5. Administration
The Staff Proposal recommends numerous required functions and necessary qualifications for a successful program administrator, or "Program Manager," to oversee the low-income single-family incentive program. Critical functions include establishing contacts with potential qualifying low-income households, partnering with community-based organizations for outreach, implementing the incentive program statewide and collaborating with city and county housing agencies or private lending institutions to create financing packages for applicants. Necessary qualifications include knowledge of the needs of low-income single-family homeowners and experience serving them, experience with solar PV, experience with financing for energy efficiency and solar, and relationships with city and county governments and affordable housing groups to collaborate and partner with them.
In its proposal, Staff analyzed the strengths and weaknesses of five Program Manager options which were (1) a non-profit that serves low-income communities, (2) a state agency that serves low-income communities, (3) a consulting firm with experience in solar and affordable housing, (4) a bank that specializes in financing PV systems, and (5) the current CSI program administrators (i.e., PG&E, SCE, and CCSE).
The Staff Proposal recommends outsourcing the statewide administration of the low-income single-family solar incentive program to one organization or agency to maximize the effectiveness of relationships with federal, state, and local agencies and private financing institutions. The Staff Proposal enumerates a Request for Proposal (RFP) process to select the Program Manager. The chosen organization or agency should have experience providing services to low-income communities, be familiar with their needs, and have existing trustworthy relationships within these communities.
5.1. Parties' Comments
Several parties, namely Grid Alternatives, A WISH, CCSE, Greenlining, Californians for Renewable Energy, Global Green U.S.A. and CSD, agree with the Staff Proposal for one statewide administrator. Grid Alternatives supports the selection of a nonprofit organization specifically dedicated to serving low-income communities. It contends that a single administrator would create significant efficiencies in administration, thereby maximizing the percentage of the program budget than can be used on incentives rather than overhead. Moreover, a single administrator would ensure equitable and consistent program administration across the state. Grid Alternatives suggests a non-profit would build a long-term infrastructure to provide ongoing support and education and help ensure the program provides long-term benefits to low-income utility customers.
A WISH supports one Program Manager, but suggests coordination with existing LIEE, Department of Energy Weatherization Assistance program, and the Low-Income Home Energy Assistance Program (LIHEAP) to maximize energy efficiency and solar dollars through program coordination. If utility administrators are used, A WISH recommends they subcontract with community service providers to leverage LIEE and DOE funds and other program benefits.
CCSE also supports statewide administration by a competent non-profit as the preferred option. However, it also recommends that if a single Program Manager cannot be found, the Commission should use the existing CSI program administrators. CCSE contends the key to program success will be strong teams of public, private and non-profit agencies focused on projects at the local level.
Greenlining claims it is imperative that the Program Manager be chosen based on its sensitivity to and experience with the economic, ethnic, and linguistic needs of California's low-income communities. It also suggests that community based organizations play a strong role in serving as outreach and marketing liaisons for the CSI low-income program. Grid Alternatives agrees, claiming this will help overcome skepticism stemming from unfamiliarity with solar PV technology in low-income communities.
Initially, Californians for Renewable Energy supported establishment of low-income incentives administered through existing housing assistance programs at the city, county, and redevelopment agency level. In reply comments, Californians for Renewable Energy amended its position and now recommends the non-profit organization Grid Alternatives as Program Manager, contending Grid Alternatives meets all the relevant criteria, particularly strategic partnerships with city and county low-income home rehabilitation loan programs.
In contrast to these comments, the utilities unanimously favor that they be allowed to administer the low-income solar incentive program in their territories.
SDG&E suggests the Commission consider administration by the three utilities in their respective service territories. SDG&E contends it already has the infrastructure and experience to effectively and efficiently reach the low-income community and process large numbers of project applications. SDG&E argues the utilities can leverage their existing administrative infrastructure and a low-income solar program is a logical complement to their other programs for low-income customers. Moreover, the Commission has found in D.05-01-055 that if energy efficiency was implemented by a third party, the Commission would not have the requisite oversight authority over a third-party administrator to hold it accountable for program implementation. SDG&E raises several contractual questions regarding third-party administration and the utility role in interacting with the administrator. SDG&E contends the Commission will encounter higher administration costs for third-party statewide administration, such as RFP costs, and outreach and marketing costs.
SCE contends it will be time consuming and inefficient for one entity to gear up for a statewide program, and risk inefficient use of ratepayer funds. SCE maintains it has all the necessary experience and expertise to administer the program in its service area. Likewise, PG&E alleges statewide administration could require significant start-up delays whereas the utilities have existing relationships from their work with LIEE and CARE. PG&E believes it satisfies the necessary Program Manager qualifications and could successfully administer the program. PG&E maintains the utilities are in the best position to leverage energy efficiency in solar installations through their administration of LIEE programs.
