17. Assignment of Proceeding

Michael R. Peevey is the assigned Commissioner and Dorothy J. Duda is the assigned ALJ in this proceeding.

Findings of Fact

1. AB 1470 authorizes the creation of a $250 million incentive program to promote the installation of solar water heating systems in homes and businesses to displace natural gas usage by 2017.

2. SB 1 added Section 2851(b) allowing $100.8 million of total CSI funds to be used for incentives to solar thermal technologies such as solar water heating.

3. Section 2862(l) states the Commission shall evaluate data from the SWH Pilot Project and determine whether an SWH program is cost-effective for ratepayers and in the public interest before designing and implementing an SWH incentive program.

4. The Itron analysis indicates the large amounts of gas and electricity used to heat water in California, and the need to reduce this usage to meet California's goals of reducing carbon emissions.

5. The Societal Test of cost-effectiveness used in the Itron analysis captures benefits that accrue to society, including ratepayers, such as avoided pollution, greenhouse gas reduction benefits, job growth and market transformation benefits.

6. Itron's analysis of cost-effectiveness includes a "business as usual" scenario that concludes an SWH incentive program will be cost effective if there is a 16% reduction in SWH system costs by 2017, as well as several other scenarios under which an SWH incentive program is cost effective.

7. SWH system costs declined 30% between 1980 and 1990. System cost reductions can be achieved through reductions in equipment costs, labor costs, marketing, and permitting.

8. A 16% system cost reduction, as used in the Itron analysis, is a reasonable expectation.

9. Further proceedings to reexamine SWH cost-effectiveness will delay consideration of a statewide program by six months to one year.

10. The Itron analysis of the cost-effectiveness of a statewide SWH program, to displace both electric and gas water heating, indicates that the program will provide societal benefits over the life of the systems installed, and that a number of factors could further improve the cost effectiveness of these programs, such as the availability of low cost loans.

11. The Itron analysis indicates that it is not cost-effective for SWH to displace electric water heating on single family homes without incentives, but an eight-year incentive program is cost-effective using the Societal Test.

12. A primary goal of AB 1470 is reduction in natural gas usage.

13. Section 2863(b)(2) describes the goal of installing 200,000 SWH systems, "or the equivalent output of 200,000 [SWH] systems...."

14. The natural gas displacement of 200,000 residential SWH systems is equivalent to 585 million therms.

15. The electric displacement of 100,800 SWH systems is 275.7 million kWh per year of electricity.

16. Sections 2864 and 2865 establish criteria for SWH systems receiving SWH incentives, including SRCC certification, warranty, metering and installation requirements and conditions involving siting, performance, energy efficiency, and rating standards.

17. Section 2864 requires meters or other kWhth measuring devices to monitor and measure system performance for systems over 30 kWth.

18. The four IOUs and CCSE have experience implementing energy efficiency, distributed generation, and CSI programs.

19. Section 2866 requires not less than 10% of the overall funds for installation of SWH systems be provided to low-income residential housing.

20. The $100.8 million set aside for solar thermal in CSI may fund both electric-displacing SWH systems and other non-PV solar thermal technologies that displace electricity usage.

21. Section 2865 requires "appropriate energy efficiency improvements" in homes or businesses where SWH is installed.

22. Bundling water heating related energy efficiency measures with an SWH installation can reduce water heating demand and SWH system size.

Conclusions of Law

1. Based on Itron's analysis an SWH program can play an important role in developing water heating alternatives and can help California to meet its carbon reduction goals and is in the public interest.

2. Based on Itron's analysis, which incorporates system cost reductions over the program's duration, and contains several scenarios under which SWH is cost-effective, an SWH program is cost-effective for ratepayers and in the public interest and should be adopted.

3. A program goal of displacing 585 million therms of natural gas usage is reasonable given Section 2863(b)(2), which allows the Commission latitude to design a program to reach the equivalent output of 200,000 systems.

4. A goal of displacing 275.7 million kWh of electricity per year is reasonable and should be adopted.

5. The requirements of Sections 2864 and 2865 should be incorporated into the Program Handbook and apply to all systems, both gas- and electric-displacing.

6. The PAs should develop siting and installation guidelines and methods, including system sizing and climate-zone specific freeze protection requirements, to prevent oversizing of systems, and include these in the Program Handbook.

