Commission allowed SCE to book its 2004 Cool Center costs into a one-way memorandum account, subject to reasonableness review.

In the same Resolution, the Commission ordered the distribution of a postage-paid usage survey at the Cool Centers for participants to fill out. In addition, we required SCE to code all CARE applications provided at the Cool Centers and track successful new CARE enrollees resulting from Cool Center participation.

In our view, there are three alternative ways to fund Cool Center programs from the low-income segment of the PPP. The first would require that the centers be established as CARE outreach providers and fund them as a CARE outreach expense. The second would require that we relax our comprehensive program requirement (that every LIEE participant receive every feasible LIEE measure), and fund the centers as a LIEE expense. The third alternative would be to establish a new component of the PGC to fund these programs. While the latter may be the most attractive alternative from a program sense, setting up such a component would require an investment of staff and utility time and programming and billing costs to establish and maintain this mechanism. The insignificant proposed program costs may not warrant such an expense.

We are currently evaluating the Cool Center data from both SCE's and SDG&E's 2004 Cool Center programs, which was only recently provided to the Energy Division. Based on the initial review, the Energy Division believes that the Cool Center programs should continue for one more year as a CARE outreach pilot, and associated costs, not to exceed those we adopt today, funded as a CARE outreach expense. We concur with the Energy Division. We will address continuation of the Cool Center programs past 2005, as well as the costs booked into SCE's 2004 Cool Center memorandum account, in a future decision, based on data collected in 2004 and 2005.

With all of the foregoing qualifications, we now turn to SCE's 2005 Cool Center proposal.

SCE's Cool Center budget is too high. It includes costs for rent, utilities, insurance, and janitorial services for the locations where the Cool Centers are held. These are fixed costs that the senior centers and other locations would incur even if cooling were not offered at the centers. We disallow all such expenses ($142,500).

The budget also includes bus passes, vehicle rental and fuel costs to provide transportation to the Cool Centers. We believe PGC funds should be used only for cooling measures, especially since Cool Centers do not neatly fall into either the LIEE or the CARE categories. This disallowance reduces SCE's budget by an additional $42,750.

SCE also proposes to cover the cost of additional personnel/staff at the locations where it houses the Cool Centers to provide direct support of Cool Center activities. Since the only "activity" SCE offers is cooling, any activities the centers otherwise offer should not be part of the Cool Center budget. We exclude this amount - $175,750 - from SCE's proposed budget.

Finally, SCE includes snacks and beverages for Cool Center participants. Again, because the Cool Centers simply provide cooling at existing senior centers and other facilities, whether or not the centers offer food should depend on whether the underlying programs housed at the centers offer food. The addition of cooling measures at the centers should not change the otherwise available programs or services. We thus exclude $19,000 from SCE's proposed budget.

Otherwise, we agree with SCE and ORA that Cool Centers provide an important measure of comfort to low income customers who live in hot climates around the state. We note, however, ORA's concern that "it does not seem appropriate to take funds from other program activities to support this program without proof of eligibility." Nonetheless, we do not see how already existing community and senior centers can bar their clients from the cooled portions of their facilities unless they show proof of LIEE or CARE eligibility. Given the relatively small amounts of funds involved (SCE's total proposal is $475,000, and we have reduced that amount by $380,000), and ORA's acknowledgement that such centers probably "are targeted toward elderly, disabled and other vulnerable populations," we approve of Cool Center funding generally.

We agree with ORA that in future low-income applications, SCE (and any other utility offering a Cool Center) should explore how to ensure that public goods charge funds are devoted only to LIEE and CARE eligible customers.

We also agree with the statement of the Assigned Commissioner and ALJ in the scoping memo for this proceeding that, "Subsidies for ... persons [attending Cool Centers] do not fit precisely under the LIEE or CARE rubric, since they are not energy efficient appliances and measures (LIEE) or direct rate assistance to utility customers (CARE)." However, exploring these centers as opportunities to expand CARE outreach is reasonable in light of the Commission's goal to achieve 100% participation in the CARE program. We thereby authorize funding, subject to the above disallowances and as a pilot CARE outreach program, for 2005. Because these are pilot programs, expenditures for the 2005 Cool Centers should not be allowed to exceed the budgeted amounts we approve today.

