3. Discussion
We hereby affirm the February 3, 2010 Assigned Commissioner's Ruling, calling for the modification of D.09-12-045 to remove the requirement for independent verification of the utilities' self-reported IMC for the purposes of the 2006-2008 true-up. This modification offers a balanced way to uphold the overall goals of the RRIM program. The existing schedule contemplates a Commission decision on the 2006-2008 earnings true-up by mid-September 2010. By incorporating three additional months into the schedule, the date for a final Commission decision on the 2010 true-up of the RRIM would move to the middle of December 2010. Extending the schedule by three months would eliminate any margin for other possible contingencies while adhering to the Commission's commitment for a decision on final 2006-2008 incentive payments by year-end 2010.5
In D.08-01-042, the Commission concluded that to be effective in motivating the utilities to treat investments in energy efficiency as being comparable to supply side investments, the RRIM must provide the opportunity for the utility to recognize and book incentive earnings on a regular basis. If incentive earnings are not booked at regular intervals, they will be excluded from operating revenues, and treated as a one-time adjustment. A one-time earnings adjustment would not factor into a utility's financial valuation, thereby greatly diluting the value of the mechanism as an incentive to achieve energy efficiency.6
Consequently, in order to avoid such a result, the Commission committed to issue a decision on any final 2006-2008 incentive earnings by year-end 2010 as a high priority. In this way, the schedule for regular RRIM earnings will be maintained, and will factor into the utility's financial valuation. The incentive value of the mechanism will thereby be maintained, thereby supporting the Commission's commitment to achieving energy efficiency goals. At the same time, the integrity of the schedule must be maintained while recognizing the importance of independent verification of incentive earnings claims. Based on these principles, the Commission committed to issuing a final decision on the 2006-2008 true-up by year-end 2010.
Accordingly, in recognition of the principles set forth in D.08-01-042, it is reasonable to modify D.09-12-045 to remove the requirement for independent verification of utility-reported IMC values. In this manner, the Commission can meet its stated goal of issuing a final true-up decision during the year 2010. It is time to put the 2006-2008 RRIM issues behind us rather than to prolong uncertainty. Preserving our commitment to conclude the 2006-2008 true-up by year-end 2010 promotes this goal. We can then focus timely attention on prospective reform of the RRIM. This modified scope will still require rigorous and extensive verification of the utilities' 2006-2008 energy efficiency claims, and will preserve the integrity of the RRIM. This disposition applies only to the 2006-2008 cycle and is not intended as a precedent as to the scope of IMC verification to be applied for the 2010-2012 program cycle or beyond.
Accordingly, by this decision, we hereby affirm the February 3, 2010 Assigned Commissioner's Ruling, and amend D.09-12-045 regarding the scope of the true-up in accordance with the Assigned Commissioner's Ruling. We likewise affirm the Assigned Commissioner's Ruling not to add an additional month to the schedule for a more limited IMC review using the DEER update, as some parties suggested. Contrary to the claims of some parties, revising the 2006-2008 IMCs based upon the use of deemed measures in the DEER would not be simple or straightforward. Such a process would entail taking the IMCs from the 2008 DEER updates used for planning the 2010-2012 portfolios and matching them with the measures in the 2006-2008 portfolios. There are four million measure records from the 2006-2008 evaluation, the bulk of which are high-impact measures, with no standardized naming convention for the measures. It would be difficult to match each of the high-impact measure records to the appropriate DEER measure category given the different measure names involved. In addition, after that mapping was done, and the DEER IMC values applied to the measure records, the data would still need to be tested for errors made in the process. Adjustments might be needed to the 2008 DEER planning values for IMCs to be more reflective of actual costs during the 2006-2008 period. Consequently, it would not be possible to perform this process without delaying the schedule. Therefore, we shall not require that the 2006-2008 IMCs be revised to reflect the DEER updates. In reaching this conclusion, we weigh the following factors:
1) The extra effort and expense that Energy Division staff, utility staff, and Energy Division consultants would expend on such a quick fix for 2006-2008 could be better directed to a more comprehensive and sensibly planned study and audit of measure costs for the 2010-2012 performance cycle. On a prospective basis, improved tracking systems can enable the utilities to gather and provide accurate measure cost data;
2) The Energy Division and its consultants are in the final stages of completing a monumental amount of work evaluating the 2006-2008 program cycle savings. Consistent with our expectations, the Energy Division made difficult decisions about priorities for the 2006-2008 true-up, including not evaluating some programs; not evaluating Incremental Measure Costs; and reducing the rigor of evaluation on lower priority programs, measures, and parameters;
3) The highest uncertainty for incremental measure costs lies in the custom measures, which staff would not be able to address with only an additional month; and
4) Finally, an additional month would not provide enough time for the Energy Division to convene stakeholder meetings, and thus the outcome of such an IMC update would not benefit from transparency and collaboration that this Commission has demanded of the Energy Division, the utilities, and the energy efficiency proceedings.
The adopted modification in D.09-12-048 will enable the Energy Division to complete its report on the true-up in a timely manner while maintaining high standards of reliability. The range of verification work thus far completed by the Energy Division and its consultants for the 2006-2008 true-up should mitigate any concerns regarding the lack of independent ex-post IMC verification. Based on a preliminary review, Energy Division estimates that roughly 90% of the 2006-2008 energy savings claimed by the utilities has undergone some form of evaluation review. The level of review for any given energy efficiency installation record may have included verification of installation, an on-site evaluation measurement, or was part of a net-to-gross analysis or combinations of any of the many analyses that were conducted for the portfolio. More detail about the types of analysis conducted for each record will be presented in the Energy Division report to be released by April 15, 2010.
The Commission's adoption of findings and conclusions consistent with the February 3, 2010 Assigned Commissioner's Ruling is in accordance with Public Utilities Code Section 3107 which states, in part:
Every finding, opinion and order made by the commission or commissioners so designated, pursuant to the investigation, inquiry, or hearing, when approved or confirmed by the commission and ordered filed in its office, is the finding, opinion, and order of the commission.
This procedure is also in accordance with Section 1708, which states, in part, that the Commission:
... may at any time, upon notice to the parties, and with opportunity to be heard as provided in the case of complaints, rescind, alter, or amend any order or decision made by it. Any order rescinding, altering or amending a prior order or decision shall, when served upon the parties, have the same effect as an original order or decision.
In response to the ruling dated December 29, 2009, parties had the opportunity to comment on the schedule implications of requiring verification of the utilities' IMC data. Pursuant to Section 1708, the assigned Commissioner's February 3, 2010 ruling reviewed parties' comments on the schedule implications of the IMC review, and served notice of his intention to present a proposed decision amending D.09-12-045 to remove the requirement to undertake verification of the utilities' IMC data. In accordance with Rule 14.3 of the Commission's Rules of Practice and Procedure, and Section 1708, parties have the opportunity to comment on this proposed decision amending D.09-12-045 to remove the directive for IMC verification.
5 See OIR 09-01-019 at 5.
6 D.08-01-042 at 9-10.
7 All subsequent section references are to the Public Utilities Code, unless otherwise noted.