7. In developing the CSI Thermal Program Handbook, Energy Division shall consider increased warranty requirements while balancing warranty costs with adequate consumer and ratepayer protection.

8. To ensure eligibility criteria and conditions are met, the PAs should inspect the first three installations by every installer, and random inspections thereafter.

9. The gas-displacing incentive levels proposed by staff are reasonable and should be adopted, with a minor decrease in the Step 4 rate to fund additional systems at the Step 1 level.

10. The PAs should post weekly information on their program websites and the Go Solar California website regarding participation and incentive levels.

11. The PAs should provide written notification of incentive reductions by letter to the ALJ, with a copy to the service list of this or any successor proceeding.

12. Gas-displacing SWH incentives shall decline when PAs accept applications and confirm reservations to pay incentives equal to the budget allocation for the customer class in each step.

13. Gas-displacing SWH incentives shall move independently in each service territory and for each customer class, namely single-family residential or commercial/multifamily.

14. Incentive caps are reasonable to ensure the program promotes a sufficient quantity of installations.

15. We should allocate 40% of the gas-displacing incentive budget to single-family residential customers, and allow the remaining 60% of the incentive budget for commercial and/or multifamily projects.

16. SWH to displace electric usage should receive lower incentives given the economics of electric versus natural gas water heating.

17. Incentives to electric-displacing SWH systems should decline using the same percentages as gas-displacing incentives.

18. When gas displacing incentives drop to a lower step level, electric-displacing incentives should also drop to the next level.

19. The PAs should count the megawatts of electric-displacing SWH installed as part of Step 10 of the general market CSI program, and Step 9 if needed, to minimize the effect of these installations on incentive levels for PV systems.

20. Single-family residential incentives should be calculated based on the SRCC estimation of annual energy savings combined with the Solar Orientation Factor.

21. The PAs should develop an on-line incentive calculation tool that estimates natural gas or electricity displacement based on system location, design, and expected performance.

22. Performance metering and monitoring equipment should be installed for program evaluation purposes on a sample of systems with a capacity for displacing 30 kWth and below, with the cost borne by PAs through their M&E budgets.

23. The current CSI administrators and SoCalGas should administer the CSI Thermal Program given their experience implementing other Commission mandated incentive programs.

24. The CSI Thermal Program should be implemented separately from utility energy efficiency programs, to better integrate solar PV and SWH choices by end users, although the PAs should determine convenient ways to customers to make combined applications for energy efficiency and solar incentives.

25. Customers may not receive SWH incentives from both a utility energy efficiency program and CSI Thermal for the same SWH system.

26. The gas-displacing program budget should be allocated across the utilities based on the percentages used to collect the natural gas Public Goods Charge.

27. It is reasonable to allocate $25 million for a low-income SWH incentive program, which is 10% of the $250 million total program budget.

28. To the extent a PA performs marketing and M&E activities jointly for gas and electric-displacing systems, it should fund these activities on a 4:1 ratio such that every dollar spent from the electric-displacing budget is matched with $4 from the gas-displacing budget.

29. Appropriate energy efficiency improvements that reduce water heating demand under this program should be ones that are broadly applicable, do not require SWH installers to develop new skills, do not significantly increase project cost or delay installation, are easily validated, and are likely to be retained by the customer.

30. Energy Division should hold a workshop to assist the PAs in determining the energy efficiency measures that meet our criteria for appropriate energy efficiency improvements under this program.

31. To receive incentives, customers should obtain an energy audit and deploy cost-effective and feasible energy efficiency measures that reduce water heating demand and meet our definition of appropriate energy efficiency improvements, as specified in the Program Handbook.

32. SWH systems should be sized based on the reduced hot water use that will result from energy efficiency improvements.

33. To reduce barriers to SWH, we direct the PAs to budget 40% of market facilitation funds in the first two years of the program.

34. Market facilitation activities and budgets will be determined by Energy Division through an annual advice letter process. The first market facilitation advice letter should include a strategic plan and detailed budget for specific short-term and mid-term activities to achieve a self-sustaining SWH market by 2018.

35. The PAs should coordinate M&E activities for CSI Thermal with M&E for the general market CSI program.

36. The PAs should jointly design and maintain a statewide program database and ensure that program participants provide performance data, as necessary, to evaluate the program.

37. To reduce disruption in the SWH market, SWH systems installed after July 15, 2009 or that obtained a building permit after July 15, 2009 should be eligible for incentives through CSI Thermal if they meet all other program eligibility criteria.