For the 2005 Cool Center pilots, SCE and SDG&E, in consultation with the Energy Division, need to design and distribute a usage survey for Cool Center participants to fill out. This survey shall have prepaid postage to facilitate mailing. SCE and SDG&E should code all CARE applications provided at the Cool Centers and track successful new CARE enrollees resulting from Cool Center participation. SCE and SDG&E should also report on CARE enrollment from the Cool Centers and survey results, as directed by the Energy Division.

Finally, within 60 days of the effective date of this decision, SCE and any other IOU offering Cool Center programs shall file and serve a proposal for evaluation of the effectiveness of the programs. The IOUs should work with the Energy Division in defining the evaluation criteria for the centers.

c) Hearings on SCE's Rate Increase

SCE indicated in its published notice of the rate increase that hearings would occur. In a ruling dated September 27, 2004, the ALJ asked interested parties to address whether the law would permit the Commission to proceed on SCE's application without hearings. Both ORA and SCE filed comments indicating that hearings were not legally required, despite the fact that notices to customers had been issued stating that the Commission would hold such hearings.

ORA states that the Commission is not required to hold a hearing before granting SCE its rate increase request, citing Wood v. Public Utilities Commission, 4 Cal. 3d 288, 292 (1971). That case held that "[t]he Public Utilities Code does not require public hearings before rate increases or rule changes resulting in rate increases may be authorized." ORA also notes that Commission rules do not provide ratepayers with a right to hearings in ratesetting cases such as this one. Commission Rule 24 requires applicants to provide notice to customers of a proposed rate increase (which the attachments to SCE's Reply to ORA's protest indicated it provided), but does not require that hearings on the increase be held.

ORA suggests, however, that the Commission contact the Public Advisor's Office to determine whether consumers have expressed an interest in participating in the rate increase aspect of this proceeding. The assigned ALJ has done so and was told on October 13, 2004 - long after SCE caused notices of the hearings to be published in July 2004 - that that no such contacts had been received.

We are satisfied that hearings are not required on SCE's rate increase, despite the notices it sent to the contrary. Those notices did not produce comments or input from members of the public. Nor does the law otherwise require a hearing. We are satisfied based on the application, and ORA's response, that we have adequate information before us to analyze the requested increase without a hearing. Except for the items noted above, we are satisfied that SCE's LIEE budget is reasonable.

B. PG&E's LIEE Program Proposal

1. PG&E's Proposal

a) Budget

PG&E seeks a LIEE budget of $73.830 million for 2005. This amount consists of $56.530 million in new funding, and approximately $17.3 million in carryover from funding not expended in prior years. In 2005, PG&E plans to continue to offer the measures we approved for 2004. PG&E estimates that it will weatherize and treat 47,000 homes during 2005.

The following table shows PG&E's LIEE budget request for 2005:

b) Electric/Gas Cost Split

PG&E requests authorization to change the current electric/gas allocation of its budget so that instead of spending 48% of its budget on electric programs and 52% on gas programs, it may spend 70% of budget on electric and 30% on gas programs. PG&E explains that its spending pattern for the LIEE program has changed in the last several years, and that it now is spending more on electric measures and less on gas measures. It asserts that the current electric/gas revenue split of 48%/52% no longer reflects the actual electric/gas split of 64%/36% (a figure PG&E derived from its 2004 expenditure data available when it filed its application). PG&E also notes that it has unspent gas funds because of the current revenue split, and wishes to reduce the likelihood that it will have substantial amounts of unspent gas funds at the end of 2005.

c) Go-Backs

PG&E asks that we impose a time limit on customers' ability to re-enter the LIEE program for additional measures or services for which they were not eligible or which were not available the first time their homes were treated. PG&E explains that in D.01-05-033, during the "Rapid Deployment period" that coincided with the state's energy crisis, utility administrators had the flexibility to send LIEE service providers back to treated homes to install new measures adopted in that decision.¹¹ PG&E instituted a "go-back" program during the Rapid Deployment period of 2001 and 2002. Under the program, PG&E attempted to contact all previous LIEE participants to determine whether they might qualify for new and additional measures.

PG&E now finds that continuing to allow re-entry into the program causes problems. PG&E also questions when to start the 10-year period during which program re-entry is prohibited if homes are allowed to receive new measures after their initial treatment under LIEE.

