4. Discussion

For three decades California has been a national leader in the design and delivery of EE programs. EE programs are essential to this Commission's effort to carry out various statutory mandates, including long-term energy resource procurement, where EE is viewed as "first in the loading order,"⁸ and greenhouse gas (GHG) amelioration pursuant to Assembly Bill (AB) 32.⁹ Losing almost a quarter of the available funding will likely disrupt programs, harm customers, lead to job loss, and have serious adverse impacts on the environment.¹⁰

For the reasons set forth below, we adopt the ACR proposal to use a portion of the PEEBA to replace the PGC funding. That portion of the PEEBA that is used to replace the PGC funding shall be recovered just as the PGC would have been - on the basis of usage. The PEEBA will be used to replace the PGC funding for programs in the 2010-2012 cycle only. Nothing in this decision should be construed as impeding or influencing the IOUs' upcoming general rate cases, or funding for EE in 2013 and beyond.

4.1. Whether a Commission Decision is Needed

The Joint IOUs (PG&E and SDG&E) and SCE support the ACR proposal to provide a backstop for the PGC funds but express the belief that the Commission previously authorized such a backstop mechanism in D.09-09-047 and no further Commission decision is needed. According to the Joint IOUs, in D.09-09-047 the Commission acknowledged that:

IOUs recover electric energy efficiency revenue requirements that remain after collection of EE PGC funds, through the [PEEBA] established in D.03-012-062 {sic}. In the Joint IOU applications and compliance advice letters, the procurement EE funding was determined residually, by deducting the EE PGC funding from the total authorized electric EE funding levels adopted by the Commission. Therefore, if EE PGC funding is no longer available due to the expiration of the statute, the Joint IOUs already would be authorized to collect the difference through procurement EE funds to ensure the portfolios are funded at authorized levels.¹¹

SCE agrees with this conclusion and requests a decision clarifying that a final decision is not necessary in order for the electric IOUs to recover the PGC portion of EE funding through their PEEBA mechanism.¹²

While various parties express an opinion on the above contention, this issue is largely moot. While D.09-09-047 authorizes the IOUs to recover the difference between PGC funding and the PPP costs in the PEEBA, no party has identified anything in D.09-09-047 or elsewhere that authorizes the IOUs to use the PEEBA as a substitute for collecting PGC funds. Thus, the IOUs should consider themselves on notice that they may not use such funds as a substitute for PGC funds, without express Commission approval.¹³

4.2. Opposition to the ACR Proposal

CFC opposes the ACR proposal. CFC first notes its general concern that approval of the ACR proposal will establish a precedent so that PEEBA funds will be permanently augmented to include the dollar amount that originally would have been collected by the PGC. CFC then argues that the Legislature failed to reenact the PGC for a reason and, absent Legislative approval, the Commission now lacks the authority to continue the PGC, albeit in a different form.¹⁴ Like CFC, The California Large Energy Consumers Association (CLECA) opposes the ACR proposal on procedural grounds. CLECA "questions the procedural propriety of addressing the cost allocation of $250 million in this rulemaking."¹⁵ In particular, CLECA argues that the current PGC allocation methodology is based on an explicit statutory requirement that was adopted and implemented for each IOU in their respective GRC proceedings. Therefore, according to CLECA, the proposed backfill runs counter to the Legislature's intent.¹⁶

In reply comments NRDC and SCE address the above contentions. The NRDC asserts that the California Constitution and Legislature have delegated broad authority to the Commission, the Commission has clear power to fix rates, establish rules ... and prescribe a uniform system of accounts for all public utilities subject to its jurisdiction, and the Commission is required to prioritize energy efficiency in funding the mix of energy resources.¹⁷ Moreover, with regard to the effect of the Legislature's failure to pass a PGC funding bill, NRDC notes:

California courts have consistently held that the failure of the Legislature to pass a particular bill cannot be relied upon as legislative intent.¹⁸

We agree with NRDC's interpretation of the facts and statement of the law, and conclude that the ACR proposal is not inconsistent with any legislative intent.