38. Customers in the SDG&E area who apply for incentives from the SWH Pilot Program between July 15, 2009 and December 31, 2009 may apply for and receive any higher incentive offered through the CSI Thermal program, if they meet all program eligibility criteria.

ORDER

IT IS ORDERED that:

1. The California Solar Initiative Thermal Program set forth in Appendix A is adopted and shall be administered by Pacific Gas and Electric Company, Southern California Edison Company, Southern California Gas Company, and the California Center for Sustainable Energy (collectively, the California Solar Initiative Thermal Program Administrators).

2. Within 60 days of this order, San Diego Gas & Electric Company shall revise its contract with the California Center for Sustainable Energy to specify that California Center for Sustainable Energy will act as Program Administrator for the California Solar Initiative Thermal Program in the San Diego Gas & Electric Company territory.

3. Within 60 days of this order, the Commission's Energy Division shall hold workshops regarding:

a) Development of siting, installation, freeze protection, and system sizing requirements to maximize solar water heating system performance and guard against oversizing of systems;

b) Development of an on-line incentive calculation tool that estimates natural gas or electricity displacement based on solar water heating system location, design, and expected performance; and

c) Development of appropriate energy efficiency improvements that reduce water heating demand and that are broadly applicable, do not require solar water heating system installer to develop new competencies, do not significantly increase project cost or delay installation, are easily validated on system inspection, and are likely to be retained by the system owner.

4. By April 1, 2010, the California Solar Initiative Thermal Program Administrators, namely Pacific Gas and Electric Company, Southern California Edison Company, Southern California Gas Company, and the California Center for Sustainable Energy, shall complete development of the on-line incentive calculation tool and provide it to Energy Division for review.

5. By April 1, 2010, the California Solar Initiative Thermal Program Administrators, namely Pacific Gas and Electric Company, Southern California Edison Company, Southern California Gas Company, and the California Center for Sustainable Energy, shall complete drafting of the single-family residential customer portion of the California Solar Initiative Thermal Program Handbook, which shall be a subset of the general market California Solar Initiative Handbook, and jointly submit it as an Advice Letter in order to begin accepting solar water heating incentive applications from single-family residential customers on May 1, 2010.

6. By April 1, 2010, each California Solar Initiative Thermal Program Administrator, namely Pacific Gas and Electric Company, Southern California Edison Company, Southern California Gas Company, and the California Center for Sustainable Energy, shall submit a separate Advice Letter that includes: a) a detailed estimate of its program budget for the first year of program implementation, indicating direct and indirect expenses, labor and non-labor, for incentives, administration, market facilitation, and measurement and evaluation; and b) its proposed market facilitation strategic plan and detailed budget for the first two years of program implementation.

7. By May 1, 2010, the California Solar Initiative Thermal Program Administrators, namely Pacific Gas and Electric Company, Southern California Edison Company, Southern California Gas Company, and the California Center for Sustainable Energy, shall complete drafting of the commercial and multifamily project portion of the California Solar Initiative Thermal Program Handbook, which shall be a subset of the general market California Solar Initiative Handbook, and submit it as an Advice Letter in order to begin accepting incentive applications for commercial and multifamily projects on June 1, 2010.

8. Within 180 days of this order, the Energy Division shall hold a workshop on the issue of the eligibility of non-solar water heating solar thermal technologies that displace gas usage and meet all other program requirements, including certification from the Solar Rating and Certification Corporation. The workshop should address how to estimate these technologies thermal displacement for incentive calculation purposes and whether performance-based incentives are appropriate for these systems. Following the workshop, Energy Division should provide a workshop report to the service list of this proceeding, or its successor proceeding, and the Administrative Law Judge.

9. The California Solar Initiative Thermal Program Administrators, namely Pacific Gas and Electric Company, Southern California Edison Company, Southern California Gas Company, and the California Center for Sustainable Energy, may file advice letters to modify the California Solar Initiative Thermal Program Handbook and expand program eligibility if the Solar Rating and Certification Corporation adopts certifications for additional solar thermal technologies such as concentrating solar collectors.

10. The Energy Division shall monitor implementation of the California Solar Initiative Thermal Program and notify the Administrative Law Judge and assigned Commissioner if there are great disparities in participation between the single-family residential, commercial, and multifamily budget categories.