First, many previous LIEE participants call the utility to request refrigerator replacement as soon as their ineligible refrigerator turns ten years old. Second, PG&E notes that the practice of going back to already treated homes makes it difficult for the utility ever to close projects and accurately count treated homes. PG&E states that, "[i]f previous LIEE participants are forever eligible to upgrade their measures, the program in effect becomes more like a subscription program than a one-time treatment service." Finally, PG&E asserts that it is hard to budget accurately for go-backs: "More customers call each year to request appliances they were ineligible for at the time of their original participation."¹²

d) Two-Year Program Cycle

PG&E also seeks a two-year program cycle going forward. As we discuss in the section entitled "Two-Year Program Cycle," below, we generally approve this request.

e) Third-Party Contractor Data

In support of its LIEE costs, PG&E submitted data - previously required by the Commission - reflecting its contractors' costs, since it contracts out many of its LIEE tasks. However, PG&E concedes that the information is less than reliable:

many contractors noted that they do not break out their costs by the requested categories [by measure] and that the data provided in their measure cost breakdown tables is based upon estimates, guesses, and averages. Several contractors provided their measure cost breakdown information under protest and voiced concerns regarding how the utility's knowledge of this information may affect their future competitiveness in the utility's and/or the administrator's bidding processes.

Because we need consistent contractor data from all utilities, we discuss this issue in the section entitled "Issues Generic to Utility CARE/LIEE Applications," below.

f) Central Air Conditioning Maintenance Pilot

PG&E also addresses the LIOB's proposal that the Commission add a pilot program to the LIEE mix for service and maintenance of electric central air conditioning systems. It suggests that the Standardization Team first analyze the LIOB recommendation. We agree that this is the appropriate first step. Because this issue pertains to more than one utility, we address this issue in the section entitled "Issues Generic to Utility CARE/LIEE Applications," below.

2. ORA's Comments on PG&E's LIEE Proposal

ORA's comments first address PG&E's natural gas appliance testing (NGAT) services. As we discuss in the section entitled "Carbon Monoxide Testing/Natural Gas Appliance Testing Settlement," below, the information in PG&E's application and ORA's protest pre-dates a settlement reached on the issue. We therefore defer discussion of the issue to later in this decision.

Second, ORA once again addresses the proposal, first raised by the LIOB, that the Commission add a pilot program to the LIEE mix for service and maintenance of electric central air conditioning systems. It supports PG&E's suggestion that the Standardization Team first analyze the LIOB recommendation, and we agree that this is the appropriate first step. Because this issue pertains to more than one utility, we address this issue in the section entitled "Issues Generic to Utility CARE/LIEE Applications," below.

Third, ORA addresses go-backs, and states that the Standardization Team should review the concerns PG&E raises as part of its standardization process.

Fourth, ORA addresses Cool Centers, which PG&E does not offer. ORA suggests that if the Commission adopts Cool Centers for SDG&E and SCE, it should order PG&E to initiate a similar program to benefit households in hot areas of PG&E's territory. It states that "because hot and desert-type climates exist throughout the state of California, it does not make sense to deprive customers in one area benefits received by customers of other utilities."¹³ ORA recommends that the funding source for the Cool Centers be similar to that proposed by SCE (a rate element funded by the PGC but supplemental to the LIEE and CARE program budgets).

3. Discussion of PG&E's LIEE Proposal

a) Budget

We approve PG&E's budget, which is the same as the one we approved for 2004. While PG&E is proposing to carryover $17.3 million in unused funding from prior years, we are satisfied that there is enough information in PG&E's filing to justify granting PG&E the same level of funding for 2005 as we did for 2004. Of course, PG&E shall carryover all unused 2005 funding into the following years' budgets. However, we impose requirements regarding third-party contractor data as discussed below in the section entitled "IOU Contractor Costs."

b) Electric/Gas Cost Split

We grant PG&E's request to reallocate its authorized budget between gas and electric programs.  It requests a revision from 48%/52% electric/gas to 70%/30%, because its data reflect a 64%/36% electric/gas program split with a trend toward an increasing allocation to electric programs. The addition of expensive electric appliance measures to the LIEE program mix is contributing to this trend.¹⁴

We therefore allow PG&E a 70%/30% split as it requests. As we have required in previous years, PG&E's unspent electric and gas funds are to be added to the 2005 funding we authorize today. PG&E shall also document in its annual report filing that the 70/30 allocation reflects its actual expenditures.

c) Go-Backs

The Commission always wishes to ensure that eligible customers with only partial LIEE measures in their homes (especially small measures such as CFLs) receive all measures for which they are eligible. Nonetheless, we also appreciate PG&E's concerns that go-backs may cause record-keeping problems, create a tendency among certain customers to over-burden the program, and make budgeting difficult.

