5. Assignment of Proceeding

Michael R. Peevey is the assigned Commissioner and Amy Yip-Kikugawa is the assigned ALJ in this proceeding.

Findings of Fact

1. AB 1613 directs the Commission to establish a PAYS pilot program to finance all the upfront costs for purchase and installation of CHP systems by eligible customers, namely nonprofit organizations and government facilities.

2. Section 2842.4(e) mandates that all costs of a PAYS program shall be borne solely by the CHP generators that use the program and program costs shall not be shifted to other customer classes.

3. DOC Release No. 60-FS provides narrow exemptions for utilities to provide project financing without being considered finance lenders or brokers.

4. CHP facilities could involve costs of $1.2 to $1.5 million per MW, compared to financing provided through utility energy efficiency programs, which is capped at a maximum of $250,000.

5. A PAYS pilot would have no up-front funding, and non-participating customers and utilities would be at risk for the principal lent to eligible customers to finance their CHP systems.

6. There is limited potential for CHP in the California communities served by Mountain Utilities, PacifiCorp and Sierra Pacific, and those utilities have limited resources to finance CHP projects.

7. In R.10-05-004, the Commission is considering modifying SGIP to provide incentives to CHP systems that meet certain criteria.

Conclusions of Law

1. The Commission should not pursue development of a PAYS pilot at this time because the level of customer interest in such a program is unclear and because it appears difficult to institute a program that imposes no costs on non-participating customers and still falls within the requirements set forth by the DOC to allow utilities exemptions from lending laws.

2. If the Commission were to consider a PAYS pilot in the future, it needs to carefully examine the DOC criteria for lending law exemptions and how to ensure that nonparticipating customers remain unaffected by the costs of a PAYS pilot, as required by the statute.

3. Potential modifications to SGIP under consideration in R.10-05-004 and standard contracts available to CHP systems reduce the need for a PAYS pilot at this time.

4. Any petition asking the Commission to consider development of a PAYS pilot should address any new facts or circumstances warranting consideration of a PAYS pilot, and the issues set forth in Section 3 of this decision.

ORDER

IT IS ORDERED that:

1. At this time, the Commission will not pursue development of a Pay As You Save Pilot Program to provide on-bill financing for combined heat and power facilities in Rulemaking 08-06-024.

2. Any petitions to modify this decision and request Commission consideration of a Pay As You Save Pilot Program should address the items set forth in Section 3 of this decision.

3. Rulemaking 08-06-024 is closed.

This order is effective today.

Dated January 13, 2011, at San Francisco, California.

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