OF THE STATE OF CALIFORNIA

Order Instituting Rulemaking to Examine the Commission's Future Energy Efficiency Policies, Administration and Programs.

R.01-08-028 (Filed August 23, 2001)

REPLY TO REQUESTS FOR ADDITIONAL INFORMATION ABOUT EFFICIENCY SERVICES GROUP'S PROGRAM PROPOSAL ENTITLED "ENERGY AND WATER SAVING PROGRAM FOR RESIDENTIAL RENTAL PROPERTIES IN TARGETED LOCAL COMMUNITIES IN PG&E AREA"

Efficiency Services Group Inc., a wholly owned subsidiary of Portland General Electric, and the RES-Team contractors (consisting of American Synergy, Cal-UCONS, Quality Conservation Services and Winegard Energy) respectfully submit the following information in response to questions received March 14, 2002. The questions were directed at the Energy and Water Saving Program For Residential Rental Properties In Targeted Local Communities in Pacific Gas & Electric (PG&E) Area proposal.

The following responses are organized to first state each QUESTION, immediately followed by an ANSWER to that question. Efficiency Services Group Inc. and members of the RES-Team representing American Synergy, Cal-UCONS, Quality Conservation Services and Winegard Energy have reviewed each question and answer.

QUESTION (1): "What measures will be provided to the typical multifamily unit? Please include the number of units installed on a per-measure basis. (e.g. X # compact fluorescent lightbulbs.) "

ANSWER (1): The program has two primary elements. The first element provides multifamily tenants, with the approval of the property manager, a comprehensive set of free energy efficiency measures suitable and targeted to benefit the HTR multifamily market. The second element offers property owners a set of options that they may contribute toward to achieve additional energy and/or water savings. Attachment A (Measures) groups the measures into "Free" and "Co-payment" and provides estimated installation rates on a per measure basis.

QUESTION (2): "Will the services provided include the conduction of Combustion Appliance Safety testing? If so, please provide the budget details associated with this work, on a per-test basis."

ANSWER (2): If the Commission requires that the program sponsors conduct Combustion Appliance Safety (CAS) testing as part of the procedures related to the installation of certain energy efficiency measures, then we will include them in the procedures for installation.

To date, neither the Commission nor the Contractors State Licensing Board, nor any other standards setting agency nationally or in California have required combustion appliance testing to be done for any of the measures we have proposed for the programs. Moreover, we note that a requirement for such CAS tests has not been included in any 2002 energy efficiency program proposed by PG&E or by any other IOU or by any third party for measures that affect infiltration or combustion appliances.

Because we did not (and do not) foresee the need for such a procedure, it was not included in our budget, either in total or on a per-test basis. Moreover, the costs for these types of tests vary greatly, depending upon their comprehensiveness or goals. For example, there are very significant differences between those tests conducted by PG&E and those conducted by SoCalGas and by SDG&E. Details on their costs could be secured from each of those IOUs, if desired.

Each of the gas IOUs (including PG&E) have funds included in their budgets to cover CAS tests requested by their customers or required to be completed by the respective IOUs. The Commission has repeatedly found that, when a utility requires that CAS tests be used either prior to installation (as PG&E has sometimes required in the past) or, if desired, following installation, the costs of those tests are to be born by utility O&M budgets, and definitely should not be charged to any public purpose programs. This Commission policy was made and/or confirmed in at least the following instances: D.98-06-063; Res E3515; D.01-03-028 (p.35); and D.01-03-028 (p. 108). The most recent of these clearly states that the costs of such tests shall not be billed to public purpose programs:

The Commission has determined that natural gas appliance safety/CAS testing will not be billed to LIEE or any other public purpose program and this issue should not be relitigated during the PY 2002 program planning cycle. Whether and how the utilities can increase distribution rates to recover the costs of natural gas appliance safety/CAS is an issue to be determined in pending or future cost of service ratemaking proceedings, and not the PY 2002 program planning cycle. [D.01-03-028, Conclusion of Law No. 20, Emphasis added]

If the CPUC elects ( a) to mandate CAS test for all measures which may affect infiltration and (b) to require that CAS testing be funded from PGC funds, the Energy Services Group Inc. and the RES-Team agrees to incorporate or provide this service, but we will need to reduce the total number of units and resultant savings that can be achieved from the remaining funds requested.

QUESTION (3): "Does the program intend to include safeguards to ensure that, on the whole, a comprehensive package of energy efficiency measures will be delivered to program participants? If so, please provide details of these safeguards."

ANSWER (3): The Safeguards to achieve comprehensiveness are in having the Energy Efficiency Group administer this program. As administrators for the program and with no installation role (measure installation will be completed by the RES-Team contractors), Energy Services Group has no incentive to do anything BUT deliver the expected quality and comprehensiveness. Since 1995, Portland General Electric (and the Energy Services Group) has provided successful, comprehensive, Oregon PUC approved, direct install multi-family programs to nearly 30,000 tenants.

Section 1.1.3. "The Program" summarizes the program, describing it as a two-part offer. The Basic, "free" package includes insulation, water, heating, lighting, and weatherization, and infiltration measures. The "Options" (Co-Payment required) package includes additional energy and water saving measures that can be purchased using economies of scale and partial funding from either PGC or water utility contributions to reduce costs and encourage installation. These installations are primarily the responsibility of the individual contractors.

Section 2.5 "INSPECTION AND QUALITY ASSURANCE indicates that inspections of completed work will be performed. The inspections will include (1) quality verifications of completed work for both "Free" and "Co-Payment" measures to predetermined California and IOU standards and (2) inspections for missed opportunities. "Missed opportunities" are opportunities where energy efficiency measures could have been installed and were not. These inspections for quality and for comprehensiveness are primarily the responsibility of the Efficiency Services Group.

