12. Performance-Based Incentives for Emerging Technologies and Information Programs
PG&E proposes separate performance-based incentives for emerging technologies and education and training programs, in recognition of the essential role they play in the total portfolio of programs. NRDC supports PG&E's proposal in order to provide some earnings potential to balance the inclusion of these program costs in the PEB.
For the Emerging Technologies Program, PG&E proposes that shareholder earnings equal to five percent (5%) of Emerging Technology expenditures be awarded based on two performance thresholds. The first would be a "product introduction" threshold, which is met if the utility successfully moves a total of seven new technologies or products into the resource programs to generate savings (one new product in 2006, two new products in 2007 and four new products in 2008). The second is an "aggregate minimum expected savings" threshold of 150 MWh and 2,250 MTherm (for all seven products combined), or approximately 5 percent of PG&E's three-year energy targets. The product threshold would apply as a condition for being eligible for earnings in the interim claims, and the aggregate minimum expected savings threshold would apply as part of the final true-up claim.
For the Education and Training Program, PG&E proposes milestones tied to the number of training sessions, energy audits and equipment tests that would trigger eligibility for five percent (5%) of the yearly program expenditures. The threshold would be 25% of the goals listed in its compliance filing for these activities for the program year.251
Although informational, marketing, emerging technologies and other non-resource programs are an essential part of the portfolio, we agree with DRA and others that a separate incentive mechanism should not be established for non-resource programs. As DRA notes, doing so runs the risk of double-counting the savings benefits already attributable to resource programs for many of the non-resource activities that PG&E seeks to include (e.g., audits and training).252 Moreover, our experience in the past with milestone-based incentive mechanisms reminds us of the difficulty in establishing mechanisms to reward the performance of non-resource programs. As SCE points out, a milestone-based mechanism can "eventually lead to a matter of interpretation either when developing how performance will be achieved for a particular milestone or deciding if performance was achieved."253 Finally, our decision to not include emerging technologies program costs in the calculation of PEB addresses NRDC's concerns about not having a performance adder mechanism for this program.
For these reasons, we do not adopt PG&E's proposal. Energy Division does plan to undertake EM&V activities to assess the net resource benefits associated with audit programs, as indicated in the September 2, 2005 ruling on EM&V Protocols.254 Therefore, to the extent that the resource savings associated with utility audits are verified through staff EM&V efforts, they will be reported in the Final Performance Earnings Basis Report and included in the true-up calculation of PEB under the shareholder incentive mechanism we adopt today.
251 PG&E's Pre-Workshop Written Comments and Proposal on Energy efficiency Shareholder Risk/Reward Incentive Mechanism, June 16, 2006, pp. 14-16.
252 DRA Proposed Risk/Return Shareholder Incentive Mechanism for Energy Efficiency Portfolios, September 8, 2006, p. 26.
253 Post-Workshop Opening Comments of SCE, September 29, 2006, p. 19.
254 ALJ's Ruling on EM&V Protocol Issues, September 2, 2005, p. 6 and Appendix 1.
