3. Procedural Background
On April 13, 2006, we opened this rulemaking to further develop the regulatory framework for energy efficiency activities administered by Pacific Gas and Electric Company (PG&E), Southern California Edison Company (SCE), San Diego Gas & Electric Company (SDG&E) and Southern California Gas Company (SoCalGas). Today's decision marks the final step in implementing our post-2005 regulatory framework for the procurement of energy efficiency by investor-owned utilities. Less than ten years ago, when utilities were removed from the role of energy portfolio managers during electric industry restructuring, energy procurement and rates became vulnerable to market abuses and factors beyond California's control. Since 2002, with the support of state legislation, we restored the utilities to their traditional energy procurement responsibilities: To procure least-cost, environmentally sensitive energy resources on behalf of their customers.
Those actions were coupled with a renewed commitment to energy efficiency, placing it "first in the loading order" for utility energy procurement.13 We have already taken several steps to ensure that this policy becomes a reality in California. In our predecessor energy efficiency Rulemaking (R.) 01-08-028, we established the savings goals, policy rules, evaluation, measurement and verification protocols and administrative structure to guide the post-2005 energy efficiency programs funded by the ratepayers of these utilities.14 In D.05-09-043, we committed $2.2 billion in ratepayer funds to procure energy efficiency savings during 2006-2008. In doing so, we identified the development of a shareholder risk/reward incentive mechanism as the next priority for energy efficiency.15
Assigned Commissioner Dian M. Grueneich and assigned Administrative Law Judge (ALJ) Meg Gottstein held a prehearing conference in this rulemaking on May 9, 2006 in San Francisco. On May 24, Commissioner Grueneich issued a detailed scoping ruling for the multiple phases of this rulemaking, identifying Phase 1 as the forum for addressing the design and implementation of a shareholder risk/reward incentive mechanism.16 Parties were directed to meet and confer informally on Phase 1 issues prior to workshops, and to submit pre-workshop written comments by June 16, 2006 with preliminary proposals for an incentive mechanism. With respect to the need for evidentiary hearings, Commissioner Grueneich made a preliminary determination that hearings would not be required to resolve disputed issues in Phase 1. However, she indicated that she would make a final determination on this matter at the completion of the workshop process.17
Pre-workshop comments were filed by the utilities, the Division of Ratepayer Advocates (DRA), The Utility Reform Network (TURN), the Natural Resources Defense Council (NRDC) and the Community Environmental Council (CE Council).
Four days of workshops on Phase 1 issues were held on June 26-28 and July 18, 2006 in San Francisco, California, facilitated by the assigned ALJ with assistance from the Commission's Division of Strategic Planning. Other than Commission staff, approximately 35 individuals representing 12 different organizations participated at one or more days of the workshop. At the final workshop session, Commissioner Grueneich indicated to the workshop participants that evidentiary hearings would not be held on Phase 1 issues. This determination was memorialized in a July 20, 2006 Assigned Commissioner's ruling.18 The ruling provided direction to the parties for the preparation of their written post-workshop comments and the development of joint summary documents of final recommendations.
Post-workshop comments and final proposals were filed on September 8, 2006 by the utilities, DRA, TURN, NRDC and CE Council. The joint summary documents were filed on September 15, 2006. The utilities, DRA, TURN and NRDC filed reply comments on September 29, 2006. On November 22, 2006, TURN filed a correction to its reply comments. On February 23, 2007, the assigned ALJ requested further comment on TURN's correction as well as additional scenarios from the utilities for their calculations of supply-side comparable earnings. The utilities, TURN, NRDC and DRA filed comments on these issues during March 2007. PG&E and SDG&E/SoCalGas filed corrections to their submitted calculations on March 28, 2007 and April 20, 2007, respectively.
