5. General Market Program Modifications

5.1. Application Processing Timelines¹²

Since the CSI program's inception, solar contractors have raised issues around CSI application processing times. The CSI Program Administrators¹³ (PAs) have made significant efforts to reduce processing times, including reducing application paperwork and making the CSI application available online. In the Staff Proposal, Energy Division reviewed and analyzed average application processing timelines for the general market CSI program. (See Staff Proposal at Section 3.1.) The Staff Proposal finds that despite these efforts, the CSI Program Administrators continue to have problems processing CSI reservations and incentive claim payments in a timely manner. Energy Division concludes that, collectively, all of the application processing times of the PAs are too long. Moreover, these delays cost solar customers time and money and lead to increased system costs.

For example, the Staff Proposal indicates that in the first quarter of 2010, 47% of SCE's residential project applications did not receive an incentive reservation in 30 days, and 13% did not receive a reservation within 60 days. For non-residential projects in the CCSE and SCE territories, one-third or more did not receive an incentive reservation within 60 days of submittal.

After CSI applicants complete their installation, they file an Incentive Claim Form (ICF). For both residential and non-residential applicants, it often takes more than 60 days to process these ICF forms. For the one in seven projects that are inspected, the wait time is even longer. In SCE's territory, 32% of inspected residential projects take more than 90 days to process, and 21% of projects take more than 90 days even when there is no inspection.

The Staff Proposal recommends the Commission order the PAs to meet minimum standards for processing CSI applications. The Staff Proposal suggests the Commission adopt standards for issuance of reservations, processing of ICF claim forms, and payment of incentives. The proposed standards would require PAs to process 95% of all applications within a specified number of days, depending on whether the application was for a residential or non-residential system, and whether an inspection was required. Further, Energy Division recommends the Commission either adopt fines or penalties if the PAs cannot meet these targets, or change PAs if the processing times cannot improve.

In response to the Staff Proposal, the PAs comment that although speed is important, specific requirements, fines and penalties will not improve performance. The PAs claim the problem stems from resource constraints, limited budgets, and spikes in program applications. They also cite incomplete applications and ICFs submitted by applicants. The Joint Solar parties support minimum requirements, fines and penalties, although they suggest one modification to the Staff Proposal. They propose the Commission adopt a shorter 21 day deadline for Expected Performance Based Buydown (EPBB)¹⁴ incentive applications claim processing.

Discussion. We will adopt the Staff Proposal and set guidelines for CSI application processing. We will require that 95% of applications be acted on within the number of calendar days shown in the table below:

Table 1: Application Processing Guidelines

PA Action	Residential Systems	Non-Residential Systems
Reservation Issued	30 days	60 days
ICF Claim Processed (no inspection)	30 days	60 days
ICF Claim Processed (with inspection)	60 days	90 days
Incentive Paid after ICF claim approval	30 days	30 days

We will not adopt fines or penalties at this time, but direct our Energy Division to monitor PA performance with regard to these guidelines. We may adopt fines and penalties in the future if we find the PAs cannot comply with the timelines in the table above. We decline to adopt the Joint Solar Parties suggestion for a shorter processing deadline for EPBB systems because we find it unnecessarily short. A 30-day deadline is reasonable and preserves flexibility for the PAs.

5.2. Project Completion Time Requirements¹⁵

The CSI Program Handbook contains time limits for applicants to install a solar energy system and obtain a CSI rebate. The Handbook also contains provisions for extensions under certain circumstances. The Staff Proposal describes growing tension between customers seeking to keep an incentive application alive through multiple extensions and the PAs who are concerned that projects sit in the application queue indefinitely, tying up incentive funds that could go to more viable projects. When projects drop out, those incentives can be made available to other projects, albeit often at a lower incentive rate. The Staff Proposal notes the failure of the PAs to enforce the existing time limits for customer application processing.

The Staff Proposal recommends the Commission take action to ensure the PAs apply the current policy on extensions consistently. Specifically, the Staff Proposal recommends the Commission establish a process to ensure the PAs do not allow projects to receive incentives if they have missed the application time limits. For example, staff suggests the Commission could force the utilities to pay for late projects through shareholder funds. The Staff Proposal also suggests the PAs allow 18 month extensions for all public entities, not just educational institutions.

