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COM/DGX, ALJ/MEG/rbg Date of Issuance 9/25/2007
Decision 07-09-043 September 20, 2007
BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
Order Instituting Rulemaking to Examine the Commission's post-2005 Energy Efficiency Policies, Programs, Evaluation, Measurement and Verification, and Related Issues. |
Rulemaking 06-04-010 (Filed April 13, 2006) |
INTERIM OPINION ON PHASE 1 ISSUES:
SHAREHOLDER RISK/REWARD INCENTIVE MECHANISM
FOR ENERGY EFFICIENCY PROGRAMS
INTERIM OPINION ON PHASE 1 ISSUES: SHAREHOLDER
RISK/REWARD INCENTIVE MECHANISM FOR ENERGY
EFFICIENCY PROGRAMS 1
1. Introduction and Summary 2
2. Procedural Background 14
3. Scope of Phase 1 and Definitions of Incentive Design Parameters 18
4. Minimum Performance Standard (MPS) 22
5. Penalty Provisions and Deadband Range 28
6. Earnings Curve and Associated Shared-Savings Rate(s) 36
6.1. Utility Supply-Side Comparable Earnings Analysis 38
6.2. Position of the Parties 41
6.2.1. PG&E, SCE, SDG&E and SoCalGas ("The Utilities") 44
6.2.2. NRDC 45
6.2.3. DRA 48
6.2.4. TURN 51
6.2.5. CE Council 56
6.2.6. Position of CLECA 57
6.3. Discussion 58
6.3.1. Supply-Side Comparability: History and Purpose 58
6.3.2. Consideration of Alternative Benchmarks 72
6.3.2.1. Mutual Fund Management Fees 72
6.3.2.2. Management Bonus Model 74
6.3.2.3. Energy Efficiency Incentives Offered in Other States 76
6.3.2.4. Non-DSM Performance-Based Incentive Mechanisms 80
6.3.2.5. Energy Efficiency Incentive Levels During
Electric Restructuring and the Energy Crisis 84
6.3.3. Supply-Side Comparability Benchmark: Adopted
Range of Values 91
6.3.4. Adopted Shared-Savings Rate(s) 101
7. Caps on Penalties and Earnings 109
8. Earnings Recovery Schedule and Linkage to EM&V Results 110
8.1. Timeframe and Treatment of Forecasts for the Interim Claims 112
8.2. True-Up Adjustments in the Final Claim 115
8.3. Schedule for Claims, Percentage of Payout
and Related Issues 120
8.4. Procedures for Reviewing and Approving Claims 123
9. Defining "What Counts" in Calculating Achieved Savings
and Net Benefits 134
9.1. Non-Resource Programs 134
9.2. EM&V 137
9.3. Codes and Standards Advocacy 138
9.4. Savings from LIEE 141
9.5. Augmented Funding for Programs During Program Cycle 142
10. Cost-Effectiveness Issues 145
10.1. Treatment of Shareholder Incentive Costs in
Cost-Effectiveness Tests 147
10.2. Free-Rider Adjustments to TRC Costs-Application
of the Net-to-Gross Ratio 149
11. Performance-Based Incentives for Emerging Technologies and Information Programs 157
12. Rate Recovery, Cost Allocation and Short-Term Rate and
Bill Impacts 159
13. Revisiting the Adopted Incentive Mechanism 163
14. Assignment of Proceeding 164
15. Comments on Proposed Decision 164
Findings of Fact 174
Conclusions of Law 207
INTERIM ORDER 210
LIST OF ATTACHMENTS
Attachment 1 |
List of Abbreviations and Acronyms |
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Attachment 2 |
Potential Shareholder Earnings/Penalties Under Proposed Risk/Reward Incentive Mechanisms |
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Attachment 3 |
Summary of Risk/Reward Proposals - September 15, 2006 |
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Attachment 4 |
Graphical Illustrations of Proposed Earnings/Penalty Curves |
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Attachment 5 |
Simplified Numerical Examples of Proposed Payout Approaches |
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Attachment 6 |
EM&V Studies: Schedule and Linkage to Earnings Claims |
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Attachment 7 |
Procedure for Review and Approval of Earnings/Penalties under the Energy Efficiency Risk/Reward Incentive Mechanism |
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Attachment 8 |
Adopted Earning/Penalty Curve and Projected Shareholder Earnings and Penalties Based on Savings Performance (For 2006-2008 Portfolio Costs and Savings Goals) |
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Attachment 9 |
Numerical Examples of Adopted Net-to-Gross Adjustment to Total Resource Costs |
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Attachment 10 |
Average Short-Term Rate and Bill Impacts to Recover Earnings for 2006-2008 Energy Efficiency (at 100% goals) |
INTERIM OPINION ON PHASE 1 ISSUES:
SHAREHOLDER RISK/REWARD INCENTIVE MECHANISM
FOR ENERGY EFFICIENCY PROGRAMS