STATE OF CALIFORNIA EDMUND G. BROWN JR., Governor



PUBLIC UTILITIES COMMISSION

505 VAN NESS AVENUE

SAN FRANCISCO, CA 94102-3298

May 18, 2012

TO: ALL PARTIES OF RECORD IN RULEMAKING 09-11-014.

Decision 12-05-015 is being mailed without the Concurrence of President Michael R. Peeve and Concurrence of Commissioner Timothy Alan Simon. The Concurrences will be mailed separately.

Very truly yours,

/s/ KAREN V. CLOPTON

Karen V. Clopton, Chief
Administrative Law Judge

KVC/lil

Attachment

ALJ/EDF/lil Date of Issuance 5/18/2012

Decision 12-05-015 May 10, 2012

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Order Instituting Rulemaking to Examine the Commission's Post-2008 Energy Efficiency Policies, Programs, Evaluation, Measurement, and Verification, and Related Issues.

Rulemaking 09-11-014 (Filed November 20, 2009)

DECISION PROVIDING GUIDANCE ON 2013-2014 ENERGY EFFICIENCY PORTFOLIOS AND 2012 MARKETING, EDUCATION, AND OUTREACH

DECISION PROVIDING GUIDANCE ON 2013-2014
ENERGY EFFICIENCY PORTFOLIOS AND 2012
MARKETING, EDUCATION, AND OUTREACH 11

1. Summary 22

2. Background 44

2.1. Procedural Background 44

3. Overview of Policy Guidance 88

3.1. Implementation of Energy Efficiency Strategic Plan 1515

3.2. Financing 1818

3.3. Deep Retrofit Strategies and AB 758 2020

3.4. Expansion of Local Government and Third-Party Delivery 2222

3.5. Codes and Standards and Emerging Technologies 2323

3.6. Energy Upgrade California 2424

3.7. Ex Ante Savings Values and Utilization of Evaluation Results 2525

4. Energy Savings Goals for the 2013-2014 Applications 2626

4.1. Background 2626

4.2. Avoided Cost and Cost-Effectiveness Guidance for 2013-2014 Applications 2727

4.2.1. Consistency with Other Demand-Side Programs 3131

4.2.2. Updates to Data Inputs 3232

4.2.3. New Avoided Cost ("Separate Components") Calculator 3232

4.2.3.1. Avoided Cost of Energy 3333

4.2.3.2. Avoided Cost of Generation Capacity 3434

4.2.3.3. Avoided Cost of Transmission and Distribution Capacity 3535

4.2.3.4. Avoided Cost of Ancillary Services Procurement 3535

4.2.3.5. Avoided Cost of Renewable Procurement 3535

4.2.3.6. Avoided Cost of Greenhouse Gas Emissions 3636

4.2.4. Discount Rate 3737

4.2.5. Adoption of the Avoided Cost Calculator and
Discount Rate 3939

4.2.6. Issues to be Considered in Future Proceedings 4040

4.3. DEER 2011 Update 4242

4.3.1. DEER 2011 Update Process 4343

4.3.1.1. Party Positions 4343

4.3.1.2. Discussion 4545

4.3.2. Complexity of Ex Ante Values 4646

4.3.2.1. Party Positions 4646

4.3.2.2. Discussion 4747

4.3.3. DEER Net-To-Gross Values 4949

4.3.3.1. Net-to-Gross Development Methodology and Complexity of Resulting Values 4949

4.3.3.1.1. Party Positions 4949

4.3.3.1.2. Discussion 5252

4.3.3.2. Considering Recent Program Improvements in DEER Net-to-Gross Values 5454

4.3.3.2.1. Party Positions 5454

4.3.3.2.2. Discussion 5656

4.3.3.3. Net-to-Gross Values for Customized Projects
and Emerging Technologies Measures 5757

4.3.3.3.1. Party Positions 5757

4.3.3.3.2. Discussion 6060

4.3.3.4. DEER Values for HVAC Interactive Effects 6262

4.3.3.4.1. Positions of the Parties 6262

4.3.3.4.2. Discussion 6464

4.3.4. Other Updates to DEER Values 6565

4.3.5. Adoption of DEER 2011 for Planning 6666

4.4. 2011 Energy Efficiency Potential Study 6666

4.4.1. Positions of the Parties 6868

4.4.2. Discussion 7070

4.4.3. Refrigerator Recycling 7171

4.4.3.1. Positions of the Parties 7171

4.4.3.2. Discussion 7272

4.4.4. Basic Compact Fluorescent Lamps 7272