However, we agree with ORA that this issue requires further study, and submit the issue for consideration as part of the Standardization Team's effort. The Team should balance the premise that all customers should receive all measures for which they are currently eligible (even if they received prior services) against the administrative concerns PG&E raises. We note that the other IOUs have not raised the same concerns PG&E does in this proceeding. Thus, the Team should develop a standardized policy for go-backs that incorporates the experiences of these IOUs. The Team should consider developing specific rules to guide IOUs and customers on how frequently the IOUs should attempt go-back efforts, time and other limitations on go-backs, and other rules designed to strike a balance between the goal of giving customers all feasible LIEE measures and IOU concerns regarding excessive record-keeping and cost.

d) Cool Centers in PG&E's Service Territory

Because we are only approving the Cool Centers SCE and SDG&E currently offer as pilot programs, we reject ORA's request to require PG&E to offer Cool Centers in PG&E service territory. We will reexamine the appropriateness of Cool Centers for all IOUs when considering the 2006-07 LIEE/CARE applications.

C. SDG&E's LIEE Program Proposal

1. SDG&E's Proposal

a) Budget and Program Elements

SDG&E seeks a total LIEE budget of $13,518,093 in 2005, as compared to $13,368,093 for 2004. Additionally, SDG&E has $2.8 million of carryover funds from prior years. This is a $150,000 increase, with the increase attributable to CO testing. The following table shows SDG&E's LIEE request:

SDG&E's LIEE program is comprised of the Direct Assistance Program (DAP) and Energy Education for Low-Income program (EELI). As is true of the other IOUs' programs, the DAP program includes 3 major elements: 1) the installation of basic measures (ceiling insulation, water heater blankets, weatherstripping, caulking, low flow showerheads, faucet aerators, outlet gaskets, water heater pipe wrap, and minor home repairs); 2) appliance repair and replacement (including natural gas appliance testing, repair or replacement of inoperable or hazardous natural gas furnaces in owner occupied dwellings, refrigerators, CFLs and energy efficient hard-wired porch light fixtures, evaporative cooler covers and evaporative coolers); and 3) in-home energy education.

SDG&E has proposed a 2005 DAP budget of $13.518 million. SDG&E's carryover funds for use in 2005 are $2.8 million including interest. Based on its proposed funding level, SDG&E estimates that it will weatherize approximately 10,700 homes, install 6,000 refrigerators, replace 100 water heaters, replace or repair 1,730 natural gas furnaces, and provide 36,000 CFLs. During 2005, SDG&E will continue several expanded outreach activities it developed in past years, including coordinating with Low Income Home Energy Assistance Program (LIHEAP)¹⁵ agencies and Native American Tribal Associations, and directing increased marketing to low-income customers residing in rural areas of San Diego County.

SDG&E's 2005 budget request for its EELI workshop program is $0.268 million. With that funding SDG&E plans to provide energy education to 20,000 low-income customers in various languages including English, Spanish, African languages, Vietnamese, Laotian, Middle Eastern languages and some Eastern European languages.

b) Marketing and Outreach

SDG&E notes that it will continue to enhance its LIEE outreach efforts by using an outside marketing firm to contact existing CARE program customers in its service territory, and schedule appointments for home energy efficiency assessments for these customers. It estimates that in this way it reached 5,352 low-income customers over a two-month time frame in 2003, and spent $43,000. Of this number, 1,263 (26.3 percent) low-income customers' homes were weatherized. SDG&E also outsources "program field activity" - which includes program outreach - to an "outside prime contractor."

c) Cool Zone Program

SDG&E offers a Cool Zone program that is similar to SCE's Cool Center program.¹⁶ Indeed, SDG&E's program offers an improvement over SCE's because all people receiving the service are income qualified¹⁷ older adults or persons with disabilities. SDG&E's program was developed by the County of San Diego's Department of Aging and Independence Services to provide energy assistance services to these community members. However, like SCE, SDG&E uses energy efficiency funding to provide transportation to the sites.

