2. Background
For purposes of verifying the utilities' second interim Risk/Reward Incentive Mechanism (RRIM) earnings claim, Energy Division did not update the incremental measure costs (IMC) values, but defaulted to utility-reported actual IMC values. Since there are two sides to the incentive earnings equation (i.e., savings and costs), Energy Division focused its efforts on the energy savings side of the incentive equation.2
In comments on the Proposed Decision that was subsequently adopted as D.09-12-045, however, certain parties asked the Commission to require complete verification of IMC figures as part of the final true-up. Accordingly, a requirement was added in finalizing D.09-12-045, calling for an independent verification of utility self-reported IMC in the true-up of 2006-2008 RRIM earnings. Although this additional requirement was incorporated into D.09-12-045, the adopted true-up schedule did not provide the additional time necessary to complete this expanded workload scope.
In view of the potential impact of the additional workload for IMC verification, parties were provided an opportunity to be heard as to the impact on the schedule, and any resulting implications for the Commission's commitment to award final 2006-2008 incentive payments by year-end 2010.3 On December 29, 2009, the assigned Commissioner issued a ruling soliciting comments on the true-up schedule impacts that would be required to meet the mandate in D.09-12-045 for independent verification of the utilities' IMC.
Based on preliminary estimates identified in the ruling, the additional time needed to perform the mandated IMC verification was estimated to be three months.4 In response to the ruling, various parties filed comments. Some parties argued that any additional time required to complete the IMC verification should be granted even if it would preclude a final Commission decision on the true up until after 2010. Other parties argued that a more limited IMC review may be feasible by using the 2008 "Database for Energy Efficiency Resources" (DEER) updates. The 2008 DEER includes IMC estimates that could be used to update the 2006-2008 energy efficiency portfolio for deemed measures (i.e., measures with predetermined savings and costs). Parties estimated that applying the DEER updates to the IMC could be done with a schedule extension of just one additional month. Other parties opposed any schedule extension at all, claiming that the existing schedule already allows sufficient time for the Energy Division to verify utility-reported IMC data.
After review of the comments in response to the December 29, 2009 ruling, the assigned Commissioner issued a subsequent ruling on February 3, 2010, affirming that three additional months would be needed for an independent verification of the utilities' self-reported IMC. The ruling stated, however, that an extension in the schedule would preclude timely adoption of a Commission decision on final 2006-2008 RRIM payments by year-end 2010. The assigned Commissioner thus declined to extend the schedule for this purpose. The assigned Commissioner likewise declined to extend the schedule to allow for a more limited IMC review by making use of the 2008 DEER updates, as certain parties mentioned in comments on the December 29, 2009 ruling. The 2008 DEER includes IMC estimates that can be used to update the 2006-2008 energy efficiency portfolio for deemed measures (i.e., measures with predetermined savings and costs).
The February 3, 2010 Assigned Commissioner's Ruling recognized that in order to maintain the Commission's commitment to issuing a decision on the 2006-2008 true-up by year-end 2010, a modification in the scope of D.09-12-045 would be necessary, removing the directive requiring independent verification of the IMC. Accordingly, the assigned Commissioner expressed the intention to present a proposed decision for adoption of this outcome.
2 See Energy Division Second Verification Report, Section 5.5 at 42.
3 See Order Instituting Rulemaking (OIR) 09-01-019 at 5.
4 A detailed delineation of work tasks and durations supporting the estimated schedule impact was set forth in the December 29, 2009 Assigned Commissioner's Ruling.