4.4.4.1. Position of the Parties 7272

4.4.4.2. Discussion 7272

4.4.5. Behavior Programs 7373

4.4.5.1. Positions of the Parties 7474

4.4.5.2. Discussion 7575

4.5. 2013-2014 Transition Portfolio Goals 7676

4.5.1. Positions of the Parties 7777

4.5.2. Discussion 7878

4.5.3. Use of 2011 Potential Study 7979

4.5.3.1. Positions of the Parties 8080

4.5.3.2. Discussion 8080

4.5.4. Codes and Standards Advocacy Savings 8181

4.5.4.1. Positions of the Parties 8383

4.5.4.2. Discussion 8484

4.5.5. Separate Targets for Goals Components 8585

4.5.5.1. Positions of the Parties 8686

4.5.5.2. Discussion 8787

4.5.6. Goals Applied on a Net or Gross Basis 8888

4.5.6.1. Positions of the Parties 8888

4.5.6.2. Discussion 8989

4.5.7. Annual and Cumulative Goals 9090

4.5.7.1. Positions of the Parties 9393

4.5.7.2. Discussion 9494

4.5.8. Adopted 2013-2014 Goals 9595

5. Financing 9696

5.1. Background 9898

5.2. Positions of the Parties 101101

5.3. Discussion 106106

5.3.1. Continuation of on-bill financing Programs 109109

5.3.2. Continuation of American Recovery and Reinvestment
Act Financing Programs 110110

5.3.3. Design of New Financing Strategies 113113

5.3.3.1. Credit Enhancement for Single Family
Residential Customers 118118

5.3.3.2. Strategy for Multifamily Residential Buildings 126126

5.3.3.3. Credit Enhancement for Small Business
Customers 129129

5.3.3.4. On-bill repayment for Non-Residential
Customers 131131

5.3.3.5. Financing Database Development and
Data Sharing 133133

5.3.4. Other Issues 135135

5.3.4.1. Utility Credit for Energy Savings Associated
with Financing Programs 135135

5.3.4.2. Next Steps for Financing Programs 137137

6. Local Government, Government Partnerships and
Third-Party Delivery 141141

6.1. Government Partnerships 142142

6.1.1. Continuation of Successful Government Programs/Partnerships 143143

6.1.2. Expansion of Successful Government Programs/
Partnerships 144144

6.1.3. Local Government Regional Energy Efficiency Pilots 146146

6.2. Third-Party Programs 151151

6.2.1. Positions of Parties 152152

6.2.2. Discussion 154154

7. Reducing the Number and Complexity of Programs 157157

7.1. Positions of Parties 157157

7.2. Discussion 160160

8. Program Guidance for the Residential Sector 161161

8.1. Energy Upgrade California (Whole House) Program 162162

8.1.1. Background 162162

8.1.2. Energy Upgrade California: A Market Transformation-Oriented Program 163163

8.1.2.1. Positions of the Parties 164164

8.1.2.2. Discussion 165165

8.1.3. Energy Upgrade California: Long-Term Commitment
and Stepwise Declining Incentives Approach 167167

8.1.3.1. Positions of Parties 167167

8.1.3.2. Discussion 168168

8.1.4. Energy Upgrade California: HVAC Incentives and
Program 170170

8.1.4.1. Participation Rules 170170

8.1.4.2. Parties' Positions 170170

8.1.4.3. Discussion 171171

8.1.5. Energy Upgrade California: Role of Local Governments 176176

8.1.5.1. Positions of the Parties 176176

8.1.5.2. Discussion 177177

8.1.6. Energy Upgrade California: Workforce Training 178178

8.1.6.1. Positions of the Parties 178178

8.1.6.2. Discussion 178178

8.1.7. Energy Upgrade California: Proposals for Additional Incentives 180180

8.1.7.1. Positions of Parties 181181

8.1.7.2. Discussion 182182

8.1.8. Energy Upgrade California: Multifamily Program 185185

8.1.8.1. Positions of Parties 186186

8.1.8.2. Discussion 188188

8.1.9. Energy Upgrade California: Whole House Home
Energy Rating System (HERs) and Energy Upgrade
California Approved Software 190190