SDG&E does not wish to fund Cool Zones with a new rate element. It states that the cost for the program will only be $55,000 annually, and that "it would be imprudent for SDG&E to establish a separate Cool Zone rate component to recover approximately 0.002% of SDG&E's total electric revenue." It states that the rate charged would be approximately $0.0000029 per kilowatt hour - a rate that would require SDG&E to adjust its computer system to reflect seven decimals. It states that the reprogramming costs alone would be $150,000 (three times the cost of the program itself). SDG&E asks us instead to allow it to charge Cool Zone program expenses to the Energy Education component of its LIEE program.

d) Carbon Monoxide/Natural Gas Appliance Testing Budget

SDG&E's budget request allocates a $150,000 increase to carbon monoxide (CO)/natural gas appliance testing (NGAT). As we discuss in the section entitled "Issues Generic to Utility CARE/LIEE Applications," below, we will not allow the IOUs to fund CO/NGAT testing out of PGC funds. Rather, CO/NGAT testing is a basic utility service that should continue to be funded by utility base rates. Therefore, we disallow SDG&E's proposed $150,000 increase.

Moreover, SDG&E states that it estimates it will spend $353,100 in 2005 for CO/NGAT testing in the 10,700 homes it plans to weatherize in 2005 (at an estimated cost of $33 per test). We also disallow this funding to the extent SDG&E seeks it from the PGC surcharge, because all such funding comes from base rates.

e) AEAP Issues

SDG&E includes within its LIEE budget for 2005 $0.105 million ($104,821) for "performance incentives" - essentially, shareholder profits - associated with its program. As the scoping memo for this proceeding indicated, performance incentives are outside the scope of this proceeding, and shall be decided in the AEAP. We thus remove the $0.105 million figure from SDG&E's requested LIEE budget and defer consideration of the appropriateness of that request to the AEAP proceeding being handled by ALJ Meg Gottstein.

2. ORA's Comments on SDG&E's LIEE Proposal

a) Funding of CO/NGAT Testing

ORA opposes SDG&E's request to fund CO/NGAT testing out of PGC funds. When SDG&E first suggested at the prehearing conference that it wished to change the status quo for this funding - which currently funds testing out of base rates - the ALJ required SDG&E to justify the change. ORA states that SDG&E has failed to provide such justification or explain why ratepayers would benefit from a change in the status quo. ORA points out that PG&E does not seek such a change. ORA seeks further justification from SDG&E. We discuss this issue in the section entitled "Issues Generic to Utility CARE/LIEE Applications," below.

b) Pilot Air Conditioning Maintenance Measure

ORA supports SDG&E's proposal - which is the same as that of the other IOUs - that the Standardization Team study LIOB's suggestion to add a pilot air conditioning maintenance measure to the mix of LIEE measures the IOUs may offer. As we state in the section entitled "Issues Generic to Utility CARE/LIEE Applications," below, we agree with this approach.

c) Go-Backs

ORA notes that in its application, SDG&E suggests that the Commission refer the "go-back" rules discussed in connection with PG&E's application to the Standardization Team. As we state in the section entitled "Issues Generic to Utility CARE/LIEE Applications," below, we agree with this approach.

d) Energy Education Workshops

ORA questions whether SDG&E's energy education workshops (its EELI program, for which it seeks funding of $0.268 million) are a good use of funds. It states that the workshops are held at community based organization (CBO) facilities in neighborhood locations. ORA questions whether these workshops are aimed exclusively at low-income customers, and suggests they be part of the standardized measure assessment process that the Standardization Team carries out. In this way, states ORA, SDG&E will be required to demonstrate how the workshops fit within LIEE requirements.

In its reply comments, SDG&E states that its energy education workshops are permitted by prior Commission order, that they are targeted only to low-income customers, that they are effective based on survey data SDG&E has obtained, and that they comport with certain requirements of Pub. Util. Code § 327 pertaining to energy savings and job skill development.

3. Discussion of SDG&E's LIEE Proposal

a) Cool Zones

We will allow SDG&E to offer its Cool Zones program as a 2005 pilot, but will limit funding to direct energy related services. As we discuss in connection with SCE's program, utility ratepayers shall not fund other expenses such as site overhead, transportation, staff salaries, and food/beverage service. SDG&E shall conform its funding to this requirement.

We understand SDG&E's concern about establishing a new rate element for its Cool Zone program, and will therefore treat SDG&E's program consistently with our decision on SCE's Cool Centers in all respects. SDG&E should fund its Cool Zones program as part of its CARE outreach budget.

b) Energy Education Workshops

We direct the Standardization Team to assess whether it is preferable for the utilities to deliver energy education at the "point of sale" - to customers in their homes - because the education immediately results in installation of measures and, consequently, energy savings. SDG&E points out that it has offered energy education in the same way for years, and we do not believe we have enough of a record to discontinue its education workshops at this point. We therefore order that the workshops should be assessed as part of the Standardization Team's next measure assessment process, and so order. The Team's process should be open to the public and invite input from diverse interests.

c) AEAP Performance Incentives

As noted above, SDG&E's request for $0.222 million in performance incentives as part of its 2005 LIEE budget is outside the scope of this proceeding, and we disallow it.