11. The Energy Division shall obtain parties' input and consult with the assigned Commissioner to establish the California Solar Initiative Thermal Measurement and Evaluation budget and scoping plan through an assigned Commissioner's Ruling.

12. The Energy Division shall issue a Request for Proposals for an independent entity to perform the measurement and evaluation work, as set forth in the assigned Commissioner's Ruling, select the measurement and evaluation contractor, and oversee the measurement and evaluation work. Pacific Gas and Electric Company, Southern California Edison Company, San Diego Gas & Electric Company, and Southern California Gas Company shall reimburse the Commission for this measurement and evaluation contract according to the percentages set forth in Appendix A.

13. In administering the California Solar Initiative Thermal Program, the California Solar Initiative Thermal Program Administrators, namely Pacific Gas and Electric Company, Southern California Edison Company, Southern California Gas Company, and the California Center for Sustainable Energy, shall perform all duties specified in Appendix A, including but not limited to the following:

a) Separately submit semi-annual expense reports to the Energy Division as a subset of and along with general market California Solar Initiative expense reports;

b) Separately submit an Advice Letter with proposed California Solar Initiative Thermal market facilitation budgets and activities for each calendar year, which addresses the activities identified in Appendix A, no later than October 1 of the preceding year;

c) Separately submit quarterly progress reports to the Energy Division;

d) Jointly host quarterly forums, in coordination with forums in the general market California Solar Initiative program, to obtain input from the public and interested parties on the program status;

e) Jointly ensure development and maintenance of a statewide program database as directed by Energy Division, and ensure program participants provide system data for the database, application processing, and program evaluation purposes;

f) Determine convenient ways for customers to make a combined application for energy efficiency and solar incentives, although customers may not receive incentives from both programs for the same solar water heating system;

g) Post weekly information on their program websites and the statewide Go Solar California website regarding participation and incentive levels;

h) Provide written notification of incentive reductions to the Administrative Law Judge, with a copy to the service list of this or any successor proceeding, within five business days following a reduction;

i) Perform system inspections; and

j) Coordinate measurement and evaluation activities with the general market California Solar Initiative program.

14. Energy Division shall monitor incentive caps under this program and may propose Program Handbook changes to adjust the caps by Commission resolution.

15. The California Center for Sustainable Energy may move no more than $50,000 annually from its market facilitation budget to cover administrative expenses.

16. Within 90 days of this order, Pacific Gas and Electric Company, Southern California Edison Company, San Diego Gas and Electric Company, and Southern California Gas Company shall each file an advice letter to amend their preliminary statements and establish a memorandum account to track actual annual expenditures for the gas-displacing California Solar Initiative Thermal program, beginning on the effective date of this decision through December 31, 2017. On an annual basis, each utility may, in its appropriate ratemaking proceeding, seek recovery from its gas customers on an equal cents per therm basis of the prior year's memorandum account balance, excluding customers participating in the California Alternate Rates for Energy Program, the Family Electric Rate Assistance Program, and any customers who are currently exempt from funding the Self Generation Incentive Program. Total expenditures by each utility over the duration of the California Solar Initiative Thermal Program may not exceed the amounts in Table 5 of this decision.

17. The Administrative Law Judge may modify the dates set forth in this order as needed and for good cause to ensure effective program implementation.

18. Rulemaking 08-03-008 shall remain open.

This order is effective today.

Dated January 21, 2010, at San Francisco, California.

Commissioners

Appendix A

California Solar Initiative

Thermal Program

The California Solar Initiative (CSI) Thermal Program offers rebates for solar water heating (SWH) installations on new and existing homes and businesses. The program will pay incentives towards SWH systems that displace natural gas water heating on new1 and existing homes and businesses of gas customers of Pacific Gas and Electric Company (PG&E), San Diego Gas and Electric Company (SDG&E) and Southern California Gas Company (SoCalGas). The program will also pay incentives towards SWH systems that displace electric water heating on existing2 homes and businesses of electric customers of PG&E, SDG&E and Southern California Edison (SCE).

The program will begin on or after January 1, 2010 and run for 8 years, until December 31, 2017 or until the program funds are exhausted, whichever occurs first.

