23. Evaluation, Measurement and Verification Activities

Evaluation, measurement and verification (EM&V) studies provide information about demand response program attributes, customer acceptance, load impact, and evaluation techniques. The utilities conduct joint evaluations of several statewide demand response activities, such as the Demand Bidding Program, the Base Interruptible Program, Marketing and Outreach, the Demand Response Statewide Awareness Campaign, and for dynamic tariffs available throughout the state, such as Critical Peak Pricing, Real Time Pricing, and Peak Time Rebates. Evaluations of statewide programs are overseen by the Demand Response Measurement and Evaluation Committee (DRMEC). In addition to joint studies of statewide activities, the utilities request funding in this application to evaluate their individual demand response activities and dynamic pricing tariffs, some of which receive administration or incentives funding in other proceedings.

In addition, the utilities propose to conduct their own evaluation of their individual (non-statewide) programs. PG&E requests a total of $9.5 million for these EM&V studies. SCE requests $6,912,899 for 2009-2011 for demand response-related evaluation, measurement, and verification activities.²⁹² SDG&E requests $4.1 million for evaluation, measurement, and verification of its Demand Response programs.

23.1. Party Positions on EM&V Funding

TURN suggests that SDG&E's EM&V funding request is inflated compared to that company's previously recorded costs, which indicate that SDG&E spent only 43% of its 2006-2008 evaluation, measurement, and verification budget. TURN proposes reducing SDG&E's evaluation, measurement, and verification budget to $0.616 million. ²⁹³ SDG&E responds that TURN misunderstands the nature of SDG&E's cost recovery mechanism, which differs from that of SCE and PG&E. Unlike SCE and PG&E, SDG&E collects its demand response funds through rates after the money has been spent.²⁹⁴ Because of this, SDG&E will only collect the amount actually spent on evaluation, measurement, and verification, not the full amount approved if it exceeds the amount spent.

TURN recommends reducing SCE's evaluation, measurement, and verification budget to $1,500,000 in total for 2009-2011 based on historical authorization and spending for EM&V by SCE. TURN also specifically argues that no money should be authorized for AMI related evaluations.²⁹⁵ SCE explains in its amended testimony that it proposes to evaluate time differentiated rates and tariffs that will be introduced as meters are replaced.²⁹⁶ The utility also proposes to submit a formal evaluation plan to describe the approaches to estimate load impacts of these AMI related tariffs or programs. SCE argues that it also has additional compliance requirements since the 2006-2008 funding was authorized, such as the ex ante and ex post load impact studies. The utility also suggested that if the EM&V budget is reduced to the level proposed by TURN, it would limit the number of programs the utility is able to evaluate and increase the financial burden of statewide evaluation on the other utilities.²⁹⁷

23.2. Discussion

EM&V activities, which include program evaluation, load impact evaluation, and demand response research projects, are essential to the development of effective, and cost effective, demand response programs in California. Ratepayer funds are limited and should be spent wisely, and EM&V activities help the Commission determine what activities should continue and how to improve those activities. It is reasonable to approve EM&V funding associated with approved demand response programs, pilots, and related activities. The funding levels proposed by the utilities appear generally to be reasonable compared the past EM&V funding to the extent that the underlying programs to be evaluated are approved.

As noted by TURN, the SCE and SDG&E funding requests seem large in comparison to the amounts SDG&E has reported spending on related activities during 2006-2008. TURN fails to acknowledge that the Bridge Funding decision, D.08-12-038, requires the utilities to use unspent 2006-08 EM&V funds to continue EM&V activities related to the 2006-2008 programs, meaning that there may be additional evaluation costs for 2006-2008 that have not yet been recorded. Also, in D.08-04-050, the Commission approved protocols for estimating demand response load impacts and increasing the EM&V requirements on the utilities over the requirements in place earlier in 2006-2008. In addition, SDG&E's cost recovery mechanism provides a safeguard, ensuring that only the amounts actually spent are recovered. To further ensure that EM&V funds are well spent, we note that the utilities are already required to evaluate the statewide programs under the oversight of the DRMEC, and we extend this oversight requirement to all of the utilities' EM&V activities, including those related to utility-specific programs.

The EM&V budgets requested by the utilities appear reasonable, with some changes to reflect other aspects of this decision. Specifically, it is not necessary to provide funding for evaluation of activities that we are denying or discontinuing in this application, so we reduce the PG&E's EM&V budget to remove costs associated with evaluation of the Business Energy Coalition/Automated Business Energy Coalition. Evaluation costs associated with pilots proposed by the utilities appear to be included in the budgets of the specific pilot programs and so are approved or denied along with the pilots themselves, discussed in Section 14, above.

We approve the following EM&V budgets for the three utilities:

	2009-2011 Requested Budget	2009-2011 Authorized Budget
PG&E	$9,562,000	$9,062,000
SDG&E	$4,105,832	$4,105,832
SCE	$7,074,990	$7,074,990

23.3. Authority to Continue the Demand Response Measurement and Evaluation Committee

Evaluation, measurement, and verification activities of the utilities are generally overseen by the Demand Response Measurement and Evaluation Committee (DRMEC), which is composed of members from the California Public Utilities Commission, the California Energy Commission, and each of the three utilities. Previous Commission decisions created the DRMEC and authorized it to oversee the evaluation of statewide demand response activities; this authority was confirmed most recently in D.06-11-049. We authorize the DRMEC to continue its oversight of demand response EM&V activities. Specifically, we require that beginning with the evaluations of 2009 demand response programs, the DRMEC will oversee not only the evaluation of statewide demand response activities, but also the evaluation of activities conducted by the individual utilities.

In addition, we require the DRMEC to conduct an annual public workshop presenting the results of demand response evaluations conducted under the DRMEC's oversight. This annual workshop will be noticed to the most recent service list of this proceeding.

²⁹² SCE Opening Brief, p. 27.

²⁹³ TURN Opening Brief, p. 51.

²⁹⁴ SDG&E Reply Brief, pp. 3-4.

²⁹⁵ TURN Opening Brief, p. 43.

²⁹⁶ SCE Exhibit 1, p. 225.

²⁹⁷ SCE Opening Brief, p. 26.