SCE notes that the Legislature previously granted the Commission authority to oversee the IOU EE portfolios for purposes of meeting established State goals for EE and climate change, and that the Commission has already authorized EE funding for the IOUs' 2010-2012 portfolio cycle. We agree with SCE's assertion and note that our actions today are entirely consistent with our grant of authority.

CLECA also "cautions against a rush to judgment by the Commission to increase procurement EE funds to replace PGC funds."¹⁹ Specifically, CLECA argues against replacing the PGC funding prior to undertaking the analysis needed to ensure that the money will be spent efficiently and cost effectively. WEM supports CLECA's request for additional analysis, and asserts that "[c]ontrary to NRDC's claims, there's no reason to believe that utilities will meet the [energy efficiency] goals even if they have full funding to complete the cycle."²⁰

As an initial matter, whether continued funding will ensure that the IOUs meet their EE goals (which WEM claims they have never met) is not the issue before us today. We will review the IOU's performance in meeting their EE goals for 2010-2012 when that funding cycle concludes. Rather, in adopting the ACR proposal, we give effect to our prior decision granting EE funding for 2010-2012 and fund already approved programs at the previously approved rates.

We emphasize that today's decision is limited to the final year of the already approved 2010-2012 program cycle since the Commission has not made any final determinations beyond this period. Nothing in the ACR proposal or today's decision should be construed as prejudging particular programs or whether a portion of the PEEBA should be used to backfill lost PGC revenues beyond the 2010-2012 cycle.

Finally, both CLECA and the CFC disagree with the IOUs' contention that backfilling the PGC will not result in a rate increase. CLECA claims "the very act of backfilling the expired funding will wipe out a rate decrease,"²¹ and CFC asserts that augmenting the PEEBA account would be equivalent to raising rates.²² These arguments are unpersuasive. The Legislature's failure to pass new legislation cannot be construed as calling for a rate decrease and, particularly in light of section 399.8(a), the Commission has ample authority to ensure that there are sufficient funds to support its previously approved programs.

4.3. Support for the Proposal

NRDC "supports the Commission acting on its authority to fund efficiency for the remainder of the program cycle and believes it is essential that the Commission provide adequate funding to implement the authorized programs."²³ Similarly, CEEIC strongly supports the Commission's proposal.²⁴ DRA expressed more guarded support for the proposal stating, "DRA does not currently disagree with the proposed approach of collecting PGC revenues on the basis of usage, but recommends that the Commission require the utilities to estimate total rate impacts by customer class in Phase III of the proceeding, with the opportunity for other parties to examine the calculations and comment."²⁵ However, as requested by the September 28, 2011 ACR, the IOUs provided documentation on the mechanics of the ACR proposal. As part of this showing, both PG&E and SDG&E (the Joint IOUs), and SCE indicate that the ACR proposal will not have any rate impacts.²⁶ We believe these assurances adequately address DRA's concerns.²⁷

4.4. The IOU Proposals

We now turn our discussion to the mechanics of these filings as proposed by the utilities. In comments on the ACR proposal, PG&E and SDG&E state "in order to accomplish the intent of the ACR [proposal] to recover the PGC portion of the energy efficiency funding through the procurement mechanism with no rate impacts, the Joint IOUs maintain existing cost-recovery mechanisms and propose no changes to electric public purpose program rate design or cost allocation as part of this proceeding."²⁸

PG&E states that it will file an advice letter that will "consolidate tracking of the electric portion of energy efficiency expenditures into one balancing account, close the PGC balancing account, and make other revisions, as needed, to implement the expiration of the PGC."²⁹ PG&E tracks the expenditures against authorized funding levels in the following "one way" balancing accounts: 1) Public Purpose Program Energy Efficiency Balancing Account (PPPEEBA - electric) and 2) the Procurement Energy Efficiency Balancing Account (PEEBA). PG&E also indicates that it has two approved revenue adjustment mechanisms as part of its electric public purpose program cost recovery: 1) Public Purpose Program Revenue Adjustment Mechanism (PPPRAM) and 2) Procurement Energy Efficiency Revenue Adjustment Mechanism (PEERAM). According to PG&E, "no change is needed to the current allocation and rate design for public purpose program rates and no change (is required) to the collection of customer revenues through its revenue adjustment mechanisms."³⁰ PG&E proposes "to continue to recover the PGC legacy portion of the energy efficiency funding at the 2011 adopted level, along with the Energy Savings Assistance (ESA) program revenue requirement, through the PPPRAM and the remaining electric energy efficiency revenue requirement through the PEERAM."