8.1.9.1. Positions of Parties 192192

8.1.9.2. Discussion 194194

8.1.10. Energy Upgrade California: Investor-Owned Utilities
Data Sharing 196196

8.1.10.1. Positions of Parties 197197

8.1.10.2. Discussion 198198

8.1.11. Energy Upgrade California: Other Program Direction 199199

8.2. Plug Loads/Appliances 200200

8.2.1. Positions of Parties 201201

8.2.2. Discussion 202202

8.3. Appliance Recycling Program 204204

8.3.1. Positions of Parties 204204

8.3.2. Discussion 205205

8.4. Residential New Construction 207207

8.4.1. Residential New Construction Guidance for 2013-2014 Implementation Activities 208208

8.4.1.1. Positions of Parties 208208

8.4.1.2. Discussion 209209

8.4.2. Residential New Construction Guidance for Future
Zero Net Energy Roadmap 211211

9. Program Guidance for the Commercial Sector 213213

9.1. Targeting the Untapped Potential of Small Commercial
Buildings 214214

9.1.1. Positions of the Parties 215215

9.1.2. Discussion 216216

9.2. Increasing the Adoption of Emerging Technologies into
Current Programs 219219

9.2.1. Positions of Parties 219219

9.2.2. Discussion 220220

9.3. Increasing the Measurement of Performance Data 221221

9.3.1. Positions of Parties 222222

9.3.2. Discussion 222222

9.4. Providing Deeper Energy Retrofits Through Innovative
Auditing Approaches and Packages of Measures 223223

9.4.1. Positions of Parties 224224

9.4.2. Discussion 224224

9.5. Addressing Split-Incentive Barriers in Multi-Tenant Buildings 226226

9.5.1. Positions of Parties 226226

9.5.2. Discussion 227227

10. Lighting Programs 227227

10.1. Upstream Rebates for Basic Compact Fluorescent Lamps 229229

10.1.1. Positions of the Parties 229229

10.1.2. Discussion 231231

10.2. Lighting Program Re-design 234234

10.2.1. Positions of the Parties 234234

10.2.2. Discussion 235235

10.3. Lighting Market Transformation as a Coordination Program 237237

10.3.1. Positions of the Parties 237237

10.3.2. Discussion 238238

10.4. Upstream Rebates for Advanced Lighting Measures 239239

10.4.1. Positions of the Parties 239239

10.4.2. Discussion 241241

11. Codes and Standards 243243

11.1. An Integrated Approach 246246

11.1.1. Positions of the Parties 247247

11.1.2. Discussion 248248

11.2. Workforce Education and Training, and Marketing and
Outreach 250250

11.2.1. Positions of the Parties 251251

11.2.2. Discussion 252252

11.3. Incentives for Codes and Standards 253253

11.3.1. Positions of the Parties 254254

11.3.2. Discussion 254254

11.4. Local Government Role 256256

11.4.1. Positions of the Parties 256256

11.4.2. Discussion 257257

12. Emerging Technologies Program 258258

12.1. Positions of Parties 262262

12.2. Discussion 265265

12.2.1. Coordination with External Market Actors 268268

13. Workforce Education and Training 272272

13.1. Positions of Parties 275275

13.2. Discussion 277277

13.2.1. Continuation of the California Advanced Lighting
Controls Training Partnership (CALCTP) 278278

13.2.2. Heating, Ventilation, and Air Conditioning
Sector Strategy Pilot 279279

13.2.3. General Direction 281281

13.2.4. Skill Standards and Certifications 282282

14. Water-Energy Nexus Programs 284284

14.1. Party Positions 284284

14.2. Discussion 286286

15. Marketing, Education, and Outreach 290290

15.1. Positions of Parties 293293

15.2. Discussion 295295

16. Continuation of 2010-2012 Programs not Addressed Elsewhere
in this Decision 310310

16.1. HVAC and Benchmarking Programs 310310

16.2. Integrated Demand-Side Management 311311

16.2.1. Positions of Parties 313313

16.2.2. Discussion 314314

16.2.2.1. Integrated Demand-Side Management
Taskforce 314314

16.2.2.2. Integrated Pilots 315315

16.2.2.3. Integrated Audit Tool 315315

16.2.2.4. Integrated Marketing 316316

16.2.2.5. Access to Relevant Data 317317

16.2.2.6. Integrated Demand-Side Management Resource-Specific Funding Guidance 317317

16.3. Continuous Energy Improvement 318318

17. Other Portfolio Direction 320320

17.1. Ex Ante Review and Updates 320320

17.1.1. Future DEER Updates 321321

17.1.1.1. Party Positions 321321

17.1.1.2. Discussion 326326

17.1.2. Non-DEER Workpaper Updates 330330

17.1.2.1. Retirement of Specific Non-DEER Workpapers 331331

17.1.2.2. Application of DEER Values to Non-DEER Workpapers 332332

17.1.2.3. Updates of Non-DEER Workpapers not
Covered in the 2011 DEER Update to
Reflect 2006-2008 Evaluation Results 332332

17.1.2.4. Review of Non-DEER Workpapers in 2013-2014 Portfolio Applications 333333

17.1.2.5. "Phase 2" Process for Mid-Cycle Review of
Interim Approved or New Measure
Workpapers 334334