Program Goals and Design Principles

The goals of the CSI Thermal Program are to:

The CSI Thermal Program shall follow these design principles:

Table 1: Adopted CSI Thermal Gas Displacing Incentive Structure

Step

Incentive for Average Residential SWH System

Funding Amount

Incentive per Therm Displaced

Therms Displaced Over System Life4

1

$1,500

$50,000,000

$12.82

97,500,000

2

$1,200

$45,000,000

$10.26

109,687,500

3

$900

$45,000,000

$7.69

146,250,000

4

$550

$40,000,000

$4.70

212,727,275

 

Total

$180,000,000

 

566,164,7755

The actual incentive paid to any qualified system would be derived by multiplying the system's estimated first-year thermal displacement based on its SRCC rating, by the incentive rate. For single-family residential systems, incentives are calculated using the SRCC OG-300 estimation of annual energy savings combined with the Solar Orientation Factor (SOF), which is calculated by measuring the tilt and compass orientation, or azimuth, of the SWH installation. For commercial and multifamily SWH systems, incentives are calculated using an on-line incentive calculation tool as described in the Program Handbook.

Incentives are capped for single-family residential systems at 125% of the average residential incentive in that step. Incentives for commercial and multifamily systems are capped at $500,000 per SWH system. Energy Division may review the caps upon considering one year of program data, and may propose handbook changes regarding the caps through a Commission resolution.

Incentives shall decline from step to step when PAs accept applications and confirm reservations to pay incentives to their qualifying applicants equal to the budget allocation for the customer class in each step. SWH incentives shall move independently in each service territory and for each class of customer. For example, residential customers in the SCE territory may be at Step 1, while residential customers of PG&E are in Step 2, and commercial/multifamily customers for both utilities may be in Step 3.

The PAs shall post weekly information on their program websites and the statewide Go Solar California website about program participation and applications so applicants can gauge whether incentives may drop soon. The PAs will provide written notification of incentive reductions by letter to the Administrative Law Judge, with a copy to the service list of
Rulemaking 08-03-008, or any successor proceeding.

Incentive dollars will be allocated between single-family residential and commercial and multifamily customers as follows:

The PAs may move funds from the commercial/multifamily budget to the single-family residential budget, but not vice versa. Energy Division shall monitor program implementation and notify the ALJ and Assigned Commissioner if there are great disparities in participation between the residential and commercial/multifamily categories, so the Commission can consider adjusting these budget allocations. If it appears that Step 1 incentives allocated to support single-family residential SWH systems will be exhausted much earlier than those incentives allocated to commercial and multifamily systems, the Commission may consider shifting incentive dollars to allow a greater number of single-family residential systems to be installed at the Step 1 incentive level.

The table below summarizes the incentive budget allocations, by step.

Table 2: Gas Displacing Incentive Structure by Customer Class

Step

Customer Class

Incentive per therm displaced

Budget Allocation

Annual Therms Displaced

(in thousands of therms)

Equivalent

Single-Family Residential

Systems6

1

Single-Family Residential

Commercial/Multifamily

$12.82

$20,000,000

$30,000,000

    1560

    2340

13,334

20,000

 

    Subtotal

 

    $50,000,000

    3900

33,334

2

Single-Family Residential

Commercial/Multifamily

$10.26

    $18,000,000

    $27,000,000

    1755

    2632

14,99

22,493

 

    Subtotal

 

    $45,000,000

    4387

37,485

3

Single-Family Residential

Commercial/Multifamily

$7.69

    $18,000,000

    $27,000,000

    2340

    3510

20,000

30,007

 

    Subtotal

 

    $45,000,000

5850

50,007

4

Single-Family Residential

Commercial/Multifamily

$4.70

    $16,000,000

    $24,000,000

    3404

    5106

29,094

43,647

 

Subtotal

 

    $40,000,000

    8510

72,741

 

Total

 

$180,000,000

22,647

193,567

Electric Displacing Incentives

Incentive rates for electric-displacing SWH systems are as follows:

Table 3: Electric Displacing Incentive Structure

      Step Level

      Electric Displacing Incentive

      ($/kWh)

      Incentive for Average Residential System

      1

      0.37

      $1010

      2

      0.30

      $820

      3

      0.22

      $600

      4

      0.14

      $380

As incentives decline under the gas-displacing program, a corresponding reduction should occur to the electric-displacing incentive. That is, each PA will offer incentives to electric displacing systems at the corresponding step level that is offered to gas-displacing systems. For example, if PG&E is offering residential customers Step 2 incentives for gas-displacing systems, it should offer residential customers Step 2 for electric-displacing systems.

