V. Issues Generic to Utility CARE/LIEE Applications

A. Two-Year Program Cycle

Each of the IOUs asks the Commission to place them on a two-year program cycle. Under such a regime, the IOUs would receive LIEE and CARE budget approval for two-year blocks of time, rather than being required to reapply for such approval each year.

ORA does not oppose a two-year program cycle, but requests that the Commission require the utilities to file their applications closer to the beginning of the year than is ordinarily the case. While applications generally come in mid-year (the applications here were due July 1), ORA asks that the Commission 1) beginning with the applications for 2006-07 funding, change the application filing date to March 1 to allow parties more time for review and discovery, 2) require budgets and goals for each year individually, and 3) add to the utilities' existing reporting a requirement for an update comparing their year-end status to the goals adopted for that year in the last program and budget application proceeding, and noting any problems meeting these goals. ORA requests that the specific types of goals included in the applications, formats for reporting on these goals, and standards to ensure that applications include necessary information be developed in workshops.

We find reasonable the IOUs' request for a two-year program cycle, as modified by ORA's proposal, but believe the March 1 filing deadline is too early to allow utilities to project their programs for the following year. To give ORA and any other interested parties more time to evaluate the utilities' applications, we will require that the utilities file applications for 2006-07 funding no later than June 1, 2005. The utilities must separate their budgets and program goals for each year and participate in workshops to develop other application and reporting requirements. The utilities should schedule and conduct workshops no later than 60 days after filing their applications and invite the LIOB members, ORA, the Energy Division, and the public to attend the workshops. The parties, ORA, ED, and a majority of the LIOB members may opt to proceed without the workshops, but all must agree.

B. Cool Centers

We discuss Cool Centers at length in connection with SCE's LIEE/CARE application, and do not repeat the full discussion here. All utilities shall live by the decisions we make here with regard to SCE.

First, for 2005, the Cool Centers will be pilot programs funded by the IOUs' CARE outreach budgets.

Second, Cool Center budgets shall not include costs for rent, utilities, insurance, janitorial services or other overhead costs for Cool Center locations. These are fixed costs that the senior centers and other locations would incur even if cooling were not offered at the centers.

Third, Cool Center budgets shall not include funds for bus passes, vehicle rental, fuel costs or other transportation costs. The CARE component of the PGC is designed to fund energy bill subsidies and associated administrative costs alone. Transportation to locations to take advantage of such cooling measures does not fit into the bill subsidy model.

Fourth, Cool Center budgets shall not cover the cost of personnel/staff at Cool Center locations. Cooling in itself is not an "activity" for which personnel is required. It is simply a comfort measure that benefits the centers as well as the low-income customers that use them. Thus, Cool Center locations shall bear their own staffing costs.

Finally, Cool Center budgets shall not include food and beverage costs. The addition of cooling measures at the centers should not change the other offerings made available to attendees, including food and beverages. Moreover, ratepayer funds should only cover the cooling measures themselves.

C. Carbon Monoxide Testing/Natural Gas Appliance Testing Settlement

After installing certain gas appliances, the IOUs test them to ensure that they are not emitting carbon monoxide (CO), a dangerous chemical in certain concentrations. In D.03-11-020, the Commission required the IOUs offering gas service to use "a consistent set of CO thresholds in conducting certain flue CO tests for diagnostic purposes." Before October 2004, PG&E on the one hand, and SoCalGas and SDG&E on the other,³⁶ had different CO thresholds for these tests.

Therefore, the ALJ set an October 2004 hearing to sort out why the IOUs proposed thresholds were different and to develop a consistent set of thresholds. The ALJ indicated that she wished to set a threshold that was low enough to ensure customer safety but not so low as to require the utility unnecessarily to take large numbers of appliances out of service for emitting too much CO and falling above the threshold. The ALJ was concerned that an unreasonably low threshold could also harm customers by leaving them without heating or cooking appliances unnecessarily. Just before the hearing, the IOUs all agreed on consistent CO thresholds for this type of testing, and have since sought Commission approval of a settlement on this issue. We approve the settlement, with conditions, as discussed below.

In a November 15, 2004, motion for adoption of the settlement, the IOUs proposed that they each adhere to the following CO threshold levels:

The parties explained that they could agree upon thresholds because new CO measurement devices now readily available on the market allow IOUs to obtain accurate CO readings. The IOUs explain that they currently use "single read" testing equipment that does not measure "air free" CO levels. "Air free" levels are based on a mathematical equation (involving carbon monoxide and oxygen or carbon dioxide readings) to convert an actual diluted ("as measured") flue gas carbon monoxide testing sample to an undiluted ("air free") flue gas carbon monoxide level. The parties had differences over the manner in which "as measured" flue CO measurements were converted to "air free" flue CO levels.

