6. Dispute Resolution Mechanism
Question 6 of the November 20 Ruling asked: "How should major disputes arising out of the EM&V work be managed? When should these disputes be elevated to the full Commission for resolution?"
In the Joint Plan at 8, ED and the IOUs state: "(i)t may not always be possible or productive to reach consensus between ED and IOU staff during the planning and implementation of EM&V projects or interpretation and use of EM&V results. ED and the IOUs will seek to achieve consensus through informal processes. If consensus cannot be reached informally, ED and the IOUs will follow the applicable dispute resolution processes in effect wherever a formal resolution is necessary."
ED has recommended the following in the ED Straw Proposal:
· For Project-Specific EM&V Plans, if parties continue to take issue with the final work plans, a party or parties may file a motion with the assigned ALJ and provide a rationale for why the plans should be changed and how. The ALJ will resolve the dispute and direct ED and/or the IOUs to revise the plans accordingly via ruling.
· For EM&V Technical Reports, if parties continue to take issue with the final EM&V technical reports, a party or parties may file a motion with the assigned ALJ and provide a rationale for why the report is deficient and what changes to the report would be necessary to correct the deficiency. The ALJ will resolve the dispute and direct ED and/or the IOUs, via ruling, to prepare an addendum to the report correcting the deficiency. The addendum will be posted on the same website where the draft reports are posted.
DRA and TURN support the ED's recommendations. NRDC recommends formulation and implementation of one or more formal dispute resolution mechanisms specifically tailored to EM&V.
SCE advocates that dispute resolution should be attempted through informal processes before being elevated to ALJ or Commission resolution, and that major disputes be resolved through Commission decisions. PG&E proposes initial submission of disputes, which are often technical in nature, to an independent, expert evaluation body for resolution. Unlike ED, PG&E would allow for escalation of disputes concerning project-specific plans and review of technical reports to the full Commission, not just the assigned ALJ. SDG&E/SoCalGas propose that major disputes should lead to an ALJ PD, with final determination by the full Commission.
Currently, disputes between the IOUs and ED regarding EM&V studies are resolved by ED, with no specific process for appeal. This is consistent with the relationship that ED has with the IOUs: ED as an arm of the regulatory body is carrying out the Commission's policy through delegated authority. IOUs have been frustrated at times with this model. Without a formal appeal process, IOUs would need to use another mechanism to challenge ED determinations, such as was done in a filing a Petition for Modification of D.07-09-043 and D.08-01-042 in 2008 in effect to appeal ED's first Verification Report of 2006 through 2007 energy savings.15
As PG&E points out, the process surrounding contractor selection and determination of EM&V study topics involves many technical issues. Certainly, the determination of energy savings involves a variety of technical assumptions and calculations, with a high potential for differing opinions. It is reasonable for certain disputes regarding complex and controversial EM&V matters to be resolved by ALJs and/or Commissioners instead of by ED staff.
All parties, as well as ED, now agree there is a need for a new dispute resolution process with regard to EM&V studies. The first priority should be to minimize any formal disputes. The best way to do so is to ensure open and full communications between ED and IOUs, as well as transparency for the public. Avoiding misunderstandings, developing trust, and providing transparency should go a long way toward avoiding or resolving potential issues before there is a need to escalate to a formal dispute resolution process. The rules for ED review adopted herein and set forth in Attachment 2 provide an orderly process which should help minimize disputes upfront.
ED is not a formal party to our proceedings. This means that ED does not present witnesses, file formal comments, present sworn testimony or have other rights or obligations of parties. Yet, at this time, for EM&V ED serves in a dual role of independent evaluator and (in the case of a formal dispute) advocate to Commission decision-makers for its analysis and decisions.
We do not wish to confer party status on ED for these purposes. To do so would be to compromise the ability of ED to perform its essential function of impartially and confidentially advising the Commission. It would be impractical to set up an "advocacy" portion of ED to engage in EM&V dispute resolution, apart from the overall "advisory" portion of ED, if for no other reason than the same personnel would have to wear two hats (or additional staff would be required).
To find our way through this issue, we look to previous efforts in the energy efficiency area. In recent years, ED proposals have at times been issued for comment by ALJ and/or assigned Commissioner Ruling. This has provided parties a formal opportunity to comment on such proposals.16 As with a Motion or Petition for Modification, ED does not have an automatic right to reply to comments on the Ruling.17 However, there has been no prohibition on ED advising the ALJ, assigned Commissioner or other decision-makers on these matters.
We do not agree with ED that the assigned ALJ should be the final arbiter of all formal disputes. This approach would put an undue burden on the ALJ and would place too much delegated authority to one individual. Instead, we will provide multiple avenues for dispute resolution.
We will provide for the following dispute resolution methods for those matters which cannot be resolved informally. A party may file a "Motion for EM&V Dispute Resolution" (EM&V Motion) with the assigned ALJ in R.09-11-014 or its successor for resolution of an EM&V matter. The EM&V Motion must include a statement from ED giving its side of the dispute.18 The ALJ may undertake any appropriate process to gather further information. The ALJ may issue a Ruling to resolve the dispute.
Alternatively, in an EM&V Motion, the filing party or the ED may ask that the matter be resolved by the assigned Commission or the full Commission. In that case, the ALJ will consult with the assigned Commissioner to determine the appropriate course of action. This may include an ALJ Ruling, an assigned Commissioner Ruling, or a Commission Decision. If the ALJ and assigned Commission decide to bring the matter to the full Commission, the ALJ or assigned Commissioner will issue a PD and allow for comment under Rule 14 of the Commission's Rules of Practice and Procedure.
The EM&V Motion may be used for the following purposes only:
· Disputes over results of EM&V studies or reports;
· Dispute over selection of an EM&V contractor;
· Disputes about project-specific final EM&V work plans;
· Disputes regarding final EM&V technical reports; and
· Disputes concerning public vetting of EM&V projects.
The EM&V Motion process does not apply to any dispute over results of ED Verification Reports, either draft or final.
SCE, NRDC, and SDG&E/SoCalGas in comments to the PD recommend that EM&V process and/or EM&V disputes should include review by non-Commission experts. We do not adopt this proposal. ED and its EM&V consultants are inherently independent of any parties' interests. Review of ED EM&V work by non-Commission experts would be redundant, costly, time-consuming, and would only serve to undermine public confidence in ED's efforts. The new dispute resolution process will be a better way to address any technical concerns.
15 ED's November 2008 draft first Verification Report recommended rewards and penalties of under $10 million for each of the four IOUs. Before the first Verification Report was completed, the IOUs filed a Petition for Modification of D.07-09-043 and D.08-01-042 arguing, among other things, that there were fundamental flaws in the underlying data and analysis used in the ED's verification process for 2006 and 2007 energy savings. The IOUs collectively sought shareholder incentive rewards for energy savings in the amount of over $150 million. Ultimately, the Commission in D.08-12-059 determined that the IOUs should be awarded an interim amount of $82 million, with a 65% holdback of claims for future review. D.09-12-045 awarded the IOUs $61 million of their subsequent claim, with 35% holdback for further review.
16 There have also been ED proposals issued for informal comment.
17 Unless ED is a party, any response to a formal filing would not be part of the record unless placed in the record by Ruling or other Commission action. It is not clear whether ED could be made a party to a proceeding. In any case, ED has never sought to file such a reply or become a party to an energy efficiency proceeding.
18 To the extent that an EM&V Motion would be delayed past the deadlines required by this Decision in order to include a statement from ED, the filing party should ask the assigned ALJ for leave to late-file the EM&V Motion.