On March 13, 2007, TURN, NRDC and DRA jointly supplemented their post-workshop comments on their proposed penalty rates, at the direction of the assigned ALJ. The utilities filed responses on March 21, 2007.19 On April 23, 2007, the utilities, TURN, NRDC and DRA provided further comment on proposed procedures for the review and approval of interim and final earnings claims, as requested by the Assigned Commissioner.20 Reply comments were filed by NRDC, DRA, TURN, PG&E and jointly by SDG&E and SoCalGas on May 4, 2007.
By ruling dated March 26, 2007, the Assigned Commissioner determined that evidentiary hearings were needed to address disputed factual issues related to the establishment of the shared-savings rate(s) under the risk/reward incentive mechanism. Opening and reply testimony was submitted by the utilities, DRA, TURN, NRDC and California Large Energy Consumers Association (CLECA). Four days of evidentiary hearings were held on May 29 through June 1, 2007, with over 70 exhibits received into evidence.
Opening briefs were filed on June 18, 2007 by DRA, TURN, NRDC, CE Council, CLECA, the utilities and Women's Energy Matters (WEM).21 Reply briefs were filed on June 27, 2007 by DRA, TURN, NRDC and the utilities.
13 Energy Action Plan (2003), page 4: "The Action Plan envisions a "loading order" of energy resources that will guide decisions made by the agencies jointly and singly. First, the agencies want to optimize all strategies for increasing conservation and energy efficiency to minimize increases electricity and natural gas demand." See also D.04-01-050 in R.01-10-024, mimeo. at p. 9, referencing the Energy Action Plan and stating the Commission's policy preference that "resource adequacy be met first through cost-effective energy efficiency programs, other cost-effective demand reduction programs, and cost-effective renewable resources." See also pp. 53-54, 96 and 100-101 in that decision.
14 See D.04-09-060, D.05-01-055 and D.05-04-051 in R.01-08-028.
15 D. 05-09-043, mimeo. p. 153; See also Conclusion of Law 163 and Ordering Paragraph 22. We use the terms "risk/reward incentive mechanism," "risk/return incentive mechanism," "shareholder incentive mechanism" and "incentive mechanism" interchangeably in today's decision.
16 See Assigned Commissioner's Ruling and Scoping Memo and Notice of Phase 1 Workshops, May 24, 2006.
17 Ibid., p. 23.
18 Assigned Commissioner's Ruling Determining No Need for Evidentiary Hearings and Establishing Procedural Schedule for Phase 1 Issues, July 20, 2006, p. 1.
19 See Administrative Law Judge's Ruling Memorializing Electronic Rulings on Phase 1 Requests for Information and Changes to Submittal Dates, March 13, 2007.
20 See Assigned Commissioner's Ruling Soliciting Further Comment on Procedures For Review and Approval of Interim and Final Earnings Claims, April 3, 2007.
21 WEM's filing goes beyond not only the Assigned Commissioner's Ruling dated March 26, 2007, which clearly defined the issues that were to be included in the hearing and addressed in the brief, but also beyond the Assigned Commissioner's Ruling and Scoping Memo, which delineated the issues to be addressed in the risk/reward incentive mechanism. Instead of addressing the factual or methodological issues for establishing a relevant benchmark for shared-savings, WEM argues against adopting any amount of shareholder incentives for energy efficiency in this proceeding. (WEM Comments on Shareholder Incentives, June 18, 2007, pp. 1-4.) WEM also argues for third party administrators, a proposal that has been decided in prior decisions and is not the subject of this proceeding. ( p. 2.) Instead of referencing any of the extensive record in this Phase of the proceeding, WEM presents excerpts from its questioning of witnesses during evidentiary hearings in R.06-02-013, as well as from a recent newspaper article, in support of its position. (Ibid., pp. 5-7.) We reiterate our previous admonition that "WEM is not new to the complex Commission proceedings and should have been able to present...its views on the issues being address." (D.07-65-012, May 3, 2007 at fn. 7 and D.07-05-012 at fn.7.) For these reasons, we find that WEM's pleading is beyond the scope of this proceeding and do not address it any further in today's decision.