Similarly, SoCal Forum supports a collaboration of utilities and CSD, noting the utilities have a statewide reach and an established network of service providers.
5.2. Discussion
We agree with the Program Manager functions and qualifications as set forth in Section 4.1 and 4.2 of the Staff Proposal. After considering the comments of parties on the institutional options for program administration, we find that the single-family low-income solar incentive program should be administered by one entity, or "Program Manager," statewide for several reasons.
First, we agree with Grid Alternatives that dedication to and knowledge of the low-income community are critical to program success. If we limit administration to the utilities or to the current CSI administrators, we may unintentionally exclude other organizations, such as non-profits, government agencies, or new combinations of public and private sector entities, that may have unique expertise and experience to offer to the CSI low-income program. We prefer to obtain a Program Manager with specific knowledge of low-income mortgage financing and other methods of integrating solar investment with low-income housing rehabilitation. Grid Alternatives also points to the potential for a statewide Program Manager to build a long-term infrastructure that extends beyond the 10-year life of the current CSI program for solar education and support to the low-income community. We agree this is an objective worth achieving and we are eager to facilitate it by considering entities beyond the current CSI administrators or the utilities. In choosing the low-income solar Program Manager, we want to consider the potential for that manager to create a model for long-term assistance to the low-income community that can continue beyond 2015 without state support. We encourage entities interested in becoming the Program Manager to include a workforce development and job training plan for low-income community members in their proposed program implementation plans.
Second, we find a statewide Program Manager with dedication to low-income communities is preferable to existing utility or CSI administration because we see differences in this program from the CARE and LIEE programs the utilities currently administer. We agree with Grid Alternatives that solar installations face a higher consumer hurdle and more skepticism than the decision to use LIEE and CARE services. Thus, a low-income solar program will require the Program Manager to undertake greater and more challenging outreach with potential recipients than LIEE and CARE programs because solar is an unfamiliar, expensive technology, potentially involving financing and tax credit information, as well as other education needs such as roof integrity analysis and system maintenance. LIEE involves cheaper and less complicated technologies, and CARE is primarily a rate assistance program. Although utilities administer CARE and LIEE, their work on those programs does not directly translate into the same skills needed for success with a low-income solar program.
Third, the CSI low-income program is narrower than the mainstream CSI program, aimed at a smaller subset of California's population. The population of low-income utility customers that qualify for LIEE and CARE may not qualify for low-income solar incentives under the stricter definitions in Section 2852. It will be easier for the Commission to ensure consistency and equity in program delivery statewide if one administrator is chosen. The Program Manager will work with a network of service providers, namely solar installers, community-based organizations, and loan providers, to provide service throughout the territories of the three large investor-owned utilities. We conclude that it will be simpler for both the Program Manager and the Commission to manage a network of service providers statewide than for three utilities to duplicate this effort in each of their service territories. Therefore, it is logical to employ one Program Manager to perform outreach across the state.
Fourth, there will likely be lower overhead cost for one entity than three administrators duplicating outreach and application processing functions. To implement this program, a program manager will likely need to perform extensive follow-through with potential recipients, beyond what is usually needed for the LIEE/CARE programs. The Program Manager should also teach applicants how to understand their energy bill and solar savings and instruct applicants on how to receive federal tax credits for their solar installations. Recipients also should be taught to monitor and maintain their solar system. The utilities will most likely have to outsource these functions to an outside entity, which could drive up administrative costs. A single administrator could potentially provide these same services in-house.
Although the utilities unanimously request the opportunity to administer the low-income portion of CSI along with their role in the mainstream CSI program and their role in CARE and LIEE, we find the reasons articulated above provide a sound basis for statewide administration open to any qualified organization, and not limited to a utility. We are confident that the RFP process described in the Staff Proposal will yield unique program management solutions and open the door to synergies with other low-income housing assistance programs and outreach efforts by groups that may not currently be involved in existing utility low-income programs.
A WISH urges the Commission to coordinate low-income solar incentives with LIEE and LIHEAP as much as possible in order to leverage funds from all assistance programs to the maximum benefit of low-income customers. In our view, it is more likely that one statewide administrator with relevant low-income expertise will gather the knowledge to master this coordination more quickly than relying on three utility administrators to each accomplish this task.