The IOUs have determined that new "dual read" CO testing equipment is now available at a reasonable cost that will measure oxygen or carbon dioxide flue gas levels, along with carbon monoxide levels. Using these "dual read" meters, a gas appliance field technician is now able to determine the "air free" level of carbon monoxide in the flue, as well as the "as measured" CO levels. According to the IOUs, if the LIEE programs use these dual read meters to conduct flue testing, the measurements will be more precise and thus allow a better determination of the proper operation of affected gas appliances.

In accordance with the Commission's settlement rule, Rule 51, on October 27, 2004, the IOUs served a notice of settlement conference, and on November 4, 2004, the IOUs held a settlement conference on the issue. No party appeared at the settlement conference to contest settlement, and no party objected to the settlement after the IOUs served their Rule 51 motion.

While the motion was pending, and at the settlement conference itself, the Energy Division made inquiries of the IOUs to verify the costs the settlement would entail. The Energy Division focused on whether the public goods charge should pay for the new, "dual read" CO testing devices, or whether the devices should be paid for from general rates. The Energy Division expressed its opinion to the IOUs that the cost of the equipment should be part of the IOUs' general rates, since CO safety testing is part of the general utility function and not specific to the LIEE program.

In data responses filed November 19, 2004, SDG&E indicated that it had purchased eight "dual read" devices with LIEE program funds, and that SDG&E subcontractors were using other devices purchased with their own funds. SDG&E later stated that, "the costs associated with the eight meters currently in the field were erroneously treated as public goods charge expenditures. They should have been reflected as operating and maintenance expenditures. SDG&E is making a correction to its accounting records." SDG&E also forwarded the adjusting journal entries reflecting this accounting change.

SoCalGas stated that all devices used for its customers were purchased by subcontractors with their own funds. In an October 20, 2004, data response, SDG&E and SoCalGas indicated that they would need to purchase 47 (SDG&E - 7, SoCalGas - 40) dual read meters to reflect the number of licensed contractor crews performing gas appliance repairs and replacements for SDG&E and SoCalGas. They explained in an October 21, 2004, response that they would purchase these meters as the "single read" meters wore out. Finally, the IOUs together intimated in their October 21, 2004 data response that the "dual read" meters must be paid for out of LIEE funds: "The purchase and use of new dual read CO meters capable of doing flue CO tests is key to the settlement proposal."

Read together, the data responses provide a somewhat confusing view of the IOUs' position on who should bear the cost of the new dual read meters. On one hand, SDG&E reversed its billing of the eight meters it already possesses from an LIEE expense to general rates. On the other hand, the IOUs jointly state that purchase of the new meters is key to the settlement, while agreeing that "all costs related to implementing the settlement will be accounted for in accordance with the Commission's 2005 LIEE program CO testing funding guidelines."³⁷

We believe that CO testing is a general utility function. Testing is performed after an appliance has been repaired or replaced to ensure that the appliance is operating safely. The testing standards should be consistent whether the utility is testing the appliance of a LIEE customer or a customer who has paid for his own appliance. Thus, we disagree with the IOUs to the extent - which is far from clear - that they are contending that LIEE funds must pay for the "dual read" meters. As we stated in D.02-09-021: "We have ... given the utilities clear direction that the administrative costs booked to low-income assistance balancing accounts must be `incremental' costs, i.e., not provided for in the utility's base rates."³⁸ Safety testing (including the cost of testing devices) is - and should continue to be - provided for in the utilities' base rates.

In order for a settlement to be approved by the Commission, the settlement must be: (1) reasonable in light of the whole record, (2) consistent with law, and (3) in the public interest. Rule 51.1(e).³⁹

1. Reasonableness in Light of the Whole Record

First, the settlement accomplishes precisely what the Commission directed the parties to accomplish in D.03-11-020: it arrives at a consistent CO flue threshold for use by each IOU after an appliance is repaired or replaced. Thus, D.03-11-020 contemplated a negotiated agreement on consistent threshold levels, and the parties - albeit belatedly - have come to such an agreement.