Performance expectations will be established by contract to ensure the RES-Team contractors will be required to address both quality and missed opportunity issues.

QUESTION (4): "Please provide details on hot water heater timers (p. 11 of proposal), including the process for enrolling residents on time-of-use rates. These details should include full and incremental cost per hot water heater timer."

ANSWER (4): Hot water heater timers were initially proposed under the 2000 Summer Initiative Program and were approved by the Commission for multi-family facilities with electric water heat, although they did not generally have time of use (TOU) rates available. Nationally, water heater timers are often employed in regions where "time of use rates" are not yet in place for residential tenants (as is the case for most PG&E tenants). In regions having limited time of use rates, timers still provide a strong regional benefit by reducing peak demand, but the benefits to participating customers are not as great as they could be when tariffs are employed to send appropriate price signals to users.

We do not propose to "enroll tenants in existing PG&E tariffs" as PG&E has already taken this action. Rather, we offer timers to property managers and tenants in order to maximize system peak demand benefits when they are available and the benefits of the energy savings available immediately. When (and where) time of use rates have been approved, we can provide tenants and property managers with utility approved information about how to subscribe so they can achieve their greatest savings for using energy most efficiently.

We have worked in a collaborative manner with regulatory agencies, customers and utilities in those regions that desire to have a greater impact on residential customer peak demand usage. Should the CPUC wish to achieve a residential contribution to reducing peak demand, the installation of water heater timers could help accomplish that objective.

There are two (2) primary applications we contemplate water heat timers to be utilized for our multi-family program:

1. For individual units with electric hot water heaters, and

2. For water heaters supplying washing machines in common areas.

Our experience is that the "Full Costs" to market, procure and install water heat timers is $200/unit, taken for the amount approved by the Commission as part of the HTR Summer Initiative Program. For our proposal, incremental costs are projected to be $125 per unit.

QUESTION (5): "Please provide details on how proposed program will change the process a tenant would take for participating in local water company programs. (p. 11 of proposal). If program funds will be used to augment incentives local water utilities are offering for water-saving devices, please provide details on proposed augmentation. These details should be outlined on both a per-measure basis, and include the number of estimated units rebated per measure. Finally, please provide details on the installation costs the customer would pay, per measure."

ANSWER (5): The option to purchase measures noted in the proposal for "water closets and outdoor watering controls" is directed to "Owners". All incremental costs associated with these options will be born by property owners and local water districts. Public Goods Charge (PGC) will not be used to provide this feature of the SWEEP Multi Family Direct Install Program.

This option, depending upon the water metering configuration and tenant contract, has the potential to save money for both the property owner and the tenants. It also has the potential to reduce water district processing and pumping requirements, therefore decreasing energy demands as a result of reduced water processing plant and delivery system operations. Please note however, that no credit is taken or requested in the proposed program for these energy savings. The number, type and costs for the various improvements will depend directly upon the level of participation by the local water companies and cannot be projected at this time.

QUESTION (6): "Does the program intend to include safeguards to ensure that contractors do not use public purpose funds to promote services not included under this program? (i.e. Contractor promotes own services to residents when conducting program work.) If so, please provide details of these safeguards."

ANSWER (6): Normally the Efficiency Service Group (ESG) would incorporate a contact provision between ESG and each RES-Team contractor, including their sub contractors concerning promotion of services. The provision speaks to solicitation for additional business, that for a period of 12 months on the completion of installation for a customer, a RES-Team contractor, having had a contract with, or knowledge of such customer, by virtue of the program, may not solicit additional work.

Unless otherwise directed by the commission, we expect to include a similar provision in our contracts with the RES-Team contractors and their subcontractors. The exception would be those contractors that participate in other PGC related energy efficiency programs, offering different services or products through other marketing channels, and delivered independently from the Multi Family Direct Install program, or as directed by the Commission.

QUESTION (7): "The program proposed to target the greater Bay Area counties (p. 14 of proposal), and the Fresno-King-Kern area. Please segment the budget according to these two territories, and section costs on a per-apartment basis."

ANSWER (7): Our evaluation of and our experience with both the Greater Bay Area and the Fresno-Kings-Kern county area confirms that both areas have a large number of MF tenants who are not deriving substantial benefits under current IOU programs. Both areas could readily utilize 100% of the proposed PG&E-area programs within their respective counties. Should the Commission desire us to do so, we could shift all of the proposed work to either of the two areas.

Currently, for the program as proposed, we internally projected that the majority (60%) of multi-family HTR units would come from the Greater Bay Area, consisting of Alameda, Contra Costa, Marin, San Mateo, San Francisco and Solano counties. This would consist of approximately 30,000 multifamily units in the Bay Area compared to about 20,000 in the Fresno-Kings-Kern county area.

Internally, we estimated that the average incentive amount per apartment would be about $400. However, because we assume the average apartment size in San Francisco and the Bay Area would be somewhat smaller and because of the more extreme weather of the Fresno-Kings-Kern region, we assumed that the amount of work needed in the average Bay Area apartment would be somewhat less than average while those in the Fresno-Kings-Kern area would need more measures installed. For planning purposes, we have projected an average cost for the Bay Area of about $367 per apartment treated, with the Fresno-King-Kern area average incentive going for about $450 each.

Based upon these projections, we assume that of the total program costs (excluding the 5% IOU administrative fee), about $11,000,000 will be for the Greater Bay Area (30,000 apartments times $367/apartment) and about $9,000,000 (20,000 apartments times $450/apartment) for the Fresno-Kings-Kern area.