Incentives for single-family residential systems are capped at 125% of the average residential incentive in that step, and are capped at $250,000 per commercial system. Energy Division may review the caps after there is one year of program data, and may propose handbook changes regarding the caps, which would be handled by Commission resolution.

The PAs shall count the capacity of electric-displacing SWH installations against Step 10 of the general market CSI program, and Step 9 if needed.

Program Handbook

The PAs shall develop the CSI Thermal Program Handbook as a section within the general market CSI Program Handbook. The CSI Thermal Program Handbook shall contain all program rules and technical specifications. The PAs shall submit, no later than April 1, 2010, the first edition of this Program Handbook to Energy Division through an Advice Letter, which shall pertain at a minimum to the single-family residential portion of the program. If a second edition of the handbook is necessary to adopt rules and specifications applicable to the commercial/multifamily market segments, that edition shall be submitted through an Advice Letter no later than May 1, 2010. The CSI-Thermal PAs should use the outline below, which was included in the Staff Proposal, as a basis for creating the CSI Thermal Program Handbook, in consultation with Energy Division.

1. Introduction to CSI-Thermal Program

2. Program Eligibility Criteria and Requirements

3. CSI-Thermal Program Incentive Structure

4. CSI-Thermal Program Incentive Calculator

5. Incentive Application Process for CSI-Thermal Program

6. Self-Installation

7. Technical Requirements

8. Definitions and Glossary

9. Program Contact Information

10. Appendices

Incentive Calculator

The PAs shall develop an online incentive calculation tool to estimate natural gas or electricity displacement for SWH systems based upon system location, design and expected performance. To calculate incentives for single-family residential SWH systems, the calculator should use the SRCC OG-300 estimation of annual energy savings combined with the Solar Orientation Factor (SOF), which is calculated by measuring the tilt and compass orientation, or "azimuth," of the SWH installation. For commercial and multifamily SWH systems using SRCC OG-100 certified equipment, the PAs shall build or license an internet-based incentive calculation tool that uses currently available software, to estimate annual energy savings for custom designed systems.

In order to assist the PAs with development of the CSI Thermal Program Handbook and incentive calculator, Energy Division shall hold a public workshop or workshops within 60 days of the effective date of this Decision that will allow for further stakeholder input on technical considerations related to development of these products.

System Monitoring

All SWH systems that displace over 30 kWth of natural gas must be equipped with meters or other kWhth measuring devices to monitor and measure the system's performance and the quantity of energy generated or displaced by the system for five years. For systems displacing 30 kWth and below, the PAs will ensure that metering and monitoring equipment is installed for program evaluation purposes on a sample of these systems - including residential, commercial and multifamily properties - at the time of system installation. The cost for monitoring equipment on this sample will be borne by the PAs through their measurement and evaluation (M&E) budgets. The sample size will be determined through the M&E process, in consultation with Energy Division.

Program Administration

PG&E and SDG&E, in coordination with its program administrator, CCSE, will disburse incentives to both electric and gas ratepayers who install eligible solar water heating systems in their territories. SCE will disburse incentives through the CSI Thermal Program to customers who install electric displacing solar water heating systems. SoCalGas will disburse incentives to customers in its territory who install gas displacing solar water heating systems.

The CSI Thermal program will be a stand-alone program, distinct from utility energy efficiency programs. Nevertheless, PAs shall determine convenient ways for customers to make a combined application for efficiency and solar measures, if that is what the customer seeks. Customers may not receive SWH incentives from both a utility energy efficiency program and CSI Thermal for the same SWH system.

In administering CSI Thermal, the PAs shall perform the following:

Budget

The CSI Thermal Program will be funded by $250 million in collections from gas ratepayers, pursuant to Assembly Bill (AB) 1470 (Statutes of 2007, Chapter 536), as well as up to $100.8 million in funds already authorized and collected through the general market CSI photovoltaic program and earmarked in Senate Bill (SB) 1 (Statutes of 2006, Chapter 132) for solar thermal projects such as solar water heating. Monies collected under AB 1470 will fund incentives to solar water heating systems that displace natural gas usage, while funds collected through CSI will fund electric displacing solar water heating systems.

For the natural gas displacing portion of the program, the $250 million program budget will be collected by the three gas utilities based on the percentages below.