Second, no party objects to the settlement, and nothing in the record indicates that the thresholds agreed upon present any safety hazards. Indeed, as the IOUs point out in their motion, the CO thresholds in the settlement are consistent with American National Standards Institute (ANSI) standards with minor exceptions. The IOUs propose to adopt ANSI Z21/83 air free standards for all appliances for which there are applicable standards except for range top burners and ovens/broilers. For those appliances, the IOUs adopt consensus flue testing CO thresholds because ANSI laboratory conditions cannot be replicated in the field. The IOUs also adopt consensus flue testing CO thresholds for appliances that cannot be tested to ANSI Z21/83 standards.

Indeed, earlier in the proceeding, PG&E resisted arriving at standards consistent with those used by the other gas IOUs because of concerns, among other things, that safety would be compromised if the thresholds were raised. PG&E has now dropped its safety-based objection due to the fact that the new dual-read meters provide more accurate information about appliances' CO levels, and is fully in support of the new, consistent standards.

Finally, the settlement does not require that LIEE funding be used to pay for the dual read meters. While the record is ambiguous as noted above, the IOUs' motion and the settlement agreement itself provide that "all related costs will be accounted for in accordance with the Commission's 2005 LIEE program CO testing funding guidelines." Since this is the decision setting forth those guidelines, it is appropriate for us to determine that the testing should be paid for out of general rates, rather than LIEE funds. We so determine here.

Thus, the settlement is reasonable in light of the whole record.

2. Consistent with the Law

The settlement resolves the issues that were to go to hearing, and is the product of good faith negotiations between the parties. No party claims that the settlement itself, or the standard thresholds adopted therein, run counter to law, rule or tariff. Indeed, as noted above, D.03-11-020 directed the parties to negotiate consistent thresholds, so the current state of the law is that parties were required to devise their own consistent standards.

Thus, we conclude that the settlement is consistent with the law.

3. In the Public Interest

When she set the matter for hearing, the ALJ noted that an appropriate settlement would ensure public safety while setting a high enough threshold that the IOUs would not needlessly leave low-income consumers without heat or other gas appliances. The parties have agreed that the standards they have agreed upon are "just and reasonable and in the public interest."⁴⁰ The joint parties to the settlement also state that they "have used their collective experience to arrive at CO flue threshold levels that are safe and consistent with best industry practices and ANSI standards."⁴¹ Finally, the settlement provides that, "No LIEE customer gas appliances will be shut off based on flue CO levels alone, unless they exceed the agreed-upon threshold levels and cannot be repaired as provided for under the LIEE program policy and procedures."⁴² Thus, we are satisfied that the settlement appropriately balances the safety of customers with the need to ensure that customers have working gas appliances.

Based on the foregoing, the Commission finds that the CO threshold settlement is reasonable in light of the whole record, is consistent with the law, and is in the public interest. We note that nothing in the agreement restrains the Commission from changing the required post-testing CO flue threshold levels or should be construed to constitute a Commission statement of what the appropriate levels should be. The settlement is approved as discussed above.

4. Funding of CO Testing

a) SDG&E and SoCalGas Proposal For Funding of CO Testing

SDG&E and SoCalGas raise a further issue regarding CO testing. These IOUs request that we change the status quo requiring who pays for the testing. Currently, testing is paid for out of general utility rates: in 1998, the Commission directed that low-income program funds were not to be used to perform LIEE-related CO testing.⁴³ We reasoned at the time that "carbon monoxide testing conducted under the LIEE program is part of the `routine' service to ratepayers and is already authorized in rates."

However, SDG&E and SoCalGas state that CO testing conducted under LIEE is not part of their routine service. They state that CBOs or private contractors conduct such testing, rather than utility personnel; that LIEE program staff at the utilities oversee these contractors; and that testing under the LIEE program is more complex and time-consuming than the testing the utilities perform as part of their regular utility service.

b) Comments on SDG&E and SoCalGas Proposal For Funding of CO Testing

ORA objects to SDG&E and SoCalGas' request.⁴⁴ It notes that PG&E has not made a similar request for a change to the status quo. ORA states that the request does not explain how SDG&E and SoCalGas will track the testing expenses so that they are not paid for twice - once out of LIEE funds and a second time out of general rates. ORA also states that the utilities do not show how a change in the status quo will benefit ratepayers.

