2. Procedural History

Following the January 23, 2004 prehearing conference (PHC) in this proceeding, Assigned Commissioner Susan Kennedy directed Energy Division to conduct workshops to address EM&V-related issues. In particular, she directed that the workshops focus on defining the basis for evaluating the performance of energy efficiency "resource programs" and on adopting standardized procedures and protocols for measuring that performance basis:

"The performance basis for energy efficiency programs designed primarily to replace more costly supply-side options (resource programs) will be different than those designed for other purposes (e.g., informational programs). Over time, it will be very useful to develop standardized EM&V procedures and protocols, including standardized performance basis, for all types of energy efficiency programs and during all phases of program implementation. As discussed at the PHC, a Framework Study that proposes a comprehensive approach to EM&V will be published by the end of February and posted on the Commission's Website. [footnote omitted.] However, I believe it is prudent to bifurcate our efforts to address EM&V-related issues by first addressing those most directly related to performance incentive design. Irrespective of the Commission's determinations on administrative structure and incentives, we need to standardize the performance basis and measurement/verification protocols associated with resource programs for a range of other purposes, such as the ongoing assessment of energy savings potential, feedback and refinement of program design, as well as overall program evaluation.

"In D.03-12-062, the Commission discussed its interest in developing an incentive mechanism for the energy efficiency component of energy procurement that is consistent with overall procurement goals and incentive policies. It was within this context that the Commission referred the evaluation of energy efficiency performance incentives to this proceeding. [Footnote omitted.] The priority for workshops on Incentives and Related EM&V should therefore be on: (1) defining the performance basis of programs in terms of net resource benefits, and (2) updating existing procedures and protocols for measuring that performance basis, generally referred to as load impact evaluation."⁵

In response to this directive, Energy Division in collaboration with CEC staff held a series of workshops on the following EM&V topics during 2004:

· Workshops #1 and #1a (April 2, 2004 and September 13, 2004): Performance basis and measurement/verification protocols associated with Resource programs.

· Workshop #2 (August 11, 2004): Integrating measurement of the performance basis into the energy efficiency program planning and implementation cycles and utility procurement planning cycles.

· Workshop #3 (September 14, 2004): Developing a performance basis for non-resource energy efficiency programs.

· Workshop #4 (November 10, 2004): Process for Developing Program Evaluation Implementation Protocols.

Attachment 2 presents the list of organizations or individuals that participated in some or all of the EM&V workshops, and a listing of those organizations that filed pre-workshop and post-workshop written comments. Energy Division and CEC staff (hereinafter referred to as "joint staff" or "staff") jointly prepared written summaries of consensus and non-consensus positions of the parties on the EM&V-related issues addressed in each workshop. Those workshop summaries are available on the Commission's Website at http://www.cpuc.ca.gov/static/industry/electric/energy+efficiency/rulemaking/eeevaluation.htm.

At the direction of the assigned Administrative Law Judge (ALJ), the utilities submitted supplemental comparison tables of historical data on resource programs. These tables compared forecasted estimates of net resource savings (resource benefits minus costs) with the net resource savings calculated using program costs and participation rates verified after program implementation, and using per measure savings reevaluated based on the results of post-installation measurement studies.⁶ Opening comments on this supplemental information were filed on February 18, 2005, by SCE, PG&E, jointly by SGD&E and SoCalGas and jointly by the ORA, NRDC and The Utility Reform Network (TURN). Reply comments were filed on February 25, 2005 by SCE and PG&E.

Concurrent with the EM&V workshop and comment process described above, the Commission addressed administrative structure issues during 2004 through workshops, comments and oral argument. The Commission's draft decision on administrative structure for post-2005 programs was issued for comment on November 29, 2004 and finalized on January 25, 2005.⁷ In both the draft and final decision, the Commission highlighted the need to update the Energy Efficiency Policy Manual adopted in D.01-11-066 and directed the Assigned Commissioner and ALJ to establish a procedural schedule and process for updating this document "as soon as practicable."⁸

Accordingly, the Assigned Commissioner issued a ruling on December 17, 2005 that set forth a comment schedule and workshop process for updating the rules, terms and definitions (Rules) for post-2005 energy efficiency program activities. On December 30, 2004, the assigned ALJ issued a proposed set of Rules for consideration by all interested parties. Pre-workshop comments were filed on February 1, 2005 by the American Council for an Energy-Efficient Economy, California Climate Action Registry, Center for Small Business and Environment/San Francisco Small Business Network and Small Business California (CSBN), NRDC, Proctor Engineering, City and County of San Francisco (CCSF), County of Los Angeles, Efficiency Partnership, Women's Energy Matters (WEM), ORA and TURN (joint filing), the IOUs (joint filing) and SCE.

The ALJ held two days of workshops on the proposed Rules on February 15 and 16, 2005, with Energy Division assistance. Over 50 organizations were represented. In addition to many of the parties listed above, workshop participants included representatives from: The San Diego Regional Energy Office, Intergy Corporation, Proctor Energy Group, Ecology Action, Staples Marketing, Univsion, GeoPraxis, Yolo Energy Efficiency Project, Insulation Contractors Association, Navigant Consulting, Sacramento Municipal Utility District, ICF Consulting, Robert Mowris and Associates, among others. (See Attachment 2.)

In the following sections we describe the key issues raised in the workshops and written comments, briefly summarize areas of consensus and non-consensus among the parties as well as staff recommendations, where applicable, and present our determinations. Our discussion is intended to highlight the general areas of debate, rather than present a detailed accounting of each party's position on each and every issue related to the Rules or EM&V.