D. SoCalGas' LIEE Proposal

1. SoCalGas' Proposal

For 2005, SoCalGas proposes a budget increase to $35.767 million for its LIEE program. We authorized a budget of $34,521,502 for SoCalGas for 2004. It requests an increase of $1.245 million for 2005 to fund DAP-related NGAT testing by transferring this amount from base rates, and to use $555,000 of its LIEE budget for CO testing. Additionally, SoCalGas has approximately $2.1 million in unspent carryover funds from prior years.

SoCalGas' LIEE program consists of two elements: the DAP and the Energy Education Workshops. DAP includes three major program elements: basic weatherization services, appliance repair and replacement services, and in-home energy education. Based on its proposed funding level, SoCalGas estimates that it will provide in-home energy education for approximately 40,000 homes, weatherize 40,000 homes, replace 1,500 water heaters, and replace or repair 9,000 natural gas furnaces. SoCalGas also plans to provide energy education to 20,000 low-income customers through workshops that take place outside the customer's home. SoCalGas outsources many of its services to community based organizations, private contractors and subcontractors, and does not plan to change this arrangement in 2005.

SoCalGas summarizes its 2005 LIEE proposal as follows:

2. ORA's Comments on SoCalGas' LIEE Proposal

ORA addresses three aspects of SoCalGas' LIEE proposal. First, it opposes allowing SoCalGas to recover the cost of CO testing from the LIEE budget. As we discuss in the Section entitled "Carbon Monoxide Testing/Natural Gas Appliance Testing," below, we agree that such testing should come from base rates rather than from the special funding earmarked for LIEE programs. We thus reject SoCalGas' request for an increase to its LIEE budget of $1.245 million to fund DAP-related CO testing. As ORA points out, SoCalGas also proposes to use $555,000 of its 2005 budget (in addition to the extra $1.245 million) for CO testing, and we also disallow this request.

Second, ORA agrees with SoCalGas' recommendations to add a pilot program to evaluate the addition of service and maintenance of electric central air conditioning systems to the DAP program measure mix. We discuss this issue in several other places, and do not reiterate our discussion here.

Third, ORA asks the Commission to examine the appropriateness of conducting general energy education workshops as part of the LIEE program. ORA notes that these workshops are held at CBO facilities at neighborhood locations. As it does for SDG&E's similar workshops, ORA questions whether these workshops are limited to low-income customers, as is required for any program receiving LIEE funding. ORA suggests that the workshops undergo the standardized measure assessment process, as does any other LIEE measure or service. ORA recommends that the Commission either ask SoCalGas to provide supplemental information to indicate how these workshops fit within the LIEE DAP program, or indicate that such assessment is required for the 2006 program year.

In reply comments, SoCalGas explains that the Commission authorized the type of energy education program SoCalGas offers in 1989, and that SoCalGas has provided essentially the same program since then. It objects to elimination of the program after such a long run. It lists the CBOs offering the service, all of which serve low-income customers. It explains that Pub. Util. Code § 327, which requires the utilities to "work with state and local agencies, community based organizations and other entities" and "encourage local employment and job skill development," supports SoCalGas' service model.

3. Discussion of SoCalGas' LIEE Proposal

We approve SoCalGas' funding with one exception. As noted previously, and in the section entitled "Carbon Monoxide Testing/Natural Gas Appliance Testing," below, we will continue to require SoCalGas (and the other utilities) to fund CO testing through base rates. Thus, we disallow SoCalGas' request for a $1.245 million budget increase, and $555,000 of its $35.767 million budget request for 2005 for carbon monoxide or other natural gas appliance testing.

We address each of the other issues ORA raises - the pilot air conditioning maintenance project and energy education workshops - elsewhere. We will not eliminate SoCalGas' energy education workshops at this time, but we agree with ORA that the workshops should be assessed as part of the Standardization Team's measure assessment process. Issues to be addressed should include whether SoCalGas' (and SDG&E's) energy education workshops serve only eligible low-income customers, and whether workshops offered in a community setting - rather than in-home - are effective in creating the opportunity for energy savings. The Standardization Team should reach its own conclusion on these issues, based on an assessment that is open to the public and invites input from diverse interests.