3. EM&V Budget for 2010 Through 2012

We approved a budget of $125 million, or 4% of the overall portfolio budgets, for 2010 through 2012 EM&V in D.09-09-047, subject to review in this decision. This preliminary budget reflected the expectation that, drawing from the experience of EM&V over the past program cycle, ED and IOU EM&V staff can produce cost efficiencies and streamline the scope and reporting of EM&V projects for 2010-2012.

In the Joint Plan, ED and the IOUs state that they have taken the Commission's desire to manage costs seriously and will strive to complete a robust research portfolio for under $125 million. However, the Joint Plan notes that the range of studies needed for 2010 through 2012 is substantially greater than the range of studies completed for 2006-2008, and thus asks that the EM&V decision keep open the option offered in D.09-09-047 to request more funding if we determine that sufficiently important projects cannot be funded. No party suggested any change to the overall EM&V budget.

We hereby finalize the overall budget level of $125 million for 2010 through 2012 tentatively adopted in D.09-09-047. If parties seek to increase the 2010-2012 EM&V budget, they may file a Motion in R.09-11-014, the open energy efficiency Rulemaking. The assigned ALJ and/or assigned Commissioner may rule on such a Motion or may prepare a Proposed Decision (PD) for full Commission consideration.

In the Joint Plan, ED and the IOUs recommend that each utility's EM&V budget should be its proportional share of the total EM&V budget approved by the Commission, with the proportion equal to its proportion of total 2010 through 2012 program budgets: 43% for Pacific Gas and Electric Company (PG&E); 39% for Southern California Edison Company (SCE); and 9% each for San Diego Gas & Electric Company (SDG&E), and Southern California Gas Company (SoCalGas). We adopt this recommendation. This allocation requires correcting Ordering Paragraph (OP) 42 of D.09-09-047, which inadvertently used the program funding proportions from the 2006-2008 cycle.

3.1. Allocation for IOU EM&V Activities

As noted above, our framework provides that the majority of the EM&V budget will be for studies managed by the Energy Division. However, a limited number of studies, pursuant to D.05-01-055 and the direction we give today, will be carried out by the IOUs. An important question is whether this decision should allocate a specific portion of the EM&V budget (set at $125 million as determined above) to the IOUs and, if not, what will be the process and, in particular the role of the Energy Division, in deciding the IOU budget. This issue was raised in Question 5 of the November 20, 2009 Ruling which asked: "Should ED have the authority to allocate the authorized EM&V budget between ED and IOU managed EM&V projects according to the overall EM&V priorities?"

In the Joint Plan at 18, ED and the IOUs agreed that a minimum allocation of 15% of the EM&V budget to the IOUs is appropriate to maintain and support necessary EM&V activities until such time as the Commission issues a final EM&V decision and budget. The Joint Plan noted that these costs are currently included as part of the process evaluation, market assessment and early M&V study costs in the budget estimates in Table C of the Joint Plan. ED and the IOUs were not able to reach consensus as to any further pre-allocation of the remaining 85% of the EM&V budget.

ED recommends that the Commission grant it authority to approve IOU projects. With this authority and the adoption of the prioritization process discussed in the Joint Plan, ED believes that a specific prior allocation to IOU managed projects above and beyond the 15% minimum to fund EM&V staff is unnecessary. Nevertheless, ED anticipates that the IOUs will request, and are likely to be granted, responsibility to manage a sizable share of the EM&V work.

ED believes that the intention of the following statement on page 301 of D.09-09-047, "EM&V plans and budgets for 2010-2012 should be categorized in accordance with the first four objectives articulated above, and will be prioritized for approval in following with the most pressing needs across each category" is to allocate EM&V resources according to overall research priorities, rather than across organizations responsible for implementing EM&V projects.

Division of Ratepayer Advocates (DRA) and The Utility Return Network (TURN) support the ED recommendations with TURN specifically supporting a 15% allocation of EM&V funds to the IOUs.

SDG&E/SoCalGas advocate that the monetary split for EM&V projects between ED and the IOUs should be determined directly by the Commission, and should be determined and approved upfront in order to determine work load, study plans and appropriate staffing. SDG&E/SoCalGas would have the IOUs and ED each be responsible for their EM&V budgets and activities as set forth in D.05-01-055.

SCE asks that the Commission grant to the IOUs the same EM&V budgets approved for the 2006-2008 program cycle. Thus, SCE would modify the ED recommendation by: a) giving ED authority only for expenditures beyond the total EM&V budget granted to the IOUs for the 2006-2008 program cycle; b) requiring ED to consult with the IOUs before making EM&V expenditure decisions; and c) allowing the IOUs to use a dispute resolution process developed for EM&V.

PG&E also calls for the Commission to allocate a specific budget to the IOUs to conduct EM&V. PG&E notes that in the Joint Plan at 18, ED and the IOUs clarified that the Commission should allocate an EM&V budget to each IOU based on the IOU's proportional share of the total program budget. PG&E also notes that the Joint Plan at 18 estimated $49.5 million would be needed for process evaluation, market analysis and early EM&V. As IOUs are principally responsible for this category of EM&V, PG&E suggests that the allocation made to the IOUs should be equal to that sum.

There is no dispute that at least 15% (or $18.75 million) of the $125 million EM&V budget for 2010 through 2012 should be allocated to the IOUs to maintain staffing levels. This works out to approximately $1.5 million per utility per each of the three years. This appears to be a reasonable funding level for utility staffing. The question before us is whether the IOUs should be granted, as SCE puts it, discretion to use additional funds for particular categories of EM&V projects, specifically program design and market assessment studies, and early EM&V. This could result in up to $49.5 million of the $125 million total allocated to the IOUs by PG&E's estimate.³ Using SCE's methodology, the IOUs would be allocated the same $45 million allocated in D.05-11-011,⁴ including staffing costs. However, in D.05-11-011, this $45 million was 27.5% of the total EM&V budget of $163 million; the same amount would be 36% of the current $125 million budget for 2010 through 2012.

Our resolution of this issue relies on the overall context of this decision. There is agreement among parties that IOUs should conduct most or all of the program design and market assessment studies and early EM&V activities to assist in determining work load, study plans, and appropriate staffing. However, as we discuss below, the allocation and expenditure of these funds will be subject to limited ED review. In 2006-2008, the IOUs received 27.5% of the total EM&V budget. We will again allocate this proportion of the budget to the IOUs - that is, an additional 12.5% beyond the 15% agreed to in the Joint Plan to maintain IOU staffing levels. 27.5% of $125 million is $34.3 million; this will be the initial allocation to the IOUs. We require the IOUs to submit a report to ED within 15 days of the effective date of this Decision which documents the amount unspent as of the effective date of D.09-09-047.

³ It appears that PG&E's $49.5 million level is inclusive of the $18.75 million needed to maintain IOU staffing level.

⁴ D.05-11-011, Attachment 3, Table 1 ("IOU managed evaluation projects" line item).