3. Discussion

The parties filing comments, namely Americans for Solar Power (ASPV), the California Solar Industries Association (CAL SEIA) and PV Now (filing jointly as the "Joint Solar Parties"), Pacific Gas and Electric Company (PG&E), San Diego Gas & Electric Company (SDG&E), Southern California Edison Company (SCE), and San Diego Regional Energy Office (SDREO), generally support the proposed method for handling drop-out allocations as described in the ALJ ruling. They comment that if the Program Administrators reallocate MWs for projects that do not come to fruition, this helps ensure MWs will not be "lost" and the Commission has a better chance of reaching its CSI MW goals.

We find the process described in the CSI Program Handbook and the ALJ ruling for reallocating MWs associated with applications that have dropped out is reasonable and the Commission should modify its prior orders describing the incentive adjustment mechanism, particularly Table 11 of D.06-08-028, to clarify that this reallocation may occur.

In addition, several parties ask for clarification that as projects drop out, the associated kilowatts (kWs) from that dropped out application should be reallocated to the current step for the same market segment in which the project was initially reserved (i.e., residential or non-residential). In other words, if a residential application drops out, the kWs associated with the application are reallocated to the current step for residential incentives, and kWs from non-residential drop outs would be reallocated to the current step for non-residential incentives. This is what was intended by the ALJ in her ruling, and we will ask Energy Division to ensure the Program Handbook is clear on this point.

SDREO requests that the reallocation method should apply not only to unused MWs from applications that drop out, but also to unused MWs from projects where system size has been reduced, because it is not uncommon that upon installation, the system size may decrease. This proposal is reasonable and we will adopt it. If we allow the Program Administrators to reallocate MWs from projects where size has been reduced, this can help the Commission meet its overall CSI MW goals.

ASPV comments that the current CSI Program Handbook requires the Program Administrators to provide data on MWs of confirmed reservations as close as possible to real time. Therefore, ASPV suggests that mandating weekly website updates of the MWs available for incentives is less of a requirement than the real time information required in the Program Handbook. ASPV asks that any requirements on Program Administrators to provide information on the total MWs of confirmed reservations not lessen the requirement for these real-time updates. We agree with this proposal and will modify the handbook language accordingly.

In summary, the Commission should modify Table 11 in D.06-08-028, as modified by D.06-12-033, to indicate that the Program Administrators may apply the MWs from applications that drop out or reduce their size to the current incentive step, as long as the cumulative total of MWs in prior steps is the same. In addition, the Energy Division should ensure the Program Administrators modify Section 3.1 of the CSI Program Handbook to state the following:

Projects are counted toward the MW trigger once they are deemed eligible, have paid an application fee (if applicable), and have been issued a confirmed reservation. As the number of MWs allocated through the confirmed reservations reaches its maximum within any particular step, the Program Administrators will move to the next step. If there are any MWs that remain unused and unaccounted for in any previous steps, due to events such as Applicants dropping out of the process or reducing the size of their systems, those MWs will be added to the current step under which Program Administrators are issuing reservations and incentives, thus increasing the number in that step and ensuring that no MW are left outstanding. Similarly, when MWs drop out of the current step, those MWs will be returned to the current step. Any reallocation of MWs from a higher step to a lower step due to drop outs or system size reductions can take place as long as the reallocation is consistent with how the MWs were initially reserved for either residential or non-residential projects. Reallocations from Step 1 may be assigned to either residential or non-residential applicants, at the discretion of the Program Administrators. The Program Administrators will provide updates to their solar application websites as close as possible to real time and no less than weekly to indicate the total MWs available for incentives at each step and in each customer sector, including those MWs newly available due to reallocations.

PG&E and SDREO request clarification that the Program Administrators' system size calculation can include the "design factor" adopted by the Commission in D.06-08-028. They claim use of the design factor is needed to ensure CSI budget dollars and MW totals match for each incentive mechanism step. It appears this accounting detail has already been proposed and approved in the context of the CSI Program Handbook which provides detailed guidance on program implementation details. We agree with PG&E and SDREO that the Program Administrators should use the design factor when tracking system size so that the dollars budgeted for incentives in each step match with the system sizes which count toward the MWs in each step.

ASPV urges the Commission to monitor the customer drop out rate over time and consider rule or program changes to discourage drop-outs. We agree that monitoring the rate of customer drop-outs is prudent and direct our Energy Division to do so. In addition, we direct the Program Administrators to work immediately with the solar industry and any other interested persons or organizations to develop additional application rules designed to reduce applications that drop-out. ASPv provides several ideas on this topic in their April 23, 2007 comments on the proposed decision which may provide a good starting point for discussion. The Program Administrators should then jointly file an Advice Letter with proposed handbook changes on this issue, within 30 days of this order.