Table 4: Adopted Gas Displacing Budget Allocation

Each utility shall establish a memorandum account to track its actual program expenditures beginning with the effective date of this decision through December 31, 2017, and seek recovery of the annual memorandum account balance through gas distribution rates on an equal cents per therm basis in its appropriate ratemaking proceeding the following year. Customers participating in the California Alternate Rates for Energy or the Family Electric Rate Assistance programs shall be exempt from this surcharge, as well as any customers who are currently exempt from funding the Self Generation Incentive Program.

The gas-displacing program budget shall be divided as follows:

Table 5: Adopted CSI Thermal Gas Displacing Program Budget

CSI Thermal Program Elements

CSI Thermal Program
Sub-Elements

Budget

Incentives

82%

General Market Incentive Component

$180,000,000

Low-Income Incentive Component (10% of total funds)7

$25,000,000

Subtotal

$205,000,000

Market Facilitation

10%

Marketing & Outreach, including training, consumer education, and other market facilitation activities such as engaging with permitting offices or financing providers.

$25,000,000

Subtotal

$25,000,000

Program Administration

8%

Application/incentive processing, General Administration, and System Inspection

$15,000,000

Measurement and Evaluation

$5,000,000

Subtotal

$20,000,000

Total

$250,000,000

CCSE may move no more than an additional $50,000 per year from its market facilitation budget to cover administrative expenses, as necessary, as long as it does not exceed its total budget allocation of $4.5 million for administration, market facilitation, and measurement and evaluation.

For the electric-displacing portion of the program, the Commission established the revenue requirement for collection of the general market CSI budget, including $100.8 million for solar thermal, in D.08-12-044. The electric-displacing program budget shall be allocated as follows:

Table 6: Adopted CSI Thermal Electric Displacing Program Budget

CSI Thermal Program Elements

CSI Thermal Program
Sub-Elements

Budget

Incentive Program Component

General Market Incentive Component

No more than $100,800,000

Low-Income Incentive Component

$0

Subtotal

$100,800,000

Market Facilitation Program Component

Marketing & Outreach, including training, consumer education, and other market facilitation activities such as engaging with permitting offices or financing providers.

$6,250,000

Subtotal

$6,250,000

Program Administration

Application/incentive processing, General Administration, and System Inspection

Subject to the overall CSI budget, but tracked separately

Measurement and Evaluation

$1,250,000

Subtotal

$1,250,000

Total

$108,300,000 + CSI Admin Budget Costs

The PAs may perform marketing and M&E activities in a combined fashion for all SWH systems, whether they displace gas or electricity. The PAs may fund these activities on a 4:1 ratio, so that for every $4 spent from the gas-displacing budget, $1 is spent from the electric-displacing budget.

Energy Efficiency Requirements

Customers seeking incentives through CSI Thermal shall obtain an energy efficiency audit and deploy appropriate energy efficiency improvements that reduce water heating demand in the home or commercial structure where the SWH system is installed. Appropriate energy efficiency improvements shall be ones that are broadly applicable, do not require SWH system installers to develop new competencies, do not significantly increase project cost or delay installation, are easily validated on system inspection, and are likely to be retained once a customer has received their incentives.

Market Facilitation

The PAs shall conduct market facilitation activities for CSI Thermal according to the following budget:

Table 7: Adopted Market Facilitation Budget

Budget Year

2010

2011

2012-2017

 

20%

20%

10% per year

Natural Gas Displacing Program

     

PG&E

39%

$9,750,000

$1,950,000

$1,950,000

$975,000

CCSE/SDG&E

10%

$2,500,000

$500,000

$500,000

$250,000

SCG

51%

$12,750,000

$2,550,000

$2,550,000

$1,275,000

SCE

0%

$0

$0

$0

$0

Total

 

$25,000,000

$5,000,000

$5,000,000

$2,500,000

Electric Displacing Program

     

PG&E

43.7%

$2,731,250

$546,250

$546,250

$273,125

CCSE/SDG&E

10.3%

$643,750

$128,750

$128,750

$64,375

SCG

0%

$0

$0

$0

$0

SCE

46%

$2,875,000

$575,000

$575,000

$287,500

Total

 

$6,250,000

$1,250,000

$1,250,000

$625,000

Combined CSI-Thermal

     