17.1.2.6. Summary of 2013-2014 Portfolio Non-DEER Workpaper Disposition Processes 336336

17.1.3. Relationship of DEER to non-DEER Ex Ante Values 337337

17.1.3.1. Party Positions 337337

17.1.3.2. Discussion 338338

17.1.4. Custom Project and Measure Ex Ante Review 340340

17.1.4.1. Custom Project and Measure Review Process 340340

17.1.4.2. Custom Project and Measure Gross
Realization Rates 342342

17.1.5. Ex Ante Value Gross Savings Baselines 345345

17.1.5.1. Parties' Positions 345345

17.1.5.2. Discussion 346346

17.2. Next Steps for Post-2014 Process Reforms 352352

18. Evaluation 354354

18.1. Evaluation Budget 355355

18.2. Next Steps for Workshops 355355

18.3. Next Steps for Program Performance Metrics/Market
Transformation Indicators 356356

18.4. Data Needs for Reporting and Evaluation 358358

19. Shareholder Incentive Mechanism 360360

20. Next Steps and the Process for 2013-2014 Utility Portfolio
Applications and Review 362362

20.1. Inclusion of Spillover in Cost-Effectiveness Calculations 362362

20.2. Program Implementation Plans 363363

20.3. Application Structure and Contents 364364

20.4. High-Level Application Budget and Cost-Effectiveness
Summary Tables 365365

20.5. Detailed Application Cost-Effectiveness Showing 366366

20.6. Programs Advisory Groups 366366

21. Comments on Proposed Decision 367367

22. Assignment of Proceeding 369369

Findings of Fact 369369

Conclusions of Law 384384

ORDER 397397

ATTACHMENT A: Summary of Changes to Database for Energy Efficiency Resources 2011

ATTACHMENT B: HVAC Emergency Retrofit Protocol

ATTACHMENT C: 2013-2014 WE&T Course Listings/Programs

ATTACHMENT D: Integrated Pilot Programs (2013-2014)

DECISION PROVIDING GUIDANCE ON 2013-2014 ENERGY EFFICIENCY PORTFOLIOS AND 2012 MARKETING, EDUCATION, AND OUTREACH

1. Summary

In this decision, the Commission directs Pacific Gas and Electric Company, Southern California Edison Company, San Diego Gas & Electric Company, and Southern California Gas Company (collectively, the investor-owned utilities) to file applications no later than July 2, 2012 to establish energy efficiency programs and budgets for 2013 and 2014.

The past several energy efficiency portfolios have been approved on a three-year cycle, which has sometimes been followed by a one-year "bridge" year extending the existing programs to allow plans to be made for the next portfolio cycle. In this decision, rather than have a simple one-year "bridge" year extension following the 2010-2012 portfolio, we establish a two-year "transition" period. This decision takes the best elements of the existing portfolio, gives guidance on some modifications, and signals the way toward broader changes to the energy efficiency portfolio starting in 2015. Rather than make fundamental changes to the California energy efficiency market in this decision, we identify what is working well and build upon it, remove what is not working well, and modify programs that have merit but are not realizing full ratepayer benefit. We primarily give guidance in this decision to support modifications to existing elements of the 2010-2012 programs. Our intent is to have this two-year transition period enable some additional research and provide time to make more fundamental changes to the energy efficiency programs.

This decision gives guidance to the utilities on the 2013-2014 energy efficiency programs, with the overall direction that they should begin a transition away from short-lived energy savings and towards deeper retrofits. The decision also gives guidance on expanding energy efficiency financing, by directing development of a portfolio of options at a total of $200 million over the two-year period. We also take steps to reduce the number and complexity of energy efficiency programs. In addition to the guidance for 2013-2014, this decision clarifies certain aspects of the 2012 Marketing, Education, and Outreach program, and other changes detailed in this decision, which will impact the 2013-2014 transition period.¹

Collectively, this decision establishes the parameters by which the Investor-Owned Utilities (IOUs) will design their portfolios and propose program budgets for 2013-2014. Their applications will include an optimization to take the guidance from this decision to simultaneously (a) meet or exceed energy savings goals utilizing adopted ex ante parameters, (b) demonstrate portfolio cost-effectiveness utilizing updated avoided cost and ex ante parameters, (c) implement program modifications or new programs directed herein, (d) sustain other existing programs, (e) align their programs with the Strategic Plan, and (f) comply with all relevant decisions and statutes.

This decision is organized to, first, step through the sequence of quantitative issues, from avoided cost and ex ante parameters, to the potential study, and finally energy savings goals. Once we establish the numerical requirements, we turn to the qualitative aspects of our guidance to the IOUs' portfolio applications, in various sections providing program direction in specific markets and cross-cutting areas. We also make certain improvements to the energy efficiency regulatory process.

¹ Consistent with the scoping memo for Phase IV of this proceeding, the years 2013 and 2014 will be a transition period for the utilities' energy efficiency programs.