In response to the Staff Proposal, the Joint Solar Parties urge clear, fair and equitable treatment by the PAs when enforcing extension policies. PG&E and CCSE contend it is important to allow the PAs some leeway when enforcing project deadlines due to unforeseen issues that can cause delay. They recommend continued monitoring of extensions along with flexibility.

The PAs oppose 18-month extensions for all public entities, preferring a case-by-case approach. The Joint Solar Parties agree with the Staff Proposal on extensions of 18 months for all public entities.

Discussion. We agree with staff that further scrutiny of project completions and extensions by the PAs is warranted. We will require the PAs to submit a quarterly report to the Energy Division containing a detailed account of extensions granted in that quarter and the reason for the extension, as well as the status of projects granted extensions in prior quarters. Energy Division should specify the format of this report, and the PAs should comply with Energy Division reporting requirements. If these reports indicate to Energy Division that project extensions appear to unnecessarily constrain a significant portion of program funds for an extended period, Energy Division may draft a resolution for Commission consideration of an audit of program administrator performance, particularly with regard to project extensions and equitable treatment of all projects.

We decline to adopt the staff proposal for 18-month extensions for all public entities. We agree with the PAs that extensions may be handled on a case-by-case basis.

5.3. Project Inspections

The Staff Proposal contained several recommendations regarding inspection of CSI projects. The recommendations focused on the rate of inspection, the cost of inspections, and suspension of installers for inspection failures.

5.3.1. Rate of Inspection¹⁶

The CSI Program Handbook and the CEC's SB 1 Guidelines¹⁷ require inspection of one in seven CSI projects. According to the SB 1 Guidelines, EPBB and performance-based incentive (PBI)¹⁸ applicants with systems smaller than 50 kW are required to pass third-party field verification tests on a sampling basis, which includes visual inspection of components, installations characteristics, and shading conditions. Field verification is encouraged for systems above 50 kW, but not required. The SB 1 Guidelines require that the field verification tests be verified using a protocol described in Appendix 2 of the Guidelines.

CSI Program stakeholders and the PAs have expressed concern about the cost of the 1:7 inspection requirement. They are also concerned with the stringency of the field verification and testing protocols. For example, the protocol limits the inspection times to between the hours of 10 a.m. and 2 p.m., based on solar irradiance levels, which significantly increases the cost of the inspection process.

In D.06-08-028, the Commission required the PAs to inspect every project between 30-100 kW because these systems would receive up-front EPBB incentives. (D.06-08-028 at 51.) No inspection was required for systems over 100 kW because they would receive PBI payments based on actual performance. Later in D.06-12-033, the size threshold beyond which PBI is mandatory was dropped to systems 30 kW, beginning January 1, 2010. (D.06-12-033 at 12.) Despite this change, the inspection requirement in D.06-08-028 was not adjusted. The PAs are sampling between 12.4% and 62.7% of applications, depending on the type of incentive and system size. (See Staff Proposal, Section 3.3.2, Table 11.)

We need to clarify the inspection requirements for CSI systems since the requirements we adopted in D.06-08-028 differ from the SB 1 Guidelines and more systems now qualify for PBI payments. The Staff Proposal recommends the Commission direct the PAs to review the cost-effectiveness of inspection requirements and based on that review, the PAs should file an annual inspection plan. Staff also recommends inspection of all PBI systems and all EPBB projects over 30 kW.

The PAs generally oppose a requirement to file an annual inspection plan by advice letter. Instead, they propose the Commission work with the CEC to reduce the 1:7 inspection rate in the SB 1 Guidelines. For example, they suggest the Guidelines be adjusted to decrease inspections for proven installers and to change onsite inspection criteria. The PAs oppose a 100% inspection rate for PBI systems. They claim this will be very expensive given the increase in the number of PBI projects. Rather, they propose they be allowed to create "smart" inspection plans that would inspect only if actual production falls outside the range of forecasted production.

The Joint Solar Parties agree with the PAs that the Commission should evaluate the cost-effectiveness of the inspection program, and that inspecting 100% of PBI systems is not cost-effective.

Discussion. First, we will modify D.06-08-028 and remove the requirement that PAs inspect every project between 30 and 100 kW. All projects 30 kW and larger receive PBI payments and inspection of every project is not necessary because these projects only receive incentives based on the power they actually produce.