Further, we are not persuaded by SCE's comment that it will be time consuming for a non-utility entity to hire staff, open offices, and establish contacts. The comments indicate that non-utility entities already exist, such as CSD, Grid Alternatives and SoCal Forum, with staff, offices and contacts to handle the proposed program, particularly since the program scope and target population of approximately 50,000 households is much smaller than the mainstream CSI program.
Similarly, we are not convinced that the contractual issues and costs enumerated by SDG&E will thwart the success of a non-utility administrator. SDG&E is concerned with Commission oversight authority over a non-utility administrator. SDG&E also questions how funds collected by the non-contracting utilities will be disbursed. We find that SDG&E's contract with CCSE provides a successful model for third-party administration for the CSI program which can be used as a model for the low-income program. The Commission's Energy Division will direct the Program Manager, and will retain the authority to direct the contracting utility to cancel the contract if the Energy Division is dissatisfied with the Program Manager's performance. Plus, funding concerns can be addressed through co-funding agreements with the contracting utility, and we discuss this in more detail below.
Therefore, we agree with the Staff Proposal and the various parties that the single-family low-income solar incentive program should be administered by a single, statewide Program Manager, and this Program Manager does not need to be one of the existing CSI program administrators or a utility.
The Program Manager will be chosen through a RFP process, as suggested by the Staff Proposal. The details of the RFP process are set forth in Appendix A of this order, and summarized here. Energy Division will develop a draft RFP for the Program Manager and issue it for comment to the parties to this proceeding. The RFP should be consistent with the selection criteria and requirements set forth in this order. The Energy Division will consider the comments, revise the RFP as necessary, and select one investor-owned utility (IOU) to issue the final RFP and ultimately contract with the Program Manager. The selected IOU shall issue the RFP within 30 days after the Energy Division has directed it to do so.
The Energy Division will review the responses to the RFP and will score the proposals based on the selection criteria and requirements in Appendix A. Energy Division will select the Program Manager and direct it to submit a final program implementation plan to the Director of Energy Division for approval. Following this approval, Energy Division will direct the selected IOU to contract with the Program Manager and to renew or extend the contract as appropriate. The Energy Division will oversee the contract between the utility and the Program Manager throughout the life of the program. Energy Division should ensure the mainstream CSI program administrators coordinate with the low-income Program manager to facilitate implementation of the low-income solar incentive program.
The utility contracting with the Program Manager will enter into a co-funding agreement with each of the other utilities specifying how each of the other utilities will fund its share of the cost of program management from its Low-Income Program funds. The contracting utility will then pay the Program Manager. The co-funding agreement will govern all financial transactions among the utilities for the low-income incentive program based on the program budget described in Section 3 of this order.
While the utilities will jointly pay the cost of program management, each utility will pay incentives directly to qualifying applicants in its service territory. Incentives shall only be paid after the Program Manager verifies that installation is complete and the solar energy system is operable. Accordingly, the co-funding agreement mentioned in the preceding paragraph should also describe how the Program Manager will inform each utility which applicants should be awarded incentive payments. In comments on the proposed decision, SCE requests full cost recovery for any payment processing costs it incurs. PG&E and SDG&E agree with SCE, but none of the utilities quantify these potential costs for cutting checks to incentive recipients, as directed by the Program Manager. We anticipate a small number of qualified applicants to this program and we find it highly unlikely that the utilities will need additional staff or equipment to handle paying incentives.19 Thus, we conclude there will be no significant costs borne by the utility as a result of this program.
Finally, we stress that the RFP should not specify whether the Program Manager is a nonprofit, for-profit or government organization. This is an unprecedented program, and it is unclear who will be able to successfully deliver a program of this scale. We should allow for all options in the proposals. We do not want to preclude the possibility of creative partnerships that introduce new private sector financing or lower solar supply costs through economies of scale. For example, the Program Manager may want to enter into joint partnerships or subcontract with a network of relevant entities (such as housing agencies, lending institutions, solar installers, and community-based organizations) to identify and educate potential program applicants, assist applicants with financing where necessary, subcontract with experienced entities to install systems, deliver incentives to eligible applicants, and provide follow-up services to program recipients. The Program Manager may be able to arrange a single statewide supply contract at discounted rates. We are eager to see these and other innovative ideas that can help reduce the cost of installations in this program, and we will therefore select the Program Manager based on the best qualifications and program implementation approach.
19 We assume the program will fund five to seven thousand partially subsidized 2 kW systems and 2000 full subsidy systems. Thus, we estimate that the program will fund no more than 10,000 total systems statewide over the eight-year course of this program. If recipients are evenly spread throughout the three utilities' service areas, this results in less than 500 checks per year per utility.