In reply, SDG&E and SoCalGas reiterate that CO testing for the LIEE program is more complex than that for general customers, and that the Commission currently changes the LIEE testing requirements. "[C]ost of service (`COS') or general rate case (`GRC') proceedings are not designed to efficiently accommodate changes in [LIEE] program CO policies and practices. COS or GRC can take years to resolve because they examine all aspects of a utility's operational costs and address literally hundreds of issues."⁴⁵

The Utility Reform Network (TURN) supports the proposal to transfer funding for LIEE-related CO testing to the LIEE program and away from general rates.⁴⁶ TURN states that it was a party to a settlement in proceeding A.02-12-027, SoCalGas' cost of service proceeding. In the settlement, TURN supported moving funding responsibility for CO testing from base rates to public purpose funds. TURN does not otherwise explain why it makes sense to fund CO testing from the PGC.

c) Discussion of SDG&E and SoCalGas Proposal For Funding of CO Testing

We do not believe SDG&E and SoCalGas have adequately demonstrated that we should change the status quo and move funding for LIEE-related CO testing from base rates to PGC funding. We believe safety testing is a normal utility function for a gas utility and should be paid for out of base rates. LIEE funding is limited in amount and is designed to fund activities that help low-income customers save energy. Safety, on the other hand, is something the utilities owe all customers, whether they are low-income or not. Such testing should not depend on a separate stream of funding, but should be guaranteed for any customer receiving utility service. Thus, CO testing should continue to be funded from base rates. We deny SDG&E and SoCalGas' request, and remove the requested amounts for CO testing from their proposed 2005 LIEE budgets.

D. Pilot Air Conditioning Maintenance Measure

In the June 24, 2004 Scoping Memo for this proceeding, the ALJ noted that the LIOB had recommended that the Commission add air conditioner maintenance to its mix of LIEE measures:

At the PHC, 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.⁴⁷

The Commission's Standardization Team analyzes all proposed new measures using evaluation criteria the Commission approved in D.02-08-034. These criteria focus on whether the proposed measure is cost-effective using two cost-benefit tests: a "Utility Cost Test" and a "Modified Participant Cost Test." Costs considered include the purchase cost of the measure plus the labor cost to install it. Benefits include energy saved plus a variety of non-energy benefits including comfort, water savings, health benefits, and others.

We agree with the IOUs and ORA that the Standardization Team should analyze the LIOB's proposed air conditioner maintenance using the foregoing cost-benefit analysis. We order the Team to communicate directly with the LIOB to obtain information on this proposed measure. We deem the LIOB's proposal preliminarily to meet the requirements for submission pursuant to the Team's December 17, 2004 Solicitation Of Proposals For New Measures For The 2006 Low Income Energy Efficiency Program. The Team should obtain any additional information it needs to assess the LIOB's recommendation as soon as possible after issuance of this decision, unless a similar proposal is made by another entity, in which case the issue will be moot because the Standardization Team will already be studying the issue.

E. IOU Contractor Costs

With their LIEE applications, the IOUs included limited information on the costs they incur by using third party contractors to run aspects of their LIEE programs. PG&E conceded that the information does not fully break down contractor costs, and is not consistent across contractors or across IOUs.

We must have before us all costs an IOU incurs - whether in-house or from an outside contractor - in analyzing IOU low-income budgets. It is not sufficient for IOUs to tell us that the contractors refuse to provide cost information. In the future, as a condition of receiving public goods charge funding, any third party contractor must agree to provide such data so that the IOUs can furnish it to the Commission. The IOUs and contractors may furnish the data under seal, but they may not refuse to provide the data at all.

The IOUs shall meet and confer and develop consistent budget templates for their contractors' use. They shall use their best efforts to include affected contractors in this process. To the extent any forms or templates developed in the context of other Commission proceedings - such as our Energy Efficiency proceeding, R.01-08-028 - are useful for this purpose, the IOUs may use them. The IOUs shall file and serve a report on the results of this meet and confer process no later than 120 days after the effective date of this decision. The contractors shall furnish data pursuant to these templates no later than January 31, 2006.

F. LIEE Measurement and Evaluation

A statewide impact evaluation on the IOUs' 2005 LIEE programs will occur in 2006. The estimated cost of the study is $600,000. The proportional share for each utility is: PG&E - $180,000, SCE - $180,000, SoCalGas - $150,000 and SDG&E - $90,000. As shown in Table 4, above, the proposed IOUs' costs do not match these numbers. SCE included $195,000 for M&E in its 2005 budget. PG&E seeks a M&E budget of $300,000 in its application. SoCalGas seeks $60,000, and SDG&E seeks $50,000. Each IOU should provide the Energy Division justification for its M&E budgets within 60 days of the effective date of this decision. The budget for the impact evaluation is approved without increasing the IOU's 2005 budgets. All the utilities have sufficient unspent carryover funds to absorb the cost of the evaluation.