Second, although we are sympathetic to concerns about the one in seven inspection requirement in the SB 1 Guidelines, these Guidelines were adopted by the CEC and the PAs will need to work with the CEC on changes to the inspection requirement. We can, however, direct the PAs to undertake a review of their inspection procedures, sampling methodology, and costs. Such a review could assess the inspection sampling methodology and whether, rather than random inspections, certain contractors should be targeted for inspection if they are new to the program or had a history of problem installations. The inspection review should consider the cost of inspections versus the benefit inspections can provide in preventing fraud and maintaining program integrity. For example, experienced installers with a good program history may require fewer inspections, and it may also be beneficial to inspect larger installations. Once completed, this PA inspection review could be used to request the CEC's reconsideration or refinement of its one in seven inspection requirements.

The review of inspection procedures described above should be completed so that the PAs can jointly submit an inspection plan by advice letter to the Commission within 90 days of this decision.

5.3.2. Inspection Costs¹⁹

The Staff Proposal notes that the PAs would like to charge inspection costs, estimated at $426 to $1,042 per inspection, to the measurement and evaluation budget. The Staff Proposal does not support this idea, preferring that the PAs continue to charge inspections to the general administrative budget so that funds reserved for measurement and evaluation can be maximized for that purpose. The Staff Proposal suggests that the PAs find efficiencies in the inspection process, such as lower cost labor to conduct inspections.

Discussion. We agree with the Staff Proposal. Inspection costs should continue to be charged to the general administrative budget and not the measurement and evaluation budget. We encourage the PAs to find methods to decrease inspections costs through the inspection review discussed in the preceding section.

5.3.3. Suspension from CSI²⁰

In D.06-08-028, the Commission directed that "project installers who fail three random inspections must be excluded from program participation." (D.06-08-028 at 51.) The decision directed the PAs to develop appropriate procedures to fulfill this mandate. Specifically, the PAs were directed to define an inspection failure, taking into consideration the severity of the transgression, and to address correction opportunities, notification, and appeal mechanisms in the CSI Handbook. The PAs accomplished this task and the current CSI Handbook (Section 4.9.2) allows certain minor inspection errors to count as "infractions," and three infractions equal a failure. Large-volume solar contractors with more than 200 installations per year are allowed up to five failures per year. (See CSI Handbook, Section 4.10.)

The Staff Proposal recommends further refinement of the suspension rules currently in effect in the CSI Program Handbook to: 1) accommodate large volume solar contractors, and 2) establish a dispute resolution process for suspended contractors.

The Joint Solar Parties and SolarCity agree with the Staff Proposal that suspension rules should be revisited. They suggest that for high volume installers (i.e., those with 200 or more project sites per 12 month period), suspension be based on the rate of failure rather than an absolute number of five failures per year. Specifically, they propose probation if a high-volume installer has a failure rate of more than 1.5% (but less than 2.5%), and suspension if the failure rate is greater than 2.5%.

In contrast, the PAs comment that there is no need to revise the current process, which applies suspension rules based on whether installers handle more or less than 200 installations per year.

Discussion. First, we will retain the scheme in the CSI Handbook Section 4.9.2 for infractions and failures. Infractions are issued for minor application problems and failures are issued for more severe problems. Three infractions are equivalent to one failure.

Second, we agree with Joint Solar Parties and SolarCity that our current rules should be modified to be based on a failure rate rather than a predetermined number of failures so as not to impose more stringent standards on high volume installers. Thus, the CSI Handbook Section 4.10 should be revised to clarify that high volume installers, defined as those with 200 or more project sites per rolling 12 month period, shall be placed on probation if their failure rate reaches 1.5%, and shall be suspended if their failure rate reaches 2.5%.

Finally, Section 4.10.4 of the CSI Handbook contains information on dispute resolution for applicants, solar contractors, system owners, sellers, or host customers to appeal PA determinations. We see no need to revise this process at this time.

5.4. Performance Monitoring and Reporting Services Cost Cap Exemption and Measurement and Evaluation Metering Expenses²¹

In implementing the CSI, the Commission stated its intent for performance data from solar energy systems installed through the program to be accessible and available to customers and PAs, and possibly the general public. (See D.06-08-028 at 80.) At the same time, the Commission was concerned that the cost of this performance metering and monitoring could be become a barrier to program participation. The Commission chose to require performance monitoring and reporting services (PMRS) for all PBI and EPBB systems, but allowed EPBB systems to apply for a "cost-cap exemption" if the cost of PMRS exceeds 1% of total system cost. (D.06-08-028 at 77.)

The Staff Proposal describes that the vast majority of EPBB systems under 15 kW take this cost-cap exemption. To qualify for the exemption, applicants need only show that they have one bid higher than the cost-cap. The Staff Proposal reports that this has resulted in large volumes of requests for bids from PMRS providers, but few PMRS purchases. According to the Staff Proposal, the small number of EPBB systems providing PMRS data has made program evaluation difficult and costly. Staff expresses further concern that PMRS providers, who are not directly under contract with the CSI Program, are not required to turn over PMRS data to the PAs. At the same time, the Staff Proposal notes that Energy Division and CEC staff have made sure that only PMRS providers who are willing to provide the CSI program with data can be considered "Eligible PMRS providers" on the Go Solar California equipment vendor website listing.²²

To address these concerns, the Staff Proposal recommended the Commission eliminate the EPBB metering cost-cap exemption and require that all EPBB customers over 15 kW take PMRS service and that all CSI systems with PMRS service report 15-minute interval kWh production data to the PAs on a quarterly basis for five years. In addition, the Staff Proposal recommended that the Commission offer a selected sample of EPBB customers under 15 kW a $100 annual incentive to install PMRS and provide the data on a quarterly basis to the Commission for up to five years. Staff estimates this recommendation could cost from $5 to $10 million, and needs to be evaluated in light of the overall measurement and evaluation (M&E) budget and evaluation plan objectives.

The Joint Solar Parties agree with the proposal to eliminate PMRS cost cap exemption but are concerned with the $5 to $10 million cost of paying EPBB customers to install PMRS. The PAs support the idea of obtaining more data from PMRS, but like the Joint Solar Parties, they question whether the $5 to $10 million cost of additional metering is too expensive given current CSI budget constraints. The PAs suggest that the PAs and Energy Division work together to decide whether additional metering is required and feasible, beyond the metering provided by the current M&E contractor, Itron. If additional metering is deemed necessary, the PAs propose the Commission: (1) require PMRS on all systems over 15 kW and, (2) require the PAs to issue a Request for Proposals (RFP) for a PMRS provider to monitor these additional systems. Cost for this additional monitoring would be borne by the M&E budget.

Grid Alternatives opposes removal of the EPBB PMRS cost cap exemption, because it would be costly to implement for low income customers who do not have the high speed internet connections needed for PMRS. The Joint Solar Parties suggest that low-income CSI applicants be exempted from this requirement.

Discussion. We agree with the Staff Proposal that the cost-cap exemption should be removed because it is hindering the collection of CSI program evaluation data. We will require all EPBB systems over 10 kW to take PMRS service and to report 15-minute interval kWh production data to the PAs on a quarterly basis for five years. We choose 10 kW as the limit, rather than the 15 kW proposed by staff, because our experience with CSI indicates this is the typical dividing line between large and small commercial solar energy systems. We agree with the PAs that due to recent cuts in CSI administrative budgets, the program cannot provide a PMRS subsidy as staff originally proposed. Therefore, CSI participants will have to bear the cost of the required PMRS. In addition, we agree with the PA proposal that any need for additional PMRS data for program evaluation from systems under 10 kW should be determined through the CSI M&E process, in coordination with Energy Division.

Moreover, the PAs should evaluate the feasibility of and projected timeline for using advanced metering infrastructure (AMI) data to make solar production data available to CSI participants and submit a report to Energy Division on this subject within one year of this decision. The report should be electronically mailed to the service list of this proceeding. In response to Grid's concerns, the requirement to take PMRS service shall not apply to low-income CSI applicants funded through the MASH or SASH programs.

5.5. EPBB Calculator Integration with Powerclerk²³

The EPBB Calculator is used to calculate the design factor of CSI applicants' systems and is a key component needed to determine an applicant's ultimate CSI incentive. The EPBB Calculator was created by the PAs in compliance with D.06-08-028. The Staff Proposal describes several aspects of the EPBB Calculator that could be streamlined and made more useful.

First, the EPBB Calculator is separate from the CSI online application processing database, PowerClerk. As a result, all applicants to the CSI program have to go to the online calculator and type in their system characteristics to get a design factor. The applicants then have to retype the same information into their CSI application in PowerClerk, as well as attach (or upload) a PDF file of their "EPBB Printout" to document their project's design factor.