PG&E proposes to revise its 2012 Annual Electric True-up³¹ (AET) in its December supplemental update to reflect the procurement backfill mechanism in the recovery of the public purpose program revenue requirement. According to PG&E, this will allow the EE cost allocation to remain unchanged per the ACR.³² We agree with PG&E that its proposal will not cause a rate shift or rate increase and that the cost allocation will remain unchanged. While we agree that the supplemental December update to the 2012 AET can be used to make these changes, we prefer to have the IOUs simultaneously make separate filings for the "regular" PEEBA and backfill portion of PEEBA being used to backfill lost PGC revenues. We therefore adopt PG&E's proposal and direct it to file a Tier 1 advice letter on December 22, 2011 that is consistent with its proposal and our requirement that there be no cost allocation shifts or rate impacts to customers due to the PGC backfill.

SDG&E states that it "will continue the PGC balancing account (called PEEBA) in its present form and will address the closing of it and other revisions in a clean-up advice letter filing at a later time."³³ For cost recovery purposes, SDG&E proposes to continue to recover its portion of the authorized EE budget through the Electric Procurement Energy Efficiency Balancing Account (EPEEBA). SDG&E contends that this "will have no impact on 2012 rates."³⁴ SDG&E proposes to reflect the adjustment in its pending Advice Letter 2293-E and states that the adjustment will have no impact on rates. We agree with this proposal. SDG&E shall make the updates necessary to AL 2293-E in order carryout this approach and file a Tier 1 advice letter by December 22, 2011.

SCE also states that no changes are necessary to its current rate design or cost allocation methodology in order to fulfill the ACR proposal of no rate impacts or shifts in cost allocation. SCE proposes to "file a compliance advice letter to revise the preliminary statements of its tariffs to consolidate the tracking of electric energy efficiency expenditures into one balancing account, close the PGC balancing account, and make other revisions as needed."³⁵ SCE also indicates that it "historically allocated the PGC revenues to each rate group based on the `percent of revenue basis.' After this revenue is determined, it is then collected from each customer within each rate group on an equal cents/kWh basis."³⁶ While its basis of collection is different from that of PG&E and SDG&E, SCE indicates that a viable alternative exists to avoid any rate impact. SCE proposes to transfer the balance recorded in its Energy Efficiency Program Adjustment Mechanism (EEPAM) as of December 31, 2011, to the PEEBA on January 1, 2012 and then eliminate the EEPAM. In 2012, SCE will balance the total authorized EE funding of $402 million with actual EE expenses incurred in 2012 in the PEEBA. According to SCE, "because SCE's over-all Public Purpose Programs revenue requirement will not change as a result of the expiration of the PGC EE funding, there will not be any rate impact to customers."³⁷ Thus, although slightly different from what was suggested in the ACR, SCE's proposal satisfies the directive that there be no rate impacts and no cost shifting. We agree that this approach is reasonable and direct SCE to file a Tier 1 advice letter on or before December 22, 2011 detailing this approach.

⁸ Energy Action Plan I, February 2008.

⁹ Stats. 2006, Ch. 488.

¹⁰ The Commission is also considering the loss of PGC funding for programs overseen by the California Energy Commission in Rulemaking 11-10-003.

¹¹ Joint IOUs' October 12, 2011 Comments at 3 (citations omitted).

¹² SCE October 12, 2011 Comments at 3.

¹³ See, e.g., CLECA October 12, 2011 Comments at 5.

¹⁴ CFC October 12, 2011 Comments at 4.

¹⁵ CLECA October 11, 2011 Comments at 3.

¹⁶ CLECA October 11, 2011 Comments at 2.

¹⁷ NRDC October 19, 2011 Reply Comments at 2-3.

¹⁸ NRDC October 19, 2011 Reply Comments at 4, citing People v. Mendoza, 23 Cal. 4th 896, 921, (Cal. 2000).

¹⁹ CLECA October 11, 2011 Comments at 3.