PG&E

39.9%

$12,481,250

$2,496,250

$2,496,250

$1,248,125

CCSE/SDG&E

10.1%

$3,143,750

$628,750

$628,750

$314,375

SCG

40.8%

$12,750,000

$2,550,000

$2,550,000

$1,275,000

SCE

9.2%

$2,875,000

$575,000

$575,000

$287,500

           

Total

 

$31,250,000

$6,250,000

$6,250,000

$3,125,000

The PAs shall each submit annual advice letters to Energy Division with their proposed market facilitation budgets and activities for each calendar year, no later than October 1 of the preceding year. The first market facilitation advice letter should include a strategic plan and detailed budget for specific short-term and mid-term activities to achieve a self-sustaining SWH market by 2018. Prior to filing this first advice letter, the CSI Thermal program administrators shall hold a public workshop to obtain input from key industry and expert sources. The specific market facilitation activities will be determined by the Commission in acting on the advice letters. The PAs shall incorporate installer training, which includes training on system sizing requirements, as part of their market facilitation activities funded through this program.

The PAs' annual market facilitation plans should address how the PAs will jointly market the CSI-Thermal Program with the general market CSI-PV Program, including incorporating information about the CSI-Thermal Program into the Go Solar California website and jointly marketing the program under the Go Solar California campaign.

The Annual Market Facilitation Plans shall include, but are not limited to, activities in the following areas.

Measurement and Evaluation (M&E)

M&E studies shall be jointly funded by the four program administrators based on the following budget allocation:

Table 8: Budget Allocation for M&E Studies

The PAs shall coordinate CSI Thermal M&E with ongoing M&E in the general market CSI Program. Energy Division shall oversee the M&E work in the CSI Thermal program and ensure it is coordinated with the general market CSI M&E work.

The Energy Division shall issue a Request for Proposal (RFP) for an independent entity to perform the M&E work, and select the evaluation contractor. The utilities shall reimburse Energy Division for this contract according to the percentages set forth above.

Energy Division should consult with the Assigned Commissioner to finalize the M&E reports that will be undertaken, and the schedule for these reports. The M&E reports may include the following:

The Energy Division will obtain parties' input and work in consultation with the Assigned Commissioner to establish the CSI Thermal M&E budget and scoping plan through an Assigned Commissioner's Ruling, which will serve as the basis for conducting M&E Studies. The M&E Studies will be made publicly available, and the results of the M&E studies will form the basis of program modifications, as necessary.

The CSI-Thermal PAs will be responsible for ensuring that program participants provide the program with performance data, as necessary, to evaluate the program. Larger systems are required to provide the program with project performance data for five years.

The CSI-Thermal PAs will be responsible for design and maintenance of a statewide program database that facilitates application processing, public program data, and program evaluation. The database should include all installation performance design characteristics and other application data. Energy Division shall oversee the other details of the database and provide direction to the program administrators in establishing the database.

The CSI-Thermal PAs will be responsible for quarterly progress reports that provide a snapshot of application and installation data, as well as other information on the implementation and administration of the program. The PAs will also be responsible for submitting semi-annual expense reports to Energy Division as a subset of general market CSI expense reporting, and these reports shall include all aspects of the program budget.

1 If SWH becomes mandatory for new home construction, new homes shall not be eligible for incentives under CSI Thermal.

2 SWH systems that displace electric usage on new homes and businesses are not eligible for CSI Thermal. New homes considering electric-displacing SWH may fall within the California Energy Commission's (CEC's) New Solar Homes Partnership Program.

3 100,800 systems x 2735 kWh per system per year = 275.7 million kWh per year.

18 Energy Division may consider expanded warranty requirements in the CSI Thermal Handbook, balancing warranty costs with adequate consumer and ratepayer protection.

4 This analysis assumes a 25 year system life.

5 The 566.1 million in total therms displaced is 97% of the 585 million program goal in the Staff Proposal. Additional therms will be displaced by the low income SWH incentive program, when adopted.

6 The annual therm displacement in each step is converted to an equivalent number of residential SWH systems based on the assumption an average residential system displaces 117 therms per year.

7 Details of SWH incentives to qualifying low income residential housing shall be set forth by the Commission at a later date.

19 AB 811 (Levine, 2008) authorizes all cities and counties in California to allow homeowners to opt in to an assessment district for the purposes of financing the upfront installation costs of solar and energy efficiency improvements. This law enables property owners in a participating city or county to finance solar systems and energy efficiency upgrades via a municipal bond that can be repaid through property tax assessments over a period of 20 years.

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