Second, the PowerClerk database does not capture all of the system characteristic fields that are used to generate the Design Factor in the EPBB Calculator. For example, PowerClerk is missing the shading information about projects. Without this shading information, the accuracy of the system characteristic dataset is significantly reduced. While the shading information is contained on the EPBB Printout that is attached to the CSI application, the data is not in a format that can be easily retrieved and used by evaluation consultants.

The Staff Proposal recommends the PAs be required to integrate the EPBB Calculator into the CSI online database, PowerClerk. The PAs have been considering various ways to make this change for several years, but have yet to take action. In addition, the Staff Proposal suggests the CSI Program online application database should capture all of the EPBB Calculator data fields, including shading.

The PAs generally support the Staff Proposal recommendation regarding the EPBB Calculator. They express concern, however, that the cost of integration should have minimal impact on the PAs' administrative budgets. The Joint Solar Parties support the Staff Proposal.

Discussion. We adopt the Staff Proposal and will require the PAs to integrate the EPBB Calculator into PowerClerk as soon as possible. This integration should occur within 90 days of this decision and any cost borne by the CSI administrative budget. We will require the PAs to report to Energy Division on whether integration is complete. Integration of the EPBB Calculator into PowerClerk is necessary for ongoing program assessment purposes. The EPBB Calculator has been funded with CSI administrative funds and should be used not only to calculate the amount of money paid to a solar customer, but also to promote solar customer understanding of how modifications to system design characteristics can improve both the customer's rebate and the customer's solar system production over the long-term.

5.6. Payment Intervals for PBI²⁴

In D.06-08-028, the Commission established that larger systems must be paid based on the actual output, or production of the system. These incentives are known as PBI. Currently, systems above 30 kW are required to receive PBI in monthly payments over a five year period. The Commission also allowed smaller solar energy systems to "opt in" to PBI, and many have taken advantage of this and receive these monthly PBI payments. The Staff Proposal notes the concern that these smaller PBI systems with little generation output can present a payment processing burden to the PAs. However, the Staff Proposal does not identify the exact cost of monthly PBI payment processing.

The Staff Proposal recommends that to minimize the administration costs of five years of monthly PBI payments, the Commission give the PAs the discretion to make PBI payments on a quarterly or semi-annual basis if the project earns PBI payments of less than a certain amount per month (e.g., $50).

The PAs comment that less frequent PBI payments would save little money and make it harder to track PBI spending. Instead, they suggest the Commission no longer allow systems under 30 kW to opt-in to receiving PBI payments. Instead, these systems would have to receive an up-front EPBB incentive. The PAs contend this will improve budget tracking and maximize program dollars.

Discussion. We will make no change regarding PBI payment intervals. Although staff suggests a change that could lead to administrative cost reductions, we have no cost data to support a change and the PAs support monthly payments for cost tracking purposes. Nevertheless, we agree with the PAs that we should narrow the ability of smaller systems to opt for PBI payments. We prohibit fixed tilt systems 10 kW or smaller from receiving PBI payments, and will instead require them to receive an up-front EPBB incentive. Systems that incorporate tracking technology are exempted from this prohibition.

¹² See Staff Proposal Section 3.1.

¹³ The CSI PAs are PG&E, SCE, and CCSE.

¹⁴ EPBB applications pay incentives up front based on an estimate of system performance.

¹⁵ See Staff Proposal Section 3.2.

¹⁶ See Staff Proposal Section 3.3.2.

¹⁷ The Third Edition of the CEC's Guidelines for California's Solar Electric Incentive Programs (Senate Bill 1) was published June 29, 2010, and can be found at: http://www.energy.ca.gov/2010publications/CEC-300-2010-004/CEC-300-2010-004-CMF.pdf.

¹⁸ PBI refers to payment of incentives over a five-year period based on the actual, measured output of the solar energy system.

¹⁹ See Staff Proposal Section 3.3.3.

²⁰ See Staff Proposal Section 3.3.4.

²¹ See Staff Proposal Sections 3.4 and 4.6.

²² See http://www.gosolarcalifornia.org/equipment/perf_monitor.php.

²³ See Staff Proposal Section 3.8.

²⁴ See Staff Proposal Section 3.9.