11. Comments on Proposed Decision
The proposed decision of Administrative Law Judge (ALJ) Fitch in this matter was mailed to the parties in accordance with Section 311 of the Public Utilities Code and comments were allowed under Rule 14.3 of the Commission's Rules of Practice and Procedure. Comments were filed on May 14, 2012 by the following parties: Altergy; AECA; Joint comments of the Black Economic Council, National Asian American Coalition, and the Latin Business Chambers of Greater Los Angeles; CBIA; Efficiency Council; CFBF; CCEJ; CALSTART; CFC; Joint Biomass Parties; Joint Environmental Groups; MEA; PFT; PG&E; SDG&E; SVLG; SCE; Sustainable Conservation; TURN; the University of California; and Waste Management.
Reply comments were filed on May 21, 2012 by the Black Economic Council, Latino Business Chamber of Greater LA, and National Asian American Coalition jointly; CEERT; CFC; DRA; Efficiency Council; Joint Biomass Parties; Joint Environmental Groups; MEA; PG&E; SDG&E; and SCE.
In response to these parties' comments and reply comments on the proposed decision, a number of changes and clarifications have been made throughout this decision. In addition, below we explain why we did not make certain changes to the decision in response to a number of the specific comments made by parties where the issues are not otherwise addressed herein.
The joint comments of the Black Economic Council, Latino Business Chamber of Greater LA, and the National Asian American Coalition, suggest that we should increase the amount of annual funding allocated for workforce training from an initial estimate of $2 million to $14 million.43 While we do not make this change immediately, we note that the exact funding allocations to various activities will be proposed by the administrators in the triennial investment plans. Should the CEC develop additional activities and plans beyond the initial $2 million annual allocation, we can consider those proposals in the investment plan.
In addition, we note that although we do not specifically call out the importance of LED lighting technologies in this decision as distinct from the many other energy efficiency or clean energy technologies, LEDs remain eligible for funding both here and in the energy efficiency emerging technologies programs authorized in the energy efficiency portfolios of the utilities.
CBIA's comments reiterate the importance of the NSHP and dispute the analysis in the staff proposal, stating that "there are other viable options for continuation of NSHP that do not require taking money from the general market CSI program."44 CBIA does not offer any ideas as to what those options might be, however. Thus, we leave this determination unchanged.
CFC, in its comments on the proposed decision and previously, has requested that the Commission conduct a financial audit "to determine not only if certain programs should continue to be funded but also whether the amount of funding is just and reasonable."45 We understand this suggestion conceptually; however, it is unclear how it could be implemented. The previous PGC-funded programs were legislatively mandated (in statute) and not under the control of this Commission. New EPIC funds are being collected, but have yet to be allocated to particular purposes (until this decision). However, the spirit of CFC's suggestion could be met by the CEC sharing publicly an accounting of the costs and estimated benefits of the previous PGC-funded programs. Such reports of various programs should already exist and could be consolidated and shared with parties to this proceeding.
CFC also identifies what it characterizes as a conflict between § 740 and the language of the proposed decision stating that EPIC should be the "primary vehicle" for utility RD&D proposals.46 However, we see no conflict. Section 740 does not specify the procedural vehicle by which the Commission may "allow the inclusion of expenses for research and development" in rates. The EPIC proceedings are just as valid a venue for consideration of these expenses as GRCs or any other type of proceeding. PG&E comments that this decision should clarify that it does not impact the natural gas public purpose program RD&D expenditures and activities.47 PG&E is correct; this decision does not impact natural gas public purpose program RD&D expenditures. However, it is possible that in the future the Commission may want to consolidate the electricity and natural gas RD&D activities into one venue for consideration.
PG&E also suggests that the proposed decision should be revised to have EPIC funding be disbursed via a contract between the IOUs and the CEC which they term a "utility-Energy Commission commercial partnership arrangement,"48 asserting that this would prevent appropriation of the funds by the Legislature. However, it is unclear how this approach protects the funds any better that the approach adopted in the decision, unless PG&E proposes to the take the additional step suggested by SDG&E,49 to allow EPIC funding transfer to the CEC only after costs have been incurred. While it is true that SDG&E's proposal would further protect funds, it is also administratively unworkable for the CEC. Thus, we continue to order the hybrid approach in this decision, where administrative funds are transferred quarterly and programmatic funds are transferred once they have been encumbered.
Sustainable Conservation filed comments enthusiastically in support of biogas projects, and arguing that the proposed decision was logically inconsistent in singling out the NSHP program for policy support while not developing a similar market support program for biogas.50 In response, we simply point out that the singling out of rooftop solar on new homes is not necessarily a statement of a Commission policy preference, but rather it is statutory; the Legislature previously expressed its preference for supporting solar on new homes when it adopted the CSI program in law.
AECA is similarly enthusiastic about developing market support programs for biogas, pointing out that biogas projects can provide substantial benefits to ratepayers through methane destruction.51 We note that agricultural projects already have the ability to capture those benefits via the Livestock Project Offset Protocol adopted by the California Air Resources Board under AB 32.52
On the issue of assignment of intellectual property rights, TURN and SDG&E suggest that this decision include at least a presumption that projects funded by EPIC should create financial benefits for ratepayers.53 We decline to create that presumption, however, because we are concerned about discouraging otherwise worthy projects from seeking EPIC funding. Creating such a presumption would seem to misunderstand the basic proposition of offering ratepayer (or other public) funding to early-stage projects. As pointed out by the Efficiency Council, "individual project failures are [a] normal and acceptable part of cutting-edge research."54 In many cases, the reason projects are seeking public or ratepayer funding is because they cannot yet demonstrate enough experience to qualify for private financing. Creating a presumption that projects must deliver ratepayer financial benefits may thus be self-defeating. In addition to expecting some failures, we also do not want to create too high a burden for projects across the board to deliver ratepayer financial gains before they are ready. Ratepayer financial benefits may be feasible in some cases, and we encourage the administrators to pursue such opportunities. This is the reason for leaving open the determination of intellectual property treatment until more specifics are proposed as to the purposes and potential recipients of funding during the investment plan process.
Several parties commented on the size of the overall EPIC annual budgets authorized in the decision. Some parties complain that the budget constitutes a reduction in authorized expenditures compared to 2011 and earlier.55 Others say that it constitutes a rate increase that is not justified.56
Both of these interpretations are incorrect. The EPIC annual budget authorized in this decision is expressly designed to represent neither an increase nor a decrease compared to prior expenditure levels. It is intentionally revenue neutral and rate neutral. The appropriate comparison is between the annual budget authorized in this decision and the prior level of PGC expenditures plus utility RD&D expenditures, including allowing for the possibility that the Legislature may reauthorize additional expenditures on the NSHP as part of EPIC.
As discussed in the February 10, 2012 staff proposal, Commission staff estimate that prior annual PGC collections were approximately $146 million, with an additional approximately $40 million per year or more being authorized in various proceedings allowing utility cost recovery for RD&D projects. $162 million, plus an anticipated approximately $25 million for the NSHP program, achieves the same approximate total as in the past. Should the Legislature not authorize additional EPIC funding for NSHP, the Commission may choose to reevaluate whether to increase the EPIC total budget, and for what purposes, in the future.
We also note that the reevaluation of appropriate public interest investments of EPIC funds in this decision has resulted in some budget recalibration and, in particular, an increase in support for RD&D (including applied research and development, as well as technology demonstration and deployment) compared to prior levels.
SCE, in its comments on the proposed decision, reiterates most of its legal arguments about the Commission's underlying authority for EPIC. Most of SCE's arguments contained in its comments on the proposed decision were raised in its January 19, 2012, application for rehearing of the Phase 1 decision in this proceeding (D.11-12-035): the EPIC is fundamentally the PGC by another name (SCE Application for Rehearing at 11-14); the Commission lacks authority to collect funds from ratepayers to fund a "state-run" RD&D program (id. at 14-20); the EPIC framework and use of the CEC as administrator make the EPIC an unlawful tax (id. at 20-22); the Commission's implementation of the EPIC surcharge violates the requirements of Section 454 and the requirements for customer notice and opportunity to be heard (id. at 15-16); the Commission's implementation of the EPIC surcharge violates Section 451 because the Commission has not established that the EPIC program is just and reasonable (id. at 15-16); the Commission unlawfully has transformed a permissive statutory scheme into a mandatory one (substantively the same argument as that raised in id. at 11-15); and the Commission has unlawfully delegated its discretionary power over ratepayer funds to another agency (id. at 22-25).
Today's decision is not intended to address or prejudge the issues raised in SCE's pending application for rehearing of D.11-12-035, which will be disposed of in a subsequent Commission decision. For the present purposes of addressing SCE's comments, we note that most of SCE's arguments speak to the Commission's underlying authority for the EPIC program, which was the subject of the Phase 1 decision, and most of SCE's comments reiterate arguments made in its application for rehearing. For the arguments identified above, SCE provides no new or justifiable reason for revisiting those arguments here. Accordingly, these arguments previously raised by SCE in its application for rehearing of D.11-12-035 are not appropriately reargued in its comments on the Phase 2 proposed decision.
SCE makes additional arguments on the Phase 2 decision about the justness and reasonableness of the funding amounts, funding allocations, program administration, and ability of IOUs to engage in applied research and development. As discussed throughout this decision, we find that the funding activities, funding amounts, funding allocations, and program administration are just and reasonable in light of the record and are supported by evidence in the record of this proceeding. We do not absolutely foreclose the IOUs from pursuing activities outside of their investment plans, although we require the IOUs to explain why such expenditures should not be considered within the EPIC program.
The single new argument SCE raised in its comments is that the proposed decision violates Article IV, Section 12 of the California Constitution, which prevents the Legislature from sending and the Governor from signing a budget bill that appropriates from the General Fund an amount in excess of the General Fund revenues for the year. SCE's argument is misplaced and without merit. The EPIC program will be funded by ratepayers and as such is specially funded. There is nothing in the record to indicate that the EPIC program funds will be deposited in the General Fund Assignment of Proceeding.
43 Black Economic Council, Latino Business Chamber of Greater LA, and the National Asian American Coalition, opening comments on the proposed decision, May 14, 2012, at 4.
44 CBIA opening comments on proposed decision, May 14, 2012, at 3.
45 CFC opening comments on proposed decision, May 14, 2012, at 9.
46 Ibid. at 10.
47 PG&E opening comments on proposed decision, May 14, 2012, at 4-5.
48 PG&E opening comments on proposed decision, May 14, 2012, at 6-7.
49 SDG&E opening comments on proposed decision, May 14, 2012, at 16.
50 Sustainable Conservation opening comments on proposed decision, May 14, 2012, at 5.
51 AECA opening comments on proposed decision, May 14, 2012, at 2.
52 See http://www.arb.ca.gov/cc/capandtrade/offsets/offsets.htm.
53 SDG&E opening comments on proposed decision, May 14, 2012, at 19, and TURN opening comments on proposed decision, May 14, 2012, at 2.
54 Efficiency Council opening comments on proposed decision, May 14, 2012, at 2.
55 CCEJ opening comments on proposed decision, May 14, 2012, at 6, and Joint Environmental Groups' opening comments on proposed decision, May 14, 2012, at 8.
56 SDG&E opening comments on proposed decision, May 14, 2012, at 7, and CFC opening comments on proposed decision May 14, 2012, at 3.
