2. Need for Modification

In a ruling dated February 27, 2007, the assigned ALJ noted a discrepancy and potential ambiguity between the incentive adjustment mechanism adopted in D.06-08-028, as modified in D.06-12-033, and the language describing implementation of that mechanism in the CSI Program Handbook. The CSI Handbook describes a process for handling the MWs associated with projects that drop out of the program. Specifically, if applicants drop out and MWs remain unused in a prior step, these MWs can be added to the next step of the incentive mechanism. However, the Commission orders adopting the incentive mechanism did not address how program administrators should handle the MWs associated with applications that drop out. As the ALJ ruling notes, if the Program Administrators follow the CSI Handbook language and reallocate MWs from drop out applications to the next incentive step, this will change the allocations set forth in Table 11 of D.06-08-028, as modified by D.06-12-033.

For example, the Commission's adopted incentive adjustment tables indicate that Step 1 contains 50 MWs and Step 2 contains 70 MWs. After 50 MWs are conditionally reserved, the incentive adjusts to the Step 2 level for the next 70 MWs of CSI applications. The Handbook language, however, will result in variance from these MW allocations. If Program Administrators determine that 10 of the 50 MWs reserved for incentives in Step 1 have dropped out, they can increase Step 2 from 70 MWs to 80 MWs. As a result, the incentive adjustments would no longer match the MW targets established in the underlying Commission decisions, although the cumulative total of MWs for Steps 1 and 2 would still be the same. If Step 1 shrinks and Step 2 expands, the two steps together still do not exceed 120 MW. Moreover, as Step 1 MWs drop out and are reallocated and paid at the lower Step 2 incentive level, the Commission still has the opportunity to achieve its overall CSI MW goals and spends less ratepayer money than originally envisioned.

The ALJ ruling solicited comments from parties on whether the method for handling drop out applications, as set forth in the CSI Program Handbook, should be adopted. In addition, the ruling asked for comment on three refinements to the drop out process described in the Handbook. These refinements are as follows. First, Program Administrators may reallocate MWs from prior steps to the current step under which reservations are being issued. Second, the reallocation of MWs should conform to originally adopted policy that one-third of MWs are reserved for residential applicants and two-thirds for non-residential. Third, the Program Administrators must provide weekly updates on their websites to indicate the total MWs available